Kentucky Bancshares (KTYB) 10-K 30 Mar 17 2016 FY Annual report Financial data

Document and Entity Information

Document and Entity Information - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Mar. 15, 2017	Jun. 30, 2016
Document and Entity Information
Entity Registrant Name	KENTUCKY BANCSHARES INC /KY/
Entity Central Index Key	1,000,232
Document Type	10-K
Document Period End Date	Dec. 31, 2016
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Non-accelerated Filer
Entity Public Float			$ 68
Entity Common Stock, Shares Outstanding		2,972,763
Document Fiscal Year Focus	2,016
Document Fiscal Period Focus	FY

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
ASSETS
Cash and due from banks	$ 42,052	$ 26,546
Federal funds sold	1,198	1,502
Cash and cash equivalents	43,250	28,048
Interest bearing time deposits	5,029	4,874
Securities available for sale	273,770	264,212
Trading Assets	5,592	5,531
Loans held for sale	724	624
Loans	656,007	624,121
Allowance for loan losses	(7,541)	(6,521)
Net loans	648,466	617,600
Federal Home Loan Bank stock	7,034	7,034
Real estate owned, net	1,824	2,347
Assets held for sale	969
Bank premises and equipment, net	14,781	16,597
Interest receivable	3,715	3,681
Mortgage servicing rights	1,321	1,277
Goodwill	14,001	14,001
Other intangible assets	529	773
Other assets	7,442	8,085
Total assets	1,028,447	974,684
Deposits
Non-interest bearing	219,556	209,289
Time deposits, $250,000 and over	74,302	61,199
Other interest bearing	509,123	488,493
Total deposits	802,981	758,981
Repurchase agreements	20,873	18,514
Long-term Federal Home Loan Bank advances	92,500	87,833
Note payable	4,090	4,794
Subordinated debentures	7,217	7,217
Interest payable	692	659
Other liabilities	7,122	7,273
Total liabilities	935,475	885,271
Stockholders' equity
Preferred stock, 300,000 shares authorized and unissued
Common stock, no par value; 10,000,000 shares authorized; 2,973,232 and 2,989,205 shares issued and outstanding at December 31, 2016 and December 31, 2015	20,767	20,730
Retained earnings	73,161	68,324
Accumulated other comprehensive income (loss)	(956)	359
Total stockholders' equity	92,972	89,413
Total liabilities and stockholders’ equity	$ 1,028,447	$ 974,684

CONSOLIDATED BALANCE SHEETS (Pa

CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Dec. 31, 2016	Dec. 31, 2015
CONSOLIDATED BALANCE SHEETS
Preferred stock, shares authorized	300,000	300,000
Preferred stock, shares issued	0	0
Common stock, par value (in dollars per share)	$ 0	$ 0
Common stock, shares authorized	10,000,000	10,000,000
Common stock, shares issued	2,973,232	2,989,205
Common stock, shares outstanding	2,973,232	2,989,205

CONSOLIDATED STATEMENTS OF INCO

CONSOLIDATED STATEMENTS OF INCOME - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Interest income
Loans, including fees	$ 30,000	$ 27,064	$ 23,857
Securities
Taxable	3,362	2,951	2,612
Tax exempt	2,618	2,680	2,812
Trading Assets	153	170	168
Other	421	320	282
Total interest income	36,554	33,185	29,731
Interest expense
Deposits	2,211	2,024	2,038
Repurchase agreements and other borrowings	108	100	96
Federal Home Loan Bank advances	1,620	1,579	1,392
Note payable	233	109
Subordinated debentures	254	238	230
Total interest expense	4,426	4,050	3,756
Net interest income	32,128	29,135	25,975
Provision for loan losses	1,150	1,450	950
Net interest income after provision for loan losses	30,978	27,685	25,025
Other income
Service charges	5,086	4,408	4,240
Loan service fee income, net	71	206	66
Trust department income	1,086	1,056	979
Securities (gains) losses, net	287	412	966
Gain (loss) on trading assets, net	(92)	(9)	202
Gain on sale of loans	2,098	1,488	951
Brokerage income	778	597	554
Debit card interchange income	2,740	2,477	2,119
Other	95	849	81
Total other income	12,149	11,484	10,158
Other expenses
Salaries and employee benefits	17,930	16,583	14,806
Occupancy expense	3,772	3,781	3,308
Repossession expense, net	401	416	371
FDIC insurance	526	576	535
Legal and professional fees	1,628	1,050	1,067
Data processing	1,627	1,427	1,351
Debit card expenses	1,311	1,287	1,005
Amortization	247	205	140
Advertising and marketing	925	1,003	827
Taxes other than payroll, property and income	1,134	904	851
Telephone	345	317	341
Postage	357	379	321
Loan fees	198	334	346
Acquisition expense		858
Other	3,384	2,687	1,946
Total other expenses	33,785	31,807	27,215
Income before income taxes	9,342	7,362	7,968
Provision for income taxes	773	530	897
Net income	$ 8,569	$ 6,832	$ 7,071
Earnings per share:
Basic (in dollars per share)	$ 2.87	$ 2.40	$ 2.60
Diluted (in dollars per share)	$ 2.87	$ 2.40	$ 2.60

CONSOLIDATED STATEMENTS OF COMP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Net income	$ 8,569	$ 6,832	$ 7,071
Other comprehensive income (loss)
Unrealized gains (losses) on securities arising during the period	(1,706)	(242)	9,931
Reclassification of realized amount	(287)	(412)	(966)
Net change in unrealized gain (loss) on securities	(1,993)	(654)	8,965
Less: Tax impact	(678)	(222)	3,048
Other comprehensive income (loss)	(1,315)	(432)	5,917
Comprehensive income	$ 7,254	$ 6,400	$ 12,988

CONSOLIDATED STATEMENTS OF CHAN

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) $ in Thousands	Common Stock	Preferred Stock	Retained Earnings	Accumulated Other Comprehensive Income	Total
Beginning Balance at Dec. 31, 2013	$ 12,570		$ 60,229	$ (5,126)	$ 67,673
Balances (in shares) at Dec. 31, 2013	2,717,434
Increase (Decrease) in Stockholders' Equity
Common stock issued	$ 2				2
Common stock issued (in shares)	7,159
Stock compensation expense	$ 111				111
Common stock purchased and retired	$ (21)		(90)		(111)
Common stock purchased and retired (in shares)	(4,495)
Other comprehensive income (loss)				5,917	5,917
Net income			7,071		7,071
Dividends declared			(2,721)		(2,721)
Ending Balance at Dec. 31, 2014	$ 12,662		64,489	791	77,942
Balances (in shares) at Dec. 31, 2014	2,720,098
Increase (Decrease) in Stockholders' Equity
Assumption of Madison Financial Corporation preferred stock		$ 4,390			4,390
Assumption of Madison Financial Corporation preferred stock (in shares)		12,047
Redemption of Madison Financial Corporation preferred stock		$ (4,390)			(4,390)
Redemption of Madison Financial Corporation preferred stock (in shares)		(12,047)
Common stock issued	$ 2				2
Common stock issued (in shares)	6,719
Shares issued to acquire Madison Financial Corporation, net of issuance costs	$ 7,939				7,939
Shares issued to acquire Madison Financial Corporation, net of issuance costs (in shares)	263,361
Stock compensation expense	$ 133				133
Common stock purchased and retired	$ (6)		(25)		(31)
Common stock purchased and retired (in shares)	(973)
Other comprehensive income (loss)				(432)	(432)
Net income			6,832		6,832
Dividends declared			(2,972)		(2,972)
Ending Balance at Dec. 31, 2015	$ 20,730		68,324	359	89,413
Balances (in shares) at Dec. 31, 2015	2,989,205
Increase (Decrease) in Stockholders' Equity
Common stock issued	$ 49				49
Common stock issued (in shares)	6,341
Stock compensation expense	$ 153				153
Common stock purchased and retired	$ (165)		(503)		(668)
Common stock purchased and retired (in shares)	(22,314)
Other comprehensive income (loss)				(1,315)	(1,315)
Net income			8,569		8,569
Dividends declared			(3,229)		(3,229)
Ending Balance at Dec. 31, 2016	$ 20,767		$ 73,161	$ (956)	$ 92,972
Balances (in shares) at Dec. 31, 2016	2,973,232

CONSOLIDATED STATEMENTS OF CHA7

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Parenthetical) - $ / shares	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
Common stock issued - employee stock grants (in shares)	6,170	7,475	5,615
Common stock issued - director stock awards (in shares)	1,352	74	49
Common stock, forfeited (in shares)	1,181
Dividends per share (in dollars per share)	$ 1.08	$ 1	$ 0.96

CONSOLIDATED STATEMENTS OF CASH

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Cash flows from operating activities
Net income	$ 8,569	$ 6,832	$ 7,071
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization	1,115	1,326	1,830
Provision for loan losses	1,150	1,450	950
Securities amortization, net	1,133	975	638
Securities (gains) losses, net	(287)	(412)	(966)
Net change in trading assets	(61)	(161)	(5,370)
Originations of loans held for sale	(62,275)	(48,953)	(37,043)
Proceeds from sale of loans	64,273	50,593	37,441
Gain on sale of loans	(2,098)	(1,488)	(951)
Stock based compensation expense	153	133	111
Losses (gain) on disposal of fixed assets	(331)	(4)	(2)
Losses (gain) on other real estate	(128)	(5)	(146)
Deferred taxes	(309)	(17)	3,048
Changes in:
Interest receivable	(34)	(73)	319
Write-downs of other real estate, net	187	252	144
Other assets	1,624	(1,163)	1,506
Interest payable	33	(42)	(94)
Other liabilities	(151)	(1,186)	(4,637)
Net cash from operating activities	12,563	8,057	3,849
Cash flows from investing activities
Acquisition of Madison Financial Corp., net		3,514
Net change in interest bearing time deposits	(155)	(615)	(980)
Purchases of securities, available for sale	(145,232)	(84,479)	(127,326)
Proceeds from sales of securities, available for sale	23,888	21,627	73,985
Proceeds from principal payments and maturities of securities	108,949	71,988	46,170
Net change in loans	(35,357)	(12,211)	(73,304)
Proceeds from redemption of Federal Home Loan Bank Stock			749
Purchases of bank premises and equipment	(131)	(733)	(1,056)
Proceeds from sale of other real estate	4,199	5,848	2,053
Proceeds from sale of bank premises and equipment	4	7	2
Net cash from investing activities	(43,835)	4,946	(79,707)
Cash Flows From Financing Activities:
Net change in deposits	44,000	8,289	37,468
Net change in repurchase agreements and other borrowings	2,359	(188)	(410)
Net change in short-term advances from Federal Home Loan Bank		(10,000)	10,000
Long-term FHLB advances	15,000	14,709	38,666
Payments on long-term FHLB advances	(10,333)	(10,661)	(12,728)
Proceeds from note payable		5,000
Payments on note payable	(704)	(206)
Redemption of acquired preferred shares and unpaid dividends and interest		(6,066)
Proceeds from issuance of common stock, including options and grants, including tax benefits	49	2	2
Purchase of common stock	(668)	(31)	(111)
Dividends paid	(3,229)	(2,972)	(2,721)
Net cash from financing activities	46,474	(2,124)	70,166
Net change in cash and cash equivalents	15,202	10,879	(5,692)
Cash and cash equivalents at beginning of year	28,048	17,169	22,861
Cash and cash equivalents at end of year	43,250	28,048	17,169
Supplemental disclosures of cash flow information Cash paid during the year for:
Interest expense	4,393	4,033	3,850
Income taxes	800	200	1,200
Supplemental schedules of non-cash investing activities
Real estate acquired through foreclosure	3,735	$ 3,394	$ 3,275
Transfer of premises and equipment to held for sale	$ 969

SUMMARY OF SIGNIFICANT ACCOUNTI

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	12 Months Ended
	Dec. 31, 2016
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation : The consolidated financial statements include the accounts of Kentucky Bancshares, Inc. (the Company), its wholly-owned subsidiaries, Kentucky Bank (the Bank) and KBI Insurance Company, Inc., a captive insurance subsidiary, and the Bank’s wholly-owned subsidiary, KB Special Assets Unit, LLC. Intercompany transactions and balances have been eliminated in consolidation. Nature of Operations : The Bank operates under a state bank charter and provides full banking services, including trust services, to customers located in Bourbon, Clark, Elliot, Fayette, Harrison, Jessamine, Madison, Rowan, Scott, Woodford and adjoining counties in Kentucky. As a state bank, the Bank is subject to regulation by the Kentucky Department of Financial Institutions and the Federal Deposit Insurance Corporation (FDIC). The Company, a bank holding company, is regulated by the Federal Reserve. KBI Insurance Company, Inc., a captive insurance subsidiary, is regulated by the State of Nevada Division of Insurance. Estimates in the Financial Statements : The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash Flows : For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks, federal funds sold, and certain short-term investments with maturities of less than three months. Generally, federal funds are sold for one-day periods. Net cash flows are reported for loan, deposit and short-term borrowing transactions. Interest Bearing Time Deposits: Interest bearing time deposits in other financial institutions have original maturities between one and three years and are carried at cost. Securities : The Company is required to classify its securities portfolio into one of three categories: trading securities, securities available for sale and securities held to maturity. Fair value adjustments are made to the securities based on their classification with the exception of the held to maturity category. The Company has no investments classified as held to maturity. Securities available for sale and trading securities are carried at fair value. Unrealized holding gains and losses for securities which are classified as available for sale are reported in other comprehensive income, net of deferred tax. Unrealized holding gains and losses for securities which are classified as trading securities are reported in other income. Interest income includes amortization of purchase premium or discount. Premiums and discounts on securities are amortized on the level-yield method without anticipating prepayments, except for mortgage backed securities where prepayments are anticipated. Gains and losses on sales are recorded on the settlement date and determined using the specific identification method. Management evaluates securities for other-than-temporary impairment (“OTTI”) at least on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. For securities in an unrealized loss position, management considers the extent and duration of the unrealized loss, and the financial condition and near-term prospects of the issuer. Management also assesses whether it intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings. For debt securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: 1) OTTI related to credit loss, which must be recognized in the income statement and 2) other-than-temporary impairment (OTTI) related to other factors, which is recognized in other comprehensive income. The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. For equity securities, the entire amount of impairment is recognized through earnings. Loans Held for Sale : Loans held for sale are carried at the lower of cost or fair value as determined by outstanding commitments from investors or current secondary market prices, calculated on the aggregate loan basis. The Company also provides for any losses on uncovered commitments to lend or sell. Loans are generally sold with servicing rights retained but with some exceptions. Loans: Loans that management has the intent and ability to hold for the foreseeable future or until maturity are stated at the amount of unpaid principal, net of deferred loan origination fees and costs and acquired purchase premiums and discounts, reduced by an allowance for loan losses. Interest income on loans is recognized on the accrual basis except for those loans on a nonaccrual status. Interest income on real estate mortgage (1-4 family residential and multi-family residential) and consumer loans is discontinued at the time the loan is 90 days delinquent, and interest income on real estate construction, non-farm and non-residential mortgage, agricultural and commercial loans is discontinued at the time the loan is 120 days delinquent, unless the loan is well-secured and in process of collection. Past due status is based on the contractual terms of the loan. In all cases, loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful. Nonaccrual loans and loans past due 90 days still on accrual include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans. Loan origination fees and certain direct origination costs are capitalized and recognized as an adjustment of the yield on the related loan. Recorded investment is the outstanding loan balance, excluding accrued interest receivable. When interest accrual is discontinued, interest income received on such loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Typically, the Company seeks to establish a payment history of at least six consecutive payments made on a timely basis before returning a loan to accrual status. Consumer and credit card loans are typically charged off no later than 120 days past due. Loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful. Concentration of Credit Risk: Most of the Company’s business activity is with customers located within Bourbon, Clark, Elliott, Fayette, Harrison, Jessamine, Madison, Rowan, Scott, Woodford and surrounding counties located in Kentucky. Therefore, the Company’s exposure to credit risk is significantly affected by changes in the economy in these counties. Allowance for Loan Losses : The allowance for loan losses is a valuation allowance for probable incurred credit losses. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. Adjustments are made to the historical loss experience ratios based on the qualitative factors as outlined in the regulatory Interagency Policy Statement on the Allowance for Loan and Lease Losses. These qualitative factors include the nature and volume of portfolio, economic and business conditions, classification, past due and non-accrual trends. Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged off. The allowance for loan losses is evaluated at the portfolio segment level using the same methodology for each segment. The recent historical actual net losses is the basis for the general reserve for each segment which is then adjusted for qualitative factors as outlined above (i.e., nature and volume of portfolio, economic and business conditions, classification, past due and non-accrual trends) specifically evaluated at individual segment levels. The allowance consists of specific and general components. The specific component relates to loans that are individually classified as impaired. The general component covers non-classified loans and is based on historical loss experience adjusted for current factors for non-classified loans and a migration analysis for classified loans. A loan is impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. Loans, for which the terms have been modified, and for which the borrower is experiencing financial difficulties and has been granted a concession, are considered troubled debt restructurings and classified as impaired. Loans are charged off when available information confirms that loans, or portions thereof, are uncollectible. While management considers the number of days a loan is past due in its evaluation process, we also consider a variety of other factors. Factors considered by management in evaluating the charge-off decision include collateral value, availability of current financial information for both borrower and guarantor, and the probability of collecting contractual principal and interest payments. These considerations may result in loans being charged off before they are 90 days or more past due. This evaluation framework for determining charge-offs is consistently applied to each segment. From time to time, the Company will charge-off a portion of impaired and non-performing loans. Loans that meet the criteria under ASC 310 are evaluated individually for impairment. Management considers payment status, collateral value, availability of current financial information for the borrower and guarantor, actual and expected cash flows, and probability of collecting amounts due. If a loan’s collection status is deemed to be collateral dependent or foreclosure is imminent, the loan is charged down to the fair value of the collateral, less selling costs. In circumstances where the loan is not deemed to be collateral dependent, but we believe, after completing our evaluation process, that probable loss has been incurred, we will provide a specific allocation on that loan. The impact of recording partial charge-offs is a reduction of gross loans and a reduction of the loan loss reserve. The net loan balance is unchanged in instances where the loan had a specific allocation as a component of the allowance for loan losses. The allowance as a percentage of total loans may be lower as the allowance no longer needs to include a component for the loss, which has now been recorded, and net charge-off amounts are increased as partial charge-offs are recorded. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Commercial and real estate construction and real estate mortgage loans (multi-family residential, and non-farm and non-residential mortgage) over $200 thousand are individually evaluated for impairment. If a loan is impaired, a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Large groups of smaller balance homogeneous loans, such as consumer and 1-4 family residential real estate loans, are collectively evaluated for impairment, and accordingly, they are not separately identified for impairment disclosures. Troubled debt restructurings are separately identified for impairment disclosures and are measured at the present value of estimated future cash flows using the loan’s effective rate at inception. If a troubled debt restructuring is considered to be a collateral dependent loan, the loan is reported, net, at the fair value of the collateral. For troubled debt restructurings that subsequently default, the Company determines the amount of reserve in accordance with the accounting policy for the allowance for loan losses. The general component covers non-impaired loans and is based on historical loss experience adjusted for current factors. The historical loss experience is determined by portfolio segment and is based on the actual loss history experienced by the Company over the most recent 5 years. This actual loss experience is supplemented with other economic factors based on the risks present for each portfolio segment. These economic factors include consideration of the following: levels of and trends in delinquencies and impaired loans; levels of and trends in charge-offs and recoveries; trends in volume and terms of loans; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedures, and practices; experience, ability, and depth of lending management and other relevant staff; national and local economic trends and conditions; industry conditions; and effects of changes in credit concentrations. A “portfolio segment” is defined as the level at which an entity develops and documents a systematic methodology to determine its allowance for loan losses. The Company has identified the following portfolio segments: commercial, real estate construction, real estate mortgage, agricultural, consumer (credit cards and other consumer) and other (overdrafts). Commercial: These loans to businesses do not have real estate as the underlying collateral. Instead of real estate, collateral could be business assets such as equipment or accounts receivable or the personal guarantee of one or more guarantors. These loans generally present a higher level of risk than loans secured by commercial real estate because in the event of default by the borrower, the business assets must be liquidated and/or guarantors pursued for deficit funds. Business assets are worth more while they are in use to produce income for the business and worth significantly less if the business is no longer in operation. Real estate construction: Real estate construction consist of loans secured by real estate for additions or alterations to existing structures, as well as constructing new structures. They include fixed and floating rate loans. Real estate construction loans generally present a higher level of risk than loans secured by 1-4 family residential real estate primarily because of the length of the construction period and the potential change in prices of construction materials. Real Estate Mortgage: 1-4 family residential: Loans secured by 1-4 family residential real estate represent the lowest risk of loans for the Company. They include fixed and floating rate loans as well as loans for commercial purposes or consumer purposes. The Company generally does not hold subprime residential mortgages. Borrowers with loans in this category, whether for commercial or consumer purposes, tend to make their payments timely as they do not want to risk foreclosure and loss of property. Multifamily residential: Loans secured by multifamily residential real estate consist primarily of loans secured by apartment buildings and can be either fixed or floating rate loans. Multi-family residential real estate loans generally present a higher level of risk than loans secured by 1-4 family residential real estate because the borrower’s repayment ability typically comes from rents from tenants. Local economic and employment fluctuations impact rent rolls and potentially the borrower’s repayment ability. Non-farm & non-residential: Loans secured by non-farm non-residential real estate consist of loans secured by commercial real estate that is not owner occupied. These loans generally consist of loans collateralized by property whereby rents received from commercial tenants of the borrower are the source of repayment. These loans generally present a higher level of risk than loans secured by owner occupied commercial real estate because repayment risk is expanded to be dependent on the success of multiple businesses which are paying rent to the borrower. If multiple businesses fail due to deteriorating economic conditions or poor business management skills, the borrower may not have enough rents to cover their monthly payment. Repayment risk is also increased depending on the level of surplus available commercial lease space in the local market area. Agricultural: These loans to agricultural businesses do not have real estate as the underlying collateral. Instead of real estate, collateral could be assets such as equipment or accounts receivable or the personal guarantee of one or more guarantors. These loans generally present a higher level of risk than loans secured by real estate because in the event of default by the borrower, the assets must be liquidated and/or guarantors pursued for deficit funds. Farm assets are worth more while they are in use to produce income and worth significantly less if the farm is no longer in operation. Consumer: Consumer loans are generally loans to borrowers for non-business purposes. They can be either secured or unsecured. Consumer loans are generally small in the individual amount of principal outstanding and are repaid from the borrower’s private funds earned from employment. Consumer lending risk is very susceptible to local economic trends. If there is a consumer loan default, any collateral that may be repossessed is generally not well maintained and has a diminished value. For this reason, consumer loans tend to have higher overall interest rates to cover the higher cost of repossession and charge-offs. However, due to their smaller average balance per borrower, consumer loans are collectively evaluated for impairment in determining the appropriate allowance for loan losses. Other: All other loan types are aggregated together for credit risk evaluation due to the varying nature but small number of the remaining types of loans in the Company’s loan portfolio. Loans in this segment include but are not limited to overdrafts. Due to their smaller balance, other loans are collectively evaluated for impairment in determining the appropriate allowance for loan losses. Due to the overall high level of real estate mortgage loans within the loan portfolio as a whole, as compared to other portfolio segments, for risk assessment and allowance purposes this segment was segregated into more granular pools by collateral property type. Real estate construction loans have the highest qualitative adjustments for economic and other credit risk factors, such as the incomplete status of the collateral and the effect of the recent economic downturn on these types of properties. The non-farm non-residential and the multi-family real estate mortgage loan portfolio segments had the next highest level of qualitative adjustments due to the effects of local markets and economies on the underlying collateral property values, as well as for industry concentrations and risks related to the this type of property. Within the commercial portfolio, risk analysis is performed primarily based on the individual loan type. Mortgage Servicing Rights : The Bank has sold certain residential mortgage loans to the Federal Home Loan Mortgage Corporation (FHLMC) while retaining the servicing rights. Servicing rights are recognized separately when they are acquired through sales of loans. When mortgage loans are sold, servicing rights are initially recorded at fair value with the income statement effect recorded in gain on sale of mortgage loans. Fair value is based on market prices for comparable mortgage servicing contracts, when available, or alternatively, is based on a valuation model that calculates the present value of estimated future net servicing income. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income, such as the cost to service, the discount rate, the custodial earnings rate, an inflation rate, ancillary income, prepayment speeds and default rates and losses. All classes of servicing assets are subsequently measured using the amortization method which requires servicing rights to be amortized into loan service fee income, net, included in non-interest income in proportion to, and over the period of, the estimated future net servicing income of the underlying loans. Servicing assets are evaluated for impairment based upon the fair value of the rights as compared to carrying amount. Impairment is determined by stratifying rights into groupings based on predominant risk characteristics, such as interest rate, loan type and investor type. Impairment is recognized through a valuation allowance for an individual grouping, to the extent that fair value is less than the carrying amount. If the Company later determines that all or a portion of the impairment no longer exists for a particular grouping, a reduction of the allowance may be recorded as an increase to income. The fair values of servicing rights are subject to significant fluctuations as a result of changes in estimated and actual prepayment speeds and default rates and losses. Servicing fee income, which is reported on the income statement as loan service income, net, is recorded for fees earned for servicing loans. The fees are based on a contractual percentage of the outstanding principal or a fixed amount per loan and are recorded as income when earned. The amortization of mortgage servicing rights and valuation allowance are netted against loan servicing fee income. Servicing fees totaled $510 thousand, $486 thousand, and $471 thousand for the years ended December 31, 2016, 2015 and 2014 and are included in loan service fee income in the income statement. Late fees and ancillary fees related to loan servicing are not material. Federal Home Loan Bank (FHLB) Stock : The Bank is a member of the FHLB system. Members are required to own a certain amount of stock based on the level of borrowings and other factors, and may invest in additional amounts. FHLB stock is carried at cost, classified as a restricted security, and periodically evaluated for impairment based on ultimate recovery of par value. Both cash and stock dividends are reported as income. Bank Premises and Equipment : Land is carried at cost. Bank premises and equipment are stated at cost less accumulated depreciation. Buildings and related components are depreciated using the straight-line method with useful lives ranging from 5 to 40 years. Furniture, fixtures and equipment are depreciated using the straight-line (or accelerated) method with useful lives ranging from 3 to 10 years. Real Estate Owned : Real estate acquired through foreclosure is initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at the lower of cost or fair value less estimated costs to sell. The value of the underlying loan is written down to the fair value of the real estate to be acquired by a charge to the allowance for loan losses, if necessary. Any subsequent write-downs are charged to operating expenses. Operating expenses of such properties, net of related income, and gains and losses on their disposition are included in other expenses. Investments in Limited Partnerships : Investments in limited partnerships represent the Company’s investments in affordable housing projects for the primary purpose of available tax benefits. The Company is a limited partner in these investments and as such, the Company is not involved in the management or operation of such investments. These investments are accounted for using the equity method of accounting. Under the equity method of accounting, the Company records its share of the partnership’s earnings or losses in its income statement and adjusts the carrying amount of the investments on the balance sheet. These investments are evaluated for impairment when events indicate the carrying amount may not be recoverable. The investment recorded at December 31, 2016 was $4.7 million and $4.0 million at December 31, 2015, respectively, and is included with other assets in the balance sheet. Repurchase Agreements : Substantially all repurchase agreement liabilities represent amounts advanced by various customers. Securities are pledged to cover these liabilities, which are not covered by federal deposit insurance. Stock-Based Compensation : Compensation cost is recognized for stock options and restricted stock awards issued to employees, based on the fair value of these awards at the date of grant. A Black-Scholes model is utilized to estimate the fair value of stock options, while the market price of the Company’s common stock at the date of grant is used for restricted stock awards. Compensation cost is recognized over the required service period, generally defined as the vesting period. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award. Income Taxes : Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The Company recognizes interest related to income tax matters as interest expense and penalties related to income tax matters as other expense. Retirement Plans : Employee 401(k) and profit sharing plan expense is the amount of matching contributions. Goodwill and Intangible Assets : Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but tested for impairment at least annually. The Company has selected December 31 as the date to perform the annual impairment test. Intangible assets with definite useful lives are amortized over their estimated useful lives to their estimated residual values. Goodwill is the only intangible asset with an indefinite life on our balance sheet. Intangible assets consist of core deposit intangible assets arising from whole bank and branch acquisitions. They are initially measured at fair value and then are amortized on either an accelerated or straight-line basis, over ten or fifteen years. Purchased Credit Impaired Loans: As part of the Madison Financial Corporation acquisition, the Company purchased loans, some of which have shown evidence of credit deterioration since origination. These purchased credit impaired loans are recorded at the amount paid, such that there is no carryover of the seller’s allowance for loan losses. After acquisition, losses are recognized by an increase in the allowance for loan losses. Such purchased credit impaired loans are accounted for individually. The Company estimated the amount and timing of expected cash flows for each loan and the expected cash flows in excess of amount paid is recorded as interest income over the remaining life of the loan. The excess of the loan's contractual principal and interest over expected cash flows is not recorded (non-accretable difference). Over the life of the loan, expected cash flows continue to be estimated. If the present value of expected cash flows is less than the carrying amount, a loss is recorded as a provision for loan losses. If the present value of expected cash flows is greater than the carrying amount, it is recognized as part of future interest income. Loan Commitments and Related Financial Instruments : Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit, issued to meet customer financing needs. The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded. Earnings Per Common Share : Basic earnings per common share is net income divided by the weighted average number of common shares outstanding during the period. Diluted earnings per common share include the dilutive effect of additional potential common shares issuable under stock options. Earnings and dividends per share are restated for all stock splits and dividends through the date of issuance of the financial statements. Comprehensive Income (Loss) : Comprehensive income consists of net income and other comprehensive income. Other comprehensive income (loss) includes unrealized gains and losses on securities available for sale, which are also recognized as a separate component of equity. Fair Value of Financial Instruments : Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in a separate note. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect the estimates. Operating Segments : While the Company’s chief decision makers monitor the revenue streams of the various Company products and services, operations are managed and financial performance is evaluated on a Company-wide basis. Accordingly, all of the Company’s operations are considered by management to be aggregated into one reportable operating segment: banking. Reclassifications : Some items in the prior year financial statements were reclassified to conform to the current presentation. Reclassifications had no effect on prior yet net income or stockholders’ equity. Adoption of New Accounting Standards ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.” Issued in August 2016, ASU 2016-15 provides guidance to reduce the diversity in practice of how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments of ASU 2016-15 provide guidance on eight specific cash flow: (i) debt prepayment or debt extinguishment costs; (ii) settlement of zero-coupon bonds; (iii) contingent consideration payments made after a business combination; (iv) proceeds from the settlement of insurance claims; (v) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; (vi) distributions received from equity method investees; (vii) beneficial interests in securitization transactions and (viii) separately identifiable cash flows and application

RESTRICTIONS ON CASH AND DUE FR

RESTRICTIONS ON CASH AND DUE FROM BANKS	12 Months Ended
	Dec. 31, 2016
RESTRICTIONS ON CASH AND DUE FROM BANKS
RESTRICTIONS ON CASH AND DUE FROM BANKS	NOTE 2 - RESTRICTIONS ON CASH AND DUE FROM BANKS Included in cash and due from banks are certain interest bearing deposits that are held at the Federal Reserve or maintained in vault cash in accordance with average balance requirements specified by the Federal Reserve Board of Governors. The reserve requirement was $2.3 million at December 31, 2016 and $0 at December 31, 2015.

SECURITIES AVAILABLE FOR SALE

SECURITIES AVAILABLE FOR SALE	12 Months Ended
	Dec. 31, 2016
SECURITIES AVAILABLE FOR SALE
SECURITIES AVAILABLE FOR SALE	NOTE 3 - SECURITIES AVAILABLE FOR SALE The following table summarizes the amortized cost and fair value of the securities at December 31, 2016 and 2015 and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) were as follows: Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value Available for Sale December 31, 2016 U. S. government agencies $ $ $ $ States and political subdivisions Mortgage-backed - residential Equity securities — Total $ $ $ $ December 31, 2015 U. S. government agencies $ $ $ $ States and political subdivisions Mortgage-backed - residential Equity securities — Total $ $ $ $ The amortized cost and fair value of securities at December 31, 2016, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity are shown separately. Amortized Fair Cost Value Due in one year or less $ $ Due after one year through five years Due after five years through ten years Due after ten years Mortgage-backed - residential Equity Total $ $ Trading assets totaling $5.6 million are excluded from securities available for sale and consist primarily of municipal securities which are generally held for a minimal period of time. Proceeds from sales of securities during 2016, 2015 and 2014 were $23.9 million, $21.7 million and $74.0 million. Gross gains of $317 thousand, $425 thousand, and $1.4 million and gross losses of $30 thousand, $13 thousand and $400 thousand, were realized on those sales, respectively. The tax provision related to these realized gains and losses was $98 thousand, $140 thousand and $328 thousand, respectively. Securities with an approximate carrying value of $252.4 million and $246.2 million at December 31, 2016 and 2015, were pledged to secure public deposits, trust funds, securities sold under agreements to repurchase and for other purposes as required or permitted by law. Securities with unrealized losses at year end 2016 and 2015 not recognized in income are as follows: 2016 Less than 12 Months 12 Months or More Total Fair Unrealized Fair Unrealized Fair Unrealized Description of Securities Value Loss Value Loss Value Loss U.S. Government agencies $ $ $ — $ — $ $ States and municipals — — Mortgage-backed - residential Total temporarily impaired $ $ $ $ $ $ 2015 Less than 12 Months 12 Months or More Total Fair Unrealized Fair Unrealized Fair Unrealized Description of Securities Value Loss Value Loss Value Loss U.S. Government agencies $ $ $ $ $ $ States and municipals Mortgage-backed - residential Total temporarily impaired $ $ $ $ $ $ The Company evaluates securities for other than temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. In analyzing an issuer’s financial condition, the Company may consider whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition. Unrealized losses on securities have not been recognized into income because the issues are of high credit quality, management does not intend to sell and it is more likely than not that management would be required to sell the securities prior to their anticipated recovery, and the decline in fair value is largely due to changes in interest rates. The fair value is expected to recover as the securities approach maturity. At December 31, 2016, eleven U.S. government agency securities have unrealized losses of 1.1% from their amortized cost, seventy mortgage-backed securities have unrealized losses of 1.6% from their amortized cost basis, and fifty two states and municipals have unrealized losses of 1.8% from their amortized cost basis. Management believes the declines in fair value from these and other securities are largely due to changes in interest rates. The Company believes there is no other than temporary impairment and does not have the intent to sell these securities and it is likely that it will not be required to sell the securities before their anticipated recovery.

LOANS

LOANS	12 Months Ended
	Dec. 31, 2016
LOANS
LOANS	NOTE 4 - LOANS Loans at year-end were as follows: 12/31/2016 12/31/2015 Commercial $ $ Real estate construction Real estate mortgage: 1-4 family residential Multi-family residential Non-farm & non-residential Agricultural Consumer Other Total $ $ As discussed under Footnote 23 “Acquisition”, the above loan balances include loans purchased in the acquisition of Madison Financial Corporation. All loan balances acquired in the Madison Financial Corporation acquisition have no allocated allowance for loan losses. The composition of loans acquired, as of December 31, 2016 and December 31, 2015, is as follows: 12/31/2016 12/31/2015 Commercial $ $ Real estate construction Real estate mortgage: 1-4 family residential Multi-family residential Non-farm & non-residential Agricultural Consumer Total $ $ The following table presents the activity in the allowance for loan losses by portfolio segment for the years ending December 31, 2016, 2015 and 2014 (in thousands): Beginning Ending December 31, 2016 Balance Charge-offs Recoveries Provision Balance Commercial $ $ $ $ $ Real estate Construction — Real estate mortgage: 1-4 family residential Multi-family residential — Non-farm & non-residential — Agricultural Consumer Other Unallocated — — $ $ $ $ $ Beginning Ending December 31, 2015 Balance Charge-offs Recoveries Provision Balance Commercial $ $ $ — $ $ Real estate Construction — Real estate mortgage: 1-4 family residential 503 Multi-family residential Non-farm & non-residential — 314 Agricultural (242) Consumer Other Unallocated — — $ $ $ $ $ Beginning Ending December 31, 2014 Balance Charge-offs Recoveries Provision Balance Commercial $ $ $ — $ $ Real estate Construction — Real estate mortgage: 1-4 family residential Multi-family residential Non-farm & non-residential — Agricultural Consumer Other Unallocated — — $ $ $ $ $ Purchased Credit Impaired Loans: The Company has purchased loans, for which there was, at acquisition, evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected. The carrying amount of those loans totaled $1.9 million at December 31, 2016 and $3.5 million at December 31, 2015. There was no associated allowance for loan losses as of December 31, 2016 or December 31, 2015 for purchased credit impaired loans. The contractually required payments of these loans were $2.6 million at December 31, 2016. Accretable yield, or income expected to be collected, is as follows (in thousands): Year Ended Year Ended 12/31/2016 12/31/2015 Balance, beginning of period $ $ — New loans purchased — Accretion of income Balance, end of period $ $ The following tables present the balance in the allowance for loan losses and the recorded investment (excluding accrued interest receivable amounting to $2.4 million and $2.3 million) in loans by portfolio segment and based on impairment method as of December 31, 2016 and December 31, 2015 (in thousands): Individually Collectively Purchased Evaluated for Evaluated for Credit As of December 31, 2016 Impairment Impairment Impaired Total Allowance for Loan Losses: Commercial $ — $ $ — $ Real estate construction — — Real estate mortgage: 1-4 family residential — Multi-family residential — — Non-farm & non-residential — Agricultural — Consumer — — Other — — Unallocated — — $ $ $ — $ Loans: Commercial $ $ $ — $ Real estate construction — Real estate mortgage: 1-4 family residential Multi-family residential — Non-farm & non-residential Agricultural Consumer — — Other — — $ $ $ $ Individually Collectively Purchased Evaluated for Evaluated for Credit As of December 31, 2015 Impairment Impairment Impaired Total Allowance for Loan Losses: Commercial $ — $ $ — $ Real estate construction — — Real estate mortgage: 1-4 family residential — Multi-family residential — — Non-farm & non-residential — Agricultural — Consumer — — Other — — Unallocated — — $ $ $ — $ Loans: Commercial $ — $ $ Real estate construction Real estate mortgage: 1-4 family residential Multi-family residential — — Non-farm & non-residential Agricultural Consumer — — Other — — Total $ $ $ $ The following table presents loans individually evaluated for impairment by class of loans as of December 31, 2016 Unpaid Allowance for Average Interest Cash Basis Principal Recorded Loan Losses Recorded Income Interest (in thousands): Balance Investment Allocated Investment Recognized Recognized With no related allowance recorded: Commercial $ $ $ — $ $ $ Real estate construction — Real estate mortgage: 1-4 family residential — — — Multi-family residential — — — — — — Non-farm & non-residential — — — — — — Agricultural — — — Consumer — — — — — — Other — — — — — — With an allowance recorded: Commercial — — — — — — Real estate construction — — — — — — Real estate mortgage 1-4 family residential Multi-family residential — — — — — — Non-farm & non-residential Agricultural Consumer — — — — — — Other — — — — — — Total $ $ $ $ $ $ The recorded investment in loans excludes accrued interest receivable and loan origination fees, net due to immateriality. The following table presents loans individually evaluated for impairment by class of loans as of December 31, 2015. Unpaid Allowance for Average Interest Cash Basis Principal Recorded Loan Losses Recorded Income Interest (in thousands): Balance Investment Allocated Investment Recognized Recognized With no related allowance recorded: Commercial $ — $ — $ — $ — $ — $ — Real estate construction — Real estate mortgage: 1-4 family residential — Multi-family residential — — — — — — Non-farm & non-residential — — — — — Agricultural — Consumer — — — — — — Other — — — — — — With an allowance recorded: Commercial — — — — — — Real estate construction — — — — — — Real estate mortgage 1-4 family residential Multi-family residential — — — — — Non-farm & non-residential Agricultural — — Consumer — — — — — — Other — — — — — — Total $ $ $ $ $ $ The recorded investment in loans excludes accrued interest receivable and loan origination fees, net due to immateriality. The following table presents loans individually evaluated for impairment by class of loans as of December 31, 2014 Unpaid Allowance for Average Interest Cash Basis Principal Recorded Loan Losses Recorded Income Interest (in thousands): Balance Investment Allocated Investment Recognized Recognized With no related allowance recorded: Commercial $ — $ — $ — $ — $ — $ — Real estate construction — — — — — — Real estate mortgage: 1-4 family residential — Multi-family residential — — — — — — Non-farm & non-residential — — — — — Agricultural — Consumer — — — — — — Other — — — — — — With an allowance recorded: Commercial — — — — — — Real estate construction — — — — — — Real estate mortgage 1-4 family residential Multi-family residential Non-farm & non-residential Agricultural Consumer — — — — — — Other — — — — — — Total $ $ $ $ $ $ The recorded investment in loans excludes accrued interest receivable and loan origination fees, net due to immateriality. Nonperforming loans include impaired loans and smaller balance homogeneous loans, such as residential mortgage and consumer loans, that are collectively evaluated for impairment. Nonaccrual loans secured by real estate make up 96.9% of the total nonaccrual loans. The following tables present the recorded investment in nonaccrual loans, loans past due over 90 days still on accrual, and troubled debt restructurings, excluding purchase credit impaired loans, by class of loans as of December 31, 2016 and 2015 (in thousands): Loans Past Due Over 90 Days Still Troubled Debt As of December 31, 2016 Nonaccrual Accruing Restructurings Commercial $ $ $ — Real estate construction — — Real estate mortgage: 1-4 family residential Multi-family residential — — Non-farm & non-residential — Agricultural — Consumer — — Total $ $ $ Loans included in totals above acquired from Madison Financial Corporation $ $ $ — Loans Past Due Over 90 Days Still Troubled Debt As of December 31, 2015 Nonaccrual Accruing Restructurings Commercial $ $ — $ — Real estate construction — Real estate mortgage: 1-4 family residential Multi-family residential — — — Non-farm & non-residential Agricultural — — Consumer — Other — — — Total $ $ $ Loans included in totals above acquired from Madison Financial Corporation $ $ $ — The following tables present the aging of the recorded investment in past due and non-accrual loans as of December 31, 2016 and 2015 by class of loans (in thousands): 2016 30–59 60–89 Greater than Total Days Days 90 Days Past Due & Loans Not (in thousands) Past Due Past Due Past Due Non-accrual Non-accrual Past Due Commercial $ $ $ $ $ $ Real estate construction — — — Real estate mortgage: 1-4 family residential Multi-family residential — Non-farm & non-residential — Agricultural Consumer — Other — — — — — Total $ $ $ $ $ $ Loans included in totals above acquired from Madison Financial Corp. $ $ — $ $ $ $ 2015 30–59 60–89 Greater than Total Days Days 90 Days Past Due & Loans Not (in thousands) Past Due Past Due Past Due Non-accrual Non-accrual Past Due Commercial $ $ $ — $ $ $ Real estate construction — — Real estate mortgage: 1-4 family residential Multi-family residential — — — — — Non-farm & non-residential Agricultural — Consumer Other — — — — — Total $ $ $ $ $ $ Loans included in totals above acquired from Madison Financial Corp. $ $ $ $ $ $ Troubled Debt Restructurings: At December 31, 2016 and 2015, the Company had a recorded investment in troubled debt restructurings of $2.1 million and $2.2 million. The Company has allocated $40 thousand and $101 thousand in reserves to customers whose loan terms have been modified in troubled debt restructurings as of December 31, 2016 and 2015. The Company has not committed to lend additional amounts as of December 31, 2016 and 2015 to customers with outstanding loans that are classified as troubled debt restructurings. During the years ending December 31, 2016 and 2015, no loans were modified that met the definition of troubled debt restructuring. The allowance for loan losses for loans classified as troubled debt restructurings decreased $61 thousand for the year ending December 31, 2016 and increased $101 thousand for the year ending December 31, 2015. Loans classified as troubled debt restructurings resulted in no charge offs during the periods ending December 31, 2016 and 2015. For the years ending December 31, 2016, 2015 and 2014, no loans modified as troubled debt restructurings had defaulted on payment. Credit Quality Indicators: The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis includes primarily non-homogeneous loans with an outstanding balance greater than $200 thousand such as commercial and commercial real estate loans. This analysis is performed on a quarterly basis. The Company uses the following definitions for risk ratings: Special Mention. Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date. Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. 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 liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans. The following tables present the risk category of loans by class of loans, based on the most recent analysis performed, as of December 31, 2016 and 2015 (in thousands): Special (in thousands) Pass Mention Substandard Doubtful Commercial $ $ $ $ — Real estate construction — — Real estate mortgage: 1-4 family residential Multi-family residential — Non-farm & non-residential — Agricultural — Total $ $ $ $ Loans included in totals above acquired from Madison Financial Corporation $ $ $ $ — Special (in thousands) Pass Mention Substandard Doubtful Commercial $ $ $ $ — Real estate construction — Real estate mortgage: 1-4 family residential — Multi-family residential — Non-farm & non-residential — Agricultural — Total $ $ $ $ — Loans included in totals above acquired from Madison Financial Corporation $ $ $ $ — For consumer loans, the Company evaluates the credit quality based on the aging of the recorded investment in loans, which was previously presented. Non-performing consumer loans are loans which are greater than 90 days past due or on non-accrual status, and total $8 thousand at December 31, 2016 and $44 thousand at December 31, 2015. Non-consumer loans with an outstanding balance less than $200 thousand are evaluated similarly to consumer loans. Loan performance is evaluated based on delinquency status. Both are reviewed at least quarterly and credit quality grades are updated as needed. Certain directors and executive officers of the Company and companies in which they have beneficial ownership were loan customers of the Bank during 2016 and 2015. An analysis of the activity with respect to all director and executive officer loans is as follows (in thousands): 2016 2015 Balance, beginning of year $ $ New loans — Effect of changes in composition of related parties — Repayments Balance, end of year $ $ Loan Servicing Mortgage loans serviced for others are not included in the accompanying consolidated balance sheets. The unpaid principal balances of mortgage loans serviced for others were approximately $206.8 million and $196.2 million at December 31, 2016 and 2015. Custodial escrow balances maintained in connection with the foregoing loan servicing, and included in demand deposits, were approximately $935 thousand and $890 thousand at December 31, 2016 and 2015. Activity for mortgage servicing rights and the related valuation allowance follows (in thousands): 2016 2015 2014 Servicing Rights, net: Beginning balance $ $ $ Additions Amortization Change in valuation allowance Ending balance $ $ $ Valuation Allowance: Beginning balance $ $ $ Additions expensed — Reductions credited to operations Ending balance $ $ $ The fair value of servicing rights was $1.8 million and $1.7 million at year-end 2016 and 2015. Fair value at year-end 2016 was determined using a discount rate of 12.0%, prepayment speeds ranging from 8.5% to 45.0%, depending on the stratification of the specific right, and default rates ranging from 0.1% to 0.9%. Fair value at year-end 2015 was determined using a discount rate of 12.0%, prepayment speeds ranging from 8.1% to 21.0%, depending on the stratification of the specific right, and default rates ranging from 0.1% to 0.9%. The weighted average amortization period is 16.3 years. Estimated amortization expense for each of the next five years is (in thousands): 2017 $ 2018 2019 2020 2021

REAL ESTATE OWNED

REAL ESTATE OWNED	12 Months Ended
	Dec. 31, 2016
REAL ESTATE OWNED
REAL ESTATE OWNED	NOTE 5 - REAL ESTATE OWNED Activity in real estate owned was as follows (in thousands): Year Ended December 31, 2016 2015 Beginning of year, net $ $ Additions Acquired with Madison Financial Corporation — Sales (Additions) subtractions to valuation allowance, net End of period, net $ $ Activity in the valuation allowance was as follows (in thousands): Year Ended December 31, 2016 2015 2014 Beginning of year $ $ $ Write-downs of other real estate, net Reductions from sale — End of Period $ $ $ Expenses related to foreclosed assets include (in thousands): Year Ended December 31, 2016 2015 2014 Net (gain) loss on sales, included in other income on income statement $ $ $ Additions to valuation allowance, net Operating expenses, net of rental income Repossession expense, net Net expenses $ $ $

PREMISES AND EQUIPMENT

PREMISES AND EQUIPMENT	12 Months Ended
	Dec. 31, 2016
PREMISES AND EQUIPMENT
PREMISES AND EQUIPMENT	NOTE 6 - PREMISES AND EQUIPMENT Year-end premises and equipment were as follows (in thousands): 2016 2015 Land and buildings $ $ Furniture and equipment Construction in process — Less accumulated depreciation Less: Held for sale — $ $ Depreciation expense was $1.3 million, $1.4 million and $1.3 million in 2016, 2015, and 2014. Certain premises, not included in premises and equipment above, are leased under operating leases. Minimum rental payments are as follows (in thousands): 2017 $ 2018 2019 2020 2021 Thereafter $

GOODWILL AND INTANGIBLE ASSETS

GOODWILL AND INTANGIBLE ASSETS	12 Months Ended
	Dec. 31, 2016
GOODWILL AND INTANGIBLE ASSETS
GOODWILL AND INTANGIBLE ASSETS	NOTE 7 - GOODWILL AND INTANGIBLE ASSETS The change in balance for goodwill during the year is as follows (in thousands): 2016 2015 2014 Beginning of year $ $ $ Acquired goodwill — — Impairment — — — End of year $ $ $ Goodwill is not amortized but instead evaluated periodically for impairment. Impairment exists when a reporting unit’s carrying value of goodwill exceeds its fair value, which is determined through a two-step impairment test. Step 1 includes the determination of the carrying value of our single reporting unit, including the existing goodwill and intangible assets, and estimating the fair value of the reporting unit. We determined the fair value of our reporting unit and compared it to its carrying amount. If the carrying amount of a reporting unit exceeds its fair value, we are required to perform a second step to the impairment test. Our annual impairment analysis as of December 31, 2016 and 2015 indicated that the Step 2 analysis was not necessary. If needed, Step 2 of the goodwill impairment test is performed to measure the impairment loss. Step 2 requires that the implied fair value of the reporting unit goodwill be compared to the carrying amount of that goodwill. If the carrying amount of the reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss shall be recognized in an amount equal to that excess. Acquired intangible assets were as follows at year-end (in thousands): 2016 2015 Gross Gross Carrying Accumulated Carrying Accumulated Amount Amortization Amount Amortization Amortized intangible assets: Core deposit intangibles $ $ $ $ Aggregate amortization expense was $244 thousand, $205 thousand and $140 thousand for 2016, 2015 and 2014. Estimated amortization expense for each of the next five years (in thousands): 2017 $ 2018 2019 2020 2021

DEPOSITS

DEPOSITS	12 Months Ended
	Dec. 31, 2016
DEPOSITS
DEPOSITS	NOTE 8 - DEPOSITS Time deposits of $250 thousand or more were $74.3 million and $61.2 million at year-end 2016 and 2015, respectively. At December 31, 2016, the scheduled maturities of time deposits for the next five years are as follows (in thousands): 2017 $ 2018 2019 2020 2021 Certain directors and executive officers of the Company and companies in whom they have beneficial ownership are deposit customers of the Bank. The amount of these deposits was approximately $5.8 million and $7.3 million at December 31, 2016 and 2015.

REPURCHASE AGREEMENTS AND OTHER

REPURCHASE AGREEMENTS AND OTHER BORROWINGS	12 Months Ended
	Dec. 31, 2016
REPURCHASE AGREEMENTS.
REPURCHASE AGREEMENTS AND OTHER BORROWINGS	NOTE 9 - REPURCHASE AGREEMENTS AND OTHER BORROWINGS Securities sold under agreements to repurchase are secured by U.S. Government securities and mortgage-backed securities with a total carrying amount of $29.4 million and $18.5 million at year-end 2016 and 2015. Repurchase agreements range in maturities from 1 day to 41 months. The securities underlying the agreements are maintained in a third-party custodian’s account under a written custodial agreement. Information concerning repurchase agreements for 2016, 2015 and 2014 is summarized as follows (in thousands): 2016 2015 2014 Average daily balance during the year $ $ $ Average interest rate during the year % % % Maximum month-end balance during the year $ $ $ Weighted average interest rate at year end % % % On July 20, 2015, the Company borrowed $5 million which had an outstanding balance of $4.1 million at December 31, 2016 and $4.8 million at December 31, 2015. The term loan has a fixed interest rate of 5.02%, requires quarterly principal and interest payments, matures July 20, 2025 and is collateralized by the Company’s stock. The maturity schedule for the term loan as of December 31, 2016 is as follows: 2017 $ 2018 2019 2020 2021 Thereafter $ At December 31, 2015 the Company had a $5 million revolving promissory note with a maturity date of July 19, 2016. Upon maturity, the Company renewed the revolving promissory note. The new note has similar terms as the original note and matures July 18, 2017. The Company had no outstanding balances related to this promissory note at December 31, 2016 or 2015.

FEDERAL HOME LOAN BANK ADVANCES

FEDERAL HOME LOAN BANK ADVANCES	12 Months Ended
	Dec. 31, 2016
FEDERAL HOME LOAN BANK ADVANCES
FEDERAL HOME LOAN BANK ADVANCES	NOTE 10 - FEDERAL HOME LOAN BANK ADVANCES At year-end, advances from the Federal Home Loan Bank were as follows (in thousands): 2016 2015 Long Term Advances Maturities range from June 2017 through March 2030, fixed rates from 1.00% to 6.86%, averaging 1.75% in 2016 and 1.77% in 2015 $ $ Advances are paid either on a monthly basis or at maturity. All advances require a prepayment penalty, and are secured by the Federal Home Loan Bank stock and substantially all first-mortgage residential, multi-family and farm real estate loans. Scheduled principal payments due on advances during the years subsequent to December 31, 2016 are as follows (in thousands): 2017 $ 2018 2019 2020 2021 Thereafter $

SUBORDINATED DEBENTURES

SUBORDINATED DEBENTURES	12 Months Ended
	Dec. 31, 2016
SUBORDINATED DEBENTURES.
SUBORDINATED DEBENTURES	NOTE 11 - SUBORDINATED DEBENTURES In August 2003, the Company formed Kentucky Bancshares, Statutory Trust I (“Trust”). The Trust issued $217 thousand of common securities to the Company and $7 million of trust preferred securities as part of a pooled offering of such securities. The Company issued $7.2 million subordinated debentures to the Trust in exchange for the proceeds of the offering, which debentures represent the sole asset of the Trust. The debentures paid interest quarterly at 7.06% for the first 5 years. Starting September 2008, the rate converted to three-month LIBOR plus 3.00% adjusted quarterly, which was 4.00% at year-end 2016. The Company is not considered the primary beneficiary of this Trust (variable interest entity), therefore the trust is not consolidated in the Company’s financial statements, but rather the subordinated debentures are shown as a liability. The Company may redeem the subordinated debentures, in whole or in part, beginning September 2008 at a price of 100% of face value. The subordinated debentures must be redeemed no later than 2033. The Company has the option to defer interest payments on the subordinated debentures from time to time for a period not to exceed five consecutive years. The subordinated debentures may be included in Tier I capital (with certain limitations applicable) under current regulatory guidelines and interpretations.

INCOME TAXES

INCOME TAXES	12 Months Ended
	Dec. 31, 2016
INCOME TAXES
INCOME TAXES	NOTE 12 - INCOME TAXES Income tax expense was as follows (in thousands): 2016 2015 2014 Current $ $ $ Deferred $ $ $ Year-end deferred tax assets and liabilities were due to the following (in thousands). No valuation allowance for the realization of deferred tax assets is considered necessary. 2016 2015 Deferred tax assets Allowance for loan losses $ $ Other real estate owned Nonaccrual loan interest Accrued expenses Acquisition market value adjustments AMT tax credit General business tax carryforward — Net operating loss carryforward — Unrealized loss on securities — Low income housing investments — Unearned income — Other Deferred tax liabilities Unrealized gain on securities — Bank premises and equipment FHLB stock Prepaid expenses Mortgage servicing rights Core deposit intangibles Low income housing investments — Acquisition loan loss recapture Other Net deferred tax asset $ $ Effective tax rates differ from federal statutory rates applied to financial statement income due to the following: 2016 2015 2014 U. S. federal income tax rate % % % Changes from the statutory rate Tax-exempt interest income Historic and low income tax credits Insurance captive Non-deductible interest expense related to carrying tax-exempt investments Non-deductible merger expenses — — Other % % % Federal income tax laws provided the First Federal Savings Bank, acquired by the Company in 2003, with additional bad debt deductions through 1987, totaling $1.3 million. Accounting standards do not require a deferred tax liability to be recorded on this amount, which otherwise would total a $441 thousand liability at December 31, 2016. The Company’s acquisition of First Federal Savings Bank did not require the recapture of the bad debt reserve. However, if Kentucky Bank was liquidated or otherwise ceased to be a bank, or if tax laws were to change, the $441 thousand would be recorded as expense. Unrecognized Tax Benefits The Company does not have any beginning and ending unrecognized tax benefits. The Company does not expect the total amount of unrecognized tax benefits to significantly increase or decrease in the next twelve months. There were no interest and penalties recorded in the income statement or accrued for the years ended December 31, 2016 and 2015. The Company and its subsidiaries file a consolidated U.S. Corporation income tax return and a corporate income tax return in the state of Kentucky. The Company is no longer subject to examination by taxing authorities for years before 2013.

EARNINGS PER SHARE

EARNINGS PER SHARE	12 Months Ended
	Dec. 31, 2016
EARNINGS PER SHARE
EARNINGS PER SHARE	NOTE 13 - EARNINGS PER SHARE The factors used in the earnings per share computation follow (in thousands): 2016 2015 2014 Basic Earnings Per Share Net income $ $ $ Weighted average common shares outstanding Basic earnings per share $ $ $ Diluted Earnings Per Share Net income $ $ $ Weighted average common shares outstanding Add effect of dilutive shares — — — Weighted average common shares outstanding including dilutive shares Diluted earnings per share $ $ $ Stock options of 1,200 shares common stock from 2016, 2,400 shares common stock from 2015 and 12,625 shares common stock from 2014 were excluded from diluted earnings per share because their impact was antidilutive. No restricted stock grants for 2016, 2015 and 2014 were excluded from diluted earnings per share because their impact was antidilutive.

RETIREMENT PLAN

RETIREMENT PLAN	12 Months Ended
	Dec. 31, 2016
RETIREMENT PLAN
RETIREMENT PLAN	NOTE 14 - RETIREMENT PLAN The Company has a qualified profit sharing plan which covers substantially all employees and includes a 401(k) provision. Profit sharing contributions, excluding the 401(k) provision, are at the discretion of the Company’s Board of Directors. Expense recognized in connection with the plan was $925 thousand, $815 thousand and $729 thousand in 2016, 2015 and 2014.

STOCK BASED COMPENSATION

STOCK BASED COMPENSATION	12 Months Ended
	Dec. 31, 2016
STOCK BASED COMPENSATION
STOCK BASED COMPENSATION	NOTE 15 - STOCK BASED COMPENSATION The Company has four share based compensation plans as described below. Total compensation cost that has been charged against income for those plans was $153 thousand, $133 thousand, and $111 thousand for 2016, 2015 and 2014. Two Stock Option Plans Under the expired 1993 Non-Employee Directors Stock Ownership Incentive Plan, the Company had also granted certain directors stock option awards which vest and become fully exercisable immediately and provided for issuance of up to 20,000 options. The exercise price of each option, which has a ten year life, was equal to the market price of the Company’s stock on the date of grant. The fair value of each option award is estimated on the date of grant using a closed form option valuation (Black-Scholes) model that uses various assumptions. Expected volatilities are based on historical volatilities of the Company’s common stock. The Company uses historical data to estimate option exercise and post-vesting termination behavior. The expected term of options granted is based on historical data and represents the period of time that options granted are expected to be outstanding, which takes into account that the options are not transferable. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of the grant. No options were granted in 2016, 2015 or 2014. Summary of activity in the two expired stock option plans for 2016 follows: Weighted Weighted Average Average Remaining Aggregate Exercise Contractual Intrinsic Shares Price Term Value Outstanding, beginning of year $ Granted — — Forfeited or expired Exercised — — Outstanding, end of year $ 9.2 months $ Vested and expected to vest $ 9.2 months $ Exercisable, end of period $ 9.2 months $ Options outstanding at year-end 2016 were as follows: Outstanding Exercisable Weighted Average Weighted Weighted Remaining Average Average Contractual Exercise Exercise Range of Exercise Prices Options Life (Months) Price Options Price From $31.00 to $31.00 per share 9.2 $ $ As of December 31, 2016, there was $0 of total unrecognized compensation cost related to nonvested stock options granted under the Plan. Since both stock option plans have expired, as of December 31, 2016, neither plan allows for additional options to be issued. 2005 Restricted Stock Grant Plan Under its expired 2005 Restricted Stock Grant Plan, total shares issuable under the plan were 50,000. There were no shares issued during 2016 and 5,385 shares issued during 2015. There were 916 shares forfeited during 2016 and 88 shares forfeited during 2015. A summary of changes in the Company’s nonvested shares for the year follows: Weighted-Average Fair Grant-Date Value Nonvested Shares Shares Fair Value Per Share Nonvested at January 1, 2016 $ $ Granted — — — Vested Forfeited Nonvested at December 31, 2016 $ $ As of December 31, 2016, there was $160 thousand of total unrecognized compensation cost related to nonvested shares granted under the Plan. The cost is expected to be recognized over a weighted-average period of 2.4 years. The total grant-date fair value of shares vested during the years ended December 31, 2016, 2015 and 2014 was $128 thousand, $105 thousand and $88 thousand. The vesting-date fair value of shares vested during 2016, 2015 and 2014 is immaterially different when compared to the grant-date fair value. Since the plan has expired, as of December 31, 2016, no additional restricted stock share awards will be issued. 2009 Stock Award Plan On May 13, 2009, the Company’s stockholders approved a stock award plan that provides for the granting of both incentive and nonqualified stock options and other share based awards. Total shares issuable under the plan are 150,000. There were 6,170 shares issued during 2016 and 1,465 shares issued during 2015. There were 265 shares forfeited during 2016 and none during 2015. A summary of changes in the Company’s nonvested shares for the year follows: Weighted-Average Fair Grant-Date Value Nonvested Shares Shares Fair Value Per Share Nonvested at January 1, 2016 $ $ Granted Vested Forfeited Nonvested at December 31, 2016 $ $ As of December 31, 2016 there was $172 thousand of total unrecognized compensation cost related to nonvested shares granted under the Plan. The cost is expected to be recognized over a weighted-average period of 3.9 years. The total grant-date fair value of shares vested during the years ended December 31, 2016, 2015 and 2014 was $15 thousand, $6 thousand and $4. The vesting-date fair value of shares vested during 2016, 2015 and 2014 is immaterially different when compared to the grant-date fair value. As of December 31, 2016, the 2009 stock award plan allows for additional restricted stock share awards of up to 142 thousand shares.

LIMITATION ON BANK DIVIDENDS

LIMITATION ON BANK DIVIDENDS	12 Months Ended
	Dec. 31, 2016
LIMITATION ON BANK DIVIDENDS
LIMITATION ON BANK DIVIDENDS	NOTE 16 - LIMITATION ON BANK DIVIDENDS The Company’s principal source of funds is dividends received from the Bank. Banking regulations limit the amount of dividends that may be paid by the Bank without prior approval of regulatory agencies. Under these regulations, the amount of dividends that may be paid in any calendar year is limited to the current year’s net profits, as defined, combined with the retained net profits of the preceding two years. During 2017 the Bank could, without prior approval, declare dividends on any 2017 net profits retained to the date of the dividend declaration plus $5.6 million.

FAIR VALUE

FAIR VALUE	12 Months Ended
	Dec. 31, 2016
FAIR VALUE.
FAIR VALUE	NOTE 17 - FAIR VALUE Fair value is 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 — Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date. Level 2 — Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. Level 3 — Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability. The Company used the following methods and significant assumptions to estimate the fair value: Securities Available for Sale and Trading Assets : The fair values for investment securities and trading assets are determined by quoted market prices, if available (Level 1). For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2). For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3). Impaired Loans : The fair value of impaired loans with specific allocations of the allowance for loan losses is generally based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted in accordance with the allowance policy. Other Real Estate Owned : 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 which are updated no less frequently than annually. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Real estate owned properties are evaluated on a quarterly basis for additional impairment and adjusted accordingly. Loan Servicing Rights : Fair value is based on market prices for comparable mortgage servicing contracts, when available, or alternatively based on a valuation model that calculates the present value of estimated future net servicing income, resulting in a Level 3 classification. Assets and Liabilities Measured on a Recurring Basis Available for sale investment securities are the Company’s only balance sheet item that meet the disclosure requirements for instruments measured at fair value on a recurring basis. Disclosures are as follows in the tables below. 2016 Quoted Prices In Active Markets for Significant Other Significant Identical Observable Unobservable Carrying Assets Inputs Inputs Description Value (Level 1) (Level 2) (Level 3) U. S. government agencies $ $ — $ $ — States and municipals — — Mortgage-backed - residential — — Equity securities — — Trading Assets — Total $ $ $ $ — Quoted Prices In Active Markets for Significant Other Significant Identical Observable Unobservable Carrying Assets Inputs Inputs Description Value (Level 1) (Level 2) (Level 3) U. S. government agencies $ $ — $ $ — States and municipals — — Mortgage-backed - residential — — Equity securities — — Trading Assets — Total $ $ $ $ — There were no transfers between level 1 and level 2 during 2016 or 2015. Assets measured at fair value on a non-recurring basis are summarized below : Fair Value Measurements at December 31, 2016 Using : Quoted Prices In Active Markets for Significant Other Significant Identical Observable Unobservable Carrying Assets Inputs Inputs (In thousands) Value (Level 1) (Level 2) (Level 3) Description Impaired loans: Real Estate Mortgage: 1-4 family Residential $ $ — $ — $ Agricultural — — Other real estate owned, net: Residential — — Commercial — — Loan servicing rights — — Fair Value Measurements at December 31, 2015 Using : Quoted Prices In Active Markets for Significant Other Significant Identical Observable Unobservable Carrying Assets Inputs Inputs (In thousands) Value (Level 1) (Level 2) (Level 3) Description Impaired loans: Real Estate Mortgage: Multi-family residential $ $ — $ — $ Non-farm & non-residential — — Agricultural — — — — Other real estate owned, net: Residential — — Loan servicing rights — — Impaired loans measured for impairment using the fair value of the collateral had a net carrying amount of $3.9 million, with a valuation allowance of $502 thousand at December 31, 2016. During 2016, four new loans became impaired resulting in an additional provision for loan losses of $427 thousand. The total allowance for specific impaired loans decreased $107 thousand for the year ending December 31, 2016. At December 31, 2015, impaired loans measured for impairment using the fair value of the collateral had a net carrying amount of $825 thousand, with a valuation allowance of $170 thousand, resulting in an additional provision for loan losses of $170 thousand for the year ending December 31, 2015. Other real estate owned measured at fair value less costs to sell, had a net carrying amount of $1.2 million, which is made up of the outstanding balance of $2.0 million, net of a valuation allowance of $803 thousand at December 31, 2016. Write-downs of other real estate totaled $187 thousand for the year ending December 31, 2016. At December 31, 2015, other real estate owned measured at fair value less costs to sell, had a net carrying amount of $1.5 million, which was made up of the outstanding balance of $2.1 million, net of a valuation allowance of $616 thousand at December 31, 2015. Write-downs of other real estate totaled $252 thousand for the year ending December 31, 2015. Certain impaired loan servicing rights, which are carried at lower of cost or fair value, were carried at their fair value of $1.1 million, which is made up of the outstanding balance of $1.2 million, net of a valuation allowance of $125 thousand at December 31, 2016. Net write-downs for the loan servicing rights totaled $105 thousand for the year ending December 31, 2016. At December 31, 2015, impaired loan servicing rights were carried at their fair value of $87 thousand, which is made up of the outstanding balance of $106 thousand, net of a valuation allowance of $20 thousand at December 31, 2015. Net Recoveries for prior write-downs were recorded in the amount of $59 thousand for the year ending December 31, 2015. The following table presents quantitative information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at December 31, 2016 and 2015: Range December 31, 2016 Fair Valuation Unobservable (Weighted (In thousands) Value Technique(s) Input(s) Average) Impaired loans Real estate mortgage: 1-4 family residential $ sales comparison adjustment for differences between the comparable sales 0%-21% (10)% Agricultural sales comparison adjustment for differences between the comparable sales 2%-75% (9)% Other real estate owned: Residential sales comparison adjustment for differences between the comparable sales 1%-16% (9)% Commercial income approach capitalization rate 10%-10% (10)% Loan Servicing Rights discounted cash flow constant prepayment rates 8%-45% (13)% Range December 31, 2015 Fair Valuation Unobservable (Weighted (In thousands) Value Technique(s) Input(s) Average) Impaired loans Real estate mortgage: 1-4 family residential $ sales comparison adjustment for differences between the comparable sales 1%-12% (7)% Non-farm & non-residential sales comparison adjustment for differences between the comparable sales 23%-31% (27)% Other real estate owned: Residential sales comparison adjustment for differences between the comparable sales 10%-28% (19)% income approach capitalization rate 10%-10% (10)% Loan Servicing Rights discounted cash flow constant prepayment rates 8%-21% (11)% Fair Value of Financial Instruments The carrying amounts and estimated fair values of financial instruments, at December 31, 2016 and December 31, 2015 are as follows: December 31, 2016: Carrying (in thousands) Value Level 1 Level 2 Level 3 Total Financial assets Cash and cash equivalents $ $ $ — $ — $ Interest bearing deposits — — Securities — Trading assets — Loans held for sale — — Loans, net — — FHLB Stock — — — N/A Interest receivable — Financial liabilities Deposits $ $ $ $ — $ Securities sold under agreements to repurchase — — Long-term Federal Home Loan Bank advances — — Note payable Subordinated debentures — — Interest payable — December 31, 2015: Carrying (in thousands) Value Level 1 Level 2 Level 3 Total Financial assets Cash and cash equivalents $ $ $ — $ — $ Interest bearing deposits — — Securities — Trading assets — Mortgage loans held for sale — — Loans, net — — FHLB Stock — — — N/A Interest receivable — Financial liabilities Deposits $ $ $ $ — $ Securities sold under agreements to repurchase — — FHLB advances — — Note payable — — Subordinated debentures — — Interest payable — The methods and assumptions, not previously presented, used to estimate fair value are described as follows: Carrying amount is the estimated fair value for cash and cash equivalents, interest bearing deposits, accrued interest receivable and payable, demand deposits, short-term debt, and variable rate loans or deposits that reprice frequently and fully. The methods for determining the fair values for securities were described previously. For fixed rate loans or deposits and for variable rate loans or deposits with infrequent repricing or repricing limits, fair value is based on discounted cash flows using current market rates applied to the estimated life and credit risk (including consideration of widening credit spreads). The method used to determine the fair value of loans does not necessarily represent an exit price. Fair value of debt is based on current rates for similar financing. It was not practicable to determine the fair value of FHLB stock due to restrictions placed on its transferability. The fair value of off-balance sheet items is not considered material.

OFF-BALANCE SHEET ACTIVITIES AN

OFF-BALANCE SHEET ACTIVITIES AND COMMITMENTS	12 Months Ended
	Dec. 31, 2016
OFF-BALANCE SHEET ACTIVITIES AND COMMITMENTS
OFF-BALANCE SHEET ACTIVITIES AND COMMITMENTS	NOTE 18 - OFF-BALANCE SHEET ACTIVITIES AND COMMITMENTS Some financial instruments, such as loan commitments, credit lines, letters of credit, and overdraft protection, are issued to meet customer financing needs. These are agreements to provide credit or to support the credit of others, as long as conditions established in the contract are met, and usually have expiration dates. Commitments may expire without being used. Off-balance sheet risk to credit loss exists up to the face amount of these instruments, although material losses are not anticipated. The same credit policies are used to make such commitments as are used for loans, including obtaining collateral at exercise of the commitment. Financial instruments with off-balance sheet risk were as follows at year-end (in thousands): 2016 2015 Fixed Rate Variable Rate Fixed Rate Variable Rate Unused lines of credit $ — $ $ — $ Commitments to make loans Letters of credit — — Unused lines of credit are substantially all at variable rates. Commitments to make loans are generally made for a period of 60 days or less and are originated at current market rates ranging from 2.88% to 6.78% with maturities ranging up to 30 years.

CAPITAL REQUIREMENTS

CAPITAL REQUIREMENTS	12 Months Ended
	Dec. 31, 2016
CAPITAL REQUIREMENTS
CAPITAL REQUIREMENTS	NOTE 19 - CAPITAL REQUIREMENTS The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Company’s and the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Company and Bank capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk weightings, and other factors. The final rules implementing the Basel Committee on Banking Supervision’s capital guidelines for US banks (Basel III rules) became effective for the Company on January 1, 2015 with full compliance with all of the requirements being phased in over a multi-year schedule, and fully phased in by January 1, 2019. Under the Basell III rules, the Company must hold a capital conservation buffer above the adequately capitalized risk-based capital ratios. The capital conservation buffer is being phased in from 0.0% for 2015 to 2.50% by 2019. The capital conservation buffer for 2016 is 0.625%. The net unrealized gain or loss on available for sale securities is not included in computing regulatory capital. Management believes as of December 31,2016, the Company and the Bank meet all capital adequacy requirements to which they are subject. Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the following table) of Total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier I capital to average assets (as defined). Management believes, as of December 31, 2016 and 2015, that the Bank meets all capital adequacy requirements to which they are subject. The most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum Total risk-based, Tier I risk-based and Tier I leverage ratios as set forth in the following table. There are no conditions or events since that notification that management believes have changed the institution’s category. The Company’s and the Bank’s actual amounts and ratios, exclusive of the capital conservation buffer, are presented in the table below: To Be Well Capitalized Under Prompt For Capital Corrective Actual Adequacy Purposes Action Provisions Amount Ratio Amount Ratio Amount Ratio (Dollars in Thousands) December 31, 2016 Consolidated Total Capital (to Risk-Weighted Assets) $ % $ % N/A N/A Tier I Capital (to Risk-Weighted Assets) N/A N/A Common Equity Tier 1 Capital (to Risk-Weighted Assets) N/A N/A Tier I Capital (to Average Assets) N/A N/A Bank Only Total Capital (to Risk-Weighted Assets) $ % $ % $ % Tier I Capital (to Risk-Weighted Assets) Common Equity Tier 1 Capital (to Risk-Weighted Assets) Tier I Capital (to Average Assets) December 31, 2015 Consolidated Total Capital (to Risk-Weighted Assets) $ % $ % N/A N/A Tier I Capital (to Risk-Weighted Assets) N/A N/A Common Equity Tier 1 Capital (to Risk-Weighted Assets) N/A N/A Tier I Capital (to Average Assets) N/A N/A Bank Only Total Capital (to Risk-Weighted Assets) $ % $ % $ % Tier I Capital (to Risk-Weighted Assets) Common Equity Tier 1 Capital (to Risk-Weighted Assets) Tier I Capital (to Average Assets)

PARENT COMPANY FINANCIAL STATEM

PARENT COMPANY FINANCIAL STATEMENTS	12 Months Ended
	Dec. 31, 2016
PARENT COMPANY FINANCIAL STATEMENTS
PARENT COMPANY FINANCIAL STATEMENTS	NOTE 20 - PARENT COMPANY FINANCIAL STATEMENTS Condensed Balance Sheets December 31 2016 2015 (In Thousands) ASSETS Cash on deposit with subsidiaries $ $ Investment in subsidiaries Securities available for sale Other assets Total assets $ $ LIABILITIES AND STOCKHOLDERS’ EQUITY Liabilities Note payable $ $ Subordinated debentures Other Liabilities Stockholders’ equity Preferred stock — — Common stock Retained earnings Accumulated other comprehensive income (loss) Total liabilities and stockholders’ equity $ $ Condensed Statements of Income and Comprehensive Income Years Ended December 31 2016 2015 2014 (In Thousands) Income Dividends from subsidiaries $ $ $ Interest income — — — Total income Expenses Interest expense Other expenses Total expenses Income before income taxes and equity in undistributed income of subsidiaries Applicable income tax benefits Income before equity in undistributed income of subsidiaries Equity in undistributed income of subsidiaries Net income Other comprehensive income (loss), net of tax: Unrealized gains (losses) on securities arising during the period Reclassification of realized amount Other comprehensive income (loss) Comprehensive income $ $ $ Condensed Statements of Cash Flows Years Ended December 31 2016 2015 2014 (In Thousands) Cash flows from operating activities Net income $ $ $ Adjustments to reconcile net income to net cash from operating activities Equity in undistributed earnings of subsidiaries Change in other assets Change in other liabilities Net cash from operating activities Cash flows from investing activities Acquisition of Madison Financial Corporation — — Investment in captive insurance subsidiary — — Net cash from investing activities — Cash flows from financing activities Proceeds from issuance of long-term debt — — Payments on note payable — Dividends paid Payment to repurchase preferred stock — — Proceeds from issuance of common stock — Purchase of common stock Net cash from financing activities Net change in cash Cash at beginning of year Cash at end of year $ $ $

QUARTERLY FINANCIAL DATA (UNAUD

QUARTERLY FINANCIAL DATA (UNAUDITED)	12 Months Ended
	Dec. 31, 2016
QUARTERLY FINANCIAL DATA (UNAUDITED)
QUARTERLY FINANCIAL DATA (UNAUDITED)	NOTE 21 - QUARTERLY FINANCIAL DATA (UNAUDITED) (in thousands, except per share data) Interest Net Interest Net Earnings Per Share Income Income Income Basic Fully Diluted 2016 First quarter $ $ $ $ $ Second quarter Third quarter Fourth quarter 2015 First quarter $ $ $ $ $ Second quarter Third quarter Fourth quarter The Company recorded an additional $747 in other income during the second quarter of 2015 for the settlement of a legal matter.

ACCUMULATED OTHER COMPREHENSIVE

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)	12 Months Ended
	Dec. 31, 2016
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)	NOTE 22 - ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) The following is changes in Accumulated Other Comprehensive Income (Loss) by component, net of tax, for the years ending December 31, 2016 and 2015 (in thousands): Unrealized Gains and Losses on Available for Sale Securities For the Year Ended December 31, 2016 2015 Beginning Balance $ $ Unrealized holding gains (losses) for the period, net of tax Less reclassification adjustment for: Securities gains realized in income Income taxes Net current period other comprehensive income (loss) Ending balance $ $

ACQUISITION OF MADISON FINANCIA

ACQUISITION OF MADISON FINANCIAL CORPORATION	12 Months Ended
	Dec. 31, 2016
ACQUISITION OF MADISON FINANCIAL CORPORATION
ACQUISITION OF MADISON FINANCIAL CORPORATION	On July 24, 2015, the Company acquired Madison Financial Corporation and its wholly-owned subsidiary, Madison Bank, both of which were headquartered in Richmond, Kentucky. As a result of the acquisition the Company expanded its presence into central Kentucky with minimal overlap of its existing market footprint and generate long-term value for the Company shareholders. Madison Bank had $116.1 million in total assets and operated three financial centers. The total purchase price for Madison Financial Corporation was $7.9 million net of capital stock issuance costs, consisting of $3 thousand cash for fractional shares and the issuance of 263,361 shares of the Company’s common stock valued at $7.9 million net of capital stock issuance costs. The acquisition was accounted for under the acquisition method of accounting. Accordingly, the Company recognized amounts for identifiable assets acquired and liabilities assumed at their estimated acquisition date fair values, while approximately $858 thousand of transaction and integration costs associated with the acquisition were expensed as incurred. Of the total purchase price, $884 thousand was allocated to goodwill which is not considered deductible for tax purposes. Based on management’s valuation of the fair value of tangible and intangible assets acquired and liabilities assumed, the purchase price for the Madison Financial Corporation acquisition is allocated as follows (in thousands): Cash and cash equivalents $ Interest-bearing deposits in other financial institutions Securities available for sale Loans Federal Home Loan Bank Stock Accrued interest receivable Premises and equipment Other real estate Deferred tax assets Core deposit intangible asset Other assets Total assets acquired $ Deposits $ Other borrowings Accrued interest payable Other liabilities Total liabilities assumed $ Liquidation amount of preferred stock including unpaid dividends and interest Total identifiable net assets $ Goodwill $ The fair value of net assets acquired includes fair value adjustments to certain loan receivables that were not considered impaired as of the acquisition date. The fair value adjustments were determined using discounted contractual cash flows. However, the Company believes that all contractual cash flows related to these loans will be collected. As such, these loan receivables were not considered impaired at the acquisition date and were not subject to the guidance relating to purchase credit impaired loans, which have shown evidence of credit deterioration since origination. Loan receivables acquired that were not subject to these requirements include non-impaired loans with a fair value and gross contractual amounts receivable of $73.6 million and $74.7 million as of the date of acquisition.

SUMMARY OF SIGNIFICANT ACCOUN32

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)	12 Months Ended
	Dec. 31, 2016
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation	Basis of Presentation : The consolidated financial statements include the accounts of Kentucky Bancshares, Inc. (the Company), its wholly-owned subsidiaries, Kentucky Bank (the Bank) and KBI Insurance Company, Inc., a captive insurance subsidiary, and the Bank’s wholly-owned subsidiary, KB Special Assets Unit, LLC. Intercompany transactions and balances have been eliminated in consolidation.
Nature of Operations	Nature of Operations : The Bank operates under a state bank charter and provides full banking services, including trust services, to customers located in Bourbon, Clark, Elliot, Fayette, Harrison, Jessamine, Madison, Rowan, Scott, Woodford and adjoining counties in Kentucky. As a state bank, the Bank is subject to regulation by the Kentucky Department of Financial Institutions and the Federal Deposit Insurance Corporation (FDIC). The Company, a bank holding company, is regulated by the Federal Reserve. KBI Insurance Company, Inc., a captive insurance subsidiary, is regulated by the State of Nevada Division of Insurance.
Estimates in the Financial Statements	Estimates in the Financial Statements : The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash Flows	Cash Flows : For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks, federal funds sold, and certain short-term investments with maturities of less than three months. Generally, federal funds are sold for one-day periods. Net cash flows are reported for loan, deposit and short-term borrowing transactions.
Interest Bearing Time Deposits	Interest Bearing Time Deposits: Interest bearing time deposits in other financial institutions have original maturities between one and three years and are carried at cost.
Securities	Securities : The Company is required to classify its securities portfolio into one of three categories: trading securities, securities available for sale and securities held to maturity. Fair value adjustments are made to the securities based on their classification with the exception of the held to maturity category. The Company has no investments classified as held to maturity. Securities available for sale and trading securities are carried at fair value. Unrealized holding gains and losses for securities which are classified as available for sale are reported in other comprehensive income, net of deferred tax. Unrealized holding gains and losses for securities which are classified as trading securities are reported in other income. Interest income includes amortization of purchase premium or discount. Premiums and discounts on securities are amortized on the level-yield method without anticipating prepayments, except for mortgage backed securities where prepayments are anticipated. Gains and losses on sales are recorded on the settlement date and determined using the specific identification method. Management evaluates securities for other-than-temporary impairment (“OTTI”) at least on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. For securities in an unrealized loss position, management considers the extent and duration of the unrealized loss, and the financial condition and near-term prospects of the issuer. Management also assesses whether it intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings. For debt securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: 1) OTTI related to credit loss, which must be recognized in the income statement and 2) other-than-temporary impairment (OTTI) related to other factors, which is recognized in other comprehensive income. The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. For equity securities, the entire amount of impairment is recognized through earnings.
Loans Held for Sale	Loans Held for Sale : Loans held for sale are carried at the lower of cost or fair value as determined by outstanding commitments from investors or current secondary market prices, calculated on the aggregate loan basis. The Company also provides for any losses on uncovered commitments to lend or sell. Loans are generally sold with servicing rights retained but with some exceptions.
Loans	Loans: Loans that management has the intent and ability to hold for the foreseeable future or until maturity are stated at the amount of unpaid principal, net of deferred loan origination fees and costs and acquired purchase premiums and discounts, reduced by an allowance for loan losses. Interest income on loans is recognized on the accrual basis except for those loans on a nonaccrual status. Interest income on real estate mortgage (1-4 family residential and multi-family residential) and consumer loans is discontinued at the time the loan is 90 days delinquent, and interest income on real estate construction, non-farm and non-residential mortgage, agricultural and commercial loans is discontinued at the time the loan is 120 days delinquent, unless the loan is well-secured and in process of collection. Past due status is based on the contractual terms of the loan. In all cases, loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful. Nonaccrual loans and loans past due 90 days still on accrual include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans. Loan origination fees and certain direct origination costs are capitalized and recognized as an adjustment of the yield on the related loan. Recorded investment is the outstanding loan balance, excluding accrued interest receivable. When interest accrual is discontinued, interest income received on such loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Typically, the Company seeks to establish a payment history of at least six consecutive payments made on a timely basis before returning a loan to accrual status. Consumer and credit card loans are typically charged off no later than 120 days past due. Loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful.
Concentration of Credit Risk	Concentration of Credit Risk: Most of the Company’s business activity is with customers located within Bourbon, Clark, Elliott, Fayette, Harrison, Jessamine, Madison, Rowan, Scott, Woodford and surrounding counties located in Kentucky. Therefore, the Company’s exposure to credit risk is significantly affected by changes in the economy in these counties.
Allowance for Loan Losses	Allowance for Loan Losses : The allowance for loan losses is a valuation allowance for probable incurred credit losses. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. Adjustments are made to the historical loss experience ratios based on the qualitative factors as outlined in the regulatory Interagency Policy Statement on the Allowance for Loan and Lease Losses. These qualitative factors include the nature and volume of portfolio, economic and business conditions, classification, past due and non-accrual trends. Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged off. The allowance for loan losses is evaluated at the portfolio segment level using the same methodology for each segment. The recent historical actual net losses is the basis for the general reserve for each segment which is then adjusted for qualitative factors as outlined above (i.e., nature and volume of portfolio, economic and business conditions, classification, past due and non-accrual trends) specifically evaluated at individual segment levels. The allowance consists of specific and general components. The specific component relates to loans that are individually classified as impaired. The general component covers non-classified loans and is based on historical loss experience adjusted for current factors for non-classified loans and a migration analysis for classified loans. A loan is impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. Loans, for which the terms have been modified, and for which the borrower is experiencing financial difficulties and has been granted a concession, are considered troubled debt restructurings and classified as impaired. Loans are charged off when available information confirms that loans, or portions thereof, are uncollectible. While management considers the number of days a loan is past due in its evaluation process, we also consider a variety of other factors. Factors considered by management in evaluating the charge-off decision include collateral value, availability of current financial information for both borrower and guarantor, and the probability of collecting contractual principal and interest payments. These considerations may result in loans being charged off before they are 90 days or more past due. This evaluation framework for determining charge-offs is consistently applied to each segment. From time to time, the Company will charge-off a portion of impaired and non-performing loans. Loans that meet the criteria under ASC 310 are evaluated individually for impairment. Management considers payment status, collateral value, availability of current financial information for the borrower and guarantor, actual and expected cash flows, and probability of collecting amounts due. If a loan’s collection status is deemed to be collateral dependent or foreclosure is imminent, the loan is charged down to the fair value of the collateral, less selling costs. In circumstances where the loan is not deemed to be collateral dependent, but we believe, after completing our evaluation process, that probable loss has been incurred, we will provide a specific allocation on that loan. The impact of recording partial charge-offs is a reduction of gross loans and a reduction of the loan loss reserve. The net loan balance is unchanged in instances where the loan had a specific allocation as a component of the allowance for loan losses. The allowance as a percentage of total loans may be lower as the allowance no longer needs to include a component for the loss, which has now been recorded, and net charge-off amounts are increased as partial charge-offs are recorded. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Commercial and real estate construction and real estate mortgage loans (multi-family residential, and non-farm and non-residential mortgage) over $200 thousand are individually evaluated for impairment. If a loan is impaired, a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Large groups of smaller balance homogeneous loans, such as consumer and 1-4 family residential real estate loans, are collectively evaluated for impairment, and accordingly, they are not separately identified for impairment disclosures. Troubled debt restructurings are separately identified for impairment disclosures and are measured at the present value of estimated future cash flows using the loan’s effective rate at inception. If a troubled debt restructuring is considered to be a collateral dependent loan, the loan is reported, net, at the fair value of the collateral. For troubled debt restructurings that subsequently default, the Company determines the amount of reserve in accordance with the accounting policy for the allowance for loan losses. The general component covers non-impaired loans and is based on historical loss experience adjusted for current factors. The historical loss experience is determined by portfolio segment and is based on the actual loss history experienced by the Company over the most recent 5 years. This actual loss experience is supplemented with other economic factors based on the risks present for each portfolio segment. These economic factors include consideration of the following: levels of and trends in delinquencies and impaired loans; levels of and trends in charge-offs and recoveries; trends in volume and terms of loans; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedures, and practices; experience, ability, and depth of lending management and other relevant staff; national and local economic trends and conditions; industry conditions; and effects of changes in credit concentrations. A “portfolio segment” is defined as the level at which an entity develops and documents a systematic methodology to determine its allowance for loan losses. The Company has identified the following portfolio segments: commercial, real estate construction, real estate mortgage, agricultural, consumer (credit cards and other consumer) and other (overdrafts). Commercial: These loans to businesses do not have real estate as the underlying collateral. Instead of real estate, collateral could be business assets such as equipment or accounts receivable or the personal guarantee of one or more guarantors. These loans generally present a higher level of risk than loans secured by commercial real estate because in the event of default by the borrower, the business assets must be liquidated and/or guarantors pursued for deficit funds. Business assets are worth more while they are in use to produce income for the business and worth significantly less if the business is no longer in operation. Real estate construction: Real estate construction consist of loans secured by real estate for additions or alterations to existing structures, as well as constructing new structures. They include fixed and floating rate loans. Real estate construction loans generally present a higher level of risk than loans secured by 1-4 family residential real estate primarily because of the length of the construction period and the potential change in prices of construction materials. Real Estate Mortgage: 1-4 family residential: Loans secured by 1-4 family residential real estate represent the lowest risk of loans for the Company. They include fixed and floating rate loans as well as loans for commercial purposes or consumer purposes. The Company generally does not hold subprime residential mortgages. Borrowers with loans in this category, whether for commercial or consumer purposes, tend to make their payments timely as they do not want to risk foreclosure and loss of property. Multifamily residential: Loans secured by multifamily residential real estate consist primarily of loans secured by apartment buildings and can be either fixed or floating rate loans. Multi-family residential real estate loans generally present a higher level of risk than loans secured by 1-4 family residential real estate because the borrower’s repayment ability typically comes from rents from tenants. Local economic and employment fluctuations impact rent rolls and potentially the borrower’s repayment ability. Non-farm & non-residential: Loans secured by non-farm non-residential real estate consist of loans secured by commercial real estate that is not owner occupied. These loans generally consist of loans collateralized by property whereby rents received from commercial tenants of the borrower are the source of repayment. These loans generally present a higher level of risk than loans secured by owner occupied commercial real estate because repayment risk is expanded to be dependent on the success of multiple businesses which are paying rent to the borrower. If multiple businesses fail due to deteriorating economic conditions or poor business management skills, the borrower may not have enough rents to cover their monthly payment. Repayment risk is also increased depending on the level of surplus available commercial lease space in the local market area. Agricultural: These loans to agricultural businesses do not have real estate as the underlying collateral. Instead of real estate, collateral could be assets such as equipment or accounts receivable or the personal guarantee of one or more guarantors. These loans generally present a higher level of risk than loans secured by real estate because in the event of default by the borrower, the assets must be liquidated and/or guarantors pursued for deficit funds. Farm assets are worth more while they are in use to produce income and worth significantly less if the farm is no longer in operation. Consumer: Consumer loans are generally loans to borrowers for non-business purposes. They can be either secured or unsecured. Consumer loans are generally small in the individual amount of principal outstanding and are repaid from the borrower’s private funds earned from employment. Consumer lending risk is very susceptible to local economic trends. If there is a consumer loan default, any collateral that may be repossessed is generally not well maintained and has a diminished value. For this reason, consumer loans tend to have higher overall interest rates to cover the higher cost of repossession and charge-offs. However, due to their smaller average balance per borrower, consumer loans are collectively evaluated for impairment in determining the appropriate allowance for loan losses. Other: All other loan types are aggregated together for credit risk evaluation due to the varying nature but small number of the remaining types of loans in the Company’s loan portfolio. Loans in this segment include but are not limited to overdrafts. Due to their smaller balance, other loans are collectively evaluated for impairment in determining the appropriate allowance for loan losses. Due to the overall high level of real estate mortgage loans within the loan portfolio as a whole, as compared to other portfolio segments, for risk assessment and allowance purposes this segment was segregated into more granular pools by collateral property type. Real estate construction loans have the highest qualitative adjustments for economic and other credit risk factors, such as the incomplete status of the collateral and the effect of the recent economic downturn on these types of properties. The non-farm non-residential and the multi-family real estate mortgage loan portfolio segments had the next highest level of qualitative adjustments due to the effects of local markets and economies on the underlying collateral property values, as well as for industry concentrations and risks related to the this type of property. Within the commercial portfolio, risk analysis is performed primarily based on the individual loan type.
Mortgage Servicing Rights	Mortgage Servicing Rights : The Bank has sold certain residential mortgage loans to the Federal Home Loan Mortgage Corporation (FHLMC) while retaining the servicing rights. Servicing rights are recognized separately when they are acquired through sales of loans. When mortgage loans are sold, servicing rights are initially recorded at fair value with the income statement effect recorded in gain on sale of mortgage loans. Fair value is based on market prices for comparable mortgage servicing contracts, when available, or alternatively, is based on a valuation model that calculates the present value of estimated future net servicing income. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income, such as the cost to service, the discount rate, the custodial earnings rate, an inflation rate, ancillary income, prepayment speeds and default rates and losses. All classes of servicing assets are subsequently measured using the amortization method which requires servicing rights to be amortized into loan service fee income, net, included in non-interest income in proportion to, and over the period of, the estimated future net servicing income of the underlying loans. Servicing assets are evaluated for impairment based upon the fair value of the rights as compared to carrying amount. Impairment is determined by stratifying rights into groupings based on predominant risk characteristics, such as interest rate, loan type and investor type. Impairment is recognized through a valuation allowance for an individual grouping, to the extent that fair value is less than the carrying amount. If the Company later determines that all or a portion of the impairment no longer exists for a particular grouping, a reduction of the allowance may be recorded as an increase to income. The fair values of servicing rights are subject to significant fluctuations as a result of changes in estimated and actual prepayment speeds and default rates and losses. Servicing fee income, which is reported on the income statement as loan service income, net, is recorded for fees earned for servicing loans. The fees are based on a contractual percentage of the outstanding principal or a fixed amount per loan and are recorded as income when earned. The amortization of mortgage servicing rights and valuation allowance are netted against loan servicing fee income. Servicing fees totaled $510 thousand, $486 thousand, and $471 thousand for the years ended December 31, 2016, 2015 and 2014 and are included in loan service fee income in the income statement. Late fees and ancillary fees related to loan servicing are not material.
Federal Home Loan Bank (FHLB) Stock	Federal Home Loan Bank (FHLB) Stock : The Bank is a member of the FHLB system. Members are required to own a certain amount of stock based on the level of borrowings and other factors, and may invest in additional amounts. FHLB stock is carried at cost, classified as a restricted security, and periodically evaluated for impairment based on ultimate recovery of par value. Both cash and stock dividends are reported as income.
Bank Premises and Equipment	Bank Premises and Equipment : Land is carried at cost. Bank premises and equipment are stated at cost less accumulated depreciation. Buildings and related components are depreciated using the straight-line method with useful lives ranging from 5 to 40 years. Furniture, fixtures and equipment are depreciated using the straight-line (or accelerated) method with useful lives ranging from 3 to 10 years.
Real Estate Owned	Real Estate Owned : Real estate acquired through foreclosure is initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at the lower of cost or fair value less estimated costs to sell. The value of the underlying loan is written down to the fair value of the real estate to be acquired by a charge to the allowance for loan losses, if necessary. Any subsequent write-downs are charged to operating expenses. Operating expenses of such properties, net of related income, and gains and losses on their disposition are included in other expenses.
Investments in Limited Partnerships	Investments in Limited Partnerships : Investments in limited partnerships represent the Company’s investments in affordable housing projects for the primary purpose of available tax benefits. The Company is a limited partner in these investments and as such, the Company is not involved in the management or operation of such investments. These investments are accounted for using the equity method of accounting. Under the equity method of accounting, the Company records its share of the partnership’s earnings or losses in its income statement and adjusts the carrying amount of the investments on the balance sheet. These investments are evaluated for impairment when events indicate the carrying amount may not be recoverable. The investment recorded at December 31, 2016 was $4.7 million and $4.0 million at December 31, 2015, respectively, and is included with other assets in the balance sheet.
Repurchase Agreements	Repurchase Agreements : Substantially all repurchase agreement liabilities represent amounts advanced by various customers. Securities are pledged to cover these liabilities, which are not covered by federal deposit insurance.
Stock-Based Compensation	Stock-Based Compensation : Compensation cost is recognized for stock options and restricted stock awards issued to employees, based on the fair value of these awards at the date of grant. A Black-Scholes model is utilized to estimate the fair value of stock options, while the market price of the Company’s common stock at the date of grant is used for restricted stock awards. Compensation cost is recognized over the required service period, generally defined as the vesting period. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award.
Income Taxes	Income Taxes : Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The Company recognizes interest related to income tax matters as interest expense and penalties related to income tax matters as other expense.
Retirement Plans	Retirement Plans : Employee 401(k) and profit sharing plan expense is the amount of matching contributions.
Goodwill and Intangible Assets	Goodwill and Intangible Assets : Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but tested for impairment at least annually. The Company has selected December 31 as the date to perform the annual impairment test. Intangible assets with definite useful lives are amortized over their estimated useful lives to their estimated residual values. Goodwill is the only intangible asset with an indefinite life on our balance sheet. Intangible assets consist of core deposit intangible assets arising from whole bank and branch acquisitions. They are initially measured at fair value and then are amortized on either an accelerated or straight-line basis, over ten or fifteen years.
Purchased Credit Impaired Loans	Purchased Credit Impaired Loans: As part of the Madison Financial Corporation acquisition, the Company purchased loans, some of which have shown evidence of credit deterioration since origination. These purchased credit impaired loans are recorded at the amount paid, such that there is no carryover of the seller’s allowance for loan losses. After acquisition, losses are recognized by an increase in the allowance for loan losses. Such purchased credit impaired loans are accounted for individually. The Company estimated the amount and timing of expected cash flows for each loan and the expected cash flows in excess of amount paid is recorded as interest income over the remaining life of the loan. The excess of the loan's contractual principal and interest over expected cash flows is not recorded (non-accretable difference). Over the life of the loan, expected cash flows continue to be estimated. If the present value of expected cash flows is less than the carrying amount, a loss is recorded as a provision for loan losses. If the present value of expected cash flows is greater than the carrying amount, it is recognized as part of future interest income.
Loan Commitments and Related Financial Instruments	Loan Commitments and Related Financial Instruments : Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit, issued to meet customer financing needs. The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded.
Earnings Per Common Share	Earnings Per Common Share : Basic earnings per common share is net income divided by the weighted average number of common shares outstanding during the period. Diluted earnings per common share include the dilutive effect of additional potential common shares issuable under stock options. Earnings and dividends per share are restated for all stock splits and dividends through the date of issuance of the financial statements.
Comprehensive Income (Loss)	Comprehensive Income (Loss) : Comprehensive income consists of net income and other comprehensive income. Other comprehensive income (loss) includes unrealized gains and losses on securities available for sale, which are also recognized as a separate component of equity.
Fair Value of Financial Instruments	Fair Value of Financial Instruments : Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in a separate note. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect the estimates.
Operating Segments	Operating Segments : While the Company’s chief decision makers monitor the revenue streams of the various Company products and services, operations are managed and financial performance is evaluated on a Company-wide basis. Accordingly, all of the Company’s operations are considered by management to be aggregated into one reportable operating segment: banking.
Reclassifications	Reclassifications : Some items in the prior year financial statements were reclassified to conform to the current presentation. Reclassifications had no effect on prior yet net income or stockholders’ equity.
Adoption of New Accounting Standards	Adoption of New Accounting Standards ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.” Issued in August 2016, ASU 2016-15 provides guidance to reduce the diversity in practice of how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments of ASU 2016-15 provide guidance on eight specific cash flow: (i) debt prepayment or debt extinguishment costs; (ii) settlement of zero-coupon bonds; (iii) contingent consideration payments made after a business combination; (iv) proceeds from the settlement of insurance claims; (v) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; (vi) distributions received from equity method investees; (vii) beneficial interests in securitization transactions and (viii) separately identifiable cash flows and application of the predominance principle. The amendments of ASU 2016-15 are effective for interim and annual periods beginning after December 15, 2017. Management has evaluated the amendments of ASU 2016-15 and does not believe that adoption of this ASU will impact Kentucky Bancshares existing presentation of the applicable cash receipts and cash payments on its consolidated statements of cash flows. ASU 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” Issued in June 2016, ASU 2016-13 will add FASB ASC Topic 326, “Financial Instruments-Credit Losses” and finalizes amendments to FASB ASC Subtopic 825-15, “Financial Instruments-Credit Losses.” The amendments of ASU 2016-13 are intended to provide financial statement users with more decision-useful information related to expected credit losses on financial instruments and other commitments to extend credit by replacing the current incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to determine credit loss estimates. The amendments of ASU 2016-13 eliminate the probable initial recognition threshold and, in turn, reflect an entity’s current estimate of all expected credit losses. ASU 2016-13 does not specify the method for measuring expected credit losses, and an entity is allowed to apply methods that reasonably reflect its expectations of the credit loss estimate. Additionally, the amendments of ASU 2016-13 require that credit losses on available for sale debt securities be presented as an allowance rather than as a write-down. The amendments of ASU 2016-13 are effective for interim and annual periods beginning after December 15, 2019. Earlier application is permitted for interim and annual periods beginning after December 15, 2018. Kentucky Bancshares plans to adopt the amendments of ASU 2016-13 during the first quarter of 2020. Kentucky Bancshares has established a steering committee which includes the appropriate members of Management to evaluate the impact this ASU will have on the Company’s financial position, results of operations and financial statement disclosures and determine the most appropriate method of implementing the amendments in this ASU as well as any resources needed to implement the amendments. ASU 2016-09, “Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” Issued in March 2016, ASU 2016-09 seeks to reduce complexity in accounting standards by simplifying several aspects of the accounting for share-based payment transactions. The amendments of ASU 2016-09 include: (i) requiring all excess tax benefits and tax deficiencies to be recognized as income tax expense or benefit in the income statement; (ii) requiring excess tax benefits to be classified along with other income tax cash flows as an operating activity on the statement of cash flow; (iii) allowing an entity to make an entity-wide accounting policy election to either estimate the number of awards that expect to vest or account for forfeitures when they occur; (iv) change the threshold to qualify for equity classification to permit withholding up to the maximum statutory tax rates in the applicable jurisdictions; and (v) requiring that cash paid by an employer when directly withholding shares for tax-withholding purposes to be classified as a financing activity on the statement of cash flows. The amendments of ASU 2016-09 became effective for Kentucky Bancshares on January 1, 2017 and did not have a material impact on Kentucky Bancshares consolidated financial statements. The Company has made an entity-wide accounting policy election to account for forfeitures of stock awards as they occur. Changes to Kentucky Bancshares consolidated statement of cash flows required by the amendments of ASU 2016-09 will be presented in the Quarterly Report on Form 10-Q for the three month period ending March 31, 2017. ASU 2016-02, “Leases (Topic 842).” Issued in February 2016, ASU 2016-02 was issued by the FASB to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and by disclosing key information about leasing arrangements. ASU 2016-02 will, among other things, require lessees to recognize a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. ASU 2016-02 does not significantly change lease accounting requirements applicable to lessors; however, the ASU contains some targeted improvements that are intended to align, where necessary, lessor accounting with the lessee accounting model and with the updated revenue recognition guidance issued in 2014. The amendments of ASU 2016-02 are effective for interim and annual periods beginning after December 15, 2018. Kentucky Bancshares plans to adopt the amendments of ASU 2016-02 beginning in the first quarter of 2019. At adoption, Kentucky Bancshares will recognize a lease asset and a corresponding lease liability on its consolidated balance sheet for its total lease obligation measured on a discounted basis. As of December 31, 2016, all leases in which Kentucky Bancshares was the lessee were classified as operating leases. Kentucky Bancshares does not anticipant any material impact to its consolidated statements of income as a result of the adoption of this ASU. The Company has an immaterial amount of leases in which it is the lessor. Based on Management’s evaluation to date, the Company does not expect the amendments of ASU 2016-02 to have any material impact to these leases or the related income. Management will continue to evaluate the impact this ASU will have on the Company’s consolidated financial statements; however, the adoption of ASU 2016-02 is not expected to have a material impact on Kentucky Bancshares consolidated financial statements. ASU 2016-01, “Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (An Amendment of the FASB Accounting Standards Codification).” Issued in January 2016, ASU 2016-01 is intended to enhance the reporting model for financial instruments to provide users of financial statements with improved decision-making information. The amendments of ASU 2016-01 include: (i) requiring equity investments, except those accounted for under the equity method of accounting or those that result in the consolidation of an investee, to be measured at fair value with changes in fair value recognized in net income; (ii) requiring a qualitative assessment to identify impairment of equity investments without readily determinable fair values; (iii) eliminating the requirement to disclose the method and significant assumptions used to estimate the fair value for financial instruments measured at amortized cost on the balance sheet; (iv) requiring the use of the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (v) requiring an entity that has elected the fair value option to measure the fair value of a liability to present separately in other comprehensive income the portion of the change in the fair value resulting from a change in the instrument-specific credit risk; (vi) requiring separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements and (vii) clarifying that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available for sale securities in combination with the entity’s other deferred tax assets. The amendments of ASU 2016-01 are effective for interim and annual periods beginning after December 15, 2017. Kentucky Bancshares plans to adopt the amendments of ASU 2016-01 during the first quarter of 2018. Management has evaluated the impact this ASU will have on the Company’s consolidated financial statements. Through this evaluation, Management has determined that the principal areas impacted by the amendments of ASU 2016-01 will be Kentucky Bancshares investment in member bank stock, which are equity securities that do not have readily determinable fair values, and various fair value related disclosures. See Note 1 – Significant Accounting Policies, “Federal Home Loan Bank (FHLB): for information regarding Kentucky Bancshares investment in member bank stock. The adoption of ASU 2016-01 is not expected to have a material impact on the Company’s consolidated financial statements. ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).” Issued in May 2014, ASU 2014-09 will add FASB ASC Topic 606, “Revenue from Contracts with Customers,” and will supersede revenue recognition requirements in FASB ASC Topic 605, “Revenue Recognition,” as well as certain cost guidance in FASB ASC Topic 605-35, “Revenue Recognition – Construction-Type and Production-Type Contracts.” ASU 2014-09 provides a framework for revenue recognition that replaces the existing industry and transaction specific requirements under the existing standards. ASU 2014-09 requires an entity to apply a five-step model to determine when to recognize revenue and at what amount. The model specifies that revenue should be recognized when (or as) an entity transfers control of goods or services to a customer at the amount in which the entity expects to be entitled. Depending on whether certain criteria are met, revenue should be recognized either over time, in a manner that depicts the entity’s performance, or at a point in time, when control of the goods or services are transferred to the customer. ASU 2014-09 provides that an entity should apply the following steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, the entity satisfies a performance obligation. In addition, the existing requirements for the recognition of a gain or loss on the transfer of non-financial assets that are not in a contract with a customer are amended to be consistent with the guidance on recognition and measurement in ASU 2014-09. The amendments of ASU 2014-09 may be applied either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application. If the transition method of application is elected, the entity should also provide the additional disclosures in reporting periods that include the date of initial application of (1) the amount by which each financial statement line item is affected in the current reporting period, as compared to the guidance that was in effect before the change, and (2) an explanation of the reasons for significant changes. ASU 2015-14, “Revenue from Contracts with Customers (Topic 606)-Deferral of the Effective Date,” issued in August 2015, defers the effective date of ASU 2014-09 by one year. ASU 2015-14 provides that the amendments of ASU 2014-09 become effective for interim and annual periods beginning after December 15, 2017. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. All subsequently issued ASUs which provide additional guidance and clarifications to various aspects of FASB ASC Topic 606 will become effective when the amendments of ASU 2014-09 become effective. Kentucky Bancshares plans to adopt these amendments during the first quarter of 2018. Management is continuing to evaluate the impact ASU 2014-09 will have on Kentucky Bancshares consolidated financial statements as well as the most appropriate transition method of application. Based on this evaluation to date, Management has determined that the majority of the revenues earned by Kentucky Bancshares are not within the scope of ASU 2014-09. Management also believes that for most revenue streams within the scope of ASU 2014-09, the amendments will not change the timing of when the revenue is recognized. Management will continue to evaluate the impact the adoption of ASU 2014-09 will have on Kentucky Bancshares consolidated financial statements, focusing on noninterest income sources within the scope of ASU 2014-09 as well as new disclosures required by these amendments; however, the adoption of ASU 2014-09 is not expected to have a material impact on Kentucky Bancshares consolidated financial statements.

SECURITIES AVAILABLE FOR SALE (

SECURITIES AVAILABLE FOR SALE (Tables)	12 Months Ended
	Dec. 31, 2016
SECURITIES AVAILABLE FOR SALE
Schedule of securities available for sale	Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value Available for Sale December 31, 2016 U. S. government agencies $ $ $ $ States and political subdivisions Mortgage-backed - residential Equity securities — Total $ $ $ $ December 31, 2015 U. S. government agencies $ $ $ $ States and political subdivisions Mortgage-backed - residential Equity securities — Total $ $ $ $
Schedule of amortized cost and fair value of securities by contractual maturity	Amortized Fair Cost Value Due in one year or less $ $ Due after one year through five years Due after five years through ten years Due after ten years Mortgage-backed - residential Equity Total $ $
Schedule of securities with unrealized losses not recognized in income	2016 Less than 12 Months 12 Months or More Total Fair Unrealized Fair Unrealized Fair Unrealized Description of Securities Value Loss Value Loss Value Loss U.S. Government agencies $ $ $ — $ — $ $ States and municipals — — Mortgage-backed - residential Total temporarily impaired $ $ $ $ $ $ 2015 Less than 12 Months 12 Months or More Total Fair Unrealized Fair Unrealized Fair Unrealized Description of Securities Value Loss Value Loss Value Loss U.S. Government agencies $ $ $ $ $ $ States and municipals Mortgage-backed - residential Total temporarily impaired $ $ $ $ $ $

LOANS (Tables)

LOANS (Tables)	12 Months Ended
	Dec. 31, 2016
LOANS
Schedule of loans	12/31/2016 12/31/2015 Commercial $ $ Real estate construction Real estate mortgage: 1-4 family residential Multi-family residential Non-farm & non-residential Agricultural Consumer Other Total $ $
Schedule of activity in the allowance for loan losses	The following table presents the activity in the allowance for loan losses by portfolio segment for the years ending December 31, 2016, 2015 and 2014 (in thousands): Beginning Ending December 31, 2016 Balance Charge-offs Recoveries Provision Balance Commercial $ $ $ $ $ Real estate Construction — Real estate mortgage: 1-4 family residential Multi-family residential — Non-farm & non-residential — Agricultural Consumer Other Unallocated — — $ $ $ $ $ Beginning Ending December 31, 2015 Balance Charge-offs Recoveries Provision Balance Commercial $ $ $ — $ $ Real estate Construction — Real estate mortgage: 1-4 family residential 503 Multi-family residential Non-farm & non-residential — 314 Agricultural (242) Consumer Other Unallocated — — $ $ $ $ $ Beginning Ending December 31, 2014 Balance Charge-offs Recoveries Provision Balance Commercial $ $ $ — $ $ Real estate Construction — Real estate mortgage: 1-4 family residential Multi-family residential Non-farm & non-residential — Agricultural Consumer Other Unallocated — — $ $ $ $ $
Schedule of allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method	The following tables present the balance in the allowance for loan losses and the recorded investment (excluding accrued interest receivable amounting to $2.4 million and $2.3 million) in loans by portfolio segment and based on impairment method as of December 31, 2016 and December 31, 2015 (in thousands): Individually Collectively Purchased Evaluated for Evaluated for Credit As of December 31, 2016 Impairment Impairment Impaired Total Allowance for Loan Losses: Commercial $ — $ $ — $ Real estate construction — — Real estate mortgage: 1-4 family residential — Multi-family residential — — Non-farm & non-residential — Agricultural — Consumer — — Other — — Unallocated — — $ $ $ — $ Loans: Commercial $ $ $ — $ Real estate construction — Real estate mortgage: 1-4 family residential Multi-family residential — Non-farm & non-residential Agricultural Consumer — — Other — — $ $ $ $ Individually Collectively Purchased Evaluated for Evaluated for Credit As of December 31, 2015 Impairment Impairment Impaired Total Allowance for Loan Losses: Commercial $ — $ $ — $ Real estate construction — — Real estate mortgage: 1-4 family residential — Multi-family residential — — Non-farm & non-residential — Agricultural — Consumer — — Other — — Unallocated — — $ $ $ — $ Loans: Commercial $ — $ $ Real estate construction Real estate mortgage: 1-4 family residential Multi-family residential — — Non-farm & non-residential Agricultural Consumer — — Other — — Total $ $ $ $
Schedule of loans individually evaluated for impairment by class of loans	The following table presents loans individually evaluated for impairment by class of loans as of December 31, 2016 Unpaid Allowance for Average Interest Cash Basis Principal Recorded Loan Losses Recorded Income Interest (in thousands): Balance Investment Allocated Investment Recognized Recognized With no related allowance recorded: Commercial $ $ $ — $ $ $ Real estate construction — Real estate mortgage: 1-4 family residential — — — Multi-family residential — — — — — — Non-farm & non-residential — — — — — — Agricultural — — — Consumer — — — — — — Other — — — — — — With an allowance recorded: Commercial — — — — — — Real estate construction — — — — — — Real estate mortgage 1-4 family residential Multi-family residential — — — — — — Non-farm & non-residential Agricultural Consumer — — — — — — Other — — — — — — Total $ $ $ $ $ $ The recorded investment in loans excludes accrued interest receivable and loan origination fees, net due to immateriality. The following table presents loans individually evaluated for impairment by class of loans as of December 31, 2015. Unpaid Allowance for Average Interest Cash Basis Principal Recorded Loan Losses Recorded Income Interest (in thousands): Balance Investment Allocated Investment Recognized Recognized With no related allowance recorded: Commercial $ — $ — $ — $ — $ — $ — Real estate construction — Real estate mortgage: 1-4 family residential — Multi-family residential — — — — — — Non-farm & non-residential — — — — — Agricultural — Consumer — — — — — — Other — — — — — — With an allowance recorded: Commercial — — — — — — Real estate construction — — — — — — Real estate mortgage 1-4 family residential Multi-family residential — — — — — Non-farm & non-residential Agricultural — — Consumer — — — — — — Other — — — — — — Total $ $ $ $ $ $ The recorded investment in loans excludes accrued interest receivable and loan origination fees, net due to immateriality. The following table presents loans individually evaluated for impairment by class of loans as of December 31, 2014 Unpaid Allowance for Average Interest Cash Basis Principal Recorded Loan Losses Recorded Income Interest (in thousands): Balance Investment Allocated Investment Recognized Recognized With no related allowance recorded: Commercial $ — $ — $ — $ — $ — $ — Real estate construction — — — — — — Real estate mortgage: 1-4 family residential — Multi-family residential — — — — — — Non-farm & non-residential — — — — — Agricultural — Consumer — — — — — — Other — — — — — — With an allowance recorded: Commercial — — — — — — Real estate construction — — — — — — Real estate mortgage 1-4 family residential Multi-family residential Non-farm & non-residential Agricultural Consumer — — — — — — Other — — — — — — Total $ $ $ $ $ $
Schedule of recorded investment in nonaccrual, loans past due over 90 days still on accrual and accruing troubled debt restructurings by class of loans	The following tables present the recorded investment in nonaccrual loans, loans past due over 90 days still on accrual, and troubled debt restructurings, excluding purchase credit impaired loans, by class of loans as of December 31, 2016 and 2015 (in thousands): Loans Past Due Over 90 Days Still Troubled Debt As of December 31, 2016 Nonaccrual Accruing Restructurings Commercial $ $ $ — Real estate construction — — Real estate mortgage: 1-4 family residential Multi-family residential — — Non-farm & non-residential — Agricultural — Consumer — — Total $ $ $ Loans included in totals above acquired from Madison Financial Corporation $ $ $ — Loans Past Due Over 90 Days Still Troubled Debt As of December 31, 2015 Nonaccrual Accruing Restructurings Commercial $ $ — $ — Real estate construction — Real estate mortgage: 1-4 family residential Multi-family residential — — — Non-farm & non-residential Agricultural — — Consumer — Other — — — Total $ $ $ Loans included in totals above acquired from Madison Financial Corporation $ $ $ —
Schedule of aging of the recorded investment in past due and non-accrual loans	The following tables present the aging of the recorded investment in past due and non-accrual loans as of December 31, 2016 and 2015 by class of loans (in thousands): 2016 30–59 60–89 Greater than Total Days Days 90 Days Past Due & Loans Not (in thousands) Past Due Past Due Past Due Non-accrual Non-accrual Past Due Commercial $ $ $ $ $ $ Real estate construction — — — Real estate mortgage: 1-4 family residential Multi-family residential — Non-farm & non-residential — Agricultural Consumer — Other — — — — — Total $ $ $ $ $ $ Loans included in totals above acquired from Madison Financial Corp. $ $ — $ $ $ $ 2015 30–59 60–89 Greater than Total Days Days 90 Days Past Due & Loans Not (in thousands) Past Due Past Due Past Due Non-accrual Non-accrual Past Due Commercial $ $ $ — $ $ $ Real estate construction — — Real estate mortgage: 1-4 family residential Multi-family residential — — — — — Non-farm & non-residential Agricultural — Consumer Other — — — — — Total $ $ $ $ $ $ Loans included in totals above acquired from Madison Financial Corp. $ $ $ $ $ $
Schedule of risk category of loans by class of loans	The following tables present the risk category of loans by class of loans, based on the most recent analysis performed, as of December 31, 2016 and 2015 (in thousands): Special (in thousands) Pass Mention Substandard Doubtful Commercial $ $ $ $ — Real estate construction — — Real estate mortgage: 1-4 family residential Multi-family residential — Non-farm & non-residential — Agricultural — Total $ $ $ $ Loans included in totals above acquired from Madison Financial Corporation $ $ $ $ — Special (in thousands) Pass Mention Substandard Doubtful Commercial $ $ $ $ — Real estate construction — Real estate mortgage: 1-4 family residential — Multi-family residential — Non-farm & non-residential — Agricultural — Total $ $ $ $ — Loans included in totals above acquired from Madison Financial Corporation $ $ $ $ —
Schedule of analysis of the activity with respect to all director and executive officer loans	An analysis of the activity with respect to all director and executive officer loans is as follows (in thousands): 2016 2015 Balance, beginning of year $ $ New loans — Effect of changes in composition of related parties — Repayments Balance, end of year $ $
Schedule of activity for mortgage servicing rights and the related valuation allowance	Activity for mortgage servicing rights and the related valuation allowance follows (in thousands): 2016 2015 2014 Servicing Rights, net: Beginning balance $ $ $ Additions Amortization Change in valuation allowance Ending balance $ $ $ Valuation Allowance: Beginning balance $ $ $ Additions expensed — Reductions credited to operations Ending balance $ $ $
Schedule of estimated amortization expense for each of the next five years	Estimated amortization expense for each of the next five years is (in thousands): 2017 $ 2018 2019 2020 2021
Madison Financial Corp
LOANS
Schedule of loans	12/31/2016 12/31/2015 Commercial $ $ Real estate construction Real estate mortgage: 1-4 family residential Multi-family residential Non-farm & non-residential Agricultural Consumer Total $ $
Schedule of accretable yield or income expected to be collected	Accretable yield, or income expected to be collected, is as follows (in thousands): Year Ended Year Ended 12/31/2016 12/31/2015 Balance, beginning of period $ $ — New loans purchased — Accretion of income Balance, end of period $ $

REAL ESTATE OWNED (Tables)

REAL ESTATE OWNED (Tables)	12 Months Ended
	Dec. 31, 2016
REAL ESTATE OWNED
Schedule of activity in real estate owned	Activity in real estate owned was as follows (in thousands): Year Ended December 31, 2016 2015 Beginning of year, net $ $ Additions Acquired with Madison Financial Corporation — Sales (Additions) subtractions to valuation allowance, net End of period, net $ $
Schedule of activity in the valuation allowance	Activity in the valuation allowance was as follows (in thousands): Year Ended December 31, 2016 2015 2014 Beginning of year $ $ $ Write-downs of other real estate, net Reductions from sale — End of Period $ $ $ Expenses related to foreclosed assets include (in thousands): Year Ended December 31, 2016 2015 2014 Net (gain) loss on sales, included in other income on income statement $ $ $ Additions to valuation allowance, net Operating expenses, net of rental income Repossession expense, net Net expenses $ $ $
Schedule of expenses related to foreclosed assets	Expenses related to foreclosed assets include (in thousands): Year Ended December 31, 2016 2015 2014 Net (gain) loss on sales, included in other income on income statement $ $ $ Additions to valuation allowance, net Operating expenses, net of rental income Repossession expense, net Net expenses $ $ $

PREMISES AND EQUIPMENT (Tables)

PREMISES AND EQUIPMENT (Tables)	12 Months Ended
	Dec. 31, 2016
PREMISES AND EQUIPMENT
Schedule of year-end premises and equipment	Year-end premises and equipment were as follows (in thousands): 2016 2015 Land and buildings $ $ Furniture and equipment Construction in process — Less accumulated depreciation Less: Held for sale — $ $
Schedule of minimum rental payments	Minimum rental payments are as follows (in thousands): 2017 $ 2018 2019 2020 2021 Thereafter $

GOODWILL AND INTANGIBLE ASSETS

GOODWILL AND INTANGIBLE ASSETS (Tables)	12 Months Ended
	Dec. 31, 2016
GOODWILL AND INTANGIBLE ASSETS
Schedule of change in balance for goodwill	The change in balance for goodwill during the year is as follows (in thousands): 2016 2015 2014 Beginning of year $ $ $ Acquired goodwill — — Impairment — — — End of year $ $ $
Schedule of acquired intangible assets	Acquired intangible assets were as follows at year-end (in thousands): 2016 2015 Gross Gross Carrying Accumulated Carrying Accumulated Amount Amortization Amount Amortization Amortized intangible assets: Core deposit intangibles $ $ $ $
Schedule of estimated amortization expense for each of the next five years	Estimated amortization expense for each of the next five years (in thousands): 2017 $ 2018 2019 2020 2021

DEPOSITS (Tables)

DEPOSITS (Tables)	12 Months Ended
	Dec. 31, 2016
DEPOSITS
Schedule of scheduled maturities of time deposits for the next five years	At December 31, 2016, the scheduled maturities of time deposits for the next five years are as follows (in thousands): 2017 $ 2018 2019 2020 2021

REPURCHASE AGREEMENTS AND OTH39

REPURCHASE AGREEMENTS AND OTHER BORROWINGS (Tables)	12 Months Ended
	Dec. 31, 2016
REPURCHASE AGREEMENTS.
Summary of information concerning repurchase agreements	Information concerning repurchase agreements for 2016, 2015 and 2014 is summarized as follows (in thousands): 2016 2015 2014 Average daily balance during the year $ $ $ Average interest rate during the year % % % Maximum month-end balance during the year $ $ $ Weighted average interest rate at year end % % %
Maturity schedule for the term loan	The maturity schedule for the term loan as of December 31, 2016 is as follows: 2017 $ 2018 2019 2020 2021 Thereafter $

FEDERAL HOME LOAN BANK ADVANC40

FEDERAL HOME LOAN BANK ADVANCES (Tables)	12 Months Ended
	Dec. 31, 2016
FEDERAL HOME LOAN BANK ADVANCES
Schedule of advances from the Federal Home Loan Bank	At year-end, advances from the Federal Home Loan Bank were as follows (in thousands): 2016 2015 Long Term Advances Maturities range from June 2017 through March 2030, fixed rates from 1.00% to 6.86%, averaging 1.75% in 2016 and 1.77% in 2015 $ $
Schedule of scheduled principal payments due on advances	Scheduled principal payments due on advances during the years subsequent to December 31, 2016 are as follows (in thousands): 2017 $ 2018 2019 2020 2021 Thereafter $

INCOME TAXES (Tables)

INCOME TAXES (Tables)	12 Months Ended
	Dec. 31, 2016
INCOME TAXES
Schedule of income tax expense	Income tax expense was as follows (in thousands): 2016 2015 2014 Current $ $ $ Deferred $ $ $
Schedule of year-end deferred tax assets and liabilities	Year-end deferred tax assets and liabilities were due to the following (in thousands). No valuation allowance for the realization of deferred tax assets is considered necessary. 2016 2015 Deferred tax assets Allowance for loan losses $ $ Other real estate owned Nonaccrual loan interest Accrued expenses Acquisition market value adjustments AMT tax credit General business tax carryforward — Net operating loss carryforward — Unrealized loss on securities — Low income housing investments — Unearned income — Other Deferred tax liabilities Unrealized gain on securities — Bank premises and equipment FHLB stock Prepaid expenses Mortgage servicing rights Core deposit intangibles Low income housing investments — Acquisition loan loss recapture Other Net deferred tax asset $ $
Schedule of reconciliation of effective tax rates and federal statutory rates applied to financial statement income	2016 2015 2014 U. S. federal income tax rate % % % Changes from the statutory rate Tax-exempt interest income Historic and low income tax credits Insurance captive Non-deductible interest expense related to carrying tax-exempt investments Non-deductible merger expenses — — Other % % %

EARNINGS PER SHARE (Tables)

EARNINGS PER SHARE (Tables)	12 Months Ended
	Dec. 31, 2016
EARNINGS PER SHARE
Schedule of factors used in the earnings per share computation	The factors used in the earnings per share computation follow (in thousands): 2016 2015 2014 Basic Earnings Per Share Net income $ $ $ Weighted average common shares outstanding Basic earnings per share $ $ $ Diluted Earnings Per Share Net income $ $ $ Weighted average common shares outstanding Add effect of dilutive shares — — — Weighted average common shares outstanding including dilutive shares Diluted earnings per share $ $ $

STOCK BASED COMPENSATION (Table

STOCK BASED COMPENSATION (Tables)	12 Months Ended
	Dec. 31, 2016
Stock Based Compensation
Summary of activity for the Stock Option Plans	Summary of activity in the two expired stock option plans for 2016 follows: Weighted Weighted Average Average Remaining Aggregate Exercise Contractual Intrinsic Shares Price Term Value Outstanding, beginning of year $ Granted — — Forfeited or expired Exercised — — Outstanding, end of year $ 9.2 months $ Vested and expected to vest $ 9.2 months $ Exercisable, end of period $ 9.2 months $
Schedule of options outstanding at year-end	Options outstanding at year-end 2016 were as follows: Outstanding Exercisable Weighted Average Weighted Weighted Remaining Average Average Contractual Exercise Exercise Range of Exercise Prices Options Life (Months) Price Options Price From $31.00 to $31.00 per share 9.2 $ $
2005 Restricted Stock Grant Plan
Stock Based Compensation
Summary of changes in the Company's nonvested shares	Weighted-Average Fair Grant-Date Value Nonvested Shares Shares Fair Value Per Share Nonvested at January 1, 2016 $ $ Granted — — — Vested Forfeited Nonvested at December 31, 2016 $ $
2009 Stock Award Plan
Stock Based Compensation
Summary of changes in the Company's nonvested shares	Weighted-Average Fair Grant-Date Value Nonvested Shares Shares Fair Value Per Share Nonvested at January 1, 2016 $ $ Granted Vested Forfeited Nonvested at December 31, 2016 $ $

FAIR VALUE (Tables)

FAIR VALUE (Tables)	12 Months Ended
	Dec. 31, 2016
FAIR VALUE.
Schedule of assets measured at fair value on a recurring basis	2016 Quoted Prices In Active Markets for Significant Other Significant Identical Observable Unobservable Carrying Assets Inputs Inputs Description Value (Level 1) (Level 2) (Level 3) U. S. government agencies $ $ — $ $ — States and municipals — — Mortgage-backed - residential — — Equity securities — — Trading Assets — Total $ $ $ $ — Quoted Prices In Active Markets for Significant Other Significant Identical Observable Unobservable Carrying Assets Inputs Inputs Description Value (Level 1) (Level 2) (Level 3) U. S. government agencies $ $ — $ $ — States and municipals — — Mortgage-backed - residential — — Equity securities — — Trading Assets — Total $ $ $ $ —
Schedule of assets measured at fair value on a non-recurring basis	Fair Value Measurements at December 31, 2016 Using : Quoted Prices In Active Markets for Significant Other Significant Identical Observable Unobservable Carrying Assets Inputs Inputs (In thousands) Value (Level 1) (Level 2) (Level 3) Description Impaired loans: Real Estate Mortgage: 1-4 family Residential $ $ — $ — $ Agricultural — — Other real estate owned, net: Residential — — Commercial — — Loan servicing rights — — Fair Value Measurements at December 31, 2015 Using : Quoted Prices In Active Markets for Significant Other Significant Identical Observable Unobservable Carrying Assets Inputs Inputs (In thousands) Value (Level 1) (Level 2) (Level 3) Description Impaired loans: Real Estate Mortgage: Multi-family residential $ $ — $ — $ Non-farm & non-residential — — Agricultural — — — — Other real estate owned, net: Residential — — Loan servicing rights — —
Schedule of quantitative information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis	Range December 31, 2016 Fair Valuation Unobservable (Weighted (In thousands) Value Technique(s) Input(s) Average) Impaired loans Real estate mortgage: 1-4 family residential $ sales comparison adjustment for differences between the comparable sales 0%-21% (10)% Agricultural sales comparison adjustment for differences between the comparable sales 2%-75% (9)% Other real estate owned: Residential sales comparison adjustment for differences between the comparable sales 1%-16% (9)% Commercial income approach capitalization rate 10%-10% (10)% Loan Servicing Rights discounted cash flow constant prepayment rates 8%-45% (13)% Range December 31, 2015 Fair Valuation Unobservable (Weighted (In thousands) Value Technique(s) Input(s) Average) Impaired loans Real estate mortgage: 1-4 family residential $ sales comparison adjustment for differences between the comparable sales 1%-12% (7)% Non-farm & non-residential sales comparison adjustment for differences between the comparable sales 23%-31% (27)% Other real estate owned: Residential sales comparison adjustment for differences between the comparable sales 10%-28% (19)% income approach capitalization rate 10%-10% (10)% Loan Servicing Rights discounted cash flow constant prepayment rates 8%-21% (11)%
Schedule of carrying amounts and estimated fair values of financial instruments	December 31, 2016: Carrying (in thousands) Value Level 1 Level 2 Level 3 Total Financial assets Cash and cash equivalents $ $ $ — $ — $ Interest bearing deposits — — Securities — Trading assets — Loans held for sale — — Loans, net — — FHLB Stock — — — N/A Interest receivable — Financial liabilities Deposits $ $ $ $ — $ Securities sold under agreements to repurchase — — Long-term Federal Home Loan Bank advances — — Note payable Subordinated debentures — — Interest payable — December 31, 2015: Carrying (in thousands) Value Level 1 Level 2 Level 3 Total Financial assets Cash and cash equivalents $ $ $ — $ — $ Interest bearing deposits — — Securities — Trading assets — Mortgage loans held for sale — — Loans, net — — FHLB Stock — — — N/A Interest receivable — Financial liabilities Deposits $ $ $ $ — $ Securities sold under agreements to repurchase — — FHLB advances — — Note payable — — Subordinated debentures — — Interest payable —

OFF-BALANCE SHEET ACTIVITIES 45

OFF-BALANCE SHEET ACTIVITIES AND COMMITMENTS (Tables)	12 Months Ended
	Dec. 31, 2016
OFF-BALANCE SHEET ACTIVITIES AND COMMITMENTS
Schedule of financial instruments with off-balance sheet risk	Financial instruments with off-balance sheet risk were as follows at year-end (in thousands): 2016 2015 Fixed Rate Variable Rate Fixed Rate Variable Rate Unused lines of credit $ — $ $ — $ Commitments to make loans Letters of credit — —

CAPITAL REQUIREMENTS (Tables)

CAPITAL REQUIREMENTS (Tables)	12 Months Ended
	Dec. 31, 2016
CAPITAL REQUIREMENTS
Schedule of Company's and the Bank's actual amounts and ratios	To Be Well Capitalized Under Prompt For Capital Corrective Actual Adequacy Purposes Action Provisions Amount Ratio Amount Ratio Amount Ratio (Dollars in Thousands) December 31, 2016 Consolidated Total Capital (to Risk-Weighted Assets) $ % $ % N/A N/A Tier I Capital (to Risk-Weighted Assets) N/A N/A Common Equity Tier 1 Capital (to Risk-Weighted Assets) N/A N/A Tier I Capital (to Average Assets) N/A N/A Bank Only Total Capital (to Risk-Weighted Assets) $ % $ % $ % Tier I Capital (to Risk-Weighted Assets) Common Equity Tier 1 Capital (to Risk-Weighted Assets) Tier I Capital (to Average Assets) December 31, 2015 Consolidated Total Capital (to Risk-Weighted Assets) $ % $ % N/A N/A Tier I Capital (to Risk-Weighted Assets) N/A N/A Common Equity Tier 1 Capital (to Risk-Weighted Assets) N/A N/A Tier I Capital (to Average Assets) N/A N/A Bank Only Total Capital (to Risk-Weighted Assets) $ % $ % $ % Tier I Capital (to Risk-Weighted Assets) Common Equity Tier 1 Capital (to Risk-Weighted Assets) Tier I Capital (to Average Assets)

PARENT COMPANY FINANCIAL STAT47

PARENT COMPANY FINANCIAL STATEMENTS (Tables)	12 Months Ended
	Dec. 31, 2016
PARENT COMPANY FINANCIAL STATEMENTS
Schedule of condensed balance sheets	Condensed Balance Sheets December 31 2016 2015 (In Thousands) ASSETS Cash on deposit with subsidiaries $ $ Investment in subsidiaries Securities available for sale Other assets Total assets $ $ LIABILITIES AND STOCKHOLDERS’ EQUITY Liabilities Note payable $ $ Subordinated debentures Other Liabilities Stockholders’ equity Preferred stock — — Common stock Retained earnings Accumulated other comprehensive income (loss) Total liabilities and stockholders’ equity $ $
Schedule of condensed statements of income and comprehensive income (loss)	Condensed Statements of Income and Comprehensive Income Years Ended December 31 2016 2015 2014 (In Thousands) Income Dividends from subsidiaries $ $ $ Interest income — — — Total income Expenses Interest expense Other expenses Total expenses Income before income taxes and equity in undistributed income of subsidiaries Applicable income tax benefits Income before equity in undistributed income of subsidiaries Equity in undistributed income of subsidiaries Net income Other comprehensive income (loss), net of tax: Unrealized gains (losses) on securities arising during the period Reclassification of realized amount Other comprehensive income (loss) Comprehensive income $ $ $
Schedule of condensed statements of cash flows	Condensed Statements of Cash Flows Years Ended December 31 2016 2015 2014 (In Thousands) Cash flows from operating activities Net income $ $ $ Adjustments to reconcile net income to net cash from operating activities Equity in undistributed earnings of subsidiaries Change in other assets Change in other liabilities Net cash from operating activities Cash flows from investing activities Acquisition of Madison Financial Corporation — — Investment in captive insurance subsidiary — — Net cash from investing activities — Cash flows from financing activities Proceeds from issuance of long-term debt — — Payments on note payable — Dividends paid Payment to repurchase preferred stock — — Proceeds from issuance of common stock — Purchase of common stock Net cash from financing activities Net change in cash Cash at beginning of year Cash at end of year $ $ $

QUARTERLY FINANCIAL DATA (UNA48

QUARTERLY FINANCIAL DATA (UNAUDITED) (Tables)	12 Months Ended
	Dec. 31, 2016
QUARTERLY FINANCIAL DATA (UNAUDITED)
Schedule of quarterly financial data (unaudited)	(in thousands, except per share data) Interest Net Interest Net Earnings Per Share Income Income Income Basic Fully Diluted 2016 First quarter $ $ $ $ $ Second quarter Third quarter Fourth quarter 2015 First quarter $ $ $ $ $ Second quarter Third quarter Fourth quarter

ACCUMULATED OTHER COMPREHENSI49

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Tables)	12 Months Ended
	Dec. 31, 2016
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Schedule of changes in Accumulated Other Comprehensive Income (Loss) by Component	The following is changes in Accumulated Other Comprehensive Income (Loss) by component, net of tax, for the years ending December 31, 2016 and 2015 (in thousands): Unrealized Gains and Losses on Available for Sale Securities For the Year Ended December 31, 2016 2015 Beginning Balance $ $ Unrealized holding gains (losses) for the period, net of tax Less reclassification adjustment for: Securities gains realized in income Income taxes Net current period other comprehensive income (loss) Ending balance $ $

ACQUISITION OF MADISON FINANC50

ACQUISITION OF MADISON FINANCIAL CORPORATION (Tables)	12 Months Ended
	Dec. 31, 2016
ACQUISITION OF MADISON FINANCIAL CORPORATION
Schedule of valuation of the fair value of tangible and intangible assets acquired and liabilities assumed	Based on management’s valuation of the fair value of tangible and intangible assets acquired and liabilities assumed, the purchase price for the Madison Financial Corporation acquisition is allocated as follows (in thousands): Cash and cash equivalents $ Interest-bearing deposits in other financial institutions Securities available for sale Loans Federal Home Loan Bank Stock Accrued interest receivable Premises and equipment Other real estate Deferred tax assets Core deposit intangible asset Other assets Total assets acquired $ Deposits $ Other borrowings Accrued interest payable Other liabilities Total liabilities assumed $ Liquidation amount of preferred stock including unpaid dividends and interest Total identifiable net assets $ Goodwill $

SUMMARY OF SIGNIFICANT ACCOUN51

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2016USD ($)payment	Dec. 31, 2015USD ($)	Dec. 31, 2014USD ($)
Loans
Period for which federal funds are sold generally	1 day
Minimum number of consecutive payments made on a timely basis before returning a loan to accrual status | payment	6
Mortgage Servicing Rights
Servicing fees	$ 510	$ 486	$ 471
Period of historical loss experience used to determine general components of allowance for loan losses	5 years
1-4 family residential
Loans
Number of days delinquent for discontinuation of interest income on loans	90 days
Consumer
Loans
Number of days delinquent for discontinuation of interest income on loans	120 days
Commercial
Loans
Number of days delinquent for discontinuation of interest income on loans	120 days
Activity in allowance for loan losses
Outstanding balance over which loans are individually evaluated for impairment	$ 200

SUMMARY OF SIGNIFICANT ACCOUN52

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - INVESTMENT, TANGIBLE ASSETS AND INCOME TAXES (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Investments in Limited Partnerships
Investment	$ 4.7	$ 4
Income Taxes
Tax benefit	$ 0
Buildings and related components | Minimum
Bank Premises and Equipment
Useful lives	5 years
Buildings and related components | Maximum
Bank Premises and Equipment
Useful lives	40 years
Furniture, fixtures and equipment | Minimum
Bank Premises and Equipment
Useful lives	3 years
Furniture, fixtures and equipment | Maximum
Bank Premises and Equipment
Useful lives	10 years

SUMMARY OF SIGNIFICANT ACCOUN53

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - INTANGIBLE ASSETS AND SEGMENTS (Details) $ in Thousands	Jul. 24, 2015USD ($)shares	Dec. 31, 2016segment
Operating Segments
Number of reportable operating segments | segment		1
Acquisition
Total purchase price net of capital stock issuance cost	$ 7,939
Minimum
Intangible Assets
Useful life of core deposit intangible assets		10 years
Maximum
Intangible Assets
Useful life of core deposit intangible assets		15 years
Madison Financial Corp
Acquisition
Payment for fractional shares	3
Value assigned	$ 7,900
Share issuance | shares	263,361
Transaction and integration costs	$ 858

RESTRICTIONS ON CASH AND DUE 54

RESTRICTIONS ON CASH AND DUE FROM BANKS (Details) - USD ($)	Dec. 31, 2016	Dec. 31, 2015
RESTRICTIONS ON CASH AND DUE FROM BANKS
Reserve requirement	$ 2,300,000	$ 0

SECURITIES AVAILABLE FOR SALE55

SECURITIES AVAILABLE FOR SALE (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Securities Available for Sale
Amortized Cost	$ 275,218	$ 263,667
Gross Unrealized Gains	2,244	2,929
Gross Unrealized Losses	(3,692)	(2,384)
Fair Value	273,770	264,212
U.S. government agencies
Securities Available for Sale
Amortized Cost	36,454	49,012
Gross Unrealized Gains	373	51
Gross Unrealized Losses	(299)	(200)
Fair Value	36,528	48,863
States and municipals
Securities Available for Sale
Amortized Cost	90,117	89,501
Gross Unrealized Gains	1,731	2,644
Gross Unrealized Losses	(716)	(183)
Fair Value	91,132	91,962
Mortgage-backed - residential
Securities Available for Sale
Amortized Cost	148,327	124,834
Gross Unrealized Gains	120	210
Gross Unrealized Losses	(2,677)	(2,001)
Fair Value	145,770	123,043
Equity securities
Securities Available for Sale
Amortized Cost	320	320
Gross Unrealized Gains	20	24
Fair Value	$ 340	$ 344

SECURITIES AVAILABLE FOR SALE -

SECURITIES AVAILABLE FOR SALE - AMORTIZED COST AND FAIR VALUE BY CONTRACTUAL MATURITY (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Amortized Cost
Due in one year or less	$ 3,300
Due after one year through five years	22,097
Due after five years through ten years	55,715
Due after ten years	45,459
Securities due at a single maturity date	126,571
Amortized Cost	275,218	$ 263,667
Fair Value
Due in one year or less	3,299
Due after one year through five years	22,486
Due after five years through ten years	55,829
Due after ten years	46,046
Securities due at a single maturity date	127,660
Fair Value	273,770	264,212
Sales of securities
Proceeds from sales of securities, available for sale	23,888	21,627	$ 73,985
Gross gains realized on sales of securities	317	425,000	1,400
Gross losses realized on sales of securities	30	13	400
Tax provision related to realized gains	98	140	$ 328
Carrying value of securities pledged	252,400	246,200
Mortgage-backed - residential
Amortized Cost
Amortized Cost	148,327	124,834
Fair Value
Fair Value	145,770	123,043
Equity securities
Amortized Cost
Amortized Cost	320	320
Fair Value
Fair Value	$ 340	$ 344

SECURITIES AVAILABLE FOR SALE57

SECURITIES AVAILABLE FOR SALE - UNREALIZED LOSSES (Details)	Dec. 31, 2016USD ($)item	Dec. 31, 2015USD ($)
Securities with unrealized losses
Less than 12 Months, Fair Value	$ 175,838,000	$ 104,079
Less than 12 Months, Unrealized Loss	(2,953,000)	(1,389)
12 Months or More, Fair Value	13,652,000	57,846
12 Months or More, Unrealized Loss	(739,000)	(995)
Total, Fair Value	189,490,000	161,925
Total, Unrealized Loss	(3,692,000)	(2,384)
Trading Assets
Trading Assets	5,592,000	5,531,000
U.S. government agencies
Securities with unrealized losses
Less than 12 Months, Fair Value	28,202,000	15,243
Less than 12 Months, Unrealized Loss	(299,000)	(56)
12 Months or More, Fair Value		30,293
12 Months or More, Unrealized Loss		(144)
Total, Fair Value	28,202,000	45,536
Total, Unrealized Loss	$ (299,000)	(200)
Amortized cost (as a percent)	1.10%
States and municipals
Securities with unrealized losses
Less than 12 Months, Fair Value	$ 27,834,000	10,938
Less than 12 Months, Unrealized Loss	(716,000)	(102)
12 Months or More, Fair Value		4,065
12 Months or More, Unrealized Loss		(81)
Total, Fair Value	27,834,000	15,003
Total, Unrealized Loss	$ (716,000)	(183)
Number of securities having unrealized losses | item	52
Amortized cost (as a percent)	1.80%
Mortgage-backed - residential
Securities with unrealized losses
Less than 12 Months, Fair Value	$ 119,802,000	77,898
Less than 12 Months, Unrealized Loss	(1,938,000)	(1,231)
12 Months or More, Fair Value	13,652,000	23,488
12 Months or More, Unrealized Loss	(739,000)	(770)
Total, Fair Value	133,454,000	101,386
Total, Unrealized Loss	$ (2,677,000)	$ (2,001)
Number of securities having unrealized losses | item	70
Amortized cost (as a percent)	1.60%

LOANS (Details)

LOANS (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Loans
Loans	$ 656,007	$ 624,121
Allowance for loan losses	0	0
Madison Financial Corp
Loans
Loans	33,087	56,751
Allowance for loan losses	0
Commercial
Loans
Loans	77,436	55,929
Commercial | Madison Financial Corp
Loans
Loans	1,113	1,505
Real estate construction
Loans
Loans	29,169	29,320
Real estate construction | Madison Financial Corp
Loans
Loans	398	1,616
1-4 family residential
Loans
Loans	244,638	230,721
1-4 family residential | Madison Financial Corp
Loans
Loans	11,462	16,376
Multi-family residential
Loans
Loans	47,199	38,281
Multi-family residential | Madison Financial Corp
Loans
Loans	5,043	5,652
Non-farm & non-residential
Loans
Loans	176,024	183,692
Non-farm & non-residential | Madison Financial Corp
Loans
Loans	13,024	29,029
Agricultural
Loans
Loans	62,491	66,782
Agricultural | Madison Financial Corp
Loans
Loans	1,940	2,194
Consumer
Loans
Loans	18,867	18,880
Consumer | Madison Financial Corp
Loans
Loans	107	379
Other
Loans
Loans	$ 183	$ 516

LOANS - ACTIVITY IN ALLOWANCE (

LOANS - ACTIVITY IN ALLOWANCE (Details) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Activity in allowance for loan losses
Beginning Balance	$ 6,521,000	$ 6,012,000	$ 5,441,000
Charge-offs	1,530,000	1,950,000	1,340,000
Recoveries	1,400,000	1,009,000	961,000
Provision	1,150,000	1,450,000	950,000
Ending Balance	7,541,000	6,521,000	6,012,000
Carrying amount	1,900,000	3,500,000
Allowance for loan losses	0	0
Contractual fair value of purchased credit impaired loans		2,600,000
Accretable yield, or income expected to be collected
Balance, beginning of period	408,000
New loans purchased		505,000
Accretion of income	168,000	97,000
Balance, end of period	240,000	408,000
Commercial
Activity in allowance for loan losses
Beginning Balance	486,000	339,000	230,000
Charge-offs	5,000	30,000	258,000
Recoveries	39,000
Provision	269,000	177,000	367,000
Ending Balance	789,000	486,000	339,000
Real estate construction
Activity in allowance for loan losses
Beginning Balance	411,000	446,000	358,000
Recoveries	15,000	11,000	14,000
Provision	138,000	(46,000)	74,000
Ending Balance	564,000	411,000	446,000
1-4 family residential
Activity in allowance for loan losses
Beginning Balance	2,081,000	1,829,000	2,169,000
Charge-offs	126,000	284,000	274,000
Recoveries	19,000	33,000	59,000
Provision	327,000	503,000	(125,000)
Ending Balance	2,301,000	2,081,000	1,829,000
Multi-family residential
Activity in allowance for loan losses
Beginning Balance	458,000	495,000	427,000
Charge-offs		(94,000)	42,000
Recoveries	12,000	30,000	57,000
Provision	111,000	27,000	53,000
Ending Balance	581,000	458,000	495,000
Non-farm & non-residential
Activity in allowance for loan losses
Beginning Balance	1,213,000	813,000	564,000
Recoveries	454,000	86,000	368,000
Provision	(464,000)	314,000	(119,000)
Ending Balance	1,203,000	1,213,000	813,000
Agricultural
Activity in allowance for loan losses
Beginning Balance	678,000	998,000	578,000
Charge-offs	193,000	242,000	8,000
Recoveries	50,000	23,000	27,000
Provision	321,000	(101,000)	401,000
Ending Balance	856,000	678,000	998,000
Consumer
Activity in allowance for loan losses
Beginning Balance	525,000	520,000	548,000
Charge-offs	298,000	283,000	239,000
Recoveries	80,000	66,000	67,000
Provision	240,000	222,000	144,000
Ending Balance	547,000	525,000	520,000
Other
Activity in allowance for loan losses
Beginning Balance	60,000	32,000	51,000
Charge-offs	908,000	1,017,000	519,000
Recoveries	731,000	760,000	369,000
Provision	177,000	285,000	131,000
Ending Balance	60,000	60,000	32,000
Unallocated
Activity in allowance for loan losses
Beginning Balance	609,000	540,000	516,000
Provision	31,000	69,000	24,000
Ending Balance	640,000	$ 609,000	$ 540,000
Madison Financial Corp
Activity in allowance for loan losses
Allowance for loan losses	$ 0

LOANS - ALLOWANCE FOR LOAN LOSS

LOANS - ALLOWANCE FOR LOAN LOSSES AND RECORDED INVESTMENT (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Loans
Accrued interest receivable	$ 2,400	$ 2,300
Allowance for Loan Losses:
Individually Evaluated for Impairment	541	648
Collectively Evaluated for Impairment	7,000	5,873
Total	7,541	6,521	$ 6,012	$ 5,441
Loans:
Individually Evaluated for Impairment	7,994	9,469
Collectively Evaluated for Impairment	646,100	610,432
Purchased Credit Impairment		4,220
Total	656,007	624,121
Commercial
Allowance for Loan Losses:
Collectively Evaluated for Impairment	789	486
Total	789	486	339	230
Loans:
Individually Evaluated for Impairment	97
Collectively Evaluated for Impairment	77,339	55,924
Purchased Credit Impairment		5
Total	77,436	55,929
Real estate construction
Allowance for Loan Losses:
Collectively Evaluated for Impairment	564	411
Total	564	411	446	358
Loans:
Individually Evaluated for Impairment	153	835
Collectively Evaluated for Impairment	29,016	28,474
Purchased Credit Impairment		11
Total	29,169	29,320
1-4 family residential
Allowance for Loan Losses:
Individually Evaluated for Impairment	99	128
Collectively Evaluated for Impairment	2,202	1,953
Total	2,301	2,081	1,829	2,169
Loans:
Individually Evaluated for Impairment	2,704	1,454
Collectively Evaluated for Impairment	240,906	226,523
Purchased Credit Impairment		2,744
Total	244,638	230,721
Multi-family residential
Allowance for Loan Losses:
Collectively Evaluated for Impairment	581	458
Total	581	458	495	427
Loans:
Collectively Evaluated for Impairment	46,637	38,281
Total	47,199	38,281
Non-farm & non-residential
Allowance for Loan Losses:
Individually Evaluated for Impairment	15	181
Collectively Evaluated for Impairment	1,188	1,032
Total	1,203	1,213	813	564
Loans:
Individually Evaluated for Impairment	1,725	2,882
Collectively Evaluated for Impairment	174,154	179,913
Purchased Credit Impairment		897
Total	176,024	183,692
Agricultural
Allowance for Loan Losses:
Individually Evaluated for Impairment	427	339
Collectively Evaluated for Impairment	429	339
Total	856	678	998	578
Loans:
Individually Evaluated for Impairment	3,315	4,298
Collectively Evaluated for Impairment	58,998	61,921
Purchased Credit Impairment		563
Total	62,491	66,782
Consumer
Allowance for Loan Losses:
Collectively Evaluated for Impairment	547	525
Total	547	525	520	548
Loans:
Collectively Evaluated for Impairment	18,867	18,880
Total	18,867	18,880
Other
Allowance for Loan Losses:
Collectively Evaluated for Impairment	60	60
Total	60	60	32	51
Loans:
Collectively Evaluated for Impairment	183	516
Total	183	516
Unallocated
Allowance for Loan Losses:
Collectively Evaluated for Impairment	640	609
Total	640	$ 609	$ 540	$ 516
Receivables Acquired with Deteriorated Credit Quality
Loans:
Purchased Credit Impairment	1,913
Receivables Acquired with Deteriorated Credit Quality | 1-4 family residential
Loans:
Purchased Credit Impairment	1,028
Receivables Acquired with Deteriorated Credit Quality | Multi-family residential
Loans:
Purchased Credit Impairment	562
Receivables Acquired with Deteriorated Credit Quality | Non-farm & non-residential
Loans:
Purchased Credit Impairment	145
Receivables Acquired with Deteriorated Credit Quality | Agricultural
Loans:
Purchased Credit Impairment	$ 178

LOANS - INDIVIDUALLY EVALUATED

LOANS - INDIVIDUALLY EVALUATED FOR IMPAIRMENT (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Unpaid Principal Balance
Total	$ 7,994	$ 9,469	$ 13,799
Recorded Investment
Total	7,994	9,469	13,799
Allowance for Loan Losses Allocated.	541	648	998
Average Recorded Investment
Total	8,795	11,920	14,183
Interest Income Recognized
Total	191	93	308
Cash Basis Interest Recognized
Total	191	93	308
Commercial
Unpaid Principal Balance
With no related allowance recorded	97
Recorded Investment
With no related allowance recorded	97
Average Recorded Investment
With no related allowance recorded	48
Interest Income Recognized
With no related allowance recorded	30
Cash Basis Interest Recognized
With no related allowance recorded	30
Real estate construction
Unpaid Principal Balance
With no related allowance recorded	153	835
Recorded Investment
With no related allowance recorded	153	835
Average Recorded Investment
With no related allowance recorded		820
With an allowance recorded	494
Interest Income Recognized
With no related allowance recorded	9	29
Cash Basis Interest Recognized
With no related allowance recorded	9	29
Multi-family residential
Unpaid Principal Balance
With an allowance recorded			264
Recorded Investment
With an allowance recorded			264
Allowance for Loan Losses Allocated.			94
Average Recorded Investment
With an allowance recorded		24	284
Interest Income Recognized
With an allowance recorded			5
Cash Basis Interest Recognized
With an allowance recorded			5
1-4 family residential
Unpaid Principal Balance
With no related allowance recorded	606	370	1,618
With an allowance recorded	2,098	1,083	480
Recorded Investment
With no related allowance recorded	606	370	1,618
With an allowance recorded	2,098	1,083	480
Allowance for Loan Losses Allocated.	99	128	56
Average Recorded Investment
With no related allowance recorded	488	1,493	1,147
With an allowance recorded	1,590	1,916	990
Interest Income Recognized
With no related allowance recorded		15	25
With an allowance recorded	56	6	18
Cash Basis Interest Recognized
With no related allowance recorded		15	25
With an allowance recorded	56	6	18
Agricultural
Unpaid Principal Balance
With no related allowance recorded	654	469	442
With an allowance recorded	2,661	3,830	8,037
Recorded Investment
With no related allowance recorded	654	469	442
With an allowance recorded	2,661	3,830	8,037
Allowance for Loan Losses Allocated.	427	339	712
Average Recorded Investment
With no related allowance recorded	561	335	2,696
With an allowance recorded	3,309	4,379	5,341
Interest Income Recognized
With no related allowance recorded		14	29
With an allowance recorded	25		116
Cash Basis Interest Recognized
With no related allowance recorded		14	29
With an allowance recorded	25		116
Non-farm & non-residential
Unpaid Principal Balance
With an allowance recorded	1,725	2,882	2,958
Recorded Investment
With an allowance recorded	1,725	2,882	2,958
Allowance for Loan Losses Allocated.	15	181	136
Average Recorded Investment
With no related allowance recorded		68	552
With an allowance recorded	2,303	2,885	3,173
Interest Income Recognized
With an allowance recorded	71	29	115
Cash Basis Interest Recognized
With an allowance recorded	$ 71	$ 29	$ 115

LOANS - NONACCRUAL, LOANS PAST

LOANS - NONACCRUAL, LOANS PAST DUE OVER 90 DAYS STILL ACCRUING AND TDR (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Loans
Nonaccrual	$ 4,566	$ 6,351
Loans Past Due Over 90 Days Still Accruing	927	1,000
Troubled Debt Restructurings	$ 2,063	2,245
Percentage of nonaccrual loans secured by real estate	96.90%
Madison Financial Corp
Loans
Nonaccrual	$ 578	1,107
Loans Past Due Over 90 Days Still Accruing	22	446
Commercial
Loans
Nonaccrual	3	6
Loans Past Due Over 90 Days Still Accruing	11
Real estate construction
Loans
Nonaccrual		145
Loans Past Due Over 90 Days Still Accruing	153	365
1-4 family residential
Loans
Nonaccrual	2,725	1,531
Loans Past Due Over 90 Days Still Accruing	31	471
Troubled Debt Restructurings	338	468
Multi-family residential
Loans
Nonaccrual	25
Non-farm & non-residential
Loans
Nonaccrual	272	481
Loans Past Due Over 90 Days Still Accruing		137
Troubled Debt Restructurings	1,725	1,777
Agricultural
Loans
Nonaccrual	1,541	4,171
Loans Past Due Over 90 Days Still Accruing	724
Consumer
Loans
Nonaccrual		17
Loans Past Due Over 90 Days Still Accruing	$ 8	$ 27

LOANS - AGING OF RECORDED INVES

LOANS - AGING OF RECORDED INVESTMENT IN PAST DUE AND NON-ACCRUAL LOANS (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Aging of recorded investment in past due and non-accrual loans
Greater than 90 Days Past Due	$ 927	$ 1,000
Non-accrual	4,566	6,351
Total Past Due and Non-accrual	9,586	12,278
Loans Not Past Due	646,421	611,843
30 to 59 Days Past Due
Aging of recorded investment in past due and non-accrual loans
Recorded Investment Past Due	3,658	4,147
60 to 89 Days Past Due
Aging of recorded investment in past due and non-accrual loans
Recorded Investment Past Due	435	780
Madison Financial Corp
Aging of recorded investment in past due and non-accrual loans
Greater than 90 Days Past Due	22	446
Non-accrual	578	1,107
Total Past Due and Non-accrual	755	1,642
Loans Not Past Due	32,332	55,109
Madison Financial Corp | 30 to 59 Days Past Due
Aging of recorded investment in past due and non-accrual loans
Recorded Investment Past Due	155	5
Madison Financial Corp | 60 to 89 Days Past Due
Aging of recorded investment in past due and non-accrual loans
Recorded Investment Past Due		84
Commercial
Aging of recorded investment in past due and non-accrual loans
Greater than 90 Days Past Due	11
Non-accrual	3	6
Total Past Due and Non-accrual	113	2,428
Loans Not Past Due	77,323	53,501
Commercial | 30 to 59 Days Past Due
Aging of recorded investment in past due and non-accrual loans
Recorded Investment Past Due	54	2,323
Commercial | 60 to 89 Days Past Due
Aging of recorded investment in past due and non-accrual loans
Recorded Investment Past Due	45	99
Real estate construction
Aging of recorded investment in past due and non-accrual loans
Greater than 90 Days Past Due	153	365
Non-accrual		145
Total Past Due and Non-accrual	153	510
Loans Not Past Due	29,016	28,810
1-4 family residential
Aging of recorded investment in past due and non-accrual loans
Greater than 90 Days Past Due	31	471
Non-accrual	2,725	1,531
Total Past Due and Non-accrual	5,294	3,774
Loans Not Past Due	239,344	226,947
1-4 family residential | 30 to 59 Days Past Due
Aging of recorded investment in past due and non-accrual loans
Recorded Investment Past Due	2,310	1,508
1-4 family residential | 60 to 89 Days Past Due
Aging of recorded investment in past due and non-accrual loans
Recorded Investment Past Due	228	264
Multi-family residential
Aging of recorded investment in past due and non-accrual loans
Non-accrual	25
Total Past Due and Non-accrual	419
Loans Not Past Due	46,780	38,281
Multi-family residential | 30 to 59 Days Past Due
Aging of recorded investment in past due and non-accrual loans
Recorded Investment Past Due	391
Multi-family residential | 60 to 89 Days Past Due
Aging of recorded investment in past due and non-accrual loans
Recorded Investment Past Due	3
Non-farm & non-residential
Aging of recorded investment in past due and non-accrual loans
Greater than 90 Days Past Due		137
Non-accrual	272	481
Total Past Due and Non-accrual	492	776
Loans Not Past Due	175,532	182,916
Non-farm & non-residential | 30 to 59 Days Past Due
Aging of recorded investment in past due and non-accrual loans
Recorded Investment Past Due	159	37
Non-farm & non-residential | 60 to 89 Days Past Due
Aging of recorded investment in past due and non-accrual loans
Recorded Investment Past Due	61	121
Agricultural
Aging of recorded investment in past due and non-accrual loans
Greater than 90 Days Past Due	724
Non-accrual	1,541	4,171
Total Past Due and Non-accrual	2,973	4,651
Loans Not Past Due	59,518	62,131
Agricultural | 30 to 59 Days Past Due
Aging of recorded investment in past due and non-accrual loans
Recorded Investment Past Due	647	229
Agricultural | 60 to 89 Days Past Due
Aging of recorded investment in past due and non-accrual loans
Recorded Investment Past Due	61	251
Consumer
Aging of recorded investment in past due and non-accrual loans
Greater than 90 Days Past Due	8	27
Non-accrual		17
Total Past Due and Non-accrual	142	139
Loans Not Past Due	18,725	18,741
Consumer | 30 to 59 Days Past Due
Aging of recorded investment in past due and non-accrual loans
Recorded Investment Past Due	97	50
Consumer | 60 to 89 Days Past Due
Aging of recorded investment in past due and non-accrual loans
Recorded Investment Past Due	37	45
Other
Aging of recorded investment in past due and non-accrual loans
Loans Not Past Due	$ 183	$ 516

LOANS - TROUBLED DEBT RESTRUCTU

LOANS - TROUBLED DEBT RESTRUCTURINGS (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2016USD ($)item	Dec. 31, 2015USD ($)item	Dec. 31, 2014USD ($)
LOANS
Reserves to customers whose loan terms have been modified in troubled debt restructurings	$ 40	$ 101
Number of loans that met the definition of troubled debt restructurings | item	0	0
Increase in allowance for loan losses	$ 61	$ 101
Charge offs resulted from troubled debt restructuring	0	0
Trouble debt restructuring defaulted on payment	$ 0	$ 0	$ 0

LOANS - RISK CATEGORY OF LOANS

LOANS - RISK CATEGORY OF LOANS (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Credit Quality Indicators
Loans	$ 656,007	$ 624,121
Maximum outstanding balance of non-consumer loans evaluated similar to consumer loans over $200,000	200
Activity with respect to all director and executive officer loans
Balance, beginning of year	1,673	1,706
New loans	74
Effect of changes in composition of related parties	(590)
Repayments	9	33
Balance, end of year	1,148	1,673
Madison Financial Corp
Credit Quality Indicators
Loans	33,087	56,751
Pass
Credit Quality Indicators
Loans	607,179	571,575
Pass | Madison Financial Corp
Credit Quality Indicators
Loans	30,359	44,367
Special Mention
Credit Quality Indicators
Loans	17,278	17,442
Special Mention | Madison Financial Corp
Credit Quality Indicators
Loans	480	2,533
Substandard
Credit Quality Indicators
Loans	12,489	15,706
Substandard | Madison Financial Corp
Credit Quality Indicators
Loans	2,248	3,189
Doubtful
Credit Quality Indicators
Loans	11
Commercial
Credit Quality Indicators
Outstanding balance over which loans are individually evaluated for impairment	200
Loans	77,436	55,929
Commercial | Madison Financial Corp
Credit Quality Indicators
Loans	1,113	1,505
Commercial | Pass
Credit Quality Indicators
Loans	76,346	54,392
Commercial | Special Mention
Credit Quality Indicators
Loans	1,078	1,323
Commercial | Substandard
Credit Quality Indicators
Loans	12	215
Real estate construction
Credit Quality Indicators
Loans	29,169	29,320
Real estate construction | Madison Financial Corp
Credit Quality Indicators
Loans	398	1,616
Real estate construction | Pass
Credit Quality Indicators
Loans	28,577	26,835
Real estate construction | Special Mention
Credit Quality Indicators
Loans		1,402
Real estate construction | Substandard
Credit Quality Indicators
Loans	592	1,083
1-4 family residential
Credit Quality Indicators
Loans	244,638	230,721
1-4 family residential | Madison Financial Corp
Credit Quality Indicators
Loans	11,462	16,376
1-4 family residential | Pass
Credit Quality Indicators
Loans	232,969	216,661
1-4 family residential | Special Mention
Credit Quality Indicators
Loans	4,031	6,155
1-4 family residential | Substandard
Credit Quality Indicators
Loans	7,627	7,903
1-4 family residential | Doubtful
Credit Quality Indicators
Loans	11
Multi-family residential
Credit Quality Indicators
Loans	47,199	38,281
Multi-family residential | Madison Financial Corp
Credit Quality Indicators
Loans	5,043	5,652
Multi-family residential | Pass
Credit Quality Indicators
Loans	43,681	35,221
Multi-family residential | Special Mention
Credit Quality Indicators
Loans	2,617	2,916
Multi-family residential | Substandard
Credit Quality Indicators
Loans	901	143
Non-farm & non-residential
Credit Quality Indicators
Loans	176,024	183,692
Non-farm & non-residential | Madison Financial Corp
Credit Quality Indicators
Loans	13,024	29,029
Non-farm & non-residential | Pass
Credit Quality Indicators
Loans	167,451	178,289
Non-farm & non-residential | Special Mention
Credit Quality Indicators
Loans	8,185	4,448
Non-farm & non-residential | Substandard
Credit Quality Indicators
Loans	388	955
Agricultural
Credit Quality Indicators
Loans	62,491	66,782
Agricultural | Madison Financial Corp
Credit Quality Indicators
Loans	1,940	2,194
Agricultural | Pass
Credit Quality Indicators
Loans	58,155	60,177
Agricultural | Special Mention
Credit Quality Indicators
Loans	1,367	1,198
Agricultural | Substandard
Credit Quality Indicators
Loans	2,969	5,407
Consumer
Credit Quality Indicators
Loans	18,867	18,880
Consumer | Madison Financial Corp
Credit Quality Indicators
Loans	107	379
Consumer | Non-performing
Credit Quality Indicators
Loans	$ 8	$ 44
Minimum period past due for loans to be considered as non-performing	90 days

LOANS - LOAN SERVICING (Details

LOANS - LOAN SERVICING (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Loan Servicing
Unpaid principal balances of mortgage loans serviced	$ 206,800	$ 196,200
Custodial escrow balances	935	890
Servicing Rights:
Beginning balance	1,277	1,209	$ 1,344
Additions	483	348	270
Amortization	(334)	(339)	(385)
Change in valuation allowance	(105)	59	(20)
Ending balance	1,321	1,277	1,209
Valuation Allowance:
Beginning balance	20	79	59
Additions expensed	109		34
Reductions credited to operations	4	59	14
Ending balance	125	20	$ 79
Fair value of servicing rights	$ 1,800	$ 1,700
Assumptions used in determination of fair value
Discount rate (as a percent)	12.00%	12.00%
Weighted average amortization period	16 years 3 months 18 days
Estimated amortization expense for each of the next five years
2,017	$ 212
2,018	162
2,019	125
2,020	101
2,021	$ 82
Minimum
Assumptions used in determination of fair value
Prepayment speeds (as a percent)	8.50%	8.10%
Default rates (as a percent)	0.10%	0.10%
Maximum
Assumptions used in determination of fair value
Prepayment speeds (as a percent)	45.00%	21.00%
Default rates (as a percent)	0.90%	0.90%

REAL ESTATE OWNED (Details)

REAL ESTATE OWNED (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Activity in real estate owned
Beginning of year, net	$ 2,347	$ 4,603
Additions	3,735	3,394
Acquired with Madison Financial Corporation		445
Sales	(4,071)	(7,062)
(Additions) subtractions to valuation allowance, net	(187)	967
End of period, net	1,824	2,347	$ 4,603
Activity in the valuation allowance
Beginning of year	616	1,583	1,524
Write-downs of other real estate, net	187	252	144
Reductions from sale		(1,219)	(85)
End of period	803	616	1,583
Expenses related to foreclosed assets
Net (gain) loss on sales, included in other income on income statement	(128)	(5)	(146)
Additions to valuation allowance, net	187	252	144
Operating expenses (receipts), net of rental income	214	164	227
Repossession expenses, net	401	416	371
Net expenses	$ 273	$ 411	$ 225

PREMISES AND EQUIPMENT (Details

PREMISES AND EQUIPMENT (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Premises and equipment
Premises and equipment, gross	$ 38,299	$ 38,528
Less accumulated depreciation	(22,549)	(21,931)
Property, Plant and Equipment, Total	15,750	16,597
Less: Held for sale	(969)
Property, Plant and Equipment, Net, Total	14,781	16,597
Depreciation expense	1,300	1,400	$ 1,300
Minimum rental payments
2,017	308
2,018	307
2,019	309
2,020	271
2,021	276
Thereafter	819
Total	2,290
Land and buildings
Premises and equipment
Premises and equipment, gross	20,076	20,755
Furniture and equipment
Premises and equipment
Premises and equipment, gross	17,785	$ 17,773
Construction in process
Premises and equipment
Premises and equipment, gross	$ 438

GOODWILL AND INTANGIBLE ASSET69

GOODWILL AND INTANGIBLE ASSETS (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Change in balance for goodwill
Goodwill, Beginning Balance	$ 14,001	$ 13,117	$ 13,117
Acquired goodwill		884
Goodwill, Ending Balance	14,001	14,001	13,117
Amortized intangible assets:
Core deposit intangibles, Gross Carrying Amount	800	3,330
Accumulated Amortization	271	2,557
Aggregate amortization expense	244	$ 205	$ 140
Estimated amortization expense for each of the next five years
2,017	160
2,018	131
2,019	102
2,020	74
2,021	$ 45

DEPOSITS (Details)

DEPOSITS (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
DEPOSITS
Time deposits of $250,000 or more	$ 74,302	$ 61,199
Scheduled maturities of time deposits for the next five years
2,017	140,877
2,018	30,081
2,019	11,118
2,020	10,679
2,021	9,806
Related Party Deposits
Deposits of directors and executive officers of the company and companies in which they have beneficial ownership	$ 5,800	$ 7,300

REPURCHASE AGREEMENTS AND OTH71

REPURCHASE AGREEMENTS AND OTHER BORROWINGS (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Repurchase agreements and other borrowings
Repurchase agreements	$ 20,873	$ 18,514
Repurchase agreements
Repurchase agreements and other borrowings
Repurchase agreements	29,400	18,500
Average daily balance during the year	$ 23,755	$ 16,596	$ 12,270
Average interest rate during the year (as a percent)	0.45%	0.59%	0.76%
Maximum month-end balance during the year	$ 27,214	$ 19,874	$ 13,788
Weighted average interest rate at year end (as a percent)	0.50%	0.54%	0.75%
Repurchase agreements | Minimum
Repurchase agreements and other borrowings
Maturity term	1 day
Repurchase agreements | Maximum
Repurchase agreements and other borrowings
Maturity term	41 months

REPURCHASE AGREEMENTS AND OTH72

REPURCHASE AGREEMENTS AND OTHER BORROWINGS - MATURITY SCHEDULE (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015	Jul. 20, 2015
Repurchase agreements and other borrowings
Fixed interest rate	5.02%
Maturity schedule of term loan
Amount outstanding	$ 4,090	$ 4,794	$ 5,000
Term loan
Maturity schedule of term loan
2,017	383
2,018	403
2,019	423
2,020	445
2,021	467
Thereafter	1,969
Total term loan maturities	4,090
Revolving promissory note
Repurchase agreements and other borrowings
Debt instrument, face amount		5,000
Maturity schedule of term loan
Amount outstanding	0	0
Parent Company
Maturity schedule of term loan
Amount outstanding	$ 4,090	$ 4,794

FEDERAL HOME LOAN BANK ADVANC73

FEDERAL HOME LOAN BANK ADVANCES (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Maturities range from June 2017 through March 2030, fixed rates from 1.00% to 6.86%, averaging 1.75% in 2016 and 1.77% in 2015	$ 92,500	$ 87,833
Scheduled principal payments due on advances
2,017	15,656
2,018	17,691
2,019	12,433
2,020	19,275
2,021	7,401
Thereafter	20,044
Long-term Federal Home Loan Bank Advances, Total	$ 92,500
Maximum
Fixed rate (as a percent)	6.86%
Minimum
Fixed rate (as a percent)	1.00%
Weighted average
Fixed rate (as a percent)	1.75%	1.77%

SUBORDINATED DEBENTURES (Detail

SUBORDINATED DEBENTURES (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Aug. 31, 2003
OTHER BORROWINGS
Subordinated debentures	$ 7,217	$ 7,217
Kentucky Bancshares, Statutory Trust I
OTHER BORROWINGS
Trust common securities			$ 217
Trust preferred securities			$ 7,000
Kentucky Bancshares, Statutory Trust I | Subordinated debentures
OTHER BORROWINGS
Subordinated debentures	$ 7,200
Fixed interest rate for the first 5 years (as a percent)	7.06%
Period of fixed interest rate	5 years
Variable interest rate base	3 month LIBOR
Basis spread on the variable rate basis (as a percent)	3.00%
Variable interest rate starting September 2008 (as a percent)	4.00%
Redemption price as a percentage of face value	100.00%
Kentucky Bancshares, Statutory Trust I | Subordinated debentures | Maximum
OTHER BORROWINGS
Period of interest payments that may be deferred	5 years

INCOME TAXES (Details)

INCOME TAXES (Details) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Income tax expense
Current	$ 1,082,000	$ 629,000	$ 853,000
Deferred	(309,000)	(99,000)	44,000
Income Tax Expense, Total	773,000	530,000	$ 897,000
Valuation allowance	0	0
Deferred tax assets
Allowance for loan losses	2,589,000	2,233,000
Other real estate owned	237,000	295,000
Nonaccrual loan interest	54,000	36,000
Accrued expenses	212,000	189,000
Acquisition market value adjustments	571,000	814,000
AMT tax credit	92,000	200,000
General business tax carryforward		244,000
Net operating loss carryforward		116,000
Unrealized loss on securities	492,000
Low income housing investments	150,000
Unearned income	362,000
Other	88,000	82,000
Deferred tax liabilities
Unrealized gain on securities		(185,000)
Bank premises and equipment	(1,041,000)	(1,109,000)
FHLB stock	(1,308,000)	(1,308,000)
Prepaid expenses	(260,000)	(263,000)
Mortgage servicing rights	(434,000)	(434,000)
Core deposit intangibles	(180,000)	(262,000)
Low income housing investments		(69,000)
Acquisition loan loss recapture	(236,000)	(193,000)
Other	(194,000)	(178,000)
Net deferred tax asset	$ 1,194,000	$ 208,000

INCOME TAXES - RECONCILIATION O

INCOME TAXES - RECONCILIATION OF EFFECTIVE TAX RATES (Details)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Reconciliation of effective tax rates and federal statutory rates applied to financial statement income
U. S. federal income tax rate (as a percent)	34.00%	34.00%	34.00%
Changes from the statutory rate
Tax-exempt interest income (as a percent)	(14.10%)	(16.30%)	(14.70%)
Historic and low income tax credits (as a percent)	(9.40%)	(8.20%)	(7.00%)
Insurance captive	(3.30%)	(3.70%)	(1.80%)
Non-deductible interest expense related to carrying tax-exempt investments (as a percent)	0.40%	0.40%	0.40%
Non-deductible merger expenses		0.90%
Other (as a percent)	0.70%	0.10%	0.40%
Effective tax rates (as a percent)	8.30%	7.20%	11.30%

INCOME TAXES - UNRECOGNIZED TAX

INCOME TAXES - UNRECOGNIZED TAX BENEFITS (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Deferred tax liability not recognized
Amount of temporary difference for which deferred tax liability is not required to be provided	$ 1,300
Unrecorded deferred tax liability	441
Unrecognized Tax Benefits
Interest and penalties	$ 0	$ 0
Accrued Interest and penalties		$ 0	$ 0

EARNINGS PER SHARE (Details)

EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Basic Earnings Per Share
Net income	$ 2,285	$ 2,365	$ 2,082	$ 1,837	$ 1,654	$ 1,541	$ 2,122	$ 1,515	$ 8,569	$ 6,832	$ 7,071
Weighted average common shares outstanding									2,991	2,842	2,721
Basic earnings per share (in dollars per share)	$ 0.77	$ 0.79	$ 0.70	$ 0.61	$ 0.55	$ 0.52	$ 0.77	$ 0.56	$ 2.87	$ 2.40	$ 2.60
Diluted Earnings Per Share
Net Income									$ 8,569	$ 6,832	$ 7,071
Weighted average common shares outstanding									2,991	2,842	2,721
Weighted average common and dilutive potential common shares outstanding									2,991	2,842	2,721
Diluted earnings per share (in dollars per share)	$ 0.77	$ 0.79	$ 0.70	$ 0.61	$ 0.55	$ 0.52	$ 0.77	$ 0.56	$ 2.87	$ 2.40	$ 2.60

EARNINGS PER SHARE - ANTIDILUTI

EARNINGS PER SHARE - ANTIDILUTIVE SECURITIES (Details) - shares	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Stock options
Antidilutive securities
Antidilutive shares excluded from computation of diluted earnings per share	1,200	2,400	12,625
Restricted stock
Antidilutive securities
Antidilutive shares excluded from computation of diluted earnings per share	0	0	0

RETIREMENT PLAN (Details)

RETIREMENT PLAN (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
RETIREMENT PLAN
Expense recognized in connection with the qualified profit sharing plan	$ 925	$ 815	$ 729

STOCK BASED COMPENSATION (Detai

STOCK BASED COMPENSATION (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2016USD ($)item	Dec. 31, 2015USD ($)	Dec. 31, 2014USD ($)
STOCK BASED COMPENSATION
Number of share based compensation plans | item	4
Compensation cost that has been charged against income | $	$ 153	$ 133	$ 111

STOCK BASED COMPENSATION - VEST

STOCK BASED COMPENSATION - VESTING PERIOD (Details) - Stock options	12 Months Ended
	Dec. 31, 2016shares
Stock Option Plans
Stock Based Compensation
Life of awards	10 years
1993 Non-Employee Directors Stock Ownership Incentive Plan
Stock Based Compensation
Number of shares authorized for issuance	20,000

STOCK BASED COMPENSATION - ACTI

STOCK BASED COMPENSATION - ACTIVITY (Details) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Stock Based Compensation
Granted (in shares)	0	0	0
Stock Option Plans
Shares
Outstanding, beginning of year (in shares)	2,400
Forfeited or expired (in shares)	(1,200)
Outstanding, end of year (in shares)	1,200	2,400
Vested and expected to vest (in shares)	1,200
Exercisable, end of period (in shares)	1,200
Weighted Average Exercise Price
Outstanding, beginning of year (in dollars per share)	$ 30.37
Forfeited or expired (in dollars per share)	29.75
Outstanding, end of year (in dollars per share)	31	$ 30.37
Vested and expected to vest (in dollars per share)	31
Exercisable, end of period (in dollars per share)	$ 31
Weighted Average Remaining Contractual Term
Outstanding, end of period	9 months 6 days
Vested and expected to vest	9 months 6 days
Exercisable, end of period	9 months 6 days
Additional disclosures
Total unrecognized compensation cost related to nonvested stock options granted	$ 0
Aggregate Intrinsic Value
Outstanding, end of period	1,800
Vested and expected to vest	1,800
Exercisable, end of period	$ 1,800

STOCK BASED COMPENSATION - OPTI

STOCK BASED COMPENSATION - OPTIONS OUTSTANDING (Details) - Range of exercise prices from $31.00 to $31.00 per share	12 Months Ended
	Dec. 31, 2016$ / sharesshares
Options outstanding
Exercise prices, low end of range (in dollars per share)	$ 31
Exercise prices, high end of range (in dollars per share)	$ 31
Outstanding Options (in shares) | shares	1,200
Outstanding Weighted Average Remaining Contractual Life	9 years 2 months 12 days
Outstanding Weighted Average Exercise Price (in dollars per share)	$ 31
Exercisable Options (in shares) | shares	1,200
Exercisable Weighted Average Exercise Price (in dollars per share)	$ 31

STOCK BASED COMPENSATION - NONV

STOCK BASED COMPENSATION - NONVESTED SHARES (Details) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
2005 Restricted Stock Grant Plan | Restricted stock
Stock Based Compensation
Number of shares authorized for issuance	50,000
Shares available for issuance	0
Shares
Nonvested at the beginning of the period (in shares)	17,551
Granted (in shares)	0	5,385
Vested (in shares)	(5,999)
Forfeited (in shares)	(916)	(88)
Nonvested at the end of the period (in shares)	10,636	17,551
Weighted-Average Grant-Date Fair Value
Nonvested shares, balance at the beginning of the period (in dollars)	$ 404,351
Vested (in dollars)	(128,453)
Forfeited (in dollars)	(22,380)
Nonvested shares, balance at the end of the period (in dollars)	$ 253,518	$ 404,351
Fair Value Per Share
Nonvested shares, balance at the beginning of the period (in dollars per share)	$ 23.04
Vested (in dollars per share)	21.41
Forfeited (in dollars per share)	(24.43)
Nonvested shares, balance at the end of the period (in dollars per share)	$ 23.84	$ 23.04
Additional disclosures
Total unrecognized compensation cost related to nonvested shares granted	$ 160,000
Period over which cost is expected to be recognized	2 years 4 months 24 days
Fair value of shares vested (in dollars)	$ 128,000	$ 105,000	$ 88,000
2009 Stock Award Plan
Stock Based Compensation
Number of shares authorized for issuance	150,000
Shares
Nonvested at the beginning of the period (in shares)	1,945
Granted (in shares)	6,170	1,465
Vested (in shares)	(553)
Forfeited (in shares)	(265)	0
Nonvested at the end of the period (in shares)	7,297	1,945
Weighted-Average Grant-Date Fair Value
Nonvested shares, balance at the beginning of the period (in dollars)	$ 54,024
Granted (in dollars)	(182,941)
Vested (in dollars)	(15,255)
Forfeited (in dollars)	(7,857)
Nonvested shares, balance at the end of the period (in dollars)	$ 213,853	$ 54,024
Fair Value Per Share
Nonvested shares, balance at the beginning of the period (in dollars per share)	$ 27.78
Granted (in dollars per share)	29.65
Vested (in dollars per share)	27.59
Forfeited (in dollars per share)	(29.65)
Nonvested shares, balance at the end of the period (in dollars per share)	$ 29.31	$ 27.78
Additional disclosures
Total unrecognized compensation cost related to nonvested shares granted	$ 172,000
Period over which cost is expected to be recognized	3 years 10 months 24 days
Fair value of shares vested (in dollars)	$ 15,000	$ 6,000	$ 4,000
2009 Stock Award Plan | Restricted stock
Stock Based Compensation
Shares available for issuance	142,000

LIMITATION ON BANK DIVIDENDS (D

LIMITATION ON BANK DIVIDENDS (Details) $ in Millions	12 Months Ended
	Dec. 31, 2016USD ($)
LIMITATION ON BANK DIVIDENDS
Preceding period of retained net profits that may be paid as dividends without prior approval of the regulatory agency	2 years
Retained net profits of the preceding two years available for dividend distribution by the Bank without prior approval	$ 5.6

FAIR VALUE (Details)

FAIR VALUE (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Fair value on instruments on recurring basis
Securities available for sale	$ 273,770	$ 264,212
Transfers from Level 1 to Level 2	0	0
Transfers from Level 2 to Level 1	0	0
Carrying Value
Fair value on instruments on recurring basis
Securities available for sale	273,770	264,212
Quoted Prices In Active Markets for Identical Assets (Level 1)
Fair value on instruments on recurring basis
Securities available for sale	340	344
Significant Other Observable Inputs (Level 2)
Fair value on instruments on recurring basis
Securities available for sale	273,430	263,868
Recurring | Carrying Value
Fair value on instruments on recurring basis
Securities available for sale	279,362	269,743
Recurring | Quoted Prices In Active Markets for Identical Assets (Level 1)
Fair value on instruments on recurring basis
Securities available for sale	1,948	1,961
Recurring | Significant Other Observable Inputs (Level 2)
Fair value on instruments on recurring basis
Securities available for sale	277,414	267,782
U.S. government agencies
Fair value on instruments on recurring basis
Securities available for sale	36,528	48,863
U.S. government agencies | Recurring | Carrying Value
Fair value on instruments on recurring basis
Securities available for sale	36,528	48,863
U.S. government agencies | Recurring | Significant Other Observable Inputs (Level 2)
Fair value on instruments on recurring basis
Securities available for sale	36,528	48,863
States and municipals
Fair value on instruments on recurring basis
Securities available for sale	91,132	91,962
States and municipals | Recurring | Carrying Value
Fair value on instruments on recurring basis
Securities available for sale	91,132	91,962
States and municipals | Recurring | Significant Other Observable Inputs (Level 2)
Fair value on instruments on recurring basis
Securities available for sale	91,132	91,962
Mortgage-backed - residential
Fair value on instruments on recurring basis
Securities available for sale	145,770	123,043
Mortgage-backed - residential | Recurring | Carrying Value
Fair value on instruments on recurring basis
Securities available for sale	145,770	123,043
Mortgage-backed - residential | Recurring | Significant Other Observable Inputs (Level 2)
Fair value on instruments on recurring basis
Securities available for sale	145,770	123,043
Equity securities
Fair value on instruments on recurring basis
Securities available for sale	340	344
Equity securities | Recurring | Carrying Value
Fair value on instruments on recurring basis
Securities available for sale	340	344
Equity securities | Recurring | Quoted Prices In Active Markets for Identical Assets (Level 1)
Fair value on instruments on recurring basis
Securities available for sale	340	344
Trading Assets | Recurring | Carrying Value
Fair value on instruments on recurring basis
Securities available for sale	5,592	5,531
Trading Assets | Recurring | Quoted Prices In Active Markets for Identical Assets (Level 1)
Fair value on instruments on recurring basis
Securities available for sale	1,608	1,617
Trading Assets | Recurring | Significant Other Observable Inputs (Level 2)
Fair value on instruments on recurring basis
Securities available for sale	$ 3,984	$ 3,914

FAIR VALUE - FAIR VALUE ON NON-

FAIR VALUE - FAIR VALUE ON NON-RECURRING (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2016USD ($)item	Dec. 31, 2015USD ($)	Dec. 31, 2014USD ($)	Dec. 31, 2013USD ($)
Impaired Loans
Valuation allowance of impaired loans	$ 541	$ 648	$ 998
Other real estate owned, net:
Outstanding balance of other real estate owned	1,824	2,347	4,603
Valuation allowance of other real estate owned	803	616	1,583	$ 1,524
Loan servicing rights
Mortgage servicing rights	1,321	1,277
Balance of loan servicing rights	1,321	1,277	1,209	1,344
Valuation allowance of loan servicing rights	125	20	$ 79	$ 59
Non-recurring
Impaired Loans
Impaired loans, at fair value	3,900	825
Valuation allowance of impaired loans	$ 502	170
Number of impaired loans. | item	4
Impaired loans, additional provision for loan losses	$ 427	170
Decreased in allowance for specific impaired loans	(107)
Other real estate owned, net:
Other real estate owned	1,200	1,500
Outstanding balance of other real estate owned	2,000	2,100
Valuation allowance of other real estate owned	803	616
Write downs of other real estate owned	187	252
Loan servicing rights
Mortgage servicing rights	1,100	87
Balance of loan servicing rights	1,200	106
Valuation allowance of loan servicing rights	125	20
Write-downs of loan servicing rights	105	59
Non-recurring | Carrying Value
Loan servicing rights
Mortgage servicing rights	1,083	87
Non-recurring | Significant Unobservable Inputs (Level 3)
Loan servicing rights
Mortgage servicing rights	1,083	87
Non-recurring | 1-4 family residential | Carrying Value
Impaired Loans
Impaired loans, at fair value	1,685
Non-recurring | 1-4 family residential | Significant Unobservable Inputs (Level 3)
Impaired Loans
Impaired loans, at fair value	1,685
Non-recurring | Multi-family residential | Carrying Value
Impaired Loans
Impaired loans, at fair value		540
Non-recurring | Multi-family residential | Significant Unobservable Inputs (Level 3)
Impaired Loans
Impaired loans, at fair value		540
Non-recurring | Non-farm & non-residential | Carrying Value
Impaired Loans
Impaired loans, at fair value		285
Non-recurring | Non-farm & non-residential | Significant Unobservable Inputs (Level 3)
Impaired Loans
Impaired loans, at fair value		285
Non-recurring | Agricultural | Carrying Value
Impaired Loans
Impaired loans, at fair value	2,234
Non-recurring | Agricultural | Significant Unobservable Inputs (Level 3)
Impaired Loans
Impaired loans, at fair value	2,234
Non-recurring | Residential | Carrying Value
Other real estate owned, net:
Other real estate owned	956	1,504
Non-recurring | Residential | Significant Unobservable Inputs (Level 3)
Other real estate owned, net:
Other real estate owned	956	$ 1,504
Non-recurring | Commercial | Carrying Value
Other real estate owned, net:
Other real estate owned	272
Non-recurring | Commercial | Significant Unobservable Inputs (Level 3)
Other real estate owned, net:
Other real estate owned	$ 272

FAIR VALUE - QUANTITATIVE INFOR

FAIR VALUE - QUANTITATIVE INFORMATION (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Fair Value Measurements
Loan servicing rights	$ 1,321	$ 1,277
Non-recurring
Fair Value Measurements
Impaired loans, at fair value	3,900	825
Other real estate owned	1,200	1,500
Loan servicing rights	1,100	87
Non-recurring | Significant Unobservable Inputs (Level 3)
Fair Value Measurements
Loan servicing rights	1,083	87
Non-recurring | Discounted cash flow | Significant Unobservable Inputs (Level 3)
Fair Value Measurements
Loan servicing rights	1,083	87
Non-recurring | 1-4 family residential | Significant Unobservable Inputs (Level 3)
Fair Value Measurements
Impaired loans, at fair value	1,685
Non-recurring | 1-4 family residential | Sales comparison | Significant Unobservable Inputs (Level 3)
Fair Value Measurements
Impaired loans, at fair value	1,685	540
Non-recurring | Multi-family residential | Significant Unobservable Inputs (Level 3)
Fair Value Measurements
Impaired loans, at fair value		540
Non-recurring | Non-farm & non-residential | Significant Unobservable Inputs (Level 3)
Fair Value Measurements
Impaired loans, at fair value		285
Non-recurring | Non-farm & non-residential | Sales comparison | Significant Unobservable Inputs (Level 3)
Fair Value Measurements
Impaired loans, at fair value		285
Non-recurring | Agricultural | Significant Unobservable Inputs (Level 3)
Fair Value Measurements
Impaired loans, at fair value	2,234
Non-recurring | Agricultural | Sales comparison | Significant Unobservable Inputs (Level 3)
Fair Value Measurements
Impaired loans, at fair value	2,234
Non-recurring | Residential | Significant Unobservable Inputs (Level 3)
Fair Value Measurements
Other real estate owned	956	1,504
Non-recurring | Residential | Sales comparison | Significant Unobservable Inputs (Level 3)
Fair Value Measurements
Impaired loans, at fair value		$ 1,504
Other real estate owned	956
Non-recurring | Commercial | Significant Unobservable Inputs (Level 3)
Fair Value Measurements
Other real estate owned	272
Non-recurring | Commercial | Income approach | Significant Unobservable Inputs (Level 3)
Fair Value Measurements
Other real estate owned	$ 272
Non-recurring | Minimum | Income approach | Significant Unobservable Inputs (Level 3)
Fair Value Measurements
Capitalization rate (as a percent)		10.00%
Non-recurring | Minimum | Discounted cash flow | Significant Unobservable Inputs (Level 3)
Fair Value Measurements
Constant prepayment rates (as a percent)	8.00%	8.00%
Non-recurring | Minimum | 1-4 family residential | Sales comparison | Significant Unobservable Inputs (Level 3)
Fair Value Measurements
adjustment for differences between the comparable sales (as a percent)	0.00%	1.00%
Non-recurring | Minimum | Non-farm & non-residential | Sales comparison | Significant Unobservable Inputs (Level 3)
Fair Value Measurements
adjustment for differences between the comparable sales (as a percent)		23.00%
Non-recurring | Minimum | Agricultural | Sales comparison | Significant Unobservable Inputs (Level 3)
Fair Value Measurements
adjustment for differences between the comparable sales (as a percent)	2.00%
Non-recurring | Minimum | Residential | Sales comparison | Significant Unobservable Inputs (Level 3)
Fair Value Measurements
adjustment for differences between the comparable sales (as a percent)	1.00%	10.00%
Non-recurring | Minimum | Commercial | Income approach | Significant Unobservable Inputs (Level 3)
Fair Value Measurements
Capitalization rate (as a percent)	10.00%
Non-recurring | Maximum | Income approach | Significant Unobservable Inputs (Level 3)
Fair Value Measurements
Capitalization rate (as a percent)		10.00%
Non-recurring | Maximum | Discounted cash flow | Significant Unobservable Inputs (Level 3)
Fair Value Measurements
Constant prepayment rates (as a percent)	45.00%	21.00%
Non-recurring | Maximum | 1-4 family residential | Sales comparison | Significant Unobservable Inputs (Level 3)
Fair Value Measurements
adjustment for differences between the comparable sales (as a percent)	21.00%	12.00%
Non-recurring | Maximum | Non-farm & non-residential | Sales comparison | Significant Unobservable Inputs (Level 3)
Fair Value Measurements
adjustment for differences between the comparable sales (as a percent)		31.00%
Non-recurring | Maximum | Agricultural | Sales comparison | Significant Unobservable Inputs (Level 3)
Fair Value Measurements
adjustment for differences between the comparable sales (as a percent)	75.00%
Non-recurring | Maximum | Residential | Sales comparison | Significant Unobservable Inputs (Level 3)
Fair Value Measurements
adjustment for differences between the comparable sales (as a percent)	16.00%	28.00%
Non-recurring | Maximum | Commercial | Income approach | Significant Unobservable Inputs (Level 3)
Fair Value Measurements
Capitalization rate (as a percent)	10.00%
Non-recurring | Weighted average | Discounted cash flow | Significant Unobservable Inputs (Level 3)
Fair Value Measurements
Constant prepayment rates (as a percent)	13.00%	11.00%
Non-recurring | Weighted average | 1-4 family residential | Sales comparison | Significant Unobservable Inputs (Level 3)
Fair Value Measurements
adjustment for differences between the comparable sales (as a percent)	10.00%	7.00%
Non-recurring | Weighted average | Non-farm & non-residential | Sales comparison | Significant Unobservable Inputs (Level 3)
Fair Value Measurements
adjustment for differences between the comparable sales (as a percent)		27.00%
Non-recurring | Weighted average | Agricultural | Sales comparison | Significant Unobservable Inputs (Level 3)
Fair Value Measurements
adjustment for differences between the comparable sales (as a percent)	9.00%
Non-recurring | Weighted average | Residential | Sales comparison | Significant Unobservable Inputs (Level 3)
Fair Value Measurements
adjustment for differences between the comparable sales (as a percent)	9.00%	19.00%
Non-recurring | Weighted average | Residential | Income approach | Significant Unobservable Inputs (Level 3)
Fair Value Measurements
Capitalization rate (as a percent)		10.00%
Non-recurring | Weighted average | Commercial | Income approach | Significant Unobservable Inputs (Level 3)
Fair Value Measurements
Capitalization rate (as a percent)	10.00%

FAIR VALUE - FAIR VALUE OF FINA

FAIR VALUE - FAIR VALUE OF FINANCIAL INSTRUMENTS (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Financial assets
Interest bearing time deposits	$ 5,029	$ 4,874
Securities	273,770	264,212
Trading assets	5,592	5,531
Loans held for sale	724	624
Assets held for sale	969
Interest receivable	3,715	3,681
Financial liabilities
Long-term Federal Home Loan Bank advances	92,500	87,833
Interest payable	692	659
Carrying Value
Financial assets
Cash and cash equivalents	43,250	28,048
Interest bearing time deposits	5,029	4,874
Securities	273,770	264,212
Trading assets	5,592	5,531
Mortgage loans held for sale	724	624
Loans, net	648,466	617,600
FHLB stock	7,034	7,034
Interest receivable	3,715	3,681
Financial liabilities
Deposits	802,981	758,981
Securities sold under agreements to repurchase and other borrowings	20,873	18,514
Federal Home Loan Bank advances	92,500	87,833
Note payable	4,090	4,794
Subordinated debentures	7,217	7,217
Interest payable	692	659
Fair Value
Financial assets
Cash and cash equivalents	43,250	28,048
Interest bearing time deposits	5,029	4,874
Securities	273,770	264,212
Trading assets	5,592	5,531
Mortgage loans held for sale	750	633
Loans, net	648,234	616,206
Interest receivable	3,715	3,681
Financial liabilities
Deposits	803,145	760,338
Securities sold under agreements to repurchase and other borrowings	21,006	18,523
Federal Home Loan Bank advances	91,015	82,349
Note payable	4,564	5,431
Subordinated debentures	7,210	7,206
Interest payable	692	659
Quoted Prices In Active Markets for Identical Assets (Level 1)
Financial assets
Cash and cash equivalents	43,250	28,048
Interest bearing time deposits	5,029	4,874
Securities	340	344
Trading assets	1,608	1,617
Financial liabilities
Deposits	607,617	557,146
Significant Other Observable Inputs (Level 2)
Financial assets
Securities	273,430	263,868
Trading assets	3,984	3,914
Mortgage loans held for sale	750	633
Interest receivable	1,334	1,358
Financial liabilities
Deposits	195,528	203,192
Securities sold under agreements to repurchase and other borrowings	21,006	18,523
Federal Home Loan Bank advances	91,015	82,349
Note payable	4,564	5,431
Interest payable	639	649
Significant Unobservable Inputs (Level 3)
Financial assets
Loans, net	648,234	616,206
Interest receivable	2,381	2,323
Financial liabilities
Subordinated debentures	7,210	7,206
Interest payable	53	10
Parent Company
Financial assets
Securities	$ 70	$ 70

OFF-BALANCE SHEET ACTIVITIES 91

OFF-BALANCE SHEET ACTIVITIES AND COMMITMENTS (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Unused lines of credit
OFF-BALANCE SHEET ACTIVITIES AND COMMITMENTS
Financial instruments with off-balance sheet risk	$ 102,088	$ 96,581
Commitments to make loans | Minimum
OFF-BALANCE SHEET ACTIVITIES AND COMMITMENTS
Fixed rates (as a percent)	2.88%
Commitments to make loans | Maximum
OFF-BALANCE SHEET ACTIVITIES AND COMMITMENTS
Period of commitments to make loans	60 days
Fixed rates (as a percent)	6.78%
Maturities of fixed rate loan commitments	30 years
Commitments to make loans with fixed rate
OFF-BALANCE SHEET ACTIVITIES AND COMMITMENTS
Financial instruments with off-balance sheet risk	$ 12,526	9,854
Commitments to make loans with variable rate
OFF-BALANCE SHEET ACTIVITIES AND COMMITMENTS
Financial instruments with off-balance sheet risk	17,040	11,894
Letters of credit
OFF-BALANCE SHEET ACTIVITIES AND COMMITMENTS
Financial instruments with off-balance sheet risk	$ 463	$ 805

CAPITAL REQUIREMENTS (Details)

CAPITAL REQUIREMENTS (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Total Capital (to Risk-Weighted Assets)
Actual, Amount	$ 94,343	$ 88,456
Actual, Ratio (as a percent)	13.90%	13.30%
For Capital Adequacy, Amount	$ 54,280	$ 53,025
For Capital Purposes, Ratio (as a percent)	8.00%	8.00%
Tier I Capital (to Risk-Weighted Assets)
Actual, Amount	$ 86,718	$ 81,849
Actual, Ratio (as a percent)	12.80%	12.40%
For Capital Adequacy, Amount	$ 40,710	$ 39,769
For Capital Purposes, Ratio (as a percent)	6.00%	6.00%
Common Equity Tier 1 Capital (to Risk-Weighted Assets)
Actual, Amount	$ 79,718	$ 74,849
Actual, Ratio (as a percent)	11.80%	11.30%
For Capital Adequacy, Amount	$ 30,533	$ 29,827
For Capital Purposes, Ratio (as a percent)	4.50%	4.50%
Tier I Capital (to Average Assets)
Actual, Amount	$ 86,718	$ 81,849
Actual, Ratio (as a percent)	8.70%	8.60%
For Capital Adequacy, Amount	$ 39,795	$ 38,232
For Capital Purposes, Ratio (as a percent)	4.00%	4.00%
Kentucky Bank
Total Capital (to Risk-Weighted Assets)
Actual, Amount	$ 95,118	$ 90,855
Actual, Ratio (as a percent)	14.00%	13.70%
For Capital Adequacy, Amount	$ 54,246	$ 52,981
For Capital Purposes, Ratio (as a percent)	8.00%	8.00%
To Be Well Capitalized Under Prompt Corrective, Action Amount	$ 67,808	$ 66,227
To Be Well Capitalized Under Prompt Corrective, Provisions Ratio (as a percent)	10.00%	10.00%
Tier I Capital (to Risk-Weighted Assets)
Actual, Amount	$ 87,493	$ 84,248
Actual, Ratio (as a percent)	12.90%	12.70%
For Capital Adequacy, Amount	$ 40,685	$ 39,736
For Capital Purposes, Ratio (as a percent)	6.00%	6.00%
To Be Well Capitalized Under Prompt Corrective, Action Amount	$ 54,246	$ 52,981
To Be Well Capitalized Under Prompt Corrective, Provisions Ratio (as a percent)	8.00%	8.00%
Common Equity Tier 1 Capital (to Risk-Weighted Assets)
Actual, Amount	$ 87,493	$ 84,248
Actual, Ratio (as a percent)	12.90%	12.70%
For Capital Adequacy, Amount	$ 30,513	$ 29,802
For Capital Purposes, Ratio (as a percent)	4.50%	4.50%
To Be Well Capitalized Under Prompt Corrective, Action Amount	$ 44,075	$ 43,047
To Be Well Capitalized Under Prompt Corrective, Provisions Ratio (as a percent)	6.50%	6.50%
Tier I Capital (to Average Assets)
Actual, Amount	$ 87,493	$ 84,248
Actual, Ratio (as a percent)	8.80%	8.90%
For Capital Adequacy, Amount	$ 39,671	$ 38,124
For Capital Purposes, Ratio (as a percent)	4.00%	4.00%
To Be Well Capitalized Under Prompt Corrective, Action Amount	$ 49,588	$ 47,654
To Be Well Capitalized Under Prompt Corrective, Provisions Ratio (as a percent)	5.00%	5.00%

PARENT COMPANY FINANCIAL STAT93

PARENT COMPANY FINANCIAL STATEMENTS (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015	Jul. 20, 2015
ASSETS
Cash on deposit with subsidiaries	$ 42,052	$ 26,546
Securities available for sale	273,770	264,212
Other assets	7,442	8,085
Total assets	1,028,447	974,684
Liabilities
Note payable	4,090	4,794	$ 5,000
Subordinated debentures	7,217	7,217
Other Liabilities	7,122	7,273
Stockholders' equity
Preferred stock
Retained earnings	73,161	68,324
Accumulated other comprehensive income (loss)	(956)	359
Total liabilities and stockholders’ equity	1,028,447	974,684
Parent Company
ASSETS
Cash on deposit with subsidiaries	1,317	500
Investment in subsidiaries	102,658	100,495
Securities available for sale	70	70
Other assets	287	369
Total assets	104,332	101,434
Liabilities
Note payable	4,090	4,794
Subordinated debentures	7,217	7,217
Other Liabilities	53	10
Stockholders' equity
Preferred stock
Common stock	20,767	20,730
Retained earnings	73,161	68,324
Accumulated other comprehensive income (loss)	(956)	359
Total liabilities and stockholders’ equity	$ 104,332	$ 101,434

PARENT COMPANY FINANCIAL STAT94

PARENT COMPANY FINANCIAL STATEMENTS - INCOME AND COMPREHENSIVE INCOME (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Expenses
Interest expense									$ 4,426	$ 4,050	$ 3,756
Other expenses									33,785	31,807	27,215
Income before income taxes and equity in undistributed income of subsidiary									9,342	7,362	7,968
Applicable income tax benefits									(773)	(530)	(897)
Net income	$ 2,285	$ 2,365	$ 2,082	$ 1,837	$ 1,654	$ 1,541	$ 2,122	$ 1,515	8,569	6,832	7,071
Other comprehensive income (loss), net of tax:
Other comprehensive income (loss)									(1,315)	(432)	5,917
Comprehensive income									7,254	6,400	12,988
Parent Company
Income
Dividends from subsidiary									5,700	4,200	4,100
Total income									5,700	4,200	4,100
Expenses
Interest expense									482	347	230
Other expenses									209	644	385
Total expenses									691	991	615
Income before income taxes and equity in undistributed income of subsidiary									5,009	3,209	3,485
Applicable income tax benefits									235	269	209
Income before equity in undistributed income of subsidiary									5,244	3,478	3,694
Equity in undistributed income of subsidiaries									3,325	3,354	3,377
Net income									8,569	6,832	7,071
Other comprehensive income (loss), net of tax:
Unrealized holding gains (losses) for the period, net of tax									(1,126)	(160)	6,555
Reclassification of realized amount									(189)	(272)	(638)
Other comprehensive income (loss)									(1,315)	(432)	5,917
Comprehensive income									$ 7,254	$ 6,400	$ 12,988

PARENT COMPANY FINANCIAL STAT95

PARENT COMPANY FINANCIAL STATEMENTS - CASH FLOWS (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Cash flows from operating activities
Net income	$ 2,285	$ 2,365	$ 2,082	$ 1,837	$ 1,654	$ 1,541	$ 2,122	$ 1,515	$ 8,569	$ 6,832	$ 7,071
Adjustments to reconcile net income to net cash from operating activities:
Change in other assets									1,624	(1,163)	1,506
Change in other liabilities									(151)	(1,186)	(4,637)
Net cash from operating activities									12,563	8,057	3,849
Cash Flows From Investing Activities
Net cash from investing activities									(43,835)	4,946	(79,707)
Cash Flows From Financing Activities:
Payments on note payable									(704)	(206)
Dividends paid									(3,229)	(2,972)	(2,721)
Purchase of common stock									(668)	(31)	(111)
Net cash from financing activities									46,474	(2,124)	70,166
Net change in cash and cash equivalents									15,202	10,879	(5,692)
Cash and cash equivalents at beginning of year				28,048				17,169	28,048	17,169	22,861
Cash and cash equivalents at end of year	43,250				28,048				43,250	28,048	17,169
Parent Company
Cash flows from operating activities
Net income									8,569	6,832	7,071
Adjustments to reconcile net income to net cash from operating activities:
Equity in undistributed income of subsidiary									(3,325)	(3,354)	(3,377)
Change in other assets									82	12	(109)
Change in other liabilities									43	(49)	50
Net cash from operating activities									5,369	3,441	3,635
Cash Flows From Investing Activities
Acquisition of Madison Financial Corporation										(229)
Investment in captive insurance subsidiary											(250)
Net cash from investing activities										(229)	(250)
Cash Flows From Financing Activities:
Proceeds from issuance of long-term debt										5,000
Payments on note payable									(704)	(206)
Dividends paid									(3,229)	(2,972)	(2,721)
Payment to repurchase preferred stock										(6,066)
Proceeds from issuance of common stock									49	2
Purchase of common stock									(668)	(31)	(111)
Net cash from financing activities									(4,552)	(4,273)	(2,832)
Net change in cash and cash equivalents									817	(1,061)	553
Cash and cash equivalents at beginning of year				$ 500				$ 1,561	500	1,561	1,008
Cash and cash equivalents at end of year	$ 1,317				$ 500				$ 1,317	$ 500	$ 1,561

QUARTERLY FINANCIAL DATA (UNA96

QUARTERLY FINANCIAL DATA (UNAUDITED) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Quarterly financial data
Interest Income	$ 9,164	$ 9,206	$ 9,086	$ 9,098	$ 8,978	$ 8,641	$ 7,835	$ 7,731	$ 36,554	$ 33,185	$ 29,731
Net Interest Income	8,068	8,066	7,985	8,009	7,911	7,598	6,863	6,763	32,128	29,135	25,975
Net Income	$ 2,285	$ 2,365	$ 2,082	$ 1,837	$ 1,654	$ 1,541	$ 2,122	$ 1,515	$ 8,569	$ 6,832	$ 7,071
Basic earnings per share (in dollars per share)	$ 0.77	$ 0.79	$ 0.70	$ 0.61	$ 0.55	$ 0.52	$ 0.77	$ 0.56	$ 2.87	$ 2.40	$ 2.60
Diluted earnings per share (in dollars per share)	$ 0.77	$ 0.79	$ 0.70	$ 0.61	$ 0.55	$ 0.52	$ 0.77	$ 0.56	$ 2.87	$ 2.40	$ 2.60
Amount of settlement							$ 747

ACCUMULATED OTHER COMPREHENSI97

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Changes in accumulated other comprehensive income (loss) by component
Beginning Balance	$ 89,413	$ 77,942	$ 67,673
Less reclassification adjustment for:
Securities gains realized in income	287	412	966
Ending Balance	92,972	89,413	77,942
Accumulated Other Comprehensive Income
Changes in accumulated other comprehensive income (loss) by component
Beginning Balance	359	791	(5,126)
Less reclassification adjustment for:
Ending Balance	(956)	359	$ 791
Unrealized Gains and Losses on Available for Sale Securities
Changes in accumulated other comprehensive income (loss) by component
Unrealized holding gains (losses) for the period, net of tax	(1,126)	(160)
Less reclassification adjustment for:
Securities gains realized in income	287	412
Income taxes	(98)	(140)
Reclassification, net of tax	189	272
Net current period other comprehensive income (loss)	$ (1,315)	$ (432)

ACQUISITION OF MADISON FINANC98

ACQUISITION OF MADISON FINANCIAL CORPORATION (Details) - USD ($) $ in Thousands	Jul. 24, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
ACQUISITION
Total assets	$ 116,065
Total purchase price net of capital stock issuance cost	7,939
Preliminary valuation of the fair value of tangible and intangible assets acquired and liabilities assumed
Cash and cash equivalents	3,517
Interest-bearing deposits in other financial institutions	2,979
Securities available for sale	27,704
Loans	77,729
Federal Home Loan Bank Stock	1,053
Accrued interest receivable	309
Premises and equipment	789
Other real estate	445
Deferred tax assets	624
Core deposit intangible asset	800
Other assets	116
Total assets acquired	116,065
Deposits	95,823
Other borrowings	6,245
Accrued interest payable	59
Other liabilities	817
Total liabilities assumed	102,944
Liquidation amount of preferred stock including unpaid dividends and interest	6,066
Total identifiable net assets	7,055
Goodwill	884	$ 14,001	$ 14,001	$ 13,117	$ 13,117
Total purchase price net of capital stock issuance cost	7,939
Madison Financial Corp
ACQUISITION
Total assets	116,100
Payment for fractional shares	$ 3
Share issuance	263,361
Value assigned	$ 7,900
Transaction and integration costs	858
Preliminary valuation of the fair value of tangible and intangible assets acquired and liabilities assumed
Total assets acquired	116,100
Goodwill	884
Receivables acquired
Fair value	73,600
Gross contractual amounts receivable	$ 74,700