Kentucky Bancshares (KTYB) 10-Q 9 May 18 2018 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2018	Apr. 30, 2018
Document and Entity Information
Entity Registrant Name	KENTUCKY BANCSHARES INC /KY/
Entity Central Index Key	1,000,232
Document Type	10-Q
Document Period End Date	Mar. 31, 2018
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		2,978,440
Document Fiscal Year Focus	2,018
Document Fiscal Period Focus	Q1

CONSOLIDATED BALANCE SHEETS (un

CONSOLIDATED BALANCE SHEETS (unaudited) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
ASSETS
Cash and due from banks	$ 23,519	$ 38,851
Federal funds sold	3,266	321
Cash and cash equivalents	26,785	39,172
Interest bearing time deposits	1,785	1,830
Securities available for sale	305,998	318,177
Loans held for sale	1,221	1,231
Loans	649,845	648,535
Allowance for loan losses	(7,905)	(7,720)
Net loans	641,940	640,815
Federal Home Loan Bank stock	7,034	7,034
Real estate owned, net	2,276	2,404
Bank premises and equipment, net	17,293	16,539
Interest receivable	3,809	3,951
Mortgage servicing rights	1,568	1,511
Goodwill	14,001	14,001
Other intangible assets	333	369
Bank owned life insurance	10,007
Other assets	7,086	6,159
Total assets	1,041,136	1,053,193
Deposits
Non-interest bearing	230,692	230,241
Time deposits, $250,000 and over	62,674	79,578
Other interest bearing	523,376	505,454
Total deposits	816,742	815,273
Repurchase agreements	12,233	19,900
Short-term Federal Home Loan Bank advances	8,200	8,400
Long-term Federal Home Loan Bank advances	88,512	90,332
Note payable	3,084	3,321
Subordinated debentures	7,217	7,217
Interest payable	641	838
Other liabilities	5,241	7,583
Total liabilities	941,870	952,864
Stockholders' equity
Preferred stock, 300,000 shares authorized and unissued
Common stock, no par value; 10,000,000 shares authorized; 2,978,440 and 2,971,522 shares issued and outstanding at March 31, 2018 and December 31, 2017	21,040	20,931
Retained earnings	82,620	80,395
Accumulated other comprehensive (loss)	(4,394)	(997)
Total stockholders' equity	99,266	100,329
Total liabilities and stockholders’ equity	$ 1,041,136	$ 1,053,193

CONSOLIDATED BALANCE SHEETS (Pa

CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Mar. 31, 2018	Dec. 31, 2017
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	2,978,440	2,971,522
Common stock, shares outstanding	2,978,440	2,971,522

CONSOLIDATED STATEMENTS OF INCO

CONSOLIDATED STATEMENTS OF INCOME (unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
INTEREST INCOME:
Loans, including fees	$ 8,012	$ 7,494
Securities
Taxable	1,502	1,062
Tax exempt	513	608
Trading assets		34
Other	193	178
Total interest income	10,220	9,376
INTEREST EXPENSE:
Deposits	847	645
Repurchase agreements and federal funds purchased	23	26
Federal Home Loan Bank advances	435	397
Note payable	36	50
Subordinated debentures	85	80
Total interest expense	1,426	1,198
Net interest income	8,794	8,178
Provision for loan losses		350
Net interest income after provision	8,794	7,828
NON-INTEREST INCOME:
Gain on sale of available for sale securities, net	(44)
Gain (loss) on trading assets		17
Gain on sale of loans	374	550
Gain on bank premises		1,194
Other	94	40
Total other income	3,051	4,350
NON-INTEREST EXPENSE:
Salaries and employee benefits	4,493	4,445
Occupancy expenses	980	965
Repossession expenses, net	15	79
FDIC Insurance	79	94
Legal and professional fees	229	283
Data processing	469	406
Debit card expenses	434	375
Amortization expense of intangible assets, excluding mortgage servicing right	36	43
Advertising and marketing	219	212
Taxes other than payroll, property and income	312	300
Telephone	79	122
Postage	85	93
Loan fees	40	63
Other	820	706
Total other expenses	8,290	8,186
Income before income taxes	3,555	3,992
Provision for income taxes	407	855
Net income	$ 3,148	$ 3,137
Earnings per share
Basic (in dollars per share)	$ 1.06	$ 1.06
Diluted (in dollars per share)	1.06	1.06
Dividends per share (in dollars per share)	$ 0.31	$ 0.29
Service Charges
NON-INTEREST INCOME:
Non-interest income within Topic 606	$ 1,288	$ 1,223
Loan Processing Fee
NON-INTEREST INCOME:
Non-interest income within Topic 606	52	114
Fiduciary and Trust
NON-INTEREST INCOME:
Non-interest income within Topic 606	315	288
Brokerage Commissions Revenue
NON-INTEREST INCOME:
Non-interest income within Topic 606	209	193
Debit card
NON-INTEREST INCOME:
Non-interest income within Topic 606	$ 763	$ 731

CONSOLIDATED STATEMENTS OF COMP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Net income	$ 3,148	$ 3,137
Other comprehensive income (loss)
Unrealized gains (losses) on securities arising during the period	(4,344)	1,115
Reclassification of realized amount	44
Net change in unrealized gain (loss) on securities	(4,300)	1,115
Less: Tax impact	903	(379)
Other comprehensive income (loss)	(3,397)	736
Comprehensive income (loss)	$ (249)	$ 3,873

CONSOLIDATED STATEMENTS OF CHAN

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (unaudited) - 3 months ended Mar. 31, 2018 - USD ($) $ in Thousands	Common Stock	Retained Earnings	Accumulated Other Comprehensive Income	Total
Beginning Balance at Dec. 31, 2017	$ 20,931	$ 80,395	$ (997)	$ 100,329
Balances (in shares) at Dec. 31, 2017	2,971,522
Increase (Decrease) in Stockholders' Equity
Common stock issued - stock awards	$ 64			64
Common stock issued - stock awards (in shares)	6,918
Stock compensation expense	$ 45			45
Other comprehensive loss			(3,397)	(3,397)
Net income		3,148		3,148
Dividends declared		(923)		(923)
Ending Balance at Mar. 31, 2018	$ 21,040	$ 82,620	$ (4,394)	$ 99,266
Balances (in shares) at Mar. 31, 2018	2,978,440

CONSOLIDATED STATEMENTS OF CHA7

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Parenthetical)	3 Months Ended
	Mar. 31, 2018USD ($)$ / sharesshares
Common stock issued for stock grants- Gross (in shares)	5,337
Common stock, forfeited (in shares)	383
Dividends per share (in dollars per share) | $ / shares	$ 0.31
Director
Common stock issued for stock grants- Gross (in shares)	981
Common stock issued - Stock options exercised (in shares) | $	$ 600

CONSOLIDATED STATEMENTS OF CASH

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Cash Flows From Operating Activities
Net Income	$ 3,148	$ 3,137
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	299	301
Amortization (accretion), net	(133)	(147)
Securities amortization (accretion), net	232	231
Stock based compensation expense	45	40
Provision for loan losses		350
Securities losses (gains) available for sale gains, net	44
Net change in trading assets		(52)
Net change in cash surrender value of bank owned life insurance	(7)
Originations of loans held for sale	(11,343)	(12,296)
Proceeds from sale of loans	11,727	12,381
Losses (gains) on sale of bank premises and equipment		(1,194)
Losses (gains) on other real estate	1	(46)
Gain on sale of loans	(374)	(550)
Changes in:
Interest receivable	142	66
Other assets	21	312
Interest payable	(197)	(25)
Deferred taxes	(45)	320
Other liabilities	(2,342)	(1,813)
Net cash from operating activities	1,218	1,015
Cash Flows From Investing Activities
Net change in interest bearing time deposits	45	370
Purchases of securities available for sale	(9,599)	(37,701)
Purchase of bank owned life insurance	(10,000)
Proceeds from sales of securities available for sale	3,922	0
Proceeds from principal payments, maturities and calls securities available for sale	13,280	10,399
Net change in loans	(1,013)	(1,593)
Purchases of bank premises and equipment	(1,053)	(454)
Proceeds from the sale of bank premises and equipment		2,093
Capitalized expenditures for other real estate	(74)
Proceeds from the sale of other real estate	201	623
Net cash used in investing activities	(4,291)	(26,263)
Cash Flows From Financing Activities:
Net change in deposits	1,469	21,364
Net change in repurchase agreements	(7,667)	938
Net change in short-term Federal Home Loan Bank advances	(200)
Repayment of long-term Federal Home Loan Bank advances	(1,820)	(1,888)
Repayment of note payable	(237)	(107)
Proceeds from issuance of common stock	64	64
Purchase of common stock		(263)
Dividends paid	(923)	(862)
Net cash (used in) from financing activities	(9,314)	19,246
Net change in cash and cash equivalents	(12,387)	(6,002)
Cash and cash equivalents at beginning of period	39,172	43,250
Cash and cash equivalents at end of period	26,785	37,248
Supplemental disclosures of cash flow information Cash paid during the year for:
Interest expense	$ 1,623	1,223
Supplemental disclosures of non-cash investing activities
Real estate acquired through foreclosure		$ 126

SUMMARY OF SIGNIFICANT ACCOUNTI

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	3 Months Ended
	Mar. 31, 2018
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial information presented as of any date other than December 31 has been prepared from the Company’s books and records without audit. The accompanying consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Certain financial information that is normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America, but is not required for interim reporting purposes, has been condensed or omitted. There have been no significant changes to the Company’s accounting and reporting policies as disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of such financial statements, have been included. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2017. Basis of Presentation : The consolidated financial statements include the accounts of Kentucky Bancshares, Inc. (“Kentucky Bancshares”, the “Company”, “we”, “our” or “us”), its wholly-owned subsidiaries, Kentucky Bank (the “Bank”) and KBI Insurance Company, Inc., and the Bank’s wholly-owned subsidiary, KB Special Assets Unit, LLC. Intercompany transactions and balances have been eliminated in consolidation. Nature of Operations : 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. is a subsidiary of Kentucky Bancshares, Inc. and is located in Las Vegas, Nevada. It is a captive insurance subsidiary which provides various liability and property damage insurance policies for Kentucky Bancshares, Inc. and its related subsidiaries. KBI Insurance Company, Inc. 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 and such differences could be material to the financial statements. Bank Owned Life Insurance : The Company has purchased life insurance policies on certain key executives. Bank owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement. Loss Contingencies : Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Reclassifications : Some items in the prior year financial statements were reclassified to conform to the current presentation. Reclassifications had no effect on prior period net income or stockholders’ equity. Adoption of New Accounting Standards 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 Financial Accounting Standards Board “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 writedown. 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 2016-02, “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 March 31, 2018, all leases in which Kentucky Bancshares was the lessee were classified as operating leases. Kentucky Bancshares does not anticipate any material impact to its consolidated statements of income, balance sheet or regulatory capital as a result of the adoption of this ASU as the Company has an immaterial amount of leases in which it is the lessee. 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 adopted the amendments of ASU 2016-01 during the first quarter of 2018. The adoption of this amendment did not have a material impact on the Company’s consolidated financial statements. ASU 2018-02, “Income Statement-Reporting Comprehensive Income (Topic 220) – Reclassification of Certain Tax Effects from Accumulated Other Comprehenisve Income.” On December 22, 2017, the U.S. federal government enacted a tax bill, H.R.1, An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018 (“Tax Cuts and Jobs Act”). Stakeholders in the banking and insurance industries submitted unsolicited comment letters to the FASB about a narrow-scope financial reporting issue that arose as a consequence of the Tax Cuts and Jobs Act. Specifically, stakeholders expressed concern about the guidance in current generally accepted accounting principles (GAAP) that requires deferred tax liabilities and assets to be adjusted for the effect of a change in tax laws or rates with the effect included in income from continuing operations in the reporting period that includes the enactment date. That guidance is applicable even in situations in which the related income tax effects of items in accumulated other comprehensive income were originally recognized in other comprehensive income (rather than in income from continuing operations). Those stakeholders asserted that because the adjustment of deferred taxes due to the reduction of the historical corporate income tax rate to the newly enacted corporate income tax rate is required to be included in income from continuing operations, the tax effects of items within accumulated other comprehensive income (referred to as stranded tax effects for purposes of ASU 2018-02) do not reflect the appropriate tax rate. The amendments in ASU 2018-02 allowed a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. Consequently, the amendments eliminate the stranded tax effects resulting from the Tax Cuts and Jobs Act and will improve the usefulness of information reported to financial statement users. However, because the amendments only relate to the reclassification of the income tax effects of the Tax Cuts and Jobs Act, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. The amendments in ASU 2018-02 also require certain disclosures about stranded tax effects. The amendments in ASU 2018-02 are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption of the amendments in ASU 2018-02 is permitted, including adoption in any interim period, (1) for public business entities for reporting periods for which financial statements have not yet been issued and (2) for all other entities for reporting periods for which financial statements have not yet been made available for issuance. The Company chose to early adopt the amendments in ASU 2018-02 as of December 31, 2017. 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. 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 adopted these amendments during the first quarter of 2018 and there was no material impact to the Company’s financial statements. In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) . The amendments relate to when another party, along with the entity, is involved in providing a good or service to a customer. Topic 606 requires an entity to determine whether the nature of its promise is to provide that good or service to the customer (that is, the entity is a principal) or to arrange for the good or service to be provided to the customer by the other party (that is, the entity is an agent). This determination is based upon whether the entity controls the good or the service before it is transferred to the customer. Topic 606 includes indicators to assist in this evaluation. The amendments in this update affect the guidance in ASU No. 2014-09 above. The effective date is the same as the effective date of ASU No. 2014-09. In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing . The amendments clarify the following two aspects of Topic 606: identifying performance obligations, and the licensing implementation guidance. Before an entity can identify its performance obligations in a contract with a customer, the entity first identifies the promised goods or services in the contract. The amendments in this update are expected to reduce the cost and complexity of applying the guidance on identifying promised goods or services. To identify performance obligations in a contract, an entity evaluates whether promised goods and services are distinct. Topic 606 includes two criteria for assessing whether promises to transfer goods or services are distinct. One of those criteria is that the promises are separately identifiable. This update will improve the guidance on assessing that criterion. Topic 606 also includes implementation guidance on determining whether as entity’s promise to grant a license provides a customer with either a right to use the entity’s intellectual property, which is satisfied at a point in time, or a right to access the entity’s intellectual property, which is satisfied over time. The amendments in this update are intended to improve the operability and understandability of the licensing implementation guidance. The amendments in this update affect the guidance in ASU No. 2014-09 above. The effective date is the same as the effective date of ASU No. 2014-09. In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients . The amendments do not change the core revenue recognition principle in Topic 606. The amendments provide clarifying guidance in certain narrow areas and add some practical expedients. In December 2016, the FASB issued ASU No. 2016-20, Revenue from Contracts with Customers (Topic 606): Technical Corrections and Improvements . The FASB board decided to issue a separate update for technical corrections and improvements to Topic 606 and other Topics amended by ASU No. 2014-09 to increase awareness of the proposals and to expedite improvements to ASU No. 2014-09. The amendment affects narrow aspects of the guidance issued in ASU No. 2014-09. On January 1, 2018, we adopted ASU 2014-09, Revenue from Contracts with Customers and all subsequent amendments to the ASU (collectively, “Topic 606”). We elected to implement using the modified retrospective application, with the cumulative effect recorded as an adjustment to opening retained earnings at January 1, 2018. Due to immateriality, we had no cumulative effect to record. Since interest income on loans and securities are both excluded from this topic, a significant majority of our revenues are not subject to the new guidance. Our services that fall within the scope of Topic 606 are presented within noninterest income and are recognized as revenue as we satisfy our obligation to the customer. Services within the scope of Topic 606 include trust department income, service charges, debit card interchange income, and brokerage income. Trust department income : We earn wealth management fees based upon asset custody, investment management, trust, and estate services provided to customers. Most of these customers receive monthly billings for services rendered based upon the market value of assets and/or income generated. Fees that are transaction based are recognized at the point in time that the transaction is executed. Service charges : We earn fees from our deposit customers for transaction-based, account maintenance, and overdraft services. Transaction-based fees and overdraft fees are recognized at a point in time, since the customer generally has a right to cancel the depository arrangement at any time. The arrangement is considered a day-to-day contract with ongoing renewals and optional purchases, so the duration of the contract does not extend beyond the services already performed. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period over which we satisfy our performance obligation. Debit card interchange income : As with the transaction-based fees on deposit accounts, debit card interchange income is recognized at the point in time that we fulfill the customer’s request. We earn interchange fees from cardholder transactions processed through card association networks. Interchange rates are generally set by the card associations based upon purchase volumes and other factors. Interchange fees represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder. Brokerage income : Brokerage income fees are the commissions and fees received from a registered broker/dealer and investment adviser that provide those services to our customers. We act as an agent in arranging the relationship between the customer and the third-party service provider. These fees are recognized monthly from the third-party broker based upon services already performed.

SECURITIES

SECURITIES	3 Months Ended
	Mar. 31, 2018
SECURITIES
SECURITIES	2. SECURITIES AVAILABLE FOR SALE Period-end securities are as follows: (in thousands) Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value Available for Sale March 31, 2018 U.S. treasury notes $ 4,043 $ — $ (60) $ 3,983 U. S. government agencies 40,155 373 (763) 39,765 States and political subdivisions 81,270 779 (613) 81,436 Mortgage-backed - residential 135,603 20 (4,004) 131,619 Mortgage-backed - commercial 50,170 5 (1,315) 48,860 Equity securities 320 15 — 335 Total $ 311,561 $ 1,192 $ (6,755) $ 305,998 December 31, 2017 U.S. treasury notes $ $ — $ $ U. S. government agencies 41,658 405 (358) 41,705 States and political subdivisions 88,485 1,783 (133) 90,135 Mortgage-backed - residential 132,664 43 (2,330) 130,377 Mortgage-backed - commercial 52,267 18 (689) 51,596 Equity securities 320 20 — 340 Total $ 319,440 $ 2,269 $ (3,532) $ 318,177 The amortized cost and fair value of securities as of March 31, 2018 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. Further discussion concerning Fair Value Measurements can be found in Note 9. Amortized Fair Cost Value Due in one year or less $ 6,096 $ 6,062 Due after one year through five years 31,976 31,959 Due after five years through ten years 29,550 29,425 Due after ten years 57,846 57,738 125,468 125,184 Mortgage-backed - residential 135,603 131,619 Mortgage-backed - commercial 50,170 48,860 Equity 320 335 Total $ 311,561 $ 305,998 Proceeds from sales of securities during the first three months of 2018 and 2017 were $3.9 million and $0. Gross gains of $34 thousand and $0 and gross losses of $78 thousand and $0 were realized on those sales, respectively. The tax provision related to these realized net losses was $(9) thousand and $0, respectively. Securities with unrealized losses at March 31, 2018 and at December 31, 2017 not recognized in income are as follows: March 31, 2018 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. treasury notes $ $ $ — $ — $ 3,983 $ (60) U.S. government agencies 14,202 (323) 34,953 (763) States and municipals 2,688 (113) 42,691 (613) Mortgage-backed - residential 82,172 (1,868) 51,443 (2,136) 133,615 (4,004) Mortgage-backed - commercial 39,033 (942) 6,837 (373) 45,870 (1,315) Total temporarily impaired $ 185,942 $ (3,810) $ 75,170 $ (2,945) $ 261,112 $ (6,755) December 31, 2017 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. treasury notes $ $ $ — $ — $ 4,024 $ (22) U.S. government agencies 12,692 (228) 31,097 (358) States and municipals 2,769 (36) 18,211 (133) Mortgage-backed - residential 70,646 (817) 54,760 (1,513) 125,406 (2,330) Mortgage-backed - commercial 39,394 (409) 7,371 (280) 46,765 (689) Total temporarily impaired $ 147,911 $ (1,475) $ 77,592 $ (2,057) $ 225,503 $ (3,532) 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, we may consider many factors including, (1) whether the securities are issued by the federal government or its agencies, (2) whether downgrades by bond rating agencies have occurred, (3) the results of reviews of the issuer’s financial condition and near-term prospects, (4) the length of time and the extent to which the fair value has been less than cost, and (5) whether we intend to sell the investment security or more likely than not will be required to sell the investment security before its anticipated recovery. Unrealized losses on securities included in the tables above have not been recognized into income because (1) all rated securities are investment grade and are of high credit quality, (2) management does not intend to sell and it is more likely than not that management would not be required to sell the securities prior to their anticipated recovery, (3) management believes the decline in fair value is largely due to changes in interest rates and (4) management believes the declines in fair value are temporary. The Company believes the fair value will recover as the securities approach maturity.

LOANS

LOANS	3 Months Ended
	Mar. 31, 2018
LOANS
LOANS	3. Loans at period-end are as follows: (in thousands) 3/31/2018 12/31/2017 Commercial $ 80,016 $ 80,070 Real estate construction 22,724 20,816 Real estate mortgage: 1-4 family residential 239,945 238,121 Multi-family residential 45,965 39,926 Non-farm & non-residential 183,252 192,074 Agricultural 59,720 59,176 Consumer 17,991 18,182 Other 232 170 Total $ 649,845 $ 648,535 Activity in the allowance for loan losses for the nine month and three month periods indicated was as follows: Three Months Ended March 31, 2018 (in thousands) Beginning Ending Balance Charge-offs Recoveries Provision Balance Commercial $ 975 $ — $ — $ (16) $ 959 Real estate Construction 462 — — (70) 392 Real estate mortgage: 1-4 family residential 2,316 (62) 257 (12) 2,499 Multi-family residential 640 — 3 133 776 Non-farm & non-residential 1,554 — — — 1,554 Agricultural 494 — 23 (33) 484 Consumer 582 (28) 16 (9) 561 Other 18 (214) 190 30 24 Unallocated 679 — — (23) 656 $ 7,720 $ (304) $ 489 $ — $ 7,905 Three Months Ended March 31, 2017 (in thousands) Beginning Ending Balance Charge-offs Recoveries Provision Balance Commercial $ 789 $ (2) $ 8 $ 76 $ 871 Real estate Construction 564 — — (19) 545 Real estate mortgage: 1-4 family residential 2,301 (11) 1 84 2,375 Multi-family residential 581 — 3 82 666 Non-farm & non-residential 1,203 — — 108 1,311 Agricultural 856 — 10 (4) 862 Consumer 547 (37) 4 20 534 Other 60 (225) 234 (9) 60 Unallocated 640 — — 12 652 $ 7,541 $ (275) $ 260 $ 350 $ 7,876 The following tables present the balance in the allowance for loan losses and the recorded investment (excluding accrued interest receivable amounting to $2.5 million as of March 31, 2018 and $2.6 million at December 31, 2017) in loans by portfolio segment and based on impairment method as of March 31, 2018 and December 31, 2017: Individually Collectively As of March 31, 2018 Evaluated for Evaluated for (in thousands) Impairment Impairment Total Allowance for Loan Losses: Commercial $ — $ 959 $ 959 Real estate construction — 392 392 Real estate mortgage: — 1-4 family residential 65 2,434 2,499 Multi-family residential — 776 776 Non-farm & non-residential — 1,554 1,554 Agricultural — 484 484 Consumer — 561 561 Other — 24 24 Unallocated — 656 656 $ 65 $ 7,840 $ 7,905 Loans: Commercial $ — $ 80,016 $ 80,016 Real estate construction — 22,724 22,724 Real estate mortgage: 1-4 family residential 737 239,208 239,945 Multi-family residential 709 45,256 45,965 Non-farm & non-residential 1,390 181,862 183,252 Agricultural 281 59,439 59,720 Consumer — 17,991 17,991 Other — 232 232 $ 3,117 $ 646,728 $ 649,845 Individually Collectively As of December 31, 2017 Evaluated for Evaluated for (in thousands) Impairment Impairment Total Allowance for Loan Losses: Commercial $ — $ 975 $ 975 Real estate construction — 462 462 Real estate mortgage: 1-4 family residential 23 2,293 2,316 Multi-family residential — 640 640 Non-farm & non-residential — 1,554 1,554 Agricultural — 494 494 Consumer — 582 582 Other — 18 18 Unallocated — 679 679 $ 23 $ 7,697 $ 7,720 Loans: Commercial $ — $ 80,070 $ 80,070 Real estate construction — 20,816 20,816 Real estate mortgage: 1-4 family residential 206 237,915 238,121 Multi-family residential — 39,926 39,926 Non-farm & non-residential 1,130 190,944 192,074 Agricultural 284 58,892 59,176 Consumer — 18,182 18,182 Other — 170 170 Total $ 1,620 $ 646,915 $ 648,535 The following table presents loans individually evaluated for impairment by class of loans as of and for the three months ended March 31, 2018 (in thousands): Unpaid Allowance for Average Interest Cash Basis Principal Recorded Loan Losses Recorded Income Interest Balance Investment Allocated Investment Recognized Recognized With no related allowance recorded: Real estate mortgage: 1-4 family residential $ 169 $ 169 $ - $ 169 $ 4 $ 4 Multi-family residential 709 709 - 712 12 12 Non-farm & non-residential 1,390 1,390 - 1,404 18 18 Agricultural 281 281 - 283 6 6 With an allowance recorded: Real estate mortgage: 1-4 family residential 568 568 65 570 7 7 Total $ 3,117 $ 3,117 $ 65 $ 3,138 $ 47 $ 47 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 for the three months ended March 31, 2017: Year to Date Year to Date Average Interest Cash Basis Recorded Income Interest (in thousands): Investment Recognized Recognized With no related allowance recorded: Real estate mortgage: 1-4 family residential $ 370 $ 2 $ 2 Agricultural 346 3 3 With an allowance recorded: Real estate mortgage: Construction 1,197 32 32 1-4 family residential 1,077 5 5 Non-farm & non-residential 2,441 18 18 Agriculturual 3,420 — — Total $ 8,851 $ 60 $ 60 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 and for the year ended December 31, 2017 (in thousands): Unpaid Allowance for Average Interest Cash Basis Principal Recorded Loan Losses Recorded Income Interest Balance Investment Allocated Investment Recognized Recognized With no related allowance recorded: Non-farm & non-residential $ 1,130 $ 1,130 $ — $ 1,140 $ 68 $ 68 Agricultural 284 284 — 289 11 11 With an allowance recorded: Real estate mortgage 1-4 family residential 206 206 23 208 8 8 Total $ 1,620 $ 1,620 $ 23 $ 1,637 $ 87 $ 87 The following tables present the recorded investment in nonaccrual, loans past due over 90 days still on accrual and accruing troubled debt restructurings by class of loans as of March 31, 2018 and December 31, 2017: Loans Past Due Over 90 Days As of March 31, 2018 Still Troubled Debt (in thousands) Nonaccrual Accruing Restructurings Commercial $ — $ 175 $ — Real estate mortgage: 1-4 family residential 648 130 — Non-farm & non-residential — 8 — Agricultural 93 19 — Consumer 7 7 — Total $ 748 $ 339 $ — Loans Past Due Over 90 Days As of December 31, 2017 Still Troubled Debt (in thousands) Nonaccrual Accruing Restructurings Commercial $ — $ 32 $ — Real estate mortgage: 1-4 family residential 1,086 184 — Agricultural 96 — — Consumer 11 15 — Total $ 1,193 $ 231 $ — Nonaccrual loans secured by real estate make up 99.1% of the total nonaccrual loan balances at March 31, 2018. 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. A loan is considered impaired when, based on current information and events, it is probable that a creditor will be unable to collect all amounts due according to the contractual terms of the loan agreement. All amounts due according to the contractual terms means that both the contractual interest payments and the contractual principal payments of a loan will be collected as scheduled in the loan agreement. Nonaccrual loans are loans for which payments in full of principal or interest is not expected or which principal or interest has been in default for a period of 90 days or more unless the asset is both well secured and in the process of collection. Other impaired loans may be loans showing signs of weakness or interruptions in cash flow, but ultimately are current or less than 90 days past due with respect to principal and interest and for which we anticipate full payment of principal and interest but not in accordance with contractual terms. Additional factors considered by management in determining impairment and non-accrual status include payment status, collateral value, availability of current financial information, and the probability of collecting all contractual principal and interest payments. The following tables present the aging of the recorded investment in past due and non-accrual loans as of March 31, 2018 and December 31, 2017 by class of loans: 30–59 60–89 Greater than Total As of March 31, 2018 Days Days 90 Days Past Due & Loans Not (in thousands) Past Due Past Due Past Due Non-accrual Non-accrual Past Due Commercial $ 444 $ — $ 175 $ — $ 619 $ 79,397 Real estate construction — — — — — 22,724 Real estate mortgage: 1-4 family residential 1,592 165 130 648 2,535 237,410 Multi-family residential — — — — — 45,965 Non-farm & non-residential 265 145 8 — 418 182,834 Agricultural 42 — 19 93 154 59,566 Consumer 49 37 7 7 100 17,891 Other — — — — — 232 Total $ 2,392 $ 347 $ 339 $ 748 $ 3,826 $ 646,019 30–59 60–89 Greater than Total As of December 31, 2017 Days Days 90 Days Past Due & Loans Not (in thousands) Past Due Past Due Past Due Non-accrual Non-accrual Past Due Commercial $ 678 $ 44 $ 32 $ — $ 754 $ 79,316 Real estate construction — — — — — 20,816 Real estate mortgage: 1-4 family residential 2,222 321 184 1,086 3,813 234,308 Multi-family residential — — — — — 39,926 Non-farm & non-residential 162 — — — 162 191,912 Agricultural 249 — — 96 345 58,831 Consumer 132 14 15 11 172 18,010 Other — — — — — 170 Total $ 3,443 $ 379 $ 231 $ 1,193 $ 5,246 $ 643,289 Troubled Debt Restructurings: Management periodically reviews renewals and modifications of previously identified TDRs, for which there was no principal forgiveness, to consider if it is appropriate to remove the TDR classification. If the borrower is no longer experiencing financial difficulty and the renewal/modification did not contain a concessionary interest rate or other concessionary terms, management considers the potential removal of the TDR classification. If deemed appropriate based upon current underwriting, the TDR classification is removed as the borrower has complied with the terms of the loan at the date of renewal/modification and there was a reasonable expectation that the borrower will continue to comply with the terms of the loan after the date of the renewal/modification. Additionally, TDR classification can be removed in circumstances in which the Company performs a non-concessionary re-modification of the loan at terms considered to be at market for loans with comparable risk and management expects the borrower will continue to perform under the re-modified terms based on the borrower's past history of performance The Company had no loans classified as troubled debt restructurings as of March 31, 2018 or December 31, 2017. 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 is performed on a quarterly basis. The Company uses the following definitions for risk ratings: Special Mention. Loans classified as special mention have one or more potential weaknesses that deserve 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 and documented 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. As of March 31, 2018 and December 31, 2017, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows: As of March 31, 2018 Special (in thousands) Pass Mention Substandard Doubtful Commercial $ 78,515 $ 1,463 $ 38 $ — Real estate construction 22,724 — — — Real estate mortgage: 1-4 family residential 232,064 3,266 4,615 — Multi-family residential 42,722 2,534 709 — Non-farm & non-residential 174,985 6,688 1,579 — Agricultural 52,760 6,238 722 — Total $ 603,770 $ 20,189 $ 7,663 $ — As of December 31, 2017 Special (in thousands) Pass Mention Substandard Doubtful Commercial $ 78,326 $ 1,703 $ 41 $ — Real estate construction 20,816 — — — Real estate mortgage: 1-4 family residential 230,103 3,522 4,496 — Multi-family residential 36,654 2,551 721 — Non-farm & non-residential 183,230 7,240 1,604 — Agricultural 54,765 3,682 729 — Total $ 603,894 $ 18,698 $ 7,591 $ — 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 $14 thousand at March 31, 2018 and $26 thousand at December 31, 2017.

REAL ESTATE OWNED

REAL ESTATE OWNED	3 Months Ended
	Mar. 31, 2018
REAL ESTATE OWNED
REAL ESTATE OWNED	4. Activity in real estate owned, net was as follows: Three Months Ended March 31, 2018 2017 Beginning of year $ 2,404 $ 1,824 Additions — 126 Capitalized Expenditures 74 — Sales (202) (577) End of period $ 2,276 $ 1,373 Activity in the valuation allowance was as follows: Three Months Ended March 31, 2018 2017 Beginning of year $ 777 $ 803 End of Period $ 777 $ 803 Expenses related to foreclosed assets include: Three Months Ended March 31, 2018 2017 (in thousands) Net (gain) loss on sales, included in other income on income statement $ $ (46) Operating expenses, net of rental income 15 79 Repossession expense, net 15 Net expense, net of gain or loss on sales, for the period $ $ 33

EARNINGS PER SHARE

EARNINGS PER SHARE	3 Months Ended
	Mar. 31, 2018
EARNINGS PER SHARE
EARNINGS PER SHARE	5. 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 includes the dilutive effect of additional potential common shares issuable under stock based compensation agreements. The factors used in the earnings per share computation follow: Three Months Ended March 31, 2018 2017 (in thousands) Basic and Diluted Earnings Per Share Net Income $ 3,148 $ 3,137 Weighted average common shares outstanding 2,962 2,954 Basic and diluted earnings per share $ 1.06 $ 1.06 Stock options for 0 shares of common stock for the three months ended March 31, 2018 and 600 shares of common stock for the three months ended March 31, 2017 were excluded from diluted earnings per share because their impact was antidilutive.

STOCK COMPENSATION

STOCK COMPENSATION	3 Months Ended
	Mar. 31, 2018
STOCK COMPENSATION
STOCK COMPENSATION	6. We hav three stock based compensation plans as described below. Stock Option Plan Under the expired 1993 Non-Employee Directors Stock Ownership Incentive Plan, the Company also granted certain directors stock option awards which vest and become fully exercisable immediately and provided for issuance of up to 20,000 options. For each Stock Option Plan, 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. Summary of activity in the stock option plan for the first three months of 2018 follows: Weighted Weighted Average Aggregate Average Remaining Intrinsic Exercise Contractual Value Shares Price Term (in thousands) Outstanding, beginning of year 600 $ 31.00 Granted — — — Forfeited or expired — — — Exercised (600) 31.00 Outstanding, end of period — $ — — $ — Vested and expected to vest — $ — — $ — Exercisable, end of period — $ — — $ — As of March 31, 2018, there was $0 of total unrecognized compensation cost related to nonvested stock options granted under the Plan. Since the stock option plans has expired, no additional options will be issued. 2005 Restricted Stock Grant Plan On May 10, 2005, the Company’s stockholders approved a restricted stock grant plan. Total shares issuable under the plan were 50,000. There were no shares issued during the first three months of 2018 or 2017. The plan is now expired and no additional shares will be issued from the 2005 plan. There were 71 shares forfeited during the first three months of 2018 and no shares were forfeited during the first three months 2017. 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 (1) Per Share Nonvested at January 1, 2018 6,141 $ 151,984 $ 24.75 Vested (3,090) (72,224) 23.37 Forfeited (71) (1,883) 26.52 Nonvested at March 31, 2018 2,980 $ 77,877 $ 26.13 (1) Grant date fair value in thousands As of March 31, 2018, there was $65 thousand of total unrecognized compensation cost related to nonvested shares granted under the 2005 restricted stock grant plan. The cost is expected to be recognized over a weighted-average period of 1.4 years. As of March 31, 2018, no additional shares are available for issuance under the restricted stock grant plan. 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 5,720 shares issued during the first three months of 2018 and 6,575 shares were issued during the first three months of 2017. There were 312 shares forfeited during the first three months of 2018 and no shares were forfeited during the first three months of 2017. 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 (1) Per Share Nonvested at January 1, 2018 10,930 $ 338,545 $ 30.97 Granted 5,720 263,406 46.05 Vested (2,448) (74,504) 30.43 Forfeited (11,679) 37.43 Nonvested at March 31, 2018 13,890 $ 515,768 $ 37.13 (1) Grant date fair value in thousands As of March 31, 2018, there was $483 thousand of total unrecognized compensation cost related to nonvested shares granted under the restricted stock grant plan. The cost is expected to be recognized over a weighted-average period of 4.0 years. As of March 31, 2018, 126,966, shares are still available for issuance.

REPURCHASE AGREEMENTS

REPURCHASE AGREEMENTS	3 Months Ended
	Mar. 31, 2018
REPURCHASE AGREEMENTS.
REPURCHASE AGREEMENTS	7. Repurchase agreements totaled $12.2 million at March 31, 2018. Of this, $6.2 million were overnight obligations and $6.0 million had terms extending through May 2021 and a weighted remaining average life of 1.1 years. The Company pledged agencies and mortgage-backed securities with a carrying amount of $16.7 million to secure repurchase agreements as of March 31, 2018.

OTHER BORROWINGS

OTHER BORROWINGS	3 Months Ended
	Mar. 31, 2018
OTHER BORROWINGS
OTHER BORROWINGS	8. On July 20, 2015, the Company borrowed $5.0 million which had an outstanding balance of $3.1 million at March 31, 2018. 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 Kentucky Bank stock. The maturity schedule for the term loan as of March 31, 2018 is as follows (in thousands): 2018 $ 361 2019 504 2020 530 2021 557 2022 586 Thereafter 546 $ 3,084

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS	3 Months Ended
	Mar. 31, 2018
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS	9. ASC Topic 820, “Fair Value Measurements and Disclosures”, defines fair value, establishes a framework for measuring fair value, and sets forth disclosures about fair value measurements. ASC Topic 825, “Financial Instruments”, allows entities to choose to measure certain financial assets and liabilities at fair value. The Company has not elected the fair value option for any financial assets or liabilities. ASC Topic 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. This Topic describes three levels of inputs that may be used to measure fair value: 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: Investment Securities : The fair values for available for sale investment securities 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 third party 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 for similar loans and collateral underlying such loans. Adjustments totaled $44 thousand the first three months of 2018 and $0 for the first three months of 2017 and resulted 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 and classified as other real estate owned (OREO) 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 with data from comparable properties. 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 were $0 for both the three months ended March 31, 2018 and March 31, 2017, and resulted 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. Mortgage 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 and trading assets are the Company’s only balance sheet items that meet the disclosure requirements for instruments measured at fair value on a recurring basis. Disclosures are as follows in the tables below. Fair Value Measurements at March 31, 2018 (in thousands): 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. treasury notes $ 3,983 $ — $ 3,983 $ — U. S. government agencies 39,765 — 39,765 — States and municipals 81,436 — 81,436 — Mortgage-backed - residential 128,815 — 128,815 — Mortgage-backed-commercial 51,664 — 51,664 — Equity securities 335 335 — — Total $ 305,998 $ 335 $ 305,663 $ — Fair Value Measurements at December 31, 2017 (in thousands): 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. treasury notes $ 4,024 $ — $ 4,024 $ — U. S. government agencies 41,705 — 41,705 — States and municipals 90,135 — 90,135 — Mortgage-backed - residential 130,377 — 130,377 — Mortgage-backed - commercial 51,596 — 51,596 — Equity securities 340 340 — — Total $ 318,177 $ 340 $ 317,837 $ — There were no transfers between level 1 and level 2 during 2018 or 2017. Assets measured at fair value on a non-recurring basis are summarized below (in thousands): Fair Value Measurements at March 31, 2018 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 $ 503 $ — $ — $ 503 Other real estate owned, net: Residential 910 — — 910 Commercial 274 — — 274 Fair Value Measurements at December 31, 2017 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 $ 183 $ — $ — $ 183 Other real estate owned, net: Residential 910 — — 910 Commercial 200 — 200 Mortgage servicing rights 1,323 — — 1,323 Impaired loans measured for impairment using the fair value of the collateral for collateral dependent loans had a net carrying amount of $503 thousand, which includes a valuation allowance of $65 thousand at March 31, 2018. Impaired loans measured for impairment using the fair value of the collateral for collateral dependent loans had a net carrying amount of $183 thousand, with a valuation allowance of $23 thousand at December 31, 2017. Five new loans became impaired during the three month period ended March 31, 2018 which resulted in $44 thousand in additional provision for loan losses for impaired loans. For the three months ended March 31, 2017, no loans became impaired. 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 $777 thousand at March 31, 2018. Other real estate owned which was measured at fair value less costs to sell, had a net carrying amount of $1.1 million, which was made up of the outstanding balance of $1.9 million, net of a valuation allowance of $777 thousand at December 31, 2017. The Company recorded $0 in write-downs of other real estate owned properties for the three months ended March 31, 2018 and $0 for the three months ended March 31, 2017. At December 31 , 2017, impaired mortgage servicing rights, which are carried at the lower of cost or fair value, were carried at their fair value of $1.3 million, which was made up of the outstanding balance of $1.4 million, net of a valuation allowance of $56 thousand. There were no impaired mortgage servicing rights as of March 31, 2018. For the first three months of 2018, the Company recorded a net recovery of prior write-downs of $56 thousand and net recoveries of prior write-downs of $39 thousand for the three months ended March 31, 2017. 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 March 31, 2018 and December 31, 2017: Range March 31, 2018 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%-27% (2)% Other real estate owned: Residential sales comparison adjustment for differences between the comparable sales 0%-16% (6)% Commercial income approach capitalization rate 10%-10% (10)% Range December 31, 2017 Fair Valuation Unobservable (Weighted (In thousands) Value Technique(s) Input(s) Average) Impaired loans Real estate mortgage: 1-4 family residential 183 sales comparison adjustment for differences between the comparable sales 3%-27% (15)% Other real estate owned: Residential 910 sales comparison adjustment for differences between the comparable sales 0%-16% (6)% Commercial 200 income approach capitalization rate 10%-10% (10)% Mortgage Servicing Rights discounted cash flow constant prepayment rates 7%-25% (10)% Fair Value of Financial Instruments The carrying amounts and estimated fair values of financial instruments, at March 31, 2018 and December 31, 2017 are as follows: March 31, 2018: Carrying (in thousands) Value Level 1 Level 2 Level 3 Total Financial assets Cash and cash equivalents $ 26,785 $ 26,785 $ — $ — $ 26,785 Interest bearing time deposits 1,785 1,785 — — 1,785 Securities available for sale 305,998 335 305,663 — 305,998 Loans held for sale 1,221 — 1,260 — 1,260 Net Loans 641,940 — — 638,561 638,561 Federal Home Loan Bank stock 7,034 — — — N/A Interest receivable 3,809 — 1,350 2,459 3,809 Financial liabilities Total deposits $ 816,742 $ 640,863 $ 176,772 $ — $ 817,635 Repurchase agreements 12,233 — 12,295 — 12,295 Short-term Federal Home Loan Bank advances 8,200 — 8,186 — 8,186 Long-term Federal Home Loan Bank advances 88,512 — 81,527 — 81,527 Note payable 3,084 3,500 3,500 Subordinated debentures 7,217 — — 7,211 7,211 Interest payable 641 — 628 13 641 December 31, 2017: Carrying (in thousands) Value Level 1 Level 2 Level 3 Total Financial assets Cash and cash equivalents $ 39,172 $ 39,172 $ — $ — $ 39,172 Interest bearing time deposits 1,830 1,830 — — 1,830 Securities available for sale 318,177 340 317,837 — 318,177 Loans held for sale 1,231 — 1,269 — 1,269 Net Loans 640,815 — — 639,421 639,421 Federal Home Loan Bank stock 7,034 — — — — Interest receivable 3,951 — 1,378 2,573 3,951 Financial liabilities Total deposits $ 815,273 $ 621,139 $ 195,143 $ — $ 816,282 Repurchase agreements 19,900 — 19,968 — 19,968 Short-term Federal Home Loan Bank advances 8,400 — 8,393 — 8,393 Long-term Federal Home Loan Bank advances 90,332 — 86,899 — 86,899 Note payable 3,321 — 3,560 — 3,560 Subordinated debentures 7,217 — — 7,212 7,212 Interest payable 838 — 825 13 838 The methods and assumptions, not previously presented, used to estimate fair values are described as follows: Cash and Cash Equivalents - The carrying amounts of cash and cash equivalents approximate fair values and are classified as Level 1. Interest Bearing Deposits - The carrying amounts of interest bearing deposits approximate fair values and are classified as Level 1. FHLB Stock - It is not practical to determine the fair value of FHLB stock due to restrictions placed on its transferability. Loans - Fair values of loans, excluding loans held for sale, are estimated as follows: For variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values resulting in a Level 3 classification. Fair values for other loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality resulting in a Level 3 classification. Impaired loans are valued at the lower of cost or fair value as described previously. The methods utilized to estimate the fair value of loans at December 31, 2017 did not necessarily represent an exit price. In accordance with our adoption of ASU 2016-01 in 2018, the methods utilized to measure the fair value of loans at March 31, 2018 represent an approximation of exit price, however, an actual exit price may differ. The fair value of mortgage loans held for sale is estimated based upon binding contracts and quotes from third party investors resulting in a Level 2 classification. Deposits - The fair values disclosed for demand deposits (e.g., interest and non-interest checking, passbook savings, and certain types of money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amount) resulting in a Level 1 classification. The carrying amounts of variable rate, fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date resulting in a Level 1 classification. Fair values for fixed rate certificates of deposit are estimated using a discounted cash flows calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits resulting in a Level 2 classification. Securities Sold Under Agreements to Repurchase and Other Borrowings - The carrying amounts of borrowings under repurchase agreements approximate their fair values resulting in a Level 2 classification. The carrying amount of the Company’s variable rate borrowings approximate their fair values resulting in a Level 2 classification. Federal Funds Purchased - The carrying amounts of federal funds purchased approximate fair values and are classified as Level 1. FHLB Advances, Borrowings and Subordinated Debentures - The fair values of the Company’s FHLB advances and other borrowings are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 2 classification. The fair values of the Company’s Subordinated Debentures are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 3 classification. Accrued Interest Receivable/Payable - The carrying amounts of accrued interest approximate fair value resulting in a Level 2 or Level 3 classification based on the level of the related asset/liability. Off-balance Sheet Instruments - Fair values for off-balance sheet, credit-related financial instruments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. The fair value of off-balance sheet instruments is not material.

SUMMARY OF SIGNIFICANT ACCOUN18

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)	3 Months Ended
	Mar. 31, 2018
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation	Basis of Presentation : The consolidated financial statements include the accounts of Kentucky Bancshares, Inc. (“Kentucky Bancshares”, the “Company”, “we”, “our” or “us”), its wholly-owned subsidiaries, Kentucky Bank (the “Bank”) and KBI Insurance Company, Inc., 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 : 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. is a subsidiary of Kentucky Bancshares, Inc. and is located in Las Vegas, Nevada. It is a captive insurance subsidiary which provides various liability and property damage insurance policies for Kentucky Bancshares, Inc. and its related subsidiaries. KBI Insurance Company, Inc. 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 and such differences could be material to the financial statements.
Bank Owned Life Insurance	Bank Owned Life Insurance : The Company has purchased life insurance policies on certain key executives. Bank owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement.
Loss Contingencies	Loss Contingencies : Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated.
Reclassifications	Reclassifications : Some items in the prior year financial statements were reclassified to conform to the current presentation. Reclassifications had no effect on prior period net income or stockholders’ equity.
Adoption of New Accounting Standards	Adoption of New Accounting Standards 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 Financial Accounting Standards Board “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 writedown. 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 2016-02, “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 March 31, 2018, all leases in which Kentucky Bancshares was the lessee were classified as operating leases. Kentucky Bancshares does not anticipate any material impact to its consolidated statements of income, balance sheet or regulatory capital as a result of the adoption of this ASU as the Company has an immaterial amount of leases in which it is the lessee. 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 adopted the amendments of ASU 2016-01 during the first quarter of 2018. The adoption of this amendment did not have a material impact on the Company’s consolidated financial statements. ASU 2018-02, “Income Statement-Reporting Comprehensive Income (Topic 220) – Reclassification of Certain Tax Effects from Accumulated Other Comprehenisve Income.” On December 22, 2017, the U.S. federal government enacted a tax bill, H.R.1, An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018 (“Tax Cuts and Jobs Act”). Stakeholders in the banking and insurance industries submitted unsolicited comment letters to the FASB about a narrow-scope financial reporting issue that arose as a consequence of the Tax Cuts and Jobs Act. Specifically, stakeholders expressed concern about the guidance in current generally accepted accounting principles (GAAP) that requires deferred tax liabilities and assets to be adjusted for the effect of a change in tax laws or rates with the effect included in income from continuing operations in the reporting period that includes the enactment date. That guidance is applicable even in situations in which the related income tax effects of items in accumulated other comprehensive income were originally recognized in other comprehensive income (rather than in income from continuing operations). Those stakeholders asserted that because the adjustment of deferred taxes due to the reduction of the historical corporate income tax rate to the newly enacted corporate income tax rate is required to be included in income from continuing operations, the tax effects of items within accumulated other comprehensive income (referred to as stranded tax effects for purposes of ASU 2018-02) do not reflect the appropriate tax rate. The amendments in ASU 2018-02 allowed a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. Consequently, the amendments eliminate the stranded tax effects resulting from the Tax Cuts and Jobs Act and will improve the usefulness of information reported to financial statement users. However, because the amendments only relate to the reclassification of the income tax effects of the Tax Cuts and Jobs Act, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. The amendments in ASU 2018-02 also require certain disclosures about stranded tax effects. The amendments in ASU 2018-02 are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption of the amendments in ASU 2018-02 is permitted, including adoption in any interim period, (1) for public business entities for reporting periods for which financial statements have not yet been issued and (2) for all other entities for reporting periods for which financial statements have not yet been made available for issuance. The Company chose to early adopt the amendments in ASU 2018-02 as of December 31, 2017. 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. 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 adopted these amendments during the first quarter of 2018 and there was no material impact to the Company’s financial statements. In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) . The amendments relate to when another party, along with the entity, is involved in providing a good or service to a customer. Topic 606 requires an entity to determine whether the nature of its promise is to provide that good or service to the customer (that is, the entity is a principal) or to arrange for the good or service to be provided to the customer by the other party (that is, the entity is an agent). This determination is based upon whether the entity controls the good or the service before it is transferred to the customer. Topic 606 includes indicators to assist in this evaluation. The amendments in this update affect the guidance in ASU No. 2014-09 above. The effective date is the same as the effective date of ASU No. 2014-09. In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing . The amendments clarify the following two aspects of Topic 606: identifying performance obligations, and the licensing implementation guidance. Before an entity can identify its performance obligations in a contract with a customer, the entity first identifies the promised goods or services in the contract. The amendments in this update are expected to reduce the cost and complexity of applying the guidance on identifying promised goods or services. To identify performance obligations in a contract, an entity evaluates whether promised goods and services are distinct. Topic 606 includes two criteria for assessing whether promises to transfer goods or services are distinct. One of those criteria is that the promises are separately identifiable. This update will improve the guidance on assessing that criterion. Topic 606 also includes implementation guidance on determining whether as entity’s promise to grant a license provides a customer with either a right to use the entity’s intellectual property, which is satisfied at a point in time, or a right to access the entity’s intellectual property, which is satisfied over time. The amendments in this update are intended to improve the operability and understandability of the licensing implementation guidance. The amendments in this update affect the guidance in ASU No. 2014-09 above. The effective date is the same as the effective date of ASU No. 2014-09. In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients . The amendments do not change the core revenue recognition principle in Topic 606. The amendments provide clarifying guidance in certain narrow areas and add some practical expedients. In December 2016, the FASB issued ASU No. 2016-20, Revenue from Contracts with Customers (Topic 606): Technical Corrections and Improvements . The FASB board decided to issue a separate update for technical corrections and improvements to Topic 606 and other Topics amended by ASU No. 2014-09 to increase awareness of the proposals and to expedite improvements to ASU No. 2014-09. The amendment affects narrow aspects of the guidance issued in ASU No. 2014-09. On January 1, 2018, we adopted ASU 2014-09, Revenue from Contracts with Customers and all subsequent amendments to the ASU (collectively, “Topic 606”). We elected to implement using the modified retrospective application, with the cumulative effect recorded as an adjustment to opening retained earnings at January 1, 2018. Due to immateriality, we had no cumulative effect to record. Since interest income on loans and securities are both excluded from this topic, a significant majority of our revenues are not subject to the new guidance. Our services that fall within the scope of Topic 606 are presented within noninterest income and are recognized as revenue as we satisfy our obligation to the customer. Services within the scope of Topic 606 include trust department income, service charges, debit card interchange income, and brokerage income. Trust department income : We earn wealth management fees based upon asset custody, investment management, trust, and estate services provided to customers. Most of these customers receive monthly billings for services rendered based upon the market value of assets and/or income generated. Fees that are transaction based are recognized at the point in time that the transaction is executed. Service charges : We earn fees from our deposit customers for transaction-based, account maintenance, and overdraft services. Transaction-based fees and overdraft fees are recognized at a point in time, since the customer generally has a right to cancel the depository arrangement at any time. The arrangement is considered a day-to-day contract with ongoing renewals and optional purchases, so the duration of the contract does not extend beyond the services already performed. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period over which we satisfy our performance obligation. Debit card interchange income : As with the transaction-based fees on deposit accounts, debit card interchange income is recognized at the point in time that we fulfill the customer’s request. We earn interchange fees from cardholder transactions processed through card association networks. Interchange rates are generally set by the card associations based upon purchase volumes and other factors. Interchange fees represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder. Brokerage income : Brokerage income fees are the commissions and fees received from a registered broker/dealer and investment adviser that provide those services to our customers. We act as an agent in arranging the relationship between the customer and the third-party service provider. These fees are recognized monthly from the third-party broker based upon services already performed.

SECURITIES (Tables)

SECURITIES (Tables)	3 Months Ended
	Mar. 31, 2018
SECURITIES
Schedule of securities available for sale	Period-end securities are as follows: (in thousands) Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value Available for Sale March 31, 2018 U.S. treasury notes $ 4,043 $ — $ (60) $ 3,983 U. S. government agencies 40,155 373 (763) 39,765 States and political subdivisions 81,270 779 (613) 81,436 Mortgage-backed - residential 135,603 20 (4,004) 131,619 Mortgage-backed - commercial 50,170 5 (1,315) 48,860 Equity securities 320 15 — 335 Total $ 311,561 $ 1,192 $ (6,755) $ 305,998 December 31, 2017 U.S. treasury notes $ $ — $ $ U. S. government agencies 41,658 405 (358) 41,705 States and political subdivisions 88,485 1,783 (133) 90,135 Mortgage-backed - residential 132,664 43 (2,330) 130,377 Mortgage-backed - commercial 52,267 18 (689) 51,596 Equity securities 320 20 — 340 Total $ 319,440 $ 2,269 $ (3,532) $ 318,177
Schedule of amortized cost and fair value of securities by contractual maturity	Amortized Fair Cost Value Due in one year or less $ 6,096 $ 6,062 Due after one year through five years 31,976 31,959 Due after five years through ten years 29,550 29,425 Due after ten years 57,846 57,738 125,468 125,184 Mortgage-backed - residential 135,603 131,619 Mortgage-backed - commercial 50,170 48,860 Equity 320 335 Total $ 311,561 $ 305,998
Schedule of securities with unrealized losses not recognized in income	March 31, 2018 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. treasury notes $ $ $ — $ — $ 3,983 $ (60) U.S. government agencies 14,202 (323) 34,953 (763) States and municipals 2,688 (113) 42,691 (613) Mortgage-backed - residential 82,172 (1,868) 51,443 (2,136) 133,615 (4,004) Mortgage-backed - commercial 39,033 (942) 6,837 (373) 45,870 (1,315) Total temporarily impaired $ 185,942 $ (3,810) $ 75,170 $ (2,945) $ 261,112 $ (6,755) December 31, 2017 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. treasury notes $ $ $ — $ — $ 4,024 $ (22) U.S. government agencies 12,692 (228) 31,097 (358) States and municipals 2,769 (36) 18,211 (133) Mortgage-backed - residential 70,646 (817) 54,760 (1,513) 125,406 (2,330) Mortgage-backed - commercial 39,394 (409) 7,371 (280) 46,765 (689) Total temporarily impaired $ 147,911 $ (1,475) $ 77,592 $ (2,057) $ 225,503 $ (3,532)

LOANS (Tables)

LOANS (Tables)	3 Months Ended
	Mar. 31, 2018
LOANS
Schedule of loans	(in thousands) 3/31/2018 12/31/2017 Commercial $ 80,016 $ 80,070 Real estate construction 22,724 20,816 Real estate mortgage: 1-4 family residential 239,945 238,121 Multi-family residential 45,965 39,926 Non-farm & non-residential 183,252 192,074 Agricultural 59,720 59,176 Consumer 17,991 18,182 Other 232 170 Total $ 649,845 $ 648,535
Schedule of activity in the allowance for loan losses	Three Months Ended March 31, 2018 (in thousands) Beginning Ending Balance Charge-offs Recoveries Provision Balance Commercial $ 975 $ — $ — $ (16) $ 959 Real estate Construction 462 — — (70) 392 Real estate mortgage: 1-4 family residential 2,316 (62) 257 (12) 2,499 Multi-family residential 640 — 3 133 776 Non-farm & non-residential 1,554 — — — 1,554 Agricultural 494 — 23 (33) 484 Consumer 582 (28) 16 (9) 561 Other 18 (214) 190 30 24 Unallocated 679 — — (23) 656 $ 7,720 $ (304) $ 489 $ — $ 7,905 Three Months Ended March 31, 2017 (in thousands) Beginning Ending Balance Charge-offs Recoveries Provision Balance Commercial $ 789 $ (2) $ 8 $ 76 $ 871 Real estate Construction 564 — — (19) 545 Real estate mortgage: 1-4 family residential 2,301 (11) 1 84 2,375 Multi-family residential 581 — 3 82 666 Non-farm & non-residential 1,203 — — 108 1,311 Agricultural 856 — 10 (4) 862 Consumer 547 (37) 4 20 534 Other 60 (225) 234 (9) 60 Unallocated 640 — — 12 652 $ 7,541 $ (275) $ 260 $ 350 $ 7,876
Schedule of allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method	Individually Collectively As of March 31, 2018 Evaluated for Evaluated for (in thousands) Impairment Impairment Total Allowance for Loan Losses: Commercial $ — $ 959 $ 959 Real estate construction — 392 392 Real estate mortgage: — 1-4 family residential 65 2,434 2,499 Multi-family residential — 776 776 Non-farm & non-residential — 1,554 1,554 Agricultural — 484 484 Consumer — 561 561 Other — 24 24 Unallocated — 656 656 $ 65 $ 7,840 $ 7,905 Loans: Commercial $ — $ 80,016 $ 80,016 Real estate construction — 22,724 22,724 Real estate mortgage: 1-4 family residential 737 239,208 239,945 Multi-family residential 709 45,256 45,965 Non-farm & non-residential 1,390 181,862 183,252 Agricultural 281 59,439 59,720 Consumer — 17,991 17,991 Other — 232 232 $ 3,117 $ 646,728 $ 649,845 Individually Collectively As of December 31, 2017 Evaluated for Evaluated for (in thousands) Impairment Impairment Total Allowance for Loan Losses: Commercial $ — $ 975 $ 975 Real estate construction — 462 462 Real estate mortgage: 1-4 family residential 23 2,293 2,316 Multi-family residential — 640 640 Non-farm & non-residential — 1,554 1,554 Agricultural — 494 494 Consumer — 582 582 Other — 18 18 Unallocated — 679 679 $ 23 $ 7,697 $ 7,720 Loans: Commercial $ — $ 80,070 $ 80,070 Real estate construction — 20,816 20,816 Real estate mortgage: 1-4 family residential 206 237,915 238,121 Multi-family residential — 39,926 39,926 Non-farm & non-residential 1,130 190,944 192,074 Agricultural 284 58,892 59,176 Consumer — 18,182 18,182 Other — 170 170 Total $ 1,620 $ 646,915 $ 648,535
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 and for the three months ended March 31, 2018 (in thousands): Unpaid Allowance for Average Interest Cash Basis Principal Recorded Loan Losses Recorded Income Interest Balance Investment Allocated Investment Recognized Recognized With no related allowance recorded: Real estate mortgage: 1-4 family residential $ 169 $ 169 $ - $ 169 $ 4 $ 4 Multi-family residential 709 709 - 712 12 12 Non-farm & non-residential 1,390 1,390 - 1,404 18 18 Agricultural 281 281 - 283 6 6 With an allowance recorded: Real estate mortgage: 1-4 family residential 568 568 65 570 7 7 Total $ 3,117 $ 3,117 $ 65 $ 3,138 $ 47 $ 47 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 for the three months ended March 31, 2017: Year to Date Year to Date Average Interest Cash Basis Recorded Income Interest (in thousands): Investment Recognized Recognized With no related allowance recorded: Real estate mortgage: 1-4 family residential $ 370 $ 2 $ 2 Agricultural 346 3 3 With an allowance recorded: Real estate mortgage: Construction 1,197 32 32 1-4 family residential 1,077 5 5 Non-farm & non-residential 2,441 18 18 Agriculturual 3,420 — — Total $ 8,851 $ 60 $ 60 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 and for the year ended December 31, 2017 (in thousands): Unpaid Allowance for Average Interest Cash Basis Principal Recorded Loan Losses Recorded Income Interest Balance Investment Allocated Investment Recognized Recognized With no related allowance recorded: Non-farm & non-residential $ 1,130 $ 1,130 $ — $ 1,140 $ 68 $ 68 Agricultural 284 284 — 289 11 11 With an allowance recorded: Real estate mortgage 1-4 family residential 206 206 23 208 8 8 Total $ 1,620 $ 1,620 $ 23 $ 1,637 $ 87 $ 87
Schedule of recorded investment in nonaccrual, loans past due over 90 days still on accrual and accruing troubled debt restructurings by class of loans	Loans Past Due Over 90 Days As of March 31, 2018 Still Troubled Debt (in thousands) Nonaccrual Accruing Restructurings Commercial $ — $ 175 $ — Real estate mortgage: 1-4 family residential 648 130 — Non-farm & non-residential — 8 — Agricultural 93 19 — Consumer 7 7 — Total $ 748 $ 339 $ — Loans Past Due Over 90 Days As of December 31, 2017 Still Troubled Debt (in thousands) Nonaccrual Accruing Restructurings Commercial $ — $ 32 $ — Real estate mortgage: 1-4 family residential 1,086 184 — Agricultural 96 — — Consumer 11 15 — Total $ 1,193 $ 231 $ —
Schedule of aging of the recorded investment in past due and non-accrual loans	30–59 60–89 Greater than Total As of March 31, 2018 Days Days 90 Days Past Due & Loans Not (in thousands) Past Due Past Due Past Due Non-accrual Non-accrual Past Due Commercial $ 444 $ — $ 175 $ — $ 619 $ 79,397 Real estate construction — — — — — 22,724 Real estate mortgage: 1-4 family residential 1,592 165 130 648 2,535 237,410 Multi-family residential — — — — — 45,965 Non-farm & non-residential 265 145 8 — 418 182,834 Agricultural 42 — 19 93 154 59,566 Consumer 49 37 7 7 100 17,891 Other — — — — — 232 Total $ 2,392 $ 347 $ 339 $ 748 $ 3,826 $ 646,019 30–59 60–89 Greater than Total As of December 31, 2017 Days Days 90 Days Past Due & Loans Not (in thousands) Past Due Past Due Past Due Non-accrual Non-accrual Past Due Commercial $ 678 $ 44 $ 32 $ — $ 754 $ 79,316 Real estate construction — — — — — 20,816 Real estate mortgage: 1-4 family residential 2,222 321 184 1,086 3,813 234,308 Multi-family residential — — — — — 39,926 Non-farm & non-residential 162 — — — 162 191,912 Agricultural 249 — — 96 345 58,831 Consumer 132 14 15 11 172 18,010 Other — — — — — 170 Total $ 3,443 $ 379 $ 231 $ 1,193 $ 5,246 $ 643,289
Schedule of risk category of loans by class of loans	As of March 31, 2018 Special (in thousands) Pass Mention Substandard Doubtful Commercial $ 78,515 $ 1,463 $ 38 $ — Real estate construction 22,724 — — — Real estate mortgage: 1-4 family residential 232,064 3,266 4,615 — Multi-family residential 42,722 2,534 709 — Non-farm & non-residential 174,985 6,688 1,579 — Agricultural 52,760 6,238 722 — Total $ 603,770 $ 20,189 $ 7,663 $ — As of December 31, 2017 Special (in thousands) Pass Mention Substandard Doubtful Commercial $ 78,326 $ 1,703 $ 41 $ — Real estate construction 20,816 — — — Real estate mortgage: 1-4 family residential 230,103 3,522 4,496 — Multi-family residential 36,654 2,551 721 — Non-farm & non-residential 183,230 7,240 1,604 — Agricultural 54,765 3,682 729 — Total $ 603,894 $ 18,698 $ 7,591 $ —

REAL ESTATE OWNED (Tables)

REAL ESTATE OWNED (Tables)	3 Months Ended
	Mar. 31, 2018
REAL ESTATE OWNED
Schedule of activity in real estate owned	Three Months Ended March 31, 2018 2017 Beginning of year $ 2,404 $ 1,824 Additions — 126 Capitalized Expenditures 74 — Sales (202) (577) End of period $ 2,276 $ 1,373
Schedule of activity in the valuation allowance	Three Months Ended March 31, 2018 2017 Beginning of year $ 777 $ 803 End of Period $ 777 $ 803
Schedule of expenses related to foreclosed assets	Three Months Ended March 31, 2018 2017 (in thousands) Net (gain) loss on sales, included in other income on income statement $ $ (46) Operating expenses, net of rental income 15 79 Repossession expense, net 15 Net expense, net of gain or loss on sales, for the period $ $ 33

EARNINGS PER SHARE (Tables)

EARNINGS PER SHARE (Tables)	3 Months Ended
	Mar. 31, 2018
EARNINGS PER SHARE
Schedule of factors used in the earnings per share computation	Three Months Ended March 31, 2018 2017 (in thousands) Basic and Diluted Earnings Per Share Net Income $ 3,148 $ 3,137 Weighted average common shares outstanding 2,962 2,954 Basic and diluted earnings per share $ 1.06 $ 1.06

STOCK COMPENSATION (Tables)

STOCK COMPENSATION (Tables)	3 Months Ended
	Mar. 31, 2018
Stock Based Compensation
Summary of activity for the Stock Option Plans	Weighted Weighted Average Aggregate Average Remaining Intrinsic Exercise Contractual Value Shares Price Term (in thousands) Outstanding, beginning of year 600 $ 31.00 Granted — — — Forfeited or expired — — — Exercised (600) 31.00 Outstanding, end of period — $ — — $ — Vested and expected to vest — $ — — $ — Exercisable, end of period — $ — — $ —
2005 Restricted Stock Grant Plan
Stock Based Compensation
Summary of changes in nonvested shares of restricted stock	Weighted-Average Fair Grant-Date Value Nonvested Shares Shares Fair Value (1) Per Share Nonvested at January 1, 2018 6,141 $ 151,984 $ 24.75 Vested (3,090) (72,224) 23.37 Forfeited (71) (1,883) 26.52 Nonvested at March 31, 2018 2,980 $ 77,877 $ 26.13 (1) Grant date fair value in thousands
2009 Stock Award Plan
Stock Based Compensation
Summary of changes in nonvested shares of restricted stock	Weighted-Average Fair Grant-Date Value Nonvested Shares Shares Fair Value (1) Per Share Nonvested at January 1, 2018 10,930 $ 338,545 $ 30.97 Granted 5,720 263,406 46.05 Vested (2,448) (74,504) 30.43 Forfeited (11,679) 37.43 Nonvested at March 31, 2018 13,890 $ 515,768 $ 37.13 (1) Grant date fair value in thousands

OTHER BORROWINGS (Tables)

OTHER BORROWINGS (Tables)	3 Months Ended
	Mar. 31, 2018
OTHER BORROWINGS
Maturity schedule for the term loan	2018 $ 361 2019 504 2020 530 2021 557 2022 586 Thereafter 546 $ 3,084

FAIR VALUE (Tables)

FAIR VALUE (Tables)	3 Months Ended
	Mar. 31, 2018
FAIR VALUE MEASUREMENTS
Schedule of assets measured at fair value on a recurring basis	Fair Value Measurements at March 31, 2018 (in thousands): 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. treasury notes $ 3,983 $ — $ 3,983 $ — U. S. government agencies 39,765 — 39,765 — States and municipals 81,436 — 81,436 — Mortgage-backed - residential 128,815 — 128,815 — Mortgage-backed-commercial 51,664 — 51,664 — Equity securities 335 335 — — Total $ 305,998 $ 335 $ 305,663 $ — Fair Value Measurements at December 31, 2017 (in thousands): 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. treasury notes $ 4,024 $ — $ 4,024 $ — U. S. government agencies 41,705 — 41,705 — States and municipals 90,135 — 90,135 — Mortgage-backed - residential 130,377 — 130,377 — Mortgage-backed - commercial 51,596 — 51,596 — Equity securities 340 340 — — Total $ 318,177 $ 340 $ 317,837 $ —
Schedule of assets measured at fair value on a non-recurring basis	Fair Value Measurements at March 31, 2018 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 $ 503 $ — $ — $ 503 Other real estate owned, net: Residential 910 — — 910 Commercial 274 — — 274 Fair Value Measurements at December 31, 2017 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 $ 183 $ — $ — $ 183 Other real estate owned, net: Residential 910 — — 910 Commercial 200 — 200 Mortgage servicing rights 1,323 — — 1,323
Schedule of quantitative information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis	Range March 31, 2018 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%-27% (2)% Other real estate owned: Residential sales comparison adjustment for differences between the comparable sales 0%-16% (6)% Commercial income approach capitalization rate 10%-10% (10)% Range December 31, 2017 Fair Valuation Unobservable (Weighted (In thousands) Value Technique(s) Input(s) Average) Impaired loans Real estate mortgage: 1-4 family residential 183 sales comparison adjustment for differences between the comparable sales 3%-27% (15)% Other real estate owned: Residential 910 sales comparison adjustment for differences between the comparable sales 0%-16% (6)% Commercial 200 income approach capitalization rate 10%-10% (10)% Mortgage Servicing Rights discounted cash flow constant prepayment rates 7%-25% (10)%
Schedule of carrying amounts and estimated fair values of financial instruments	March 31, 2018: Carrying (in thousands) Value Level 1 Level 2 Level 3 Total Financial assets Cash and cash equivalents $ 26,785 $ 26,785 $ — $ — $ 26,785 Interest bearing time deposits 1,785 1,785 — — 1,785 Securities available for sale 305,998 335 305,663 — 305,998 Loans held for sale 1,221 — 1,260 — 1,260 Net Loans 641,940 — — 638,561 638,561 Federal Home Loan Bank stock 7,034 — — — N/A Interest receivable 3,809 — 1,350 2,459 3,809 Financial liabilities Total deposits $ 816,742 $ 640,863 $ 176,772 $ — $ 817,635 Repurchase agreements 12,233 — 12,295 — 12,295 Short-term Federal Home Loan Bank advances 8,200 — 8,186 — 8,186 Long-term Federal Home Loan Bank advances 88,512 — 81,527 — 81,527 Note payable 3,084 3,500 3,500 Subordinated debentures 7,217 — — 7,211 7,211 Interest payable 641 — 628 13 641 December 31, 2017: Carrying (in thousands) Value Level 1 Level 2 Level 3 Total Financial assets Cash and cash equivalents $ 39,172 $ 39,172 $ — $ — $ 39,172 Interest bearing time deposits 1,830 1,830 — — 1,830 Securities available for sale 318,177 340 317,837 — 318,177 Loans held for sale 1,231 — 1,269 — 1,269 Net Loans 640,815 — — 639,421 639,421 Federal Home Loan Bank stock 7,034 — — — — Interest receivable 3,951 — 1,378 2,573 3,951 Financial liabilities Total deposits $ 815,273 $ 621,139 $ 195,143 $ — $ 816,282 Repurchase agreements 19,900 — 19,968 — 19,968 Short-term Federal Home Loan Bank advances 8,400 — 8,393 — 8,393 Long-term Federal Home Loan Bank advances 90,332 — 86,899 — 86,899 Note payable 3,321 — 3,560 — 3,560 Subordinated debentures 7,217 — — 7,212 7,212 Interest payable 838 — 825 13 838

SECURITIES (Details)

SECURITIES (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Securities Available for Sale
Amortized Cost	$ 311,561	$ 319,440
Gross Unrealized Gains	1,192	2,269
Gross Unrealized Losses	(6,755)	(3,532)
Fair Value	305,998	318,177
U.S. treasury notes
Securities Available for Sale
Amortized Cost	4,043	4,046
Gross Unrealized Losses	(60)	(22)
Fair Value	3,983	4,024
U.S. government agencies
Securities Available for Sale
Amortized Cost	40,155	41,658
Gross Unrealized Gains	373	405
Gross Unrealized Losses	(763)	(358)
Fair Value	39,765	41,705
States and political subdivisions
Securities Available for Sale
Amortized Cost	81,270	88,485
Gross Unrealized Gains	779	1,783
Gross Unrealized Losses	(613)	(133)
Fair Value	81,436	90,135
Mortgage-backed - residential
Securities Available for Sale
Amortized Cost	135,603	132,664
Gross Unrealized Gains	20	43
Gross Unrealized Losses	(4,004)	(2,330)
Fair Value	131,619	130,377
Mortgage-backed - commercial
Securities Available for Sale
Amortized Cost	50,170	52,267
Gross Unrealized Gains	5	18
Gross Unrealized Losses	(1,315)	(689)
Fair Value	48,860	51,596
Equity securities
Securities Available for Sale
Amortized Cost	320	320
Gross Unrealized Gains	15	20
Fair Value	$ 335	$ 340

SECURITIES - AMORTIZED COST AND

SECURITIES - AMORTIZED COST AND FAIR VALUE BY CONTRACTUAL MATURITY (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017
Amortized Cost
Due in one year or less	$ 6,096
Due after one year through five years	31,976
Due after five years through ten years	29,550
Due after ten years	57,846
Securities due at a single maturity date	125,468
Amortized Cost	311,561		$ 319,440
Fair Value
Due in one year or less	6,062
Due after one year through five years	31,959
Due after five years through ten years	29,425
Due after ten years	57,738
Securities due at a single maturity date	125,184
Fair Value	305,998		318,177
Sales of securities
Proceeds from sales of securities available for sale	3,922	$ 0
Gross gains realized on sales of securities	34	0
Gross losses realized on sales of securities	78	0
Tax provision related to realized gains	(9)	$ 0
Mortgage-backed - residential
Amortized Cost
Amortized Cost	135,603		132,664
Fair Value
Fair Value	131,619		130,377
Mortgage-backed - commercial
Amortized Cost
Amortized Cost	50,170		52,267
Fair Value
Fair Value	48,860		51,596
Equity securities
Amortized Cost
Amortized Cost	320		320
Fair Value
Fair Value	$ 335		$ 340

SECURITIES - UNREALIZED LOSSES

SECURITIES - UNREALIZED LOSSES (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Securities with unrealized losses
Less than 12 Months, Fair Value	$ 185,942	$ 147,911
Less than 12 Months, Unrealized Loss	(3,810)	(1,475)
12 Months or More, Fair Value	75,170	77,592
12 Months or More, Unrealized Loss	(2,945)	(2,057)
Total, Fair Value	261,112	225,503
Total, Unrealized Loss	(6,755)	(3,532)
U.S. treasury notes
Securities with unrealized losses
Less than 12 Months, Fair Value	3,983	4,024
Less than 12 Months, Unrealized Loss	(60)	(22)
Total, Fair Value	3,983	4,024
Total, Unrealized Loss	(60)	(22)
U.S. government agencies
Securities with unrealized losses
Less than 12 Months, Fair Value	20,751	18,405
Less than 12 Months, Unrealized Loss	(440)	(130)
12 Months or More, Fair Value	14,202	12,692
12 Months or More, Unrealized Loss	(323)	(228)
Total, Fair Value	34,953	31,097
Total, Unrealized Loss	(763)	(358)
States and political subdivisions
Securities with unrealized losses
Less than 12 Months, Fair Value	40,003	15,442
Less than 12 Months, Unrealized Loss	(500)	(97)
12 Months or More, Fair Value	2,688	2,769
12 Months or More, Unrealized Loss	(113)	(36)
Total, Fair Value	42,691	18,211
Total, Unrealized Loss	(613)	(133)
Mortgage-backed - residential
Securities with unrealized losses
Less than 12 Months, Fair Value	82,172	70,646
Less than 12 Months, Unrealized Loss	(1,868)	(817)
12 Months or More, Fair Value	51,443	54,760
12 Months or More, Unrealized Loss	(2,136)	(1,513)
Total, Fair Value	133,615	125,406
Total, Unrealized Loss	(4,004)	(2,330)
Mortgage-backed - commercial
Securities with unrealized losses
Less than 12 Months, Fair Value	39,033	39,394
Less than 12 Months, Unrealized Loss	(942)	(409)
12 Months or More, Fair Value	6,837	7,371
12 Months or More, Unrealized Loss	(373)	(280)
Total, Fair Value	45,870	46,765
Total, Unrealized Loss	$ (1,315)	$ (689)

LOANS (Details)

LOANS (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Loans
Loans	$ 649,845	$ 648,535
Commercial
Loans
Loans	80,016	80,070
Real estate construction
Loans
Loans	22,724	20,816
1-4 family residential
Loans
Loans	239,945	238,121
Multi-family residential
Loans
Loans	45,965	39,926
Non-farm & non-residential
Loans
Loans	183,252	192,074
Agricultural
Loans
Loans	59,720	59,176
Consumer
Loans
Loans	17,991	18,182
Other
Loans
Loans	$ 232	$ 170

LOANS - ACTIVITY IN ALLOWANCE (

LOANS - ACTIVITY IN ALLOWANCE (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Activity in allowance for loan losses
Beginning Balance	$ 7,720	$ 7,541
Charge-offs	(304)	(275)
Recoveries	489	260
Provision		350
Ending Balance	7,905	7,876
Commercial
Activity in allowance for loan losses
Beginning Balance	975	789
Charge-offs		(2)
Recoveries		8
Provision	(16)	76
Ending Balance	959	871
Real estate construction
Activity in allowance for loan losses
Beginning Balance	462	564
Provision	(70)	(19)
Ending Balance	392	545
1-4 family residential
Activity in allowance for loan losses
Beginning Balance	2,316	2,301
Charge-offs	(62)	(11)
Recoveries	257	1
Provision	(12)	84
Ending Balance	2,499	2,375
Multi-family residential
Activity in allowance for loan losses
Beginning Balance	640	581
Recoveries	3	3
Provision	133	82
Ending Balance	776	666
Non-farm & non-residential
Activity in allowance for loan losses
Beginning Balance	1,554	1,203
Provision		108
Ending Balance	1,554	1,311
Agricultural
Activity in allowance for loan losses
Beginning Balance	494	856
Recoveries	23	10
Provision	(33)	(4)
Ending Balance	484	862
Consumer
Activity in allowance for loan losses
Beginning Balance	582	547
Charge-offs	(28)	(37)
Recoveries	16	4
Provision	(9)	20
Ending Balance	561	534
Other
Activity in allowance for loan losses
Beginning Balance	18	60
Charge-offs	(214)	(225)
Recoveries	190	234
Provision	30	(9)
Ending Balance	24	60
Unallocated
Activity in allowance for loan losses
Beginning Balance	679	640
Provision	(23)	12
Ending Balance	$ 656	$ 652

LOANS - ALLOWANCE FOR LOAN LOSS

LOANS - ALLOWANCE FOR LOAN LOSSES AND RECORDED INVESTMENT (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017	Mar. 31, 2017	Dec. 31, 2016
Loans
Accrued interest receivable	$ 2,500	$ 2,600
Allowance for Loan Losses:
Individually Evaluated for Impairment	65	23
Collectively Evaluated for Impairment	7,840	7,697
Total	7,905	7,720	$ 7,876	$ 7,541
Loans:
Individually Evaluated for Impairment	3,117	1,620
Collectively Evaluated for Impairment	646,728	646,915
Total	649,845	648,535
Commercial
Allowance for Loan Losses:
Collectively Evaluated for Impairment	959	975
Total	959	975	871	789
Loans:
Collectively Evaluated for Impairment	80,016	80,070
Total	80,016	80,070
Real estate construction
Allowance for Loan Losses:
Collectively Evaluated for Impairment	392	462
Total	392	462	545	564
Loans:
Collectively Evaluated for Impairment	22,724	20,816
Total	22,724	20,816
1-4 family residential
Allowance for Loan Losses:
Individually Evaluated for Impairment	65	23
Collectively Evaluated for Impairment	2,434	2,293
Total	2,499	2,316	2,375	2,301
Loans:
Individually Evaluated for Impairment	737	206
Collectively Evaluated for Impairment	239,208	237,915
Total	239,945	238,121
Multi-family residential
Allowance for Loan Losses:
Collectively Evaluated for Impairment	776	640
Total	776	640	666	581
Loans:
Individually Evaluated for Impairment	709
Collectively Evaluated for Impairment	45,256	39,926
Total	45,965	39,926
Non-farm & non-residential
Allowance for Loan Losses:
Collectively Evaluated for Impairment	1,554	1,554
Total	1,554	1,554	1,311	1,203
Loans:
Individually Evaluated for Impairment	1,390	1,130
Collectively Evaluated for Impairment	181,862	190,944
Total	183,252	192,074
Agricultural
Allowance for Loan Losses:
Collectively Evaluated for Impairment	484	494
Total	484	494	862	856
Loans:
Individually Evaluated for Impairment	281	284
Collectively Evaluated for Impairment	59,439	58,892
Total	59,720	59,176
Consumer
Allowance for Loan Losses:
Collectively Evaluated for Impairment	561	582
Total	561	582	534	547
Loans:
Collectively Evaluated for Impairment	17,991	18,182
Total	17,991	18,182
Other
Allowance for Loan Losses:
Collectively Evaluated for Impairment	24	18
Total	24	18	60	60
Loans:
Collectively Evaluated for Impairment	232	170
Total	232	170
Unallocated
Allowance for Loan Losses:
Collectively Evaluated for Impairment	656	679
Total	$ 656	$ 679	$ 652	$ 640

LOANS - INDIVIDUALLY EVALUATED

LOANS - INDIVIDUALLY EVALUATED FOR IMPAIRMENT (Details) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017
Unpaid Principal Balance
Total	$ 3,117		$ 1,620
Recorded Investment
Total	3,117		1,620
Allowance for Loan Losses Allocated.	65		23
Average Recorded Investment
Total	3,138	$ 8,851	1,637
Interest Income Recognized
Total	47	60	87
Cash Basis Interest Recognized
Total	47	60	87
1-4 family residential
Unpaid Principal Balance
With no related allowance recorded	169
With an allowance recorded	568		206
Recorded Investment
With no related allowance recorded	169
With an allowance recorded	568		206
Allowance for Loan Losses Allocated.	65		23
Average Recorded Investment
With no related allowance recorded	169	370
With an allowance recorded	570	1,077	208
Interest Income Recognized
With no related allowance recorded	4	2
With an allowance recorded	7	5	8
Cash Basis Interest Recognized
With no related allowance recorded	4	2
With an allowance recorded	7	5	8
Non-farm & non-residential
Unpaid Principal Balance
With no related allowance recorded	1,390		1,130
Recorded Investment
With no related allowance recorded	1,390		1,130
Average Recorded Investment
With no related allowance recorded	1,404		1,140
With an allowance recorded		2,441
Interest Income Recognized
With no related allowance recorded	18		68
With an allowance recorded		18
Cash Basis Interest Recognized
With no related allowance recorded	18		68
With an allowance recorded		18
Multi-family residential
Unpaid Principal Balance
With no related allowance recorded	709
Recorded Investment
With no related allowance recorded	709
Average Recorded Investment
With no related allowance recorded	712
Interest Income Recognized
With no related allowance recorded	12
Cash Basis Interest Recognized
With no related allowance recorded	12
Construction
Average Recorded Investment
With an allowance recorded		1,197
Interest Income Recognized
With an allowance recorded		32
Cash Basis Interest Recognized
With an allowance recorded		32
Agricultural
Unpaid Principal Balance
With no related allowance recorded	281		284
Recorded Investment
With no related allowance recorded	281		284
Average Recorded Investment
With no related allowance recorded	283	346	289
With an allowance recorded		3,420
Interest Income Recognized
With no related allowance recorded	6	3	11
Cash Basis Interest Recognized
With no related allowance recorded	$ 6	$ 3	$ 11

LOANS - NONACCRUAL, LOANS PAST

LOANS - NONACCRUAL, LOANS PAST DUE OVER 90 DAYS STILL ACCRUING AND TDR (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Dec. 31, 2017
Loans
Nonaccrual	$ 748	$ 1,193
Loans Past Due Over 90 Days Still Accruing	$ 339	231
Percentage of nonaccrual loans secured by real estate	99.10%
Maximum period past due for loans to be considered as impaired	90 days
Commercial
Loans
Loans Past Due Over 90 Days Still Accruing	$ 175	32
1-4 family residential
Loans
Nonaccrual	648	1,086
Loans Past Due Over 90 Days Still Accruing	130	184
Non-farm & non-residential
Loans
Loans Past Due Over 90 Days Still Accruing	8
Agricultural
Loans
Nonaccrual	93	96
Loans Past Due Over 90 Days Still Accruing	19
Consumer
Loans
Nonaccrual	7	11
Loans Past Due Over 90 Days Still Accruing	$ 7	$ 15

LOANS - AGING OF RECORDED INVES

LOANS - AGING OF RECORDED INVESTMENT IN PAST DUE AND NON-ACCRUAL LOANS (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Aging of recorded investment in past due and non-accrual loans
Greater than 90 Days Past Due	$ 339	$ 231
Non-accrual	748	1,193
Total Past Due and Non-accrual	3,826	5,246
Loans Not Past Due	646,019	643,289
30 to 59 Days Past Due
Aging of recorded investment in past due and non-accrual loans
Recorded Investment Past Due	2,392	3,443
60 to 89 Days Past Due
Aging of recorded investment in past due and non-accrual loans
Recorded Investment Past Due	347	379
Commercial
Aging of recorded investment in past due and non-accrual loans
Greater than 90 Days Past Due	175	32
Total Past Due and Non-accrual	619	754
Loans Not Past Due	79,397	79,316
Commercial | 30 to 59 Days Past Due
Aging of recorded investment in past due and non-accrual loans
Recorded Investment Past Due	444	678
Commercial | 60 to 89 Days Past Due
Aging of recorded investment in past due and non-accrual loans
Recorded Investment Past Due		44
Real estate construction
Aging of recorded investment in past due and non-accrual loans
Loans Not Past Due	22,724	20,816
1-4 family residential
Aging of recorded investment in past due and non-accrual loans
Greater than 90 Days Past Due	130	184
Non-accrual	648	1,086
Total Past Due and Non-accrual	2,535	3,813
Loans Not Past Due	237,410	234,308
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	1,592	2,222
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	165	321
Multi-family residential
Aging of recorded investment in past due and non-accrual loans
Loans Not Past Due	45,965	39,926
Non-farm & non-residential
Aging of recorded investment in past due and non-accrual loans
Greater than 90 Days Past Due	8
Total Past Due and Non-accrual	418	162
Loans Not Past Due	182,834	191,912
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	265	162
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	145
Agricultural
Aging of recorded investment in past due and non-accrual loans
Greater than 90 Days Past Due	19
Non-accrual	93	96
Total Past Due and Non-accrual	154	345
Loans Not Past Due	59,566	58,831
Agricultural | 30 to 59 Days Past Due
Aging of recorded investment in past due and non-accrual loans
Recorded Investment Past Due	42	249
Consumer
Aging of recorded investment in past due and non-accrual loans
Greater than 90 Days Past Due	7	15
Non-accrual	7	11
Total Past Due and Non-accrual	100	172
Loans Not Past Due	17,891	18,010
Consumer | 30 to 59 Days Past Due
Aging of recorded investment in past due and non-accrual loans
Recorded Investment Past Due	49	132
Consumer | 60 to 89 Days Past Due
Aging of recorded investment in past due and non-accrual loans
Recorded Investment Past Due	37	14
Other
Aging of recorded investment in past due and non-accrual loans
Loans Not Past Due	$ 232	$ 170

LOANS - TROUBLED DEBT RESTRUCTU

LOANS - TROUBLED DEBT RESTRUCTURINGS (Details) - loan	3 Months Ended	12 Months Ended
	Mar. 31, 2018	Dec. 31, 2017
LOANS
Number of loans that met the definition of troubled debt restructurings	0	0

LOANS - RISK CATEGORY OF LOANS

LOANS - RISK CATEGORY OF LOANS (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Dec. 31, 2017
Credit Quality Indicators
Loans	$ 649,845	$ 648,535
Pass
Credit Quality Indicators
Loans	603,770	603,894
Special Mention
Credit Quality Indicators
Loans	20,189	18,698
Substandard
Credit Quality Indicators
Loans	7,663	7,591
Commercial
Credit Quality Indicators
Loans	80,016	80,070
Commercial | Pass
Credit Quality Indicators
Loans	78,515	78,326
Commercial | Special Mention
Credit Quality Indicators
Loans	1,463	1,703
Commercial | Substandard
Credit Quality Indicators
Loans	38	41
Real estate construction
Credit Quality Indicators
Loans	22,724	20,816
Real estate construction | Pass
Credit Quality Indicators
Loans	22,724	20,816
1-4 family residential
Credit Quality Indicators
Loans	239,945	238,121
1-4 family residential | Pass
Credit Quality Indicators
Loans	232,064	230,103
1-4 family residential | Special Mention
Credit Quality Indicators
Loans	3,266	3,522
1-4 family residential | Substandard
Credit Quality Indicators
Loans	4,615	4,496
Multi-family residential
Credit Quality Indicators
Loans	45,965	39,926
Multi-family residential | Pass
Credit Quality Indicators
Loans	42,722	36,654
Multi-family residential | Special Mention
Credit Quality Indicators
Loans	2,534	2,551
Multi-family residential | Substandard
Credit Quality Indicators
Loans	709	721
Non-farm & non-residential
Credit Quality Indicators
Loans	183,252	192,074
Non-farm & non-residential | Pass
Credit Quality Indicators
Loans	174,985	183,230
Non-farm & non-residential | Special Mention
Credit Quality Indicators
Loans	6,688	7,240
Non-farm & non-residential | Substandard
Credit Quality Indicators
Loans	1,579	1,604
Agricultural
Credit Quality Indicators
Loans	59,720	59,176
Agricultural | Pass
Credit Quality Indicators
Loans	52,760	54,765
Agricultural | Special Mention
Credit Quality Indicators
Loans	6,238	3,682
Agricultural | Substandard
Credit Quality Indicators
Loans	722	729
Consumer
Credit Quality Indicators
Loans	17,991	18,182
Consumer | Non-performing
Credit Quality Indicators
Loans	$ 14	$ 26
Minimum period past due for loans to be considered as non-performing	90 days

REAL ESTATE OWNED (Details)

REAL ESTATE OWNED (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Activity in real estate owned
Beginning of year, net	$ 2,404	$ 1,824
Additions		126
Capitalized Expenditures	74
Sales	(202)	(577)
End of period, net	2,276	1,373
Activity in the valuation allowance
Beginning of year	777	803
End of period	777	803
Expenses related to foreclosed assets
Net (gain) loss on sales, included in other income on income statement	1	(46)
Operating expenses, net of rental income	15	79
Repossession expenses, net	15	79
Net expense, net of gain or loss on sales, for the period	$ 16	$ 33

EARNINGS PER SHARE (Details)

EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Basic Earnings Per Share
Net income	$ 3,148	$ 3,137
Weighted average common shares outstanding	2,962	2,954
Basic and Diluted Earnings Per Share
Basic and diluted earnings per share	$ 1.06	$ 1.06

EARNINGS PER SHARE - ANTIDILUTI

EARNINGS PER SHARE - ANTIDILUTIVE SECURITIES (Details) - shares	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Stock options
Antidilutive securities
Antidilutive shares excluded from computation of diluted earnings per share	0	600

STOCK COMPENSATION - VESTING PE

STOCK COMPENSATION - VESTING PERIOD (Details)	3 Months Ended
	Mar. 31, 2018planshares
Stock Based Compensation
Number of share based compensation plans | plan	3
Stock Option Plans | Stock options
Stock Based Compensation
Life of awards	10 years
1993 Non-Employee Directors Stock Ownership Incentive Plan | Stock options
Stock Based Compensation
Number of shares authorized for issuance | shares	20,000

STOCK COMPENSATION - ACTIVITY (

STOCK COMPENSATION - ACTIVITY (Details) - Stock Option Plans $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2018USD ($)$ / sharesshares
Shares
Outstanding, beginning of year (in shares) | shares	600
Exercised (in shares) | shares	(600)
Weighted Average Exercise Price
Outstanding, beginning of year (in dollars per share) | $ / shares	$ 31
Exercised (in dollars per share) | $ / shares	$ 31
Additional disclosures
Total unrecognized compensation cost related to nonvested stock options granted | $	$ 0

STOCK COMPENSATION - NONVESTED

STOCK COMPENSATION - NONVESTED SHARES (Details) - USD ($)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
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)	6,141
Vested (in shares)	(3,090)
Forfeited (in shares)	(71)
Nonvested at the end of the period (in shares)	2,980
Weighted-Average Grant-Date Fair Value
Nonvested shares, balance at the beginning of the period (in dollars)	$ 151,984
Vested (in dollars)	(72,224)
Forfeited (in dollars)	(1,883)
Nonvested shares, balance at the end of the period (in dollars)	$ 77,877
Fair Value Per Share
Nonvested shares, balance at the beginning of the period (in dollars per share)	$ 24.75
Vested (in dollars per share)	23.37
Forfeited (in dollars per share)	26.52
Nonvested shares, balance at the end of the period (in dollars per share)	$ 26.13
Additional disclosures
Total unrecognized compensation cost related to nonvested shares granted	$ 65,000
Period over which cost is expected to be recognized	1 year 4 months 24 days
2009 Stock Award Plan
Stock Based Compensation
Number of shares authorized for issuance	150,000
Shares available for issuance	126,966
Shares
Nonvested at the beginning of the period (in shares)	10,930
Granted (in shares)	5,720	6,575
Vested (in shares)	(2,448)
Forfeited (in shares)	(312)
Nonvested at the end of the period (in shares)	13,890
Weighted-Average Grant-Date Fair Value
Nonvested shares, balance at the beginning of the period (in dollars)	$ 338,545
Granted (in dollars)	263,406
Vested (in dollars)	(74,504)
Forfeited (in dollars)	(11,679)
Nonvested shares, balance at the end of the period (in dollars)	$ 515,768
Fair Value Per Share
Nonvested shares, balance at the beginning of the period (in dollars per share)	$ 30.97
Granted (in dollars per share)	46.05
Vested (in dollars per share)	30.43
Forfeited (in dollars per share)	37.43
Nonvested shares, balance at the end of the period (in dollars per share)	$ 37.13
Additional disclosures
Total unrecognized compensation cost related to nonvested shares granted	$ 483,000
Period over which cost is expected to be recognized	4 years

REPURCHASE AGREEMENTS (Details)

REPURCHASE AGREEMENTS (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Dec. 31, 2017
REPURCHASE AGREEMENTS
Repurchase agreements	$ 12,233	$ 19,900
Carrying amount of agency-backed securities pledged to secure repurchase agreements	16,700
Overnight obligations
REPURCHASE AGREEMENTS
Repurchase agreements	6,200
Maturity terms extending
REPURCHASE AGREEMENTS
Repurchase agreements	$ 6,000
Average weighted remaining life	1 year 1 month 6 days

OTHER BORROWINGS (Details)

OTHER BORROWINGS (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017	Jul. 20, 2015
OTHER BORROWINGS
Amount outstanding	$ 3,084	$ 3,321
Term loan
OTHER BORROWINGS
Debt instrument, face amount			$ 5,000
Amount outstanding	3,100
Fixed interest rate			5.02%
Maturity schedule of term loan
2,018	361
2,019	504
2,020	530
2,021	557
2,022	586
Thereafter	546
Total term loan maturities	$ 3,084

FAIR VALUE (Details)

FAIR VALUE (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017
Fair value on instruments on recurring basis
Securities available for sale	$ 305,998		$ 318,177
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	305,998		318,177
Quoted Prices In Active Markets for Identical Assets (Level 1)
Fair value on instruments on recurring basis
Securities available for sale	335		340
Significant Other Observable Inputs (Level 2)
Fair value on instruments on recurring basis
Securities available for sale	305,663		317,837
Recurring | Carrying Value
Fair value on instruments on recurring basis
Securities available for sale	305,998		318,177
Recurring | Quoted Prices In Active Markets for Identical Assets (Level 1)
Fair value on instruments on recurring basis
Securities available for sale	335		340
Recurring | Significant Other Observable Inputs (Level 2)
Fair value on instruments on recurring basis
Securities available for sale	305,663		317,837
Impaired Loans
Fair value on instruments on recurring basis
Adjustments for differences between the comparable sales and income data available	44	0
Other Real Estate Owned | Significant Unobservable Inputs (Level 3)
Fair value on instruments on recurring basis
Adjustments for differences between the comparable sales and income data available	0	$ 0
U.S. treasury notes
Fair value on instruments on recurring basis
Securities available for sale	3,983		4,024
U.S. treasury notes | Recurring | Carrying Value
Fair value on instruments on recurring basis
Securities available for sale	3,983		4,024
U.S. treasury notes | Recurring | Significant Other Observable Inputs (Level 2)
Fair value on instruments on recurring basis
Securities available for sale	3,983		4,024
U.S. government agencies
Fair value on instruments on recurring basis
Securities available for sale	39,765		41,705
U.S. government agencies | Recurring | Carrying Value
Fair value on instruments on recurring basis
Securities available for sale	39,765		41,705
U.S. government agencies | Recurring | Significant Other Observable Inputs (Level 2)
Fair value on instruments on recurring basis
Securities available for sale	39,765		41,705
States and political subdivisions
Fair value on instruments on recurring basis
Securities available for sale	81,436		90,135
States and political subdivisions | Recurring | Carrying Value
Fair value on instruments on recurring basis
Securities available for sale	81,436		90,135
States and political subdivisions | Recurring | Significant Other Observable Inputs (Level 2)
Fair value on instruments on recurring basis
Securities available for sale	81,436		90,135
Mortgage-backed - residential
Fair value on instruments on recurring basis
Securities available for sale	131,619		130,377
Mortgage-backed - residential | Recurring | Carrying Value
Fair value on instruments on recurring basis
Securities available for sale	128,815		130,377
Mortgage-backed - residential | Recurring | Significant Other Observable Inputs (Level 2)
Fair value on instruments on recurring basis
Securities available for sale	128,815		130,377
Mortgage-backed - commercial
Fair value on instruments on recurring basis
Securities available for sale	48,860		51,596
Mortgage-backed - commercial | Recurring | Carrying Value
Fair value on instruments on recurring basis
Securities available for sale	51,664		51,596
Mortgage-backed - commercial | Recurring | Significant Other Observable Inputs (Level 2)
Fair value on instruments on recurring basis
Securities available for sale	51,664		51,596
Equity securities
Fair value on instruments on recurring basis
Securities available for sale	335		340
Equity securities | Recurring | Carrying Value
Fair value on instruments on recurring basis
Securities available for sale	335		340
Equity securities | Recurring | Quoted Prices In Active Markets for Identical Assets (Level 1)
Fair value on instruments on recurring basis
Securities available for sale	$ 335		$ 340

FAIR VALUE - FAIR VALUE ON NON-

FAIR VALUE - FAIR VALUE ON NON-RECURRING (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2018USD ($)loan	Mar. 31, 2017USD ($)loan	Dec. 31, 2017USD ($)	Dec. 31, 2016USD ($)
Impaired Loans
Valuation allowance of impaired loans	$ 65		$ 23
Other real estate owned, net:
Outstanding balance of other real estate owned	2,276	$ 1,373	2,404	$ 1,824
Valuation allowance of other real estate owned	777	$ 803	777	$ 803
Loan servicing rights
Mortgage servicing rights	1,568		1,511
Non-recurring
Impaired Loans
Impaired loans, at fair value	503		183
Valuation allowance of impaired loans	$ 65		23
Number of impaired loans. | loan	5	0
Loan loss provision expense for impaired loans	$ 44
Other real estate owned, net:
Other real estate owned	1,200		1,100
Outstanding balance of other real estate owned	2,000		1,900
Valuation allowance of other real estate owned	777		777
Write downs of other real estate owned	0	$ 0
Loan servicing rights
Mortgage servicing rights	0		1,300
Balance of loan servicing rights			1,400
Valuation allowance of loan servicing rights			56
Recovery of prior write-downs	56	$ 39
Non-recurring | Carrying Value
Loan servicing rights
Mortgage servicing rights			1,323
Non-recurring | Significant Unobservable Inputs (Level 3)
Loan servicing rights
Mortgage servicing rights			1,323
Non-recurring | 1-4 family residential | Carrying Value
Impaired Loans
Impaired loans, at fair value	503		183
Non-recurring | 1-4 family residential | Significant Unobservable Inputs (Level 3)
Impaired Loans
Impaired loans, at fair value	503		183
Non-recurring | Residential | Carrying Value
Other real estate owned, net:
Other real estate owned	910		910
Non-recurring | Residential | Significant Unobservable Inputs (Level 3)
Other real estate owned, net:
Other real estate owned	910		910
Non-recurring | Commercial | Carrying Value
Other real estate owned, net:
Other real estate owned	274		200
Non-recurring | Commercial | Significant Unobservable Inputs (Level 3)
Other real estate owned, net:
Other real estate owned	$ 274		$ 200

FAIR VALUE - QUANTITATIVE INFOR

FAIR VALUE - QUANTITATIVE INFORMATION (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2018	Dec. 31, 2017
Fair Value Measurements
Mortgage servicing rights	$ 1,568	$ 1,511
Non-recurring
Fair Value Measurements
Impaired loans, at fair value	503	183
Other real estate owned	1,200	1,100
Mortgage servicing rights	0	1,300
Non-recurring | Significant Unobservable Inputs (Level 3)
Fair Value Measurements
Mortgage servicing rights		1,323
Non-recurring | Discounted cash flow | Significant Unobservable Inputs (Level 3)
Fair Value Measurements
Mortgage servicing rights		1,323
Non-recurring | 1-4 family residential | Significant Unobservable Inputs (Level 3)
Fair Value Measurements
Impaired loans, at fair value	503	183
Non-recurring | 1-4 family residential | Sales comparison | Significant Unobservable Inputs (Level 3)
Fair Value Measurements
Impaired loans, at fair value	503	183
Non-recurring | Residential | Significant Unobservable Inputs (Level 3)
Fair Value Measurements
Other real estate owned	910	910
Non-recurring | Residential | Sales comparison | Significant Unobservable Inputs (Level 3)
Fair Value Measurements
Other real estate owned	910	910
Non-recurring | Commercial | Significant Unobservable Inputs (Level 3)
Fair Value Measurements
Other real estate owned	274	200
Non-recurring | Commercial | Income approach | Significant Unobservable Inputs (Level 3)
Fair Value Measurements
Other real estate owned	$ 274
Non-recurring | Commercial | Discounted cash flow | Significant Unobservable Inputs (Level 3)
Fair Value Measurements
Other real estate owned		$ 200
Non-recurring | Minimum | Discounted cash flow | Significant Unobservable Inputs (Level 3)
Fair Value Measurements
Constant prepayment rates (as a percent)		7.00%
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%	3.00%
Non-recurring | Minimum | Residential | Sales comparison | Significant Unobservable Inputs (Level 3)
Fair Value Measurements
Adjustment for differences between the comparable sales (as a percent)	0.00%	0.00%
Non-recurring | Minimum | Commercial | Income approach | Significant Unobservable Inputs (Level 3)
Fair Value Measurements
Capitalization rate (as a percent)	10.00%
Non-recurring | Minimum | Commercial | Discounted cash flow | 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)		25.00%
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)	27.00%	27.00%
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%	16.00%
Non-recurring | Maximum | Commercial | Income approach | Significant Unobservable Inputs (Level 3)
Fair Value Measurements
Capitalization rate (as a percent)	10.00%	10.00%
Non-recurring | Weighted average | Discounted cash flow | Significant Unobservable Inputs (Level 3)
Fair Value Measurements
Constant prepayment rates (as a percent)		10.00%
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)	2.00%	15.00%
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)	(6.00%)	6.00%
Non-recurring | Weighted average | Residential | Income approach | Significant Unobservable Inputs (Level 3)
Fair Value Measurements
Capitalization rate (as a percent)	10.00%	10.00%

FAIR VALUE - FAIR VALUE OF FINA

FAIR VALUE - FAIR VALUE OF FINANCIAL INSTRUMENTS (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Financial assets
Interest bearing time deposits	$ 1,785	$ 1,830
Securities available for sale	305,998	318,177
Loans held for sale	1,221	1,231
Interest receivable	3,809	3,951
Financial liabilities
Short-term Federal Home Loan Bank advances	8,200	8,400
Long-term Federal Home Loan Bank advances	88,512	90,332
Interest payable	641	838
Carrying Value
Financial assets
Cash and cash equivalents	26,785	39,172
Interest bearing time deposits	1,785	1,830
Securities available for sale	305,998	318,177
Loans held for sale	1,221	1,231
Net Loans	641,940	640,815
Federal Home Loan Bank stock	7,034	7,034
Interest receivable	3,809	3,951
Financial liabilities
Total deposits	816,742	815,273
Repurchase agreements	12,233	19,900
Short-term Federal Home Loan Bank advances	8,200	8,400
Long-term Federal Home Loan Bank advances	88,512	90,332
Note payable	3,084	3,321
Subordinated debentures	7,217	7,217
Interest payable	641	838
Fair Value
Financial assets
Cash and cash equivalents	26,785	39,172
Interest bearing time deposits	1,785	1,830
Securities available for sale	305,998	318,177
Loans held for sale	1,260	1,269
Net Loans	638,561	639,421
Interest receivable	3,809	3,951
Financial liabilities
Total deposits	817,635	816,282
Repurchase agreements	12,295	19,968
Short-term Federal Home Loan Bank advances	8,186	8,393
Long-term Federal Home Loan Bank advances	81,527	86,899
Note payable	3,500	3,560
Subordinated debentures	7,211	7,212
Interest payable	641	838
Quoted Prices In Active Markets for Identical Assets (Level 1)
Financial assets
Cash and cash equivalents	26,785	39,172
Interest bearing time deposits	1,785	1,830
Securities available for sale	335	340
Financial liabilities
Total deposits	640,863	621,139
Significant Other Observable Inputs (Level 2)
Financial assets
Securities available for sale	305,663	317,837
Loans held for sale	1,260	1,269
Interest receivable	1,350	1,378
Financial liabilities
Total deposits	176,772	195,143
Repurchase agreements	12,295	19,968
Short-term Federal Home Loan Bank advances	8,186	8,393
Long-term Federal Home Loan Bank advances	81,527	86,899
Note payable	3,500	3,560
Interest payable	628	825
Significant Unobservable Inputs (Level 3)
Financial assets
Net Loans	638,561	639,421
Interest receivable	2,459	2,573
Financial liabilities
Subordinated debentures	7,211	7,212
Interest payable	$ 13	$ 13