UNITED STATESSECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2014

Or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission file number: 001-33126

CITIZENS FIRST CORPORATION

(Exact name of registrant as specified in its charter)

Kentucky	61-0912615
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1065 Ashley Street, Bowling Green, Kentucky	42103
(Address of principal executive offices)	(Zip Code)

(270) 393-0700

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   x  No   o

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

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

Large accelerated filer   o

Accelerated filer   o

Non-accelerated filer  o

Smaller reporting company    x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  o  No  x

Indicate the number of shares outstanding of each of the issuer’s class of common stock, as of the latest practicable date.

1,968,777 shares of Common Stock, no par value, were outstanding at May 8, 2014.

CITIZENS FIRST CORPORATION

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION
ITEM 1	FINANCIAL STATEMENTS	3
ITEM 2	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	28
ITEM 3	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	43
ITEM 4	CONTROLS AND PROCEDURES	44
PART II — OTHER INFORMATION
ITEM 6	EXHIBITS	45
SIGNATURES		47

2

Part 1. Financial Information

Item 1. Financial Statements

Citizens First Corporation

Consolidated Balance Sheets

	(In Thousands, Except Share Data)
	March 31, 2014			December 31, 2013
	Unaudited
Assets
Cash and due from financial institutions	$	8,166		$	8,572
Federal funds sold	30,095			28,490
Cash and cash equivalents	38,261			37,062
Available-for-sale securities	54,675			51,633
Loans held for sale	85			—
Loans, net of allowance for loan losses of $4,827 and $4,653 at March 31, 2014 and December 31, 2013, respectively	296,771			290,415
Premises and equipment, net	10,970			11,054
Bank owned life insurance (BOLI)	7,853			7,806
Federal Home Loan Bank (FHLB) stock, at cost	2,025			2,025
Accrued interest receivable	1,444			1,554
Deferred income taxes	1,759			2,279
Goodwill	4,097			4,097
Core deposit intangible	581			665
Other real estate owned	631			833
Other assets	976			752
Total Assets	$	420,128		$	410,175
Liabilities
Deposits
Noninterest bearing	41,653			39,967
Savings, NOW and money market	146,130			143,602
Time	164,414			159,382
Total deposits	352,197			342,951
FHLB advances and other borrowings	25,300			22,000
Subordinated debentures	5,000			5,000
Accrued interest payable	241			243
Other liabilities	1,477			1,634
Total Liabilities	$	384,215		$	371,828
Stockholders’ Equity
6.5% cumulative preferred stock; no par value, authorized 250 shares, aggregate liquidation preference of $7,998; issued and outstanding 250 shares at March 31, 2014 and December 31, 2013, respectively	$	7,659		$	7,659
5.0% Series A cumulative preferred stock; no par value, authorized 250 shares, aggregate liquidation preference of $0 and $3,266; issued and outstanding 0 shares at March 31, 2014 and 93 shares at December 31, 2013	—			3,266
Common stock, no par value, authorized 5,000,000 shares; issued and outstanding 1,968,777 shares at March 31, 2014 and December 31, 2013, respectively	27,072			27,072
Retained earnings	1,212			653
Accumulated other comprehensive loss	(30		)	(303		)
Total stockholders’ equity	$	35,913		$	38,347
Total liabilities and stockholders’ equity	$	420,128		$	410,175

See Notes to Unaudited Consolidated Financial Statements

3

Citizens First Corporation
Unaudited Consolidated Statements of Income

	Three months ended
	(In Thousands, Except Per Share Data)
	March 31, 2014		March 31, 2013
Interest and dividend income
Loans	$	3,844	$	4,125
Taxable securities	141		96
Non-taxable securities	164		170
Federal funds sold and other	32		37
Total interest and dividend income	4,181		4,428
Interest expense
Deposits	543		628
FHLB advances and other	117		110
Subordinated debentures	23		24
Total interest expense	683		762
Net interest income	3,498		3,666
Provision for loan losses	125		1,250
Net interest income after provision for loan losses	3,373		2,416
Non-interest income
Service charges on deposit accounts	261		291
Other service charges and fees	153		138
Gain on sale of mortgage loans	24		82
Non-deposit brokerage fees	69		65
Lease income	75		74
BOLI income	47		61
Gain on sale of securities available-for-sale (includes $8 accumulated other comprehensive income reclassifications for unrealized net gains on available-for-sale-securities)	—		8
Total non-interest income	629		719
Non-interest expenses
Salaries and employee benefits	1,527		1,441
Net occupancy expense	482		461
Advertising and public relations	83		78
Professional fees	153		164
Data processing services	233		265
Franchise shares and deposit tax	146		141
FDIC insurance	77		85
Core deposit intangible amortization	84		84
Postage and office supplies	51		43
Other real estate owned expenses	10		11
Other	216		309
Total non-interest expenses	3,062		3,082
Income before income taxes	940		53
Income taxes	249		(62		)
Net income	$	691	$	115
Dividends and accretion on preferred stock	132		217
Net income (loss) available for common stockholders	$	559	$	(102	)
Basic earnings (loss) per common share	$	0.28	$	(0.05	)
Diluted earnings (loss) per common share	$	0.27	$	(0.05	)

See Notes to Unaudited Consolidated Financial Statements

4

Citizens First Corporation

Unaudited Consolidated Statements of Comprehensive Income

In thousands, except share data

	Three months ended
	(In Thousands, Except Per Share Data)
	March 31, 2014		March 31, 2013
Comprehensive income, net of tax
Net income	691		115
Other comprehensive income (loss)
Reclassification adjustment for gains included in net income, net	—		(5		)
Change in unrealized gain (loss) on available for sale securities, net of $141 taxes in 2014 and $49 in 2013	273		(96		)
Total other comprehensive income (loss)	273		(101		)
Comprehensive income	$	964	$	14

See Notes to Unaudited Consolidated Financial Statements

5

Citizens First Corporation

Unaudited Consolidated Statements of Changes in Stockholders’ Equity

In thousands, except share data

	Preferred Stock			Common Stock		Retained Earnings (Deficit)			Accumulated Other Comprehensive Income			Total
Balance, January 1, 2013	$	14,178		$	27,072	$	(430	)	$	746		$	41,566
Net income						115						115
Series A preferred stock	(3,301		)									(3,301		)
Accretion on Series A preferred stock	29					(29		)				—
Change in other comprehensive loss									(101		)	(101		)
Dividend declared and paid on preferred stock						(188		)				(188		)
Balance, March 31, 2013	$	10,906		$	27,072	$	(532	)	$	645		$	38,091

	Preferred Stock			Common Stock		Retained Earnings			Accumulated Other Comprehensive Loss			Total
Balance, January 1, 2014	$	10,925		$	27,072	$	653		$	(303	)	$	38,347
Net income						691						691
Repayment of 93 shares Series A preferred stock	(3,266		)									(3,266		)
Change in other comprehensive income									273			273
Dividend declared and paid on preferred stock						(132		)				(132		)
Balance, March 31, 2014	$	7,659		$	27,072	$	1,212		$	(30	)	$	35,913

See Notes to Unaudited Consolidated Financial Statements

6

Citizens First Corporation

Unaudited Consolidated Statements of Cash Flows

	(In Thousands)
	March 31, 2014			March 31, 2013
Operating Activities
Net income	$	691		$	115
Items not requiring (providing) cash:
Depreciation and amortization	144			155
Provision for loan losses	125			1,250
Amortization of premiums and discounts on securities	68			86
Amortization of core deposit intangible	84			84
Deferred income taxes	799			487
BOLI income	(47		)	(61		)
Proceeds from sale of mortgage loans	982			3,556
Origination of mortgage loans held for sale	(1,044		)	(3,556		)
Gains on sales of available-for-sale securities	—			(8		)
Gains on sales of mortgage loans	(24		)	(82		)
Write-downs and losses on sale of other real estate owned	11			2
Gain on sale premises and equipment	(7		)	(4		)
Changes in:
Accrued interest receivable	110			78
Other assets	(641		)	(2		)
Accrued interest payable and other liabilities	(158		)	(479		)
Net cash provided by operating activities	1,093			1,621
Investing Activities
Loan originations and payments, net	(6,485		)	(2,746		)
Purchase of premises and equipment	(72		)	(8		)
Proceeds from maturities of available-for-sale securities	1,429			2,543
Proceeds from sales of available-for-sale securities	—			619
Proceeds from sales of other real estate owned	191			25
Purchase of available-for-sale securities	(4,124		)	(7,238		)
Proceeds from sales of premises and equipment	19			4
Net cash used in investing activities	(9,042		)	(6,801		)
Financing Activities
Net change in demand deposits, money market, NOW and savings accounts	4,214			6,420
Net change in time deposits	5,032			9,771
Repayment of TARP preferred stock	(3,266		)	(3,301		)
Proceeds from other borrowings	3,300			3,300
Dividends paid on preferred stock	(132		)	(188		)
Net cash provided by financing activities	9,148			16,002
Increase in Cash and Cash Equivalents	1,199			10,822
Cash and Cash Equivalents, Beginning of Year	37,062			34,799
Cash and Cash Equivalents, End of Quarter	$	38,261		$	45,621
Supplemental Cash Flows Information
Interest paid	$	685		$	711
Income taxes paid	$	—		$	—
Loans transferred to other real estate owned	$	—		$	68

See Notes to Unaudited Consolidated Financial Statements

7

Citizens First Corporation

Notes to Unaudited Consolidated Financial Statements

Note 1 — Nature of Operations and Summary of Significant Accounting Policies

The accounting and reporting policies of Citizens First Corporation (the “Company”) and its subsidiary, Citizens First Bank, Inc. (the “Bank”), conform to U.S. generally accepted accounting principles and general practices within the banking industry.  The consolidated financial statements include the accounts of the Company and the Bank.  All significant intercompany transactions and accounts have been eliminated in consolidation.

Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted.  These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2013 Annual Report on Form 10-K filed with the Securities and Exchange Commission.

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Estimates used in the preparation of the financial statements are based on various factors including the current interest rate environment and the general strength of the local economy.  Changes in the overall interest rate environment can significantly affect the Company’s net interest income and the value of its recorded assets and liabilities.  Actual results could differ from those estimates used in the preparation of the financial statements.

In the opinion of management, all adjustments considered necessary for a fair presentation have been reflected in the accompanying unaudited financial statements.  Those adjustments consist only of normal recurring adjustments. Results of interim periods are not necessarily indicative of results to be expected for the full year.  The consolidated balance sheet of the Company as of December 31, 2013 has been derived from the audited consolidated balance sheet of the Company as of that date.

Note 2 -  Reclassifications

Certain reclassifications have been made to the consolidated financial statements of prior periods to conform to the current period presentation.  These reclassifications do not affect net income or total stockholders’ equity as previously reported.

8

Note 3 - Available-For-Sale Securities

The following table summarizes the amortized cost and fair value of the available-for sale securities portfolio at March 31, 2014 and December 31, 2013 and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive loss:

	(Dollars in Thousands)
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
March 31, 2014
U. S. government agencies and government sponsored entities	$	6,991	$	—	$	(140	)	$	6,851
State and municipal	20,575		646		(203		)	21,018
Agency mortgage-backed securities: residential	24,282		229		(105		)	24,406
Trust preferred security	1,872		—		(472		)	1,400
Corporate Bonds	1,000		—		—			1,000
Total Available-for-Sale Securities	$	54,720	$	875	$	(920	)	$	54,675
December 31, 2013
U. S. government agencies and government sponsored entities	$	6001	$	—	$	(182	)	$	5,819
State and municipal	19,394		547		(265		)	19,676
Agency mortgage-backed securities: residential	23,825		172		(253		)	23744
Trust preferred security	1,872		—		(472		)	1,400
Corporate bond	1,000		—		(6		)	994
Total Available-for-Sale Securities	$	52,092	$	719	$	(1,178	)	$	51,633

The amortized cost and fair value of investment securities at March 31, 2014 by contractual maturity were as follows.  Securities not due at a single maturity date, primarily mortgage-backed securities, are shown separately.

9

	March 31, 2014 (Dollars in Thousands)
	Available-For-Sale
	Amortized Cost		Fair Value
Due in one year or less	255		256
Due from one to five years	7,969		8,090
Due from five to ten years	13,582		13,673
Due after ten years	8,632		8,250
Agency mortgage-backed: residential	24,282		24,406
Total	$	54,720	$	54,675

The following table summarizes the investment securities with unrealized losses at March 31, 2014 and December 31, 2013, aggregated by investment category and length of time that individual securities have been in continuous unrealized loss position:

	(Dollars in Thousands)
	Less than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
March 31, 2014:
U.S. government agencies and government sponsored entities	$	5,905	$	(85	)	$	946	$	(55	)	$	6,851	$	(140	)
State and municipal	2,607		(93		)	871		(110		)	3,478		(203		)
Agency mortgage-backed: residential	6,018		(105		)	—		—			6,018		(105		)
Trust preferred security	—		—			1,400		(472		)	1,400		(472		)
Total temporarily impaired	$	14,530	$	(283	)	$	3,217	$	(637	)	$	17,747	$	(920	)

	(Dollars in Thousands)
	Less than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
December 31, 2013:
U.S. government agencies and government sponsored entities	$	4,882	$	(119	)	$	937	$	(63	)	$	5,819	$	(182	)
State and municipal	3,988		(128		)	844		(137		)	4,832		(265		)
Agency mortgage-backed: residential	12,977		(253		)	—		—			12,977		(253		)
Trust preferred security	—		—			1,400		(472		)	1,400		(472		)
Corporate bonds	994		(6		)	—		—			994		(6		)
Total temporarily impaired	$	22,841	$	(506	)	$	3,181	$	(672	)	$	26,022	$	(1,178	)

10

Other-Than-Temporary-Impairment

Management evaluates securities for other-than-temporary impairment (“OTTI”) at least on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation.  Investment securities classified as available-for-sale are generally evaluated for OTTI under ASC Topic 320, “Investments - Debt and Equity Securities.”

In determining OTTI under the ASC Topic 320 model, management considers many factors, including: (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) whether the market decline was affected by macroeconomic conditions, and (4) whether the entity has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery.  The assessment of whether an other-than-temporary decline exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time.

As of March 31, 2014, our securities portfolio consisted of $54.7 million fair value of securities, $17.7 million, or 22 securities, of which were in an unrealized loss position.

All rated securities are investment grade.  For those that are not rated, the financial condition has been evaluated and no adverse conditions were identified related to repayment.  Declines in fair value are a function of rate differences in the market and market illiquidity.  The Company does not intend or is not expected to be required to sell these securities before recovery of their amortized cost basis.

The Company’s unrealized losses 12 months or more relate primarily to its investment in a single trust preferred security.  The security is a single-issuer trust preferred that is not rated.  While market conditions have allowed some increase in the fair market value of the trust preferred security at March 31, 2014, a full recovery has not yet occurred.  No impairment charge is being taken as no loss of principal or interest is anticipated.  All principal and interest payments are being received as scheduled.  On a quarterly basis, we evaluate the creditworthiness of the issuer, a bank holding company with operations in the state of Kentucky.  Based on the issuer’s continued profitability and well-capitalized position, we do not deem that there is credit loss.  The decline in fair value is primarily attributable to illiquidity affecting these markets and not the expected cash flows of the individual securities.  We have evaluated the financial condition and near term prospects of the issuer and expect to fully recover our cost basis.  This security continues to pay interest as agreed and future payments are expected to be made as agreed.  This security is not considered to be other-than-temporarily impaired.

11

Note 4 - Loans and Allowance for Loan Losses

Categories of loans include:

	(Dollars in Thousands)
	March 31, 2014			December 31, 2013
Commercial	$	44,926		$	45,254
Commercial real estate:
Construction	14,510			15,052
Other	164,257			154,975
Residential real estate	71,963			74,040
Consumer:
Auto	2,326			2,544
Other	3,616			3,203
Total loans	301,598			295,068
Less allowance for loan losses	(4,827		)	(4,653		)
Net loans	$	296,771		$	290,415

The following table sets forth an analysis of our allowance for loan losses for the three months ending March 31, 2014 and 2013.

	(Dollars In Thousands)
	Commercial			Commercial Real Estate		Residential Real Estate			Consumer			Unallocated			Total
March 31, 2014 Allowance for loan losses:
Beginning balance	$	1,420		$	2,079	$	703		$	86		$	365		$	4,653
Provision for loan losses	(500		)	887		9			(13		)	(258		)	125
Loans charged-off	—			—		(19		)	(3		)	—			(22		)
Recoveries	17			47		6			1			—			71
Total ending allowance balance	$	937		$	3,013	$	699		$	71		$	107		$	4,827

	(Dollars In Thousands)
	Commercial			Commercial Real Estate			Residential Real Estate			Consumer			Unallocated			Total
March 31, 2013 Allowance for loan losses:
Beginning balance	$	2,156		$	2,635		$	589		$	90		$	251		$	5,721
Provision for loan losses	1,459			(65		)	(89		)	—			(55		)	1,250
Loans charged-off	(333		)	(14		)	—			(11		)	—			(358		)
Recoveries	—			28			7			2			—			37
Total ending allowance balance	$	3,282		$	2,584		$	507		$	81		$	196		$	6,650

12

The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on the impairment method as of March 31, 2014 and December 31, 2013.  As of March 31, 2014 and December 31, 2013, accrued interest receivable of $1.2 million and $1.3 million, respectively, are not considered significant and therefore not included in the recorded investment in loans presented in the following tables. Net deferred loan fees of $321,000 and $280,000, respectively, are included in the following tables.

	(Dollars In Thousands)
	Commercial		Commercial Real Estate		Residential Real Estate		Consumer		Unallocated		Total
March 31, 2014
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	198	$	382	$	143	$	19	$	—	$	742
Collectively evaluated	739		2,631		556		52		107		4,085
Total ending allowance balance	$	937	$	3,013	$	699	$	71	$	107	$	4,827
Loans:
Individually evaluated for impairment	$	2,804	$	1,533	$	1,348	$	33	$	—	$	5,718
Collectively evaluated	42,122		177,234		70,615		5,909		—		295,880
Total ending loans balance	$	44,926	$	178,767	$	71,963	$	5,942	$	—	$	301,598

	(Dollars In Thousands)
	Commercial		Commercial Real Estate		Residential Real Estate		Consumer		Unallocated		Total
December 31, 2013
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	676	$	369	$	307	$	35	$	—	$	1,387
Collectively evaluated	744		1,710		396		51		365		3,266
Total ending allowance balance	$	1,420	$	2,079	$	703	$	86	$	365	$	4,653
Loans:
Individually evaluated for impairment	$	3,085	$	2,021	$	1,383	$	36	$	—	$	6,525
Collectively evaluated	42,169		168,006		72,657		5,711		—		288,543
Total ending loans balance	$	45,254	$	170,027	$	74,040	$	5,747	$	—	$	295,068

The following table presents information related to impaired loans by class of loans as of March 31, 2014 and December 31, 2013. In this table presentation the unpaid principal balance of the loans has not been reduced by partial net charge-offs. In this table presentation the recorded investment of the loans was reduced by partial net charge-offs.

13

	(Dollars in Thousands) March 31, 2014						(Dollars in Thousands) December 31, 2013
	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With no related allowance recorded:
Commercial	$	814	$	814	$	—	$	1,880	$	1,880	$	—
Commercial real estate:
Construction	—		—		—		—		—		—
Other	115		115		—		843		843		—
Residential real estate	994		994		—		337		337		—
Consumer:
Auto	—		—		—		1		1		—
Other	—		—		—		—		—		—
Subtotal	1,923		1,923		—		3,061		3,061		—
With an allowance recorded:
Commercial	1,990		1,990		198		1,205		1,205		676
Commercial real estate:
Construction	—		—		—		—		—		—
Other	1,418		1,418		382		1,178		1,178		369
Residential real estate	354		354		143		1,046		1,046		307
Consumer:
Auto	19		19		19		21		21		21
Other	14		14		—		14		14		14
Subtotal	3,795		3,795		742		3,464		3,464		1,387
Total	$	5,718	$	5,718	$	742	$	6,525	$	6,525	$	1,387

Information on impaired loans for the three months ending March 31, 2014 and 2013 is as follows:

	(Dollars in Thousands) March 31, 2014						(Dollars in Thousands) March 31, 2013
	Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized
Commercial	$	2,944	32		27		$	6,161	71		43
Commercial real estate:
Construction	—		—		—		—		—		—
Other	1,777		20		14		7,380		88		31
Residential real estate	1,366		18		10		399		3		1
Consumer:
Auto	20		—		—		31		1		—
Other	14		—		—		4		—		—
Total	$	6,121	$	70	$	51	$	13,975	$	163	$	75

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The recorded investment in nonaccrual and loans past due over 90 days still on accrual by class of loans as of March 31, 2014 and December 31, 2013 are summarized below:

	(Dollars in Thousands) As of March 31, 2014				(Dollars in Thousands) As of December 31, 2013
	Loans Past Due Over 90 Days and Still Accruing		Nonaccrual		Loans Past Due Over 90 Days and Still Accruing		Nonaccrual
Commercial	$	46	$	810	$	—	$	153
Commercial real estate:
Construction	—		—		—		—
Other	—		501		—		362
Residential real estate	10		589		—		643
Consumer:
Auto	—		19		—		22
Other	—		—		—		—
Total	$	56	$	1,919	$	—	$	1,180

Nonaccrual loans and loans past due 90 days still on accrual include individually classified impaired loans.

The following tables present the aging of the recorded investment in past due loans as of March 31, 2014 and December 31, 2013 by class of loans.  Non-accrual loans are included and have been categorized based on their payment status:

	(Dollars In Thousands)
	30-59 Days Past Due		60-89 Days Past Due		Over 90 Days Past Due		Total Past Due		Loans Not Past Due		Total
March 31, 2014
Commercial	$	110	$	670	$	47	$	827	$	44,099	$	44,926
Commercial real estate:
Construction	—		—		—		—		14,510		14,510
Other	—		143		304		447		163,810		164,257
Residential real estate	69		—		533		602		71,361		71,963
Consumer:
Auto	—		9		—		9		2,317		2,326
Other	—		1		—		1		3,615		3,616
Total	$	179	$	823	$	884	$	1,886	$	299,712	$	301,598

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	(Dollars In Thousands)
	30-59 Days Past Due		60-89 Days Past Due		Over 90 Days Past Due		Total Past Due		Loans Not Past Due		Total
December 31, 2013
Commercial	$	53	$	—	$	—	$	53	$	45,201	$	45,254
Commercial real estate:
Construction	—		—		—		—		15,052		15,052
Other	321		—		303		624		154,351		154,975
Residential real estate	98		66		574		738		73,302		74,040
Consumer:
Auto	6		1		—		7		2,537		2,544
Other	—		—		—		—		3,203		3,203
Total	$	478	$	67	$	877	$	1,422	$	293,646	$	295,068

Troubled Debt Restructurings:

The Company reported total troubled debt restructurings of $4.6 million and $5.5 million as of March 31, 2014 and December 31, 2013, respectively.  The Company has no commitments to lend additional amounts to customers with outstanding loans that are classified as troubled debt restructurings.  Troubled debt restructurings are included in impaired loans. Of the 15 troubled debt restructurings reported at quarter end, 12 loans totaling $3.7 million were accruing and 3 loans totaling $815,000 were on nonaccrual status.

During the quarter ending March 31, 2014, one additional loan totaling $15,000 was modified as a troubled debt restructuring. The modification of the terms of this loan included reducing the interest rate, granting an interest only payment period, and extending the amortization term.

The following table presents loans by class modified as troubled debt restructurings outstanding as of March 31, 2014:

		(Dollars in thousands)
	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings:
Commercial	7	$	3,347	$	3,347
Commercial real estate:
Other	3	1,137		1,137
Residential real estate	4	757		759
Consumer	1	16		15
Total	15	$	5,257	$	5,258

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The following table presents loans by class modified as troubled debt restructurings outstanding as of December 31, 2013:

		(Dollars in thousands)
	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings:
Commercial	10	$	2,716	$	2,716
Commercial real estate:
Other	1	604		604
Residential real estate	3	841		854
Consumer other	1	16		15
Total	15	$	4,177	$	4,189

The following table presents loans by class modified as troubled debt restructurings that occurred during the quarter ending March 31, 2014:

		(Dollars in thousands)
	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings:
Residential real estate	1	$	15	$	15
Total	1	$	15	$	15

The following table presents loans by class modified as troubled debt restructurings that occurred during the quarter ending March 31, 2013:

		(Dollars in thousands)
	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings:
Commercial	3	$	665	$	765
Residential real estate	1	110		123
Total	4	$	775	$	888

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Specific allocations of $362,000 and $1.1 million were reported for troubled debt restructurings as of March 31, 2014 and December 31, 2013.  No payment defaults were reported for troubled debt restructurings during the quarter ending March 31, 2014 or March 31, 2013. Specific allocations of $2.4 million were reported for the troubled debt restructurings as of March 31, 2013. No charge offs were taken on troubled debt restructurings during the first quarter of 2014. One previously reported troubled debt restructuring with a balance of $309,000 was charged off during the quarter ending March 31, 2013.

The terms of certain other loans were modified during the three months ending March 31, 2014 and 2013 that did not meet the definition of a troubled debt restructuring. These loans modified during the three months ending March 31, 2014 have a total recorded investment of $3.7 million as of March 31, 2014. These loans modified during the three months ending March 31, 2013 have a total recorded investment of $1.5 million as of March 31, 2013. The modification of these loans involved either a modification of the terms of a loan to borrowers who were not experiencing financial difficulties or a delay in a payment that was considered to be insignificant.

In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the Company’s internal underwriting policy.

Credit Quality Indicators:

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors.  The Company analyzes loans individually by classifying the loans as to credit risk.  This analysis includes commercial and commercial real estate loans with an outstanding balance greater than $25 thousand and is reviewed on a monthly basis. For residential real estate and consumer loans the analysis primarily involves monitoring the past due status of these loans and at such time that these loans are past due, the Company evaluates the loans to determine if a change in risk category is warranted. The Company uses the following definitions for risk ratings:

Special Mention.  Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

Substandard.  Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the

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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.  All loans in all loan categories are assigned risk ratings.  Based on the most recent analyses performed, the risk category of loans by class of loans is as follows:

	Pass		Special Mention		Substandard		Doubtful		Total
March 31, 2014
Commercial	$	40,668	$	77	$	4,181	$	—	$	44,926
Commercial real estate:
Construction	14,510		—		—		—		14,510
Other	156,606		—		7,651		—		164,257
Residential real estate	70,249		162		1,552		—		71,963
Consumer
Auto	2,326		—		—		—		2,326
Other	3,616		—		—		—		3,616
Total	$	287,975	$	239	$	13,384	$	—	$	301,598

	Pass		Special Mention		Substandard		Doubtful		Total
December 31, 2013
Commercial	$	41,968	$	77	$	3,209	$	—	$	45,254
Commercial real estate:
Construction	15,052		—		—		—		15,052
Other	147,429		—		7,546		—		154,975
Residential real estate	72,264		164		1,612		—		74,040
Consumer:
Auto	2,543		—		1		—		2,544
Other	3,203		—		—		—		3,203
Total	$	282,459	$	241	$	12,368	$	—	$	295,068

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Note 5 - Fair Value Measurements

Fair value is the exchange price that would be received to sell an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair values:

Level 1 — Quoted prices in active markets for identical assets or liabilities.

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, and other inputs that are observable or can be corroborated by observable market data.

Level 3 — Significant unobservable inputs that are supported by little or no market activity, reflect a company’s own assumptions about market participant assumptions of fair value, and are significant to the fair value of the assets or liabilities.

In determining the appropriate levels, the Company used the following methods and significant assumptions to estimate the fair value of each type of financial instrument:

Investment Securities: The fair value of securities available-for-sale are determined by obtaining quoted prices on nationally recognized securities exchanges (level 1 inputs) or matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (level 2 inputs).  The Company does not have any Level 1 securities.  Level 2 securities include certain U.S. agency bonds, collateralized mortgage and debt obligations, and certain municipal securities. The Company also has one Level 3 security. The fair value is this security is obtained directly from the broker which originally handled the security issue.

Impaired Loans: The fair value of impaired loans with specific allocations of the allowance for loan losses is generally based on recent real estate appraisals.  These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach.  Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available.  Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.

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Other Real Estate Owned: Commercial and residential real estate properties classified as other real estate owned (OREO) are measured at fair value, less costs to sell.  Fair values are based on recent real estate appraisals.  These appraisals may use a single valuation approach or a combination of approaches including comparable sales and the income approach.  Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available.  Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.

Appraisals for collateral-dependent impaired loans and real estate properties classified as other real estate owned are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by Bank management.  The appraisal values for collateral-dependent impaired loans are discounted to allow for selling expenses and fees, the limited use nature of various properties, the age of the most recent appraisal, and additional discretionary discounts for location, condition, etc. The Bank annually obtains an updated current appraisal value for each OREO property to certify that the fair value has not declined.  For each parcel of OREO that has declined in value, the Bank records the decline in value by a direct writedown of the asset.

Assets measured on a recurring basis:

	Fair Value Measurements at March 31, 2014 (Dollars in Thousands)
	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Securities available-for-sale
U. S. government agencies and government sponsored entities		$	6,851
State and municipal		21,018
Agency mortgage-backed securities -residential		24,406
Trust preferred security				1,400
Corporate bonds		1,000
Total investment securities	—	$	53,275	$	1,400

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	Fair Value Measurements at December 31, 2013 (Dollars in Thousands)
	Quoted Prices  in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Securities available-for-sale
U. S. government agencies and government sponsored entities		$	5,819
State and municipal		19,676
Agency mortgage-backed securities -residential		23,744
Trust preferred security		1,400
Corporate Bond		994
Total investment securities	—	$	51,633	—

The following transfers between Level 2 and Level 3 occurred during the first quarter of 2014.

	March 31, 2014
Transfer from Level 2 to Level 3:	$	1,400

Assets measured on a non-recurring basis:

	Fair Value Measurements (Dollars in Thousands)
	March 31, 2014 Significant Unobservable Inputs (Level 3)		December 31, 2013 Significant Unobservable Inputs (Level 3)
Impaired loans:
Commercial	$	16	$	530
Commercial RE	213		808
Residential	203		739
Other real estate owned:
Commercial RE	$	504	$	516
Residential	127		317

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Impaired loans which are measured for impairment using the fair value of collateral for collateral dependent loans, had a principal balance of $887,000 at March 31, 2014 with a valuation allowance of $455,000.  Impaired loans had a principal balance of $3.5 million at December 31, 2013, with a valuation allowance of $1.4 million.  An increase in the provision for loan losses of $64,000 was recognized for the three months ended March 31, 2014, as a result of net changes in fair values on collateral dependent loans and other factors affecting the provision for loan losses.

Other real estate owned, which is measured at fair value less costs to sell, had a net carrying value of $631,000 at March 31, 2014 and $833,000 at December 31, 2013.  Total writedowns of other real estate owned year to date March 31, 2014 and 2013, were $17,000 and $5,000 respectively.

The following table presents quantitative and qualitative information about Level 3 fair value measurements for financial instruments measured on a non-recurring basis at March 31, 2014.

	March 31, 2014		Valuation Techniques	Unobservable Inputs (Dollars in thousands)	Range (Weighted Avg)
Impaired loans:
Commercial	$	16	Market Approach	Discounts to allow for market value of assets	(50.00)%
Commercial RE	213		Sales Comparison	Adjustments for limited use nature of certain properties, age of appraisal, location, and/or condition	20%-50% (35.60%)
Residential	203		Sales Comparison	Adjustments for limited use nature of certain properties, age of appraisal, location, and/or condition	0%-10% (6.21%)
Other real estate owned:
Commercial RE	504		Sales Comparison	Adjustments for limited use nature of certain properties, age of appraisal, location, and/or condition	8%-55% (43.15%)
Residential	127		Sales Comparison	Adjustments for limited use nature of certain properties, age of appraisal, location, and/or condition	6%-33% (10.10%)

The following table presents quantitative and qualitative information about Level 3 fair value measurements for financial instruments measured on a non-recurring basis at December 31, 2013.

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	December 31, 2013		Valuation Techniques	Unobservable Inputs (Dollars in thousands)	Range (Weighted Avg)
Impaired loans:
Commercial	$	530	Market Approach	Discounts to allow for market value of assets	0%-50% (39.42%)
Commercial RE	808		Sales Comparison	Adjustments for limited use nature of certain properties, age of appraisal, location, and/or condition	20%-50% (24.92%)
Residential	739		Sales Comparison	Adjustments for limited use nature of certain properties, age of appraisal, location, and/or condition	0%-20% (18.43%)
Other real estate owned:
Residential	317		Sales Comparison	Adjustments for limited use nature of certain properties, age of appraisal, location, and/or condition	6%-42.3% (21.47%)
Commercial RE	516		Sales Comparison	Adjustments for limited use nature of certain properties, age of appraisal, location, and/or condition	7.9%-54.5% (42.93%)

Carrying amount and estimated fair values of financial instruments, not previously presented, were as follows:

	Carrying		Fair Value Measurements at March 31, 2014
	Amount		Level 1		Level 2	Level 3	Total
Financial Assets
Cash and cash equivalents	$	38,261	$	38,261			$	38,261
Loans held for sale	85				88		88
Loans, net of allowance	296,339					303,672	303,672
Accrued interest receivable	1,444				279	1,165	1,444
Federal Home Loan Bank stock	2,025						N/A
Financial Liabilities
Demand and savings deposits	$	187,783	$	151,558			$	151,558
Time deposits	164,414				165,312		165,312
FHLB advances	22,000				21,839		21,839
Subordinate debentures	5,000					2,836	2,836
Accrued interest payable	241		11		230		241

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	Carrying		Fair Value Measurements at December 31, 2013
	Amount		Level 1		Level 2	Level 3	Total
Financial Assets
Cash and cash equivalents	$	37,062	$	37,062			$	37,062
Loans, net of allowance	288,338					295,850	295,850
Accrued interest receivable	1,554				274	1,280	1,554
Federal Home Loan Bank stock	2,025						N/A
Financial Liabilities
Demand and savings deposits	$	183,569	$	144,220			$	144,220
Time deposits	159,382				160,284		160,284
FHLB advances	22,000				21,794		21,794
Subordinate debentures	5,000					2,836	2,836
Accrued interest payable	243		15		228		243

The methods and assumptions used to estimate fair value are described as follows:

(a)Cash and Cash Equivalents: The carrying amounts of cash and short-term instruments approximate fair values and are classified as Level 1.

(b)FHLB Stock: It is not practical to determine the fair value of FHLB stock due to restrictions placed on its transferability.

(c)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 do not necessarily represent an exit price. The fair value of loans held for sale is estimated based upon binding contracts and quotes from third party investors resulting in a Level 2 classification.

(d)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 money market accounts and certificates of deposit approximate their fair values at the reporting date resulting in a Level 2 classification. Fair values for fixed rate certificates of deposit are estimated using

25

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.

(e)FHLB Advances/ Subordinated Debentures: The fair values of the Company’s long-term 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.

(f)Accrued Interest Receivable/Payable: The carrying amounts of accrued interest approximate fair value resulting in a Level 1 or Level 2 classification consistent with the asset/liability they are associated with.

Note 6 - Earnings Per Share

Basic earnings per share have been computed by dividing net income available for common shareholders by the weighted-average number of common shares outstanding for the period.  Diluted earnings per share have been computed the same as basic earnings per share, and assumes the conversion of outstanding stock options, convertible preferred stock and warrants, if dilutive.  The following table reconciles the basic and diluted earnings per share computations for the quarters ending March 31, 2014 and 2013.

	Quarter ended March 31, 2014						Quarter ended March 31, 2013
	Income			Weighted Average Shares	Per Share Amount		Income/ (Loss)			Weighted- Average Shares	Per Share Amount
Basic earnings (loss) per share:
Net income	$	691					$	115
Less: Dividends and accretion on preferred stock	(132		)				(217		)
Net income (loss) available to common shareholders	$	559		1,968,777	$	0.28	$	(102	)	1,968,777	$	(0.05	)
Effect of dilutive securities
Convertible preferred stock	—			—			—			—
Stock options	—			—			—			—
Warrants	—			121,203			—			112,316
Diluted earnings (loss) per share
Net income (loss) available to common shareholders and assumed conversions	$	559		2,089,980	$	0.27	$	(102	)	2,081,093	$	(0.05	)

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Stock options for 72,931 and 85,980 shares of common stock were not considered in computing diluted earnings per common share for March 31, 2014 and 2013, respectively, because they are anti-dilutive.  Convertible preferred shares are not included because they are anti-dilutive as of March 31, 2014 and 2013.  Common stock warrants totaled 254,218 as of March 31, 2014 and 2013.

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

Management’s discussion and analysis of Citizens First Corporation (the “Company”) is included to provide the shareholders with an expanded narrative of our results of operations, changes in financial condition, liquidity and capital adequacy.  This narrative should be reviewed in conjunction with our consolidated financial statements and notes thereto included in our 2013 Annual Report on Form 10-K filed with the Securities and Exchange Commission.

Forward-Looking Statements

We may from time to time make written or oral statements, including statements contained in this report, which may constitute forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”).  The words “may”, “expect”, “anticipate”, “intend”, “consider”, “plan”, “believe”, “seek”, “should”, “estimate”, and similar expressions are intended to identify such forward-looking statements, but other statements may constitute forward-looking statements.  These statements should be considered subject to various risks and uncertainties.  Such forward-looking statements are made based upon management’s belief as well as assumptions made by, and information currently available to, management pursuant to “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.  Our actual results may differ materially from the results anticipated in forward-looking statements due to a variety of factors.  Among the risks and uncertainties that could cause actual results to differ materially are current and future economic conditions generally and in our market areas, changes in the interest rate environment, overall loan demand, increased competition in the financial services industry which could negatively impact our ability to increase total earning assets, and retention of key personnel.  Actions by the Department of the Treasury and federal and state bank regulators in response to changing economic conditions, changes in interest rates, loan prepayments by and the financial health of our borrowers, and other factors described in the reports filed by us with the Securities and Exchange Commission could also impact current expectations.

Results of Operations

For the quarter ended March 31, 2014, we reported net income of $691,000 compared to net income of $115,000 in the first quarter of 2013, an increase of $576,000.  Net income available to common shareholders was $559,000 or, $0.27 per diluted common share this quarter, compared to net loss available to common shareholders of $102,000 or, $0.05 per diluted common share for the first quarter of 2013.  The provision expense was higher in the first quarter of 2013 as a result of an increase in non-performing assets in that period.

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Our annualized return on average assets was 0.68% for the three months ended March 31, 2014, compared to 0.11% in March 31, 2013.  Our annualized return on average equity was 7.74% for the three months ending March 31, 2014, compared to 1.16% for the three months ending March 31, 2013.

Net Interest Income

Net interest income, our principal source of earnings, is the difference between the interest income generated by earning assets, such as loans and securities, and the total interest cost of the deposits and borrowings obtained to fund these assets.  Factors that influence the level of net interest income include the volume of earning assets and interest bearing liabilities, yields earned and rates paid, the level of non-performing loans and non-earning assets, and the amount of non-interest bearing deposits supporting earning assets.

Net interest income for the quarter ended March 31, 2014 decreased $168,000, or 4.6%, compared to March 31, 2013. The decrease in net interest income was impacted by a reduction in interest expense of $79,000 combined with a decrease in interest income of $247,000. The decrease in interest income was created by a decrease in loan income for the quarter.

The net interest margin for the three months ended March 31, 2014 was 3.81%, compared to 3.96% in 2013.  This decrease of 15 basis points is attributable primarily to a decline in the yield on loans from 5.50% in the first quarter of 2013 to 5.14% in the first quarter of 2014. Loan yields have declined as maturing loans were repriced at a lower rate, as well as increased competition for new loans that has resulted in lower rates.

The following tables set forth for the three months ended March 31, 2014 and 2013, information regarding average balances of assets and liabilities as well as the total dollar amounts of interest income from average interest-earning assets and interest expense on average interest-bearing liabilities and average yields and costs.  Such yields and costs for the periods indicated are derived by dividing income or expense by the average balances of assets or liabilities, respectively, for the periods presented.

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Average Consolidated Balance Sheets and Net Interest Analysis (Dollars in thousands)

	2014						2013
Quarter ended March 31,	Average Balance		Income/ Expense		Average Rate		Average Balance		Income/ Expense		Average Rate
Earning assets:
Federal funds sold	$	23,748	12		0.20	%	$	30,694	$	15	0.20	%
Available-for-sale securities (1)
Taxable	32,388		141		1.77	%	28,466		96		1.37	%
Nontaxable (1)	19,886		249		5.08	%	19,532		257		5.34	%
Federal Home Loan Bank stock	2,025		20		4.01	%	2,025		22		4.41	%
Loans receivable (2)	303,438		3,844		5.14	%	303,942		4,125		5.50	%
Total interest earning assets	381,485		4,266		4.54	%	384,659		4,515		4.76	%
Non-interest earning assets	32,604						33,145
Total Assets	$	414,089					$	417,804
Interest-bearing liabilities:
NOW accounts	$	105,445	110		0.42	%	$	76,559	$	69	0.37	%
Money market accounts	23,910		21		0.36	%	22,820		21		0.37	%
Savings accounts	16,740		10		0.24	%	15,656		9		0.23	%
Time deposits	159,144		402		1.02	%	184,757		529		1.16	%
Total interest-bearing deposits	305,239		543		0.72	%	299,792		628		0.85	%
Borrowings	24,787		117		1.91	%	27,760		110		1.61	%
Subordinated debentures	5,000		23		1.87	%	5,000		24		1.95	%
Total interest-bearing liabilities	335,026		683		0.83	%	332,552		762		0.93	%
Non-interest bearing deposits	40,849						42,682
Other liabilities	2,001						2,406
Total liabilities	377,876						377,640
Stockholders’ equity	36,213						40,164
Total Liabilities and Stockholders’ Equity	$	414,089					$	417,804
Net interest income			$	3,583					$	3,753
Net interest spread (1)					3.71	%					3.83	%
Net interest margin (1) (3)					3.81	%					3.96	%
Return on average assets ratio					0.68	%					0.11	%
Return on average equity ratio					7.74	%					1.16	%
Average equity to assets ratio					8.75	%					9.61	%

(1)  Income and yield stated at a tax equivalent basis for nontaxable securities using the marginal corporate Federal tax rate of 34.0%

(2)  Average loans include non-performing loans.  Interest income includes interest and fees on loans, but does not include interest on loans on non-accrual.

(3)  Net interest income as a percentage of average interest-earning assets.

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Rate/Volume Analysis

The following table sets forth the effects of changing rates and volumes on our net interest income for the quarter ended March 31, 2014 and 2013.  Information is provided with respect to (1) effects on interest income attributable to changes in volume (changes in volume multiplied by prior rate) and (2) effects on interest income attributable to changes in rate (changes in rate multiplied by prior volume).  Changes attributable to the combined input of volume and rate have been allocated proportionately to the changes due to volume and the changes due to rate.

	(Dollars in Thousands)
	Three Months Ended March 31,
	2014 Vs. 2013
	Increase (Decrease) Due to
	Rate			Volume			Net
Interest-earning assets:
Federal funds sold	$	—		$	(3	)	$	(3	)
Available-for-sale securities:
Taxable	32			13			45
Nontaxable (1)	(13		)	5			(8		)
FHLB stock	(2		)	—			(2		)
Loans, net	(274		)	(7		)	(281		)
Total net change in income on interest-earning assets	(257		)	8			(249		)
Interest-bearing liabilities:
NOW accounts	15			26			41
Money market accounts	(1		)	1			—
Savings accounts	—			1			1
Time deposits	(54		)	(73		)	(127		)
FHLB and other borrowings	19			(12		)	7
Subordinated debentures	(1		)	—			(1		)
Total net change in expense on interest-bearing liabilities	(22		)	(57		)	(79		)
Net change in net interest income	$	(235	)	$	65		$	(170	)
Percentage change	138.24		%	(38.24		)%	100.0		%

(1) Income stated at a fully tax equivalent basis using the marginal corporate Federal tax rate of 34.0%.

Provision for Loan Losses

A $125,000 provision for loan losses was recorded for the first quarter of 2014, a decrease of $1.1 million, from $1.3 million in the first quarter of 2013.  The allowance for loan losses to total loans decreased from 2.21% of total loans at March 31, 2013 to 1.60% at March 31, 2014, primarily due to charge-offs of specific allocations which were included in the allowance at March 31, 2013.  Net charge-offs (recoveries) were $(49,000) for the first quarter of 2014 compared to $321,000 in the first quarter of 2013.

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Non-Interest Income

Non-interest income for the three months ended March 31, 2014 decreased $90,000, or 12.5%, compared to the three months ended March 31, 2013, primarily due to a decline in gains on sale of mortgage loans of $58,000 from the prior year.

Non-Interest Expense

Non-interest expense for the three months ended March 31, 2014 decreased $20,000, or 0.6%, compared to the three months ended March 31, 2013, due to a decrease in legal and collection expenses.

Income Taxes

Income tax expense was calculated using our expected effective rate for 2014 and 2013.  We have recognized deferred tax liabilities and assets to show the tax effects of differences between the financial statement and tax bases of assets and liabilities.  Our statutory federal tax rate was 34.0% in both 2014 and 2013. The effective tax rate for the first quarter of 2014 was 26.5% compared to a negative effective tax rate for 2013. Tax-exempt income exceeded income before taxes in 2013 which ultimately resulted in a negative effective tax rate for the quarter. The difference between the statutory and effective rates are impacted by such factors as income from tax-exempt loans, tax-exempt income on state and municipal securities, and income on bank owned life insurance.

Balance Sheet Review

Overview

Total assets at March 31, 2014 were $420.1 million, an increase of $9.9 million from $410.2 million at December 31, 2013.  Average assets during the first quarter were $414.1 million, a decrease of 0.9%, or $3.7 million, from $417.8 million in the first quarter of 2013.  Average interest earning assets decreased 0.8%, or $3.1 million, from $384.6 million in the first quarter of 2013 to $381.5 million in the first quarter of 2014.

Loans

Loans increased $6.5 million, or 2.2%, from $295.1 million at December 31, 2013 to $301.6 million at March 31, 2014.  Total loans averaged $303.4 million the first quarter of 2014, compared to $303.9 million the first quarter of 2013, an increase of $0.5 million, or 0.2%.  We experienced increases in commercial real estate loans during the first three months of the year compared to 2013.  The following table presents a summary of the loan portfolio by category:

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	(Dollars in Thousands)
	March 31, 2014				December 31, 2013
			% of Total Loans				% of Total Loans
Commercial and agricultural	$	44,926	14.90	%	$	45,254	15.34	%
Commercial real estate	178,767		59.27	%	170,027		57.62	%
Residential real estate	71,963		23.86	%	74,040		25.09	%
Consumer	5,942		1.97	%	5,747		1.95	%
	$	301,598	100.00	%	$	295,068	100.00	%

The majority of our loans are to customers located in south central Kentucky and central Tennessee.  As of March 31, 2014, our twenty largest credit relationships consisted of loans and loan commitments ranging from $3.8 million to $10.1 million.  The aggregate amount of these credit relationships was $97.6 million.

Our lending activities are subject to a variety of lending limits imposed by state and federal law.  Citizens First Bank’s secured legal lending limit to a single borrower was approximately $12.5 million at March 31, 2014.

As of March 31, 2014, we had $15.5 million of participations in loans purchased from, and $8.8 million of participations in loans sold to, other banks.

The following table sets forth the maturity distribution of the loan portfolio as of March 31, 2014.  Maturities are based on contractual terms.  Our policy is to specifically review and approve all loans renewed; loans are not automatically rolled over.

	(Dollars in Thousands)
Loan Maturities as of March 31, 2014	Within One Year		After One but Within Five Years		After Five Years		Total
Commercial and agricultural	$	15,661	$	25,526	$	3,739	$	44,926
Commercial real estate	28,440		95,887		54,440		178,767
Residential real estate	5,915		29,020		37,028		71,963
Consumer	1,817		4,053		72		5,942
Total	$	51,833	$	154,486	$	95,279	$	301,598

Credit Quality and the Allowance for Loan Losses

The allowance for loan losses represents management’s estimate of probable credit losses incurred in the loan portfolio. Determining the amount of the allowance for loan losses is considered a critical accounting estimate because it requires significant judgment and the use of estimates related to the amount and timing of expected future

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cash flows on impaired loans, estimated losses on loans based on historical loss experience, and consideration of current economic trends and conditions, all of which may be susceptible to significant change.

The allowance for loans losses at March 31, 2014 was $4.8 million, or 1.60% of total loans, compared to $4.7 million, or 1.58% of total loans as of December 31, 2013. The allowance increased slightly due to a growth in loans during the first quarter of 2014.

The following table sets forth an analysis of our allowance for loan losses for the quarter ended March 31, 2014 and 2013.

	(Dollars in Thousands)
	March 31,
	2014			2013
Balance at beginning of period	$	4,653		$	5,721
Provision for loan losses	125			1,250
Amounts charged off:
Commercial	—			333
Commercial real estate	—			14
Residential real estate	19			—
Consumer	3			11
Total loans charged off	22			358
Recoveries of amounts previously charged off:
Commercial	17			—
Commercial real estate	47			28
Residential real estate	6			7
Consumer	1			2
Total recoveries	71			37
Net charge-offs (recoveries)	(49		)	321
Balance at end of period	$	4,827		$	6,650
Total loans, net of unearned income:
YTD Average	$	303,438		$	303,942
At March 31	$	301,598		$	301,111
As a percentage of YTD average loans:
Net charge-offs (recoveries), annualized	(0.06		)%	0.42		%
Provision for loan losses, annualized	0.16		%	1.65		%

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The following table sets forth selected asset quality measurements and ratios for the periods indicated:

	(Dollars in Thousands)
	March 31, 2014			December 31, 2013
Non-accrual loans	$	1,104		$	1,026
Loans 90+ days past due/accruing	56			—
Restructured loans	815			154
Total non-performing loans	1,975			1,180
Other real estate owned	631			833
Total non-performing assets	$	2,606		2,013
Allowance for loan losses	$	4,827		$	4,653
Non-performing assets to total assets	0.62		%	0.49		%
Net charge-offs YTD to average YTD total loans, annualized	(0.06		)%	1.22		%
Allowance for loan losses to non-performing loans	244.41		%	394.3		%
Allowance for loan losses to total loans	1.60		%	1.58		%

Non-performing assets totaled $2.6 million at March 31, 2014 compared to $2.0 million at December 31, 2013, an increase of $600,000. Payoffs and paydowns of $339,000 included two other real estate owned properties sold for $185,000 and the payoff of one residential real estate loan of $83,000, but were offset by the addition of $143,000 in commercial real estate loans, $717,000 in commercial loans, and $73,000 in residential real estate loans.

Non-performing loans are defined as non-accrual loans and loans accruing but past due 90 days or more. Non-performing assets are defined as non-performing loans, other real estate owned, and repossessed assets. Management classifies commercial and commercial real estate loans as non-accrual when principal or interest is past due 90 days or more and the loan is not adequately collateralized, or earlier when, in the opinion of management, principal or interest is not likely to be paid in accordance with the terms of the obligation. We charge off consumer loans after 120 days of delinquency unless they are adequately secured and in the process of collection. Non-accrual loans are not reclassified as accruing until principal and interest payments are brought current and future payments appear reasonably certain.

Troubled debt restructurings (TDRs) are modified loans in which a concession is provided to a borrower experiencing financial difficulties. Loan modifications are considered TDRs when the concession provided is not available to the borrower through either normal channels or other sources. However, not all loan modifications are TDRs. Our standards relating to loan modifications consider, among other factors, minimum verified income requirements, cash flow analysis, and collateral valuations. However, each potential loan modification is reviewed individually and the terms of the loan are modified to meet a borrower’s specific circumstances at a point in time.TDRs can be classified as either accrual or nonaccrual loans. Non-accrual TDRs are included in non-accrual loans whereas accruing TDRs are excluded because the borrower remains contractually current.

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Loans that exhibit probable or observed credit weaknesses are subject to individual review. Where appropriate, allocations for individual loans are included in the allowance calculation based on management’s estimate of the borrower’s ability to repay the loan given the availability of collateral, other sources of cash flow and legal options available to us.  Included in the review of individual loans are those that are impaired as provided in ASC Topic 310 “Receivables”. We evaluate the collectability of both principal and interest when assessing the need for a loss accrual.  Historical loss rates are applied to other loans not subject to individual allocations.  These historical loss rates may be adjusted for significant factors that, in management’s judgment, reflect the impact of any current conditions on loss recognition.  Factors which management considers in the analysis include the effects of the national and local economies, trends in the nature and volume of loans (delinquencies, charge-offs and non-accrual loans), changes in mix, asset quality trends, risk management and loan administration, changes in internal lending policies and credit standards, and examination results from bank regulatory agencies and our internal credit examiners.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement.  Factors considered by management in determining impairment include payment status and the probability of collecting scheduled principal and interest payments when due.  Loans for which the terms have been modified resulting in a concession, and for which the borrower is experiencing financial difficulties, are considered troubled debt restructurings and classified as impaired.  Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired.  Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed.  Impairment is measured on a loan-by-loan basis for all loan classes by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price or the fair value of the collateral if the loan is collateral dependent.

The following table presents impaired loans and the related allowance for loan losses attributable to loans evaluated for impairment by portfolio segment for the periods indicated.

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	(Dollars in Thousands)
	March 31, 2014				December 31, 2013
	Loans		Allowance for Loan Losses		Loans		Allowance  for Loan Losses
Commercial and agriculture	$	2,804	$	198	$	3,086	$	676
Commercial real estate	1,533		382		2,021		369
Residential real estate	1,348		143		1,383		307
Consumer and other	33		19		36		35
Impaired Loans	5,718		742		6,525		1,387
Loans collectively evaluated for impairment	295,880		4,085		288,543		3,266
Total	301,598		$	4,827	295,068		$	4,653

The decrease in impaired loans during the period is primarily attributed to a $598,000 commercial real estate loan and a $238,000 commercial loan that are no longer being evaluated for impairment, along with the payoff of an $83,000 residential real estate loan, that are offset by the addition of $143,000 in commercial real estate loans, $47,000 in commercial loans, and $63,000 in residential real estate loans that are now evaluated for impairment as of March 31, 2014.

Summary of Allowance for Loan Losses

The following table sets forth the breakdown of the allowance for loan losses by loan category at the dates indicated.  This allocation is not intended to suggest how actual losses may occur.

	(Dollars in Thousands)
	March 31, 2014				December 31, 2013
	Amount		% of Loans in Each Category to Total Loans		Amount		% of Loans in Each Category to Total Loans
Commercial and agricultural	$	937	14.90	%	$	1,420	15.34	%
Commercial real estate	3,013		59.27	%	2,079		57.62	%
Residential real estate	699		23.86	%	703		25.09	%
Consumer and other	71		1.97	%	86		1.95	%
Unallocated	107		0.00	%	365		0.00	%
Total allowance for loan losses	$	4,827	100.00	%	$	4,653	100.00	%

We maintain a modest unallocated amount in the allowance to recognize the imprecision in estimating and measuring losses when evaluating allocations for individual loans or pools of loans.  Allocations on individual loans and historical loss rates are reviewed quarterly and adjusted as necessary based on changing borrower and/or collateral conditions and actual collection and charge-off experience. The

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unallocated portion of the allowance decreased from $365,000 at December 31, 2013 to $107,000 at March 31, 2014 due to changes in qualitative factors assigned to specific pools of loans based on the unique risk factors of these pools.

We believe that the allowance for loan losses of $4.8 million at March 31, 2014 is adequate to absorb probable incurred credit losses in the loan portfolio as of that date.  That determination is based on the best information available to management, but necessarily involves uncertainties and matters of judgment and, therefore, cannot be determined with precision and could be susceptible to significant change in the future.  In addition, bank regulatory authorities, as a part of their periodic examinations, may reach different conclusions about the quality of our loan portfolio and the level of the allowance, which could require us to make additional provisions in the future.

Securities

The investment securities portfolio is comprised of U.S. Government agency and government sponsored entity securities, agency mortgage-backed securities, tax-exempt securities of states and political subdivisions, a corporate bond and a trust preferred security. The purchase of nontaxable obligations of states and political subdivisions is a part of managing our effective tax rate. Securities are all classified as available-for-sale, and averaged $52.3 million for the first quarter of 2014, compared to $48.0 million for 2013. The table below presents the carrying value of securities by major category.

	(Dollars in Thousands)
	March 31, 2014		December 31, 2013
U.S. Government agencies and government sponsored entities	$	6,851	$	5,819
Municipal securities	21,018		19,676
Agency mortgage-backed securities-residential	24,406		23,744
Trust preferred security	1,400		1,400
Corporate bond	1,000		994
Total available-for-sale securities	$	54,675	$	51,633

The table below presents the maturities and yield characteristics of securities as of March 31, 2014.  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.

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	(Dollars in Thousands)
	One Year or Less			Over One Year Through Five Years			Over Five Years Through Ten Years			Over Ten Years			Total Maturities			Fair Value
March 31, 2014
U.S. Government agencies and government sponsored entities	$	—		$	3,991		$	3,000		$	—		$	6,991		$	6,851
Municipal securities	255			3,979			9,582			6,759			20,575			21,018
Agency mortgage-backed securities: (1)	181			19,741			4,360			—			24,282			24,406
Trust preferred security	—			—			—			1,872			1,872			1,400
Corporate bond	—			—			1,000			—			1,000			1,000
Total available-for-sale securities	$	436		$	27,711		$	17,942		$	8,631		$	54,720		$	54,675
Percent of total	0.8		%	50.6		%	32.8		%	15.8		%	100.0		%
Weighted average yield(2)	3.80		%	2.46		%	3.27		%	4.25		%	3.03		%

(1)Agency mortgage-backed securities (residential) are grouped into average lives based on March 2014 prepayment projections.

(2)The weighted average yields are based on amortized cost and municipal securities are calculated on a full tax- equivalent basis.

Other securities consist of one single issue trust preferred security which has experienced a decline in fair value due to inactivity in the market. No impairment charge is being taken as no loss of principal is anticipated and all principal and interest payments are being received as scheduled. All rated securities are investment grade.  For those that are not rated, the financial condition has been evaluated and no adverse conditions were identified related to repayment. Declines in fair value are a function of rate changes in the market and market illiquidity. The Company does not intend to sell these securities and does not believe it will be required to sell these securities.

Deposits

Our primary funding source for lending and investment activities results from customer deposits and a deposit listing service.  Deposits at March 31, 2014 were $352.2 million, an increase of $9.2 million, or 2.7%, compared to $343.0 million at December 31, 2013.  Total deposits averaged $346.1 million the first quarter of 2014, an increase of $3.6 million, or 1.1%, compared to $342.5 million during the first quarter of 2013.  Average deposits increased during the year, but the cost of funds declined as higher cost deposits matured and were renewed at lower rates.

Time deposits of $100,000 or more totaled $65.0 million at March 31, 2014, compared to $56.8 million at December 31, 2013.  Interest expense on time deposits of $100,000 or more was $159,000 for the first quarter of 2014, compared to $203,000 for the first quarter of 2013.  Our cost has decreased as these certificates of deposit matured and were renewed at lower current market rates.  The following table shows the maturities of time deposits as of March 31, 2014.

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	(Dollars in Thousands)
	March 31, 2014
Three months or less	$	15,531
Over three through six months	17,288
Over six through twelve months	52,724
Over one year through three years	60,350
Over three years through five years	255
Over five years	18,266
Total	$	164,414

Borrowings

FHLB Advances. We obtain advances from the Federal Home Bank of Cincinnati (FHLB) for funding and liability management.  These advances are collateralized by a blanket agreement of eligible 1-4 family residential mortgage loans and eligible commercial real estate.  Rates vary based on the term to repayment, and are summarized below as of March 31, 2014:

				(Dollars in Thousands)
Type	Maturity	Rate		Amount
Fixed	December 10, 2014	1.73	%	2,000
Fixed	December 24, 2014	3.46	%	2,000
Fixed	February 25, 2015	2.85	%	2,000
Fixed	May 22, 2015	0.73	%	3,000
Fixed	December 2, 2015	1.14	%	5,000
Fixed	May 25, 2016	0.99	%	3,000
Fixed	June 3, 2016	0.68	%	2,000
Fixed	May 24, 2019	1.72	%	3,000
				$	22,000

At March 31, 2014, we had available collateral to borrow an additional $36.5 million from the FHLB.

Other Borrowings.

In 2013, we renewed a credit agreement with a community bank to be used for operating capital and general corporate purposes.  The line has a total availability of $5.0 million, matures November 26, 2014, and bears interest at the prime rate as published in the Money Rates section of The Wall Street Journal, plus 0.5%, with interest payable monthly.  The loan is secured by the Bank’s common stock.  As of March 31, 2014, the line had a balance of $3.3 million.

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At March 31, 2014, we had established Federal Funds lines of credit totaling $18.8 million with three correspondent banks.  No amounts were drawn as of March 31, 2014.

We issued $5.0 million in subordinated debentures in October, 2006.  These trust preferred securities bear an interest rate, which reprices each calendar quarter, of 165 basis points over 3-month LIBOR (London Inter Bank Offering Rate).  The rate as of March 31, 2014 was 1.88%.  The subordinated debentures may be included with tier 1 capital (with certain limitations) under current regulatory guidelines.

Liquidity

Our objective for liquidity management is to ensure that we have funds available to meet deposit withdrawals and credit demands without unduly penalizing profitability.  In order to maintain a proper level of liquidity, the Bank has several sources of funds available on a daily basis that can be used for liquidity purposes.  Those sources of funds include the Bank’s core deposits, cash flow generated by repayment of principal and interest on loans and investment securities; FHLB borrowings; and federal funds purchased and securities sold under agreements to repurchase.  While maturities and scheduled amortization of loans and investment securities are generally a predictable source of funds, deposit outflows and mortgage prepayments are influenced significantly by general interest rates, economic conditions, and competition in our local markets.

Our asset and liability management committee meets monthly and monitors the composition of the balance sheet to ensure comprehensive management of interest rate risk and liquidity.  We prepare a monthly cash flow report which forecasts funding needs and availability for the coming months, based on forecasts of loan closings and payoffs, potentially callable securities, and other factors.

Capital

At March 31, 2014, total shareholders’ equity was $35.9 million compared to $38.3 million at December 31, 2013, a decrease of $2.4 million.  During the first quarter of 2014, the Company paid $3.3 million to repurchase the remaining 93 shares of the Series A preferred stock that the Company had issued to the Treasury in 2008 under the TARP Capital Purchase Program.  No common dividends have been paid during 2014.

We are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary, actions by regulators that, if undertaken could have a material effect on our financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, we must meet specific capital guidelines that involve quantitative measures of our assets, liabilities and certain off-balance sheet items as calculated under the regulatory accounting practices. Our capital amounts and classification are also subject to

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qualitative judgments by the regulators about components, risk weightings and other factors.

Under quantitative measures established by regulation to ensure capital adequacy, we are required to maintain minimum amounts and ratios of total Tier 1 capital to risk-weighted assets and to total assets.  We believe we met all capital adequacy requirements as of March 31, 2014 and December 31, 2013.

Our capital ratios (calculated in accordance with regulatory guidelines) were as follows:

	March 31, 2014		December 31, 2013
Tier 1 leverage ratio	8.86	%	9.57	%
Regulatory minimum	4.00	%	4.00	%
“Well-capitalized” minimum	N/A		N/A
Tier 1 risk-based capital ratio	11.48	%	12.56	%
Regulatory minimum	4.00	%	4.00	%
“Well-capitalized” minimum	N/A		N/A
Total risk-based capital ratio	12.73	%	13.81	%
Regulatory minimum	8.00	%	8.00	%
“Well-capitalized” minimum	N/A		N/A

The Bank’s capital ratios (calculated in accordance with regulatory guidelines) were as follows:

	March 31, 2014		December 31, 2013
Tier 1 leverage ratio	9.65	%	9.62	%
Regulatory minimum	4.00	%	4.00	%
“Well-capitalized” minimum	5.00	%	5.00	%
Tier 1 risk-based capital ratio	12.51	%	12.58	%
Regulatory minimum	4.00	%	4.00	%
“Well-capitalized” minimum	6.00	%	6.00	%
Total risk-based capital ratio	13.76	%	13.83	%
Regulatory minimum	8.00	%	8.00	%
“Well-capitalized” minimum	10.00	%	10.00	%

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ITEM 3.  Quantitative and Qualitative Disclosures about Market Risk

We use a simulation model as a tool to monitor and evaluate interest rate risk exposure.  The model is designed to measure the sensitivity of net interest income and net income to changing interest rates over future time periods.  Forecasting net interest income and its sensitivity to changes in interest rates requires us to make assumptions about the volume and characteristics of many attributes, including assumptions relating to the replacement of maturing earning assets and liabilities.  Other assumptions include, but are not limited to, projected prepayments, projected new volume, and the predicted relationship between changes in market interest rates and changes in customer account balances.  These effects are combined with our estimate of the most likely rate environment to produce a forecast of net interest income and net income.  The forecasted results are then adjusted for the effect of a gradual increase and decrease in market interest rates on our net interest income and net income.  Because assumptions are inherently uncertain, the model cannot precisely estimate net interest income or net income or the effect of interest rate changes on net interest income and net income.  Actual results could differ significantly from simulated results.

At March 31, 2014, the model indicated that if rates were to increase by 200 basis points during the remainder of the calendar year, then net interest income would increase 11.51% over the next twelve months.  The model indicated that if rates were to decrease by 200 basis points over the same period, then net interest income would decrease 1.56%.  The table below notes the projected changes in net interest income as indicated by the model for increases in rates up to 400 basis points and decreases in rates to 200 basis points.

Projections for: April 2014 - March 2015

Projected Interest Rate Change	Estimated Value	Net Interest Income $ Change From Base	% Change From Base
+400	18,653,434	4,022,195	27.49	%
+300	17,476,849	2,845,609	19.45	%
+200	16,314,898	1,683,659	11.51	%
Base	14,631,239	0	0.00	%
-200	14,402,657	-228,582	-1.56	%

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Item 4.  Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer have reviewed and evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report, and have concluded that our disclosure controls and procedures were adequate and effective in all material respects to ensure that all material information required to be disclosed in this report has been made known to them in a timely fashion.

There was no change in our internal controls over financial reporting that occurred during the relevant period that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting, subsequent to the date of the Chief Executive Officer’s and Chief Financial Officer’s evaluation, nor were there any significant deficiencies or material weaknesses in the controls which required corrective action.

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PART II-OTHER INFORMATION

Item 6. Exhibits

EXHIBIT INDEX

3.1Restated Articles of Incorporation of Citizens First Corporation, as amended (incorporated by reference to Exhibit 3.1 of the Company’s Registration Statement on Form SB-2 (No. 333-103238)).

3.2Articles of Amendment to Amended and Restated Articles of Incorporation of Citizens First Corporation (incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K dated June 5, 2007).

3.3Articles of Amendment to Amended and Restated Articles of Incorporation of Citizens First Corporation (incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K filed December 23, 2008).

3.4Amended and Restated Bylaws of Citizens First Corporation (incorporated by reference to Exhibit 3 of the Registrant’s Current Report on Form 8-K filed April 17, 2014).

4.1Restated Articles of Incorporation of Citizens First Corporation, as amended (see Exhibit 3.1).

4.2Articles of Amendment to Amended and Restated Articles of Incorporation of Citizens First Corporation (see Exhibits 3.2 and 3.3).

4.3Amended and Restated Bylaws of Citizens First Corporation (see Exhibit 3.4).

4.4Copy of Registrants’ Agreement Pursuant to Item 601(b) (4) (iii) (A) of Regulation S-K dated March 30, 2007 with respect to certain debt instruments (incorporated by reference to Exhibit 4.4 of the Registrant’s Form 10K-SB dated March 31, 2007).

4.5Warrant to Purchase Common Stock (incorporated by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K filed December 23, 2008).

10.1Repurchase Agreement between Citizens First Corporation and U.S. Department of the Treasury dated January 15, 2014.

31.1Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act.

31.2Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act.

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32.1Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350.

32.2Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.

101Interactive data files: (i) Consolidated Balance Sheets at March 31, 2014 and December 31, 2013, (ii) the Consolidated Statements of Income for the three months ended March 31, 2014 and March 31, 2013, (iii) the Consolidated Statement of Stockholders’ Equity for the three months ended March 31, 2014 and March 30, 2013, (iv) Consolidated Statements of Cash Flows for the three month periods ended March 31, 2014 and 2013, and (v) Notes to Consolidated Financial Statements.**

**Pursuant to Rule 406T of Regulation S-T, the interactive data files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under these sections.

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		CITIZENS FIRST CORPORATION
Date:	May 8, 2014	/s/M. Todd Kanipe
		M. Todd Kanipe
		President and Chief Executive Officer
	May 8, 2014	/s/ J. Steven Marcum
		J. Steven Marcum
		Executive Vice President and Chief Financial Officer

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