10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT

Pursuant to Section 13 OR 15(d) of

The Securities Exchange Act of 1934

For the quarterly period ended September 30, 2013

Farmers Capital Bank Corporation

(Exact name of registrant as specified in its charter)

Kentucky	000-14412	61-1017851
(State or other jurisdiction	(Commission	(IRS Employer
of incorporation)	File Number)	Identification No.)

P.O. Box 309 Frankfort, KY	40602
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code – (502) 227-1668

Not Applicable

(Former name or former address, if changed since last report.)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes   ☒     No  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes  ☒     No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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  ☐                                                                                       Accelerated filer  ☐

Non-accelerated filer  ☒ (Do not check if a smaller reporting company)Smaller reporting company  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  ☐    No  ☒

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

Common stock, par value $0.125 per share

7,476,831 shares outstanding at November 6, 2013

1

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Unaudited Condensed Consolidated Balance Sheets	3
Unaudited Condensed Consolidated Statements of Income	4
Unaudited Condensed Consolidated Statements of Comprehensive Income	5
Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity	6
Unaudited Condensed Consolidated Statements of Cash Flows	7
Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
Item 3. Quantitative and Qualitative Disclosures About Market Risk	56
Item 4. Controls and Procedures	57
PART II - OTHER INFORMATION
Item 1. Legal Proceedings	57
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	57
Item 6. Exhibits	57
SIGNATURES	59

2

PART I – FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

Unaudited Condensed Consolidated Balance Sheets

(Dollars in thousands, except share data)	September 30, 2013			December 31, 2012
Assets
Cash and cash equivalents:
Cash and due from banks	$	25,936		$	27,448
Interest bearing deposits in other banks		55,165			65,675
Federal funds sold and securities purchased under agreements to resell		2,733			2,732
Total cash and cash equivalents		83,834			95,855
Investment securities:
Available for sale, amortized cost of $586,234 (2013) and $558,630 (2012)		586,053			573,108
Held to maturity, fair value of $871 (2013) and $956 (2012)		820			820
Total investment securities		586,873			573,928
Loans, net of unearned income		1,010,131			1,004,995
Allowance for loan losses		(21,949	)		(24,445	)
Loans, net		988,182			980,550
Premises and equipment, net		36,636			36,183
Company-owned life insurance		28,662			27,973
Intangible assets, net		989			1,394
Other real estate owned		41,661			52,562
Other assets		43,516			38,787
Total assets	$	1,810,353		$	1,807,232
Liabilities
Deposits:
Noninterest bearing	$	267,270		$	254,912
Interest bearing		1,136,215			1,155,898
Total deposits		1,403,485			1,410,810
Federal funds purchased and other short-term borrowings		32,885			24,083
Securities sold under agreements to repurchase and other long-term borrowings		127,165			129,297
Subordinated notes payable to unconsolidated trusts		48,970			48,970
Dividends payable		188			188
Other liabilities		29,660			25,863
Total liabilities		1,642,353			1,639,211
Shareholders’ Equity
Preferred stock, no par value 1,000,000 shares authorized; 30,000 Series A shares issued and outstanding at September 30, 2013 and December 31, 2012; Liquidation preference of $30,000		29,873			29,537
Common stock, par value $.125 per share 14,608,000 shares authorized; 7,476,831 and 7,469,813 shares issued and outstanding at September 30, 2013 and December 31, 2012, respectively		935			934
Capital surplus		51,060			50,934
Retained earnings		88,660			79,747
Accumulated other comprehensive (loss) income		(2,528	)		6,869
Total shareholders’ equity		168,000			168,021
Total liabilities and shareholders’ equity	$	1,810,353		$	1,807,232

See accompanying notes to unaudited condensed consolidated financial statements.

3

Unaudited Condensed Consolidated Statements of Income

	Three Months Ended September 30,						Nine Months Ended September 30,
(In thousands, except per share data)	2013			2012			2013			2012
Interest Income
Interest and fees on loans	$	13,313		$	13,883		$	40,335		$	42,268
Interest on investment securities:
Taxable		2,578			3,084			7,599			10,044
Nontaxable		629			573			1,885			1,661
Interest on deposits in other banks		42			37			114			99
Interest on federal funds sold and securities purchased under agreements to resell		1			1			3			3
Total interest income		16,563			17,578			49,936			54,075
Interest Expense
Interest on deposits		1,423			2,141			4,610			7,320
Interest on federal funds purchased and other short-term borrowings		21			24			60			74
Interest on securities sold under agreements to repurchase and other long-term borrowings		1,292			1,828			3,837			5,481
Interest on subordinated notes payable to unconsolidated trusts		217			518			650			1,559
Total interest expense		2,953			4,511			9,157			14,434
Net interest income		13,610			13,067			40,779			39,641
Provision for loan losses		(586	)		(256	)		(1,580	)		2,062
Net interest income after provision for loan losses		14,196			13,323			42,359			37,579
Noninterest Income
Service charges and fees on deposits		2,116			2,062			6,094			6,080
Allotment processing fees		1,217			1,304			3,724			3,932
Other service charges, commissions, and fees		1,282			1,104			3,738			3,332
Trust income		497			469			1,451			1,404
Investment securities gains (losses), net		2			276			(58	)		964
Gains on sale of mortgage loans, net		236			603			867			1,364
Income from company-owned life insurance		244			301			716			1,289
Other		84			47			(2	)		241
Total noninterest income		5,678			6,166			16,530			18,606
Noninterest Expense
Salaries and employee benefits		7,229			7,019			21,784			20,999
Occupancy expenses, net		1,247			1,235			3,578			3,606
Equipment expenses		619			576			1,760			1,757
Data processing and communication expenses		929			1,059			2,972			3,211
Bank franchise tax		603			605			1,803			1,793
Amortization of intangibles		135			254			405			761
Deposit insurance expense		559			667			1,698			2,039
Other real estate expenses, net		2,404			1,531			4,781			3,197
Legal expenses		209			251			575			989
Other		2,050			2,150			5,859			5,989
Total noninterest expense		15,984			15,347			45,215			44,341
Income before income taxes		3,890			4,142			13,674			11,844
Income tax expense		855			1,051			3,300			2,297
Net income		3,035			3,091			10,374			9,547
Less preferred stock dividends and discount accretion		489			481			1,461			1,439
Net income available to common shareholders	$	2,546		$	2,610		$	8,913		$	8,108
Per Common Share
Net income - basic and diluted	$	.34		$	.35		$	1.19		$	1.09
Cash dividends declared	N/A			N/A			N/A			N/A
Weighted Average Common Shares Outstanding
Basic and diluted		7,475			7,461			7,473			7,454

See accompanying notes to unaudited condensed consolidated financial statements.

4

Unaudited Condensed Consolidated Statements of Comprehensive Income

	Three Months Ended September 30,						Nine Months Ended September 30,
(In thousands)	2013			2012			2013			2012
Net Income	$	3,035		$	3,091		$	10,374		$	9,547
Other comprehensive income (loss):
Unrealized holding gain (loss) on available for sale securities arising during the period on securities held at end of period, net of tax of $912, $1,270, $(5,110), and $1,861, respectively		1,694			2,359			(9,490	)		3,456
Reclassification adjustment for prior period unrealized gain previously reported in other comprehensive income recognized during current period, net of tax of $1, $97, $20, and $275, respectively		(1	)		(181	)		(38	)		(511	)
Change in unfunded portion of postretirement benefit obligation, net of tax of $25, $44, $71, and $111, respectively		43			82			131			206
Other comprehensive income (loss)		1,736			2,260			(9,397	)		3,151
Comprehensive income	$	4,771		$	5,351		$	977		$	12,698

See accompanying notes to unaudited condensed consolidated financial statements.

5

Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity

(Dollars in thousands, except per share data)													Accumulated
													Other			Total
Nine months ended	Preferred		Common Stock				Capital			Retained			Comprehensive			Shareholders’
September 30, 2013 and 2012	Stock		Shares		Amount		Surplus			Earnings			(Loss) Income			Equity
Balance at January 1, 2013	$	29,537		7,470	$	934	$	50,934		$	79,747		$	6,869		$	168,021
Net income		-		-		-		-			10,374			-			10,374
Other comprehensive loss		-		-		-		-			-			(9,397	)		(9,397	)
Cash dividends declared – preferred, $37.50 per share		-		-		-		-			(1,125	)		-			(1,125	)
Preferred stock discount accretion		336		-		-		-			(336	)		-			-
Shares issued pursuant to employee stock purchase plan		-		7		1		98			-			-			99
Expense related to employee stock purchase plan		-		-		-		28			-			-			28
Balance at September 30, 2013	$	29,873		7,477	$	935	$	51,060		$	88,660		$	(2,528	)	$	168,000
Balance at January 1, 2012	$	29,115		7,446	$	931	$	50,848		$	69,520		$	6,643		$	157,057
Net income		-		-		-		-			9,547			-			9,547
Other comprehensive income		-		-		-		-			-			3,151			3,151
Cash dividends declared – preferred, $37.50 per share		-		-		-		-			(1,125	)		-			(1,125	)
Preferred stock discount accretion		314		-		-		-			(314	)		-			-
Repurchase of common stock warrant		-		-		-		(75	)		-			-			(75	)
Shares issued pursuant to employee stock purchase plan		-		20		2		90			-			-			92
Expense related to employee stock purchase plan		-		-		-		31			-			-			31
Balance at September 30, 2012	$	29,429		7,466	$	933	$	50,894		$	77,628		$	9,794		$	168,678

See accompanying notes to unaudited condensed consolidated financial statements.

6

Unaudited Condensed Consolidated Statements of Cash Flows

Nine months ended September 30, (In thousands)	2013			2012
Cash Flows from Operating Activities
Net income	$	10,374		$	9,547
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		3,013			3,398
Net premium amortization of available for sale investment securities		4,068			3,921
Provision for loan losses		(1,580	)		2,062
Deferred income tax expense		142			68
Noncash employee stock purchase plan expense		28			31
Mortgage loans originated for sale		(42,867	)		(60,376	)
Proceeds from sale of mortgage loans		42,948			60,099
Gain on sale of mortgage loans, net		(867	)		(1,364	)
Loss on disposals and write downs of premises and equipment, net		4			259
Net loss on sale and write downs of other real estate		3,820			2,443
Net loss (gain) on sale of available for sale investment securities		58			(964	)
Increase in cash surrender value of company-owned life insurance		(689	)		(732	)
Death benefits in excess of cash surrender value on company-owned life insurance		-			(529	)
Decrease in accrued interest receivable		41			714
(Increase) decrease in other assets		(3	)		1,039
Decrease in accrued interest payable		(209	)		(331	)
Increase in other liabilities		4,208			3,089
Net cash provided by operating activities		22,489			22,374
Cash Flows from Investing Activities
Proceeds from maturities and calls of available for sale investment securities		102,757			144,364
Proceeds from sale of available for sale investment securities		948			125,308
Purchase of available for sale investment securities		(135,435	)		(270,836	)
Loans originated for investment, net of principal collected		(6,764	)		31,063
Proceeds from death benefits of company-owned life insurance		-			1,051
Purchase of premises and equipment		(2,970	)		(1,491	)
Proceeds from sale of other real estate		8,604			7,427
Proceeds from disposals of equipment		31			427
Net cash (used in) provided by investing activities		(32,829	)		37,313
Cash Flows from Financing Activities
Net decrease in deposits		(7,325	)		(31,074	)
Net increase (decrease) in federal funds purchased and other short-term borrowings		8,802			(1,282	)
Repayments of securities sold under agreements to repurchase and other long-term borrowings		(2,132	)		(10,314	)
Dividends paid, preferred		(1,125	)		(1,125	)
Repurchase of common stock warrant		-			(75	)
Shares issued under employee stock purchase plan		99			92
Net cash used in financing activities		(1,681	)		(43,778	)
Net (decrease) increase in cash and cash equivalents		(12,021	)		15,909
Cash and cash equivalents at beginning of year		95,855			94,309
Cash and cash equivalents at end of period	$	83,834		$	110,218
Supplemental Disclosures
Cash paid during the period for:
Interest	$	9,366		$	14,765
Income taxes		4,400			2,500
Transfers from loans to other real estate		5,589			21,914
Sale and financing of other real estate		4,091			2,721
Cash dividends payable, preferred		188			188

See accompanying notes to unaudited condensed consolidated financial statements.

7

Notes to Unaudited Condensed Consolidated Financial Statements

1. Basis of Presentation and Nature of Operations

The condensed consolidated financial statements include the accounts of Farmers Capital Bank Corporation (the “Company” or “Parent Company”), a bank holding company, and its bank and nonbank subsidiaries. Bank subsidiaries include Farmers Bank & Capital Trust Company (“Farmers Bank”) in Frankfort, KY, United Bank & Trust Company (“United Bank”) in Versailles, KY, First Citizens Bank (“First Citizens”) in Elizabethtown, KY, and Citizens Bank of Northern Kentucky, Inc. (“Citizens Northern”) in Newport, KY.

Farmers Bank’s significant subsidiaries include EG Properties, Inc., Leasing One Corporation (“Leasing One”), and Farmers Capital Insurance Corporation (“Farmers Insurance”). EG Properties, Inc. is involved in real estate management and liquidation for certain repossessed properties of Farmers Bank. Leasing One is a commercial leasing company in Frankfort, KY, and Farmers Insurance is an insurance agency in Frankfort, KY. United Bank has one wholly-owned subsidiary, EGT Properties, Inc. EGT Properties, Inc. is involved in real estate management and liquidation for certain repossessed properties of United Bank. First Citizens has one wholly-owned subsidiary, HBJ Properties, LLC. HBJ Properties, LLC is involved in real estate management and liquidation for certain repossessed properties of First Citizens. Citizens Northern has one wholly-owned subsidiary, ENKY Properties, Inc. ENKY Properties, Inc. is involved in real estate management and liquidation for certain repossessed properties of Citizens Northern.

The Company has three active nonbank subsidiaries, FCB Services, Inc. (“FCB Services”), FFKT Insurance Services, Inc. (“FFKT Insurance”), and EKT Properties, Inc. (“EKT”). FCB Services is a data processing subsidiary located in Frankfort, KY that provides services to the Company’s banks as well as unaffiliated entities. FFKT Insurance is a captive property and casualty insurance company insuring primarily deductible exposures and uncovered liability related to properties of the Company. EKT was formed to manage and liquidate certain real estate properties repossessed by the Company. The Company has three subsidiaries organized as Delaware statutory trusts that are not consolidated into its financial statements. These trusts were formed for the purpose of issuing trust preferred securities. All significant intercompany transactions and balances are eliminated in consolidation.

The Company provides financial services at its 36 locations in 23 communities throughout Central and Northern Kentucky to individual, business, agriculture, government, and educational customers. Its primary deposit products are checking, savings, and term certificate accounts. Its primary lending products are residential mortgage, commercial lending, and consumer installment loans. Substantially all loans and leases are secured by specific items of collateral including business assets, consumer assets, and commercial and residential real estate. Commercial loans and leases are expected to be repaid from cash flow from operations of businesses. Other services include, but are not limited to, cash management services, issuing letters of credit, safe deposit box rental, and providing funds transfer services. Other financial instruments, which potentially represent concentrations of credit risk, include deposit accounts in other financial institutions and federal funds sold.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) 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. Estimates used in the preparation of the condensed financial statements are based on various factors including the current interest rate environment and the general strength of the local and state 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 condensed financial statements. The allowance for loan losses, carrying value of other real estate owned, actuarial assumptions used to calculate postretirement benefits, and the fair values of financial instruments are estimates that are particularly subject to change.

The condensed consolidated balance sheet as of December 31, 2012 has been derived from the audited financial statements of the Company as of that date. For further information, refer to the consolidated financial statements and footnotes thereto for the year ended December 31, 2012 included in the Company’s annual report on Form 10-K. The accompanying condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X and do not include all of the information and the footnotes required by U.S. GAAP for complete statements. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of such condensed 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. All significant intercompany transactions and balances are eliminated in consolidation.

8

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, 2012.

2. Adoption of New Accounting Standards

Effective January 1, 2013, the Company adopted Accounting Standards Update (“ASU”) 2013-02, Comprehensive Income (Topic 220) – Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. This ASU requires additional disclosure about the changes in the components of accumulated other comprehensive income, including amounts reclassified and amounts due to current period other comprehensive income. The following table presents changes in accumulated other comprehensive income by component, net of tax, for the periods indicated.

	Three months ended September 30, 2013									Nine months ended September 30, 2013
(In thousands)	Unrealized Gains and Losses on Available for Sale Investment Securities			Postretirement Benefit Obligation			Total			Unrealized Gains and Losses on Available for Sale Investment Securities			Postretirement Benefit Obligation			Total
Beginning balance	$	(1,810	)	$	(2,454	)	$	(4,264	)	$	9,411		$	(2,542	)	$	6,869
Other comprehensive income (loss) before reclassifications		1,694			-			1,694			(9,490	)		-			(9,490	)
Amounts reclassified from accumulated other comprehensive income		(1	)		43			42			(38	)		131			93
Net current-period other comprehensive income (loss)		1,693			43			1,736			(9,528	)		131			(9,397	)
Ending balance	$	(117	)	$	(2,411	)	$	(2,528	)	$	(117	)	$	(2,411	)	$	(2,528	)

9

The following table presents amounts reclassified out of accumulated other comprehensive income by component for the period indicated. Line items in the statement of income affected by the reclassification are also presented.

	Amount Reclassified from Accumulated Other Comprehensive Income						Affected Line Item in the Statement Where Net Income is Presented
(In thousands)	Three months ended September 30, 2013			Nine months ended September 30, 2013
Unrealized gains and losses on available for sale investment securities	$	2		$	58		Investment securities gains, net
		(1	)		(20	)	Income tax expense
	$	1		$	38		Net of tax
Amortization related to postretirement benefits
Prior service costs	$	(65	)	$	(193	)	Salaries and employee benefits
Actuarial losses		(3	)		(9	)	Salaries and employee benefits
		(68	)		(202	)	Total before tax
		25			71		Income tax benefit
	$	(43	)	$	(131	)	Net of tax
Total reclassifications for the period	$	(42	)	$	(93	)	Net of tax

3. Reclassifications

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

4. Accounting Policy

Loans and Interest Income

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are reported at their unpaid principal amount outstanding adjusted for any charge-offs and deferred fees or costs on originated loans. Interest income on loans is recognized using the interest method based on loan principal amounts outstanding during the period. Interest income also includes amortization and accretion of any premiums or discounts over the expected life of acquired loans at the time of purchase or business acquisition. Loan origination fees, net of certain direct origination costs, are deferred and amortized as yield adjustments over the contractual term of the loans.

10

The Company disaggregates certain disclosure information related to loans, the related allowance for loan losses, and credit quality measures by either portfolio segment or by loan class. The Company segregates its loan portfolio segments based on similar risk characteristics as follows: real estate loans, commercial loans, and consumer loans. Portfolio segments are further disaggregated into classes for certain required disclosures as follows:

Portfolio Segment	Class
Real estate loans	Real estate mortgage - construction and land development Real estate mortgage - residential Real estate mortgage - farmland and other commercial enterprises
Commercial loans	Commercial and industrial Depository institutions Agriculture production and other loans to farmers States and political subdivisions Leases Other
Consumer loans	Secured Unsecured

The Company has a loan policy in place that is amended and approved from time to time as needed to reflect current economic conditions and product offerings in its markets. The policy establishes written procedures concerning areas such as the lending authorities of loan officers, committee review and approval of certain credit requests, underwriting criteria, policy exceptions, appraisal requirements, and loan review. Credit is extended to borrowers based primarily on their ability to repay as demonstrated by income and cash flow analysis.

Loans secured by real estate make up the largest segment of the Company’s loan portfolio. If a borrower fails to repay a loan secured by real estate, the Company may liquidate the collateral in order to satisfy the amount owed. Determining the value of real estate is a key component to the lending process for real estate backed loans. If the fair value of real estate (less estimated cost to sell) securing a collateral dependent loan declines below the outstanding loan amount, the Company will write down the carrying value of the loan and thereby incur a loss. The Company uses independent third party state certified or licensed appraisers in accordance with its loan policy to mitigate risk when underwriting real estate loans. Cash flow analysis of the borrower, loan to value limits as adopted by loan policy, and other customary underwriting standards are also in place which are designed to maximize credit quality and mitigate risks associated with real estate lending.

Commercial loans are made to businesses and are secured mainly by assets such as inventory, accounts receivable, machinery, fixtures and equipment, or other business assets. Commercial lending involves significant risk, as loan repayments are more dependent on the successful operation or management of the business and its cash flows. Consumer lending includes loans to individuals mainly for personal autos, boats, or a variety of other personal uses and may be secured or unsecured. Loan repayment associated with consumer loans is highly dependent upon the borrower’s continuing financial stability, which is heavily influenced by local unemployment rates. The Company mitigates its risk exposure to each of its loan segments by analyzing the borrower’s repayment capacity, imposing restrictions on the amount it will loan compared to estimated collateral values, limiting the payback periods, and following other customary underwriting practices as adopted in its loan policy.

The accrual of interest on loans is discontinued when it is determined that the collection of interest or principal is doubtful, or when a default of interest or principal has existed for 90 days or more, unless such loan is well secured and in the process of collection. Past due status is based on the contractual terms of the loan. Interest accrued but not received for a loan placed on nonaccrual status is reversed against interest income. Cash payments received on nonaccrual loans generally are applied to principal until qualifying for return to accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. The Company’s policy for placing a loan on nonaccrual status or subsequently returning a loan to accrual status does not differ based on its portfolio class or segment.

Commercial and real estate loans delinquent in excess of 120 days and consumer loans delinquent in excess of 180 days are charged off, unless the collateral securing the debt is of such value that any loss appears to be unlikely. In all cases, loans are charged off at an earlier date if classified as loss under its loan grading process or as a result of regulatory examination. The Company’s charge-off policy for impaired loans does not differ from the charge-off policy for loans outside the definition of impaired.

11

Provision and Allowance for Loan Losses

The provision for loan losses represents charges made to earnings to maintain an allowance for loan losses at a level considered adequate to provide for probable incurred credit losses at the balance sheet date. The allowance for loan losses is a valuation allowance increased by the provision for loan losses and decreased by net charge-offs. Loan losses are charged against the allowance when management believes the uncollectibility of a loan is confirmed. Subsequent recoveries, if any, are credited to the allowance.

The Company estimates the adequacy of the allowance using a risk-rated methodology which is based on the Company’s past loan loss experience, known and inherent risks in the loan portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral securing loans, composition of the loan portfolio, current economic conditions, and other relevant factors. This evaluation is inherently subjective as it requires significant judgment and the use of estimates that may be susceptible to change.

The allowance for loan losses consists of specific and general components. The specific component relates to loans that are individually classified as impaired. The general component covers non-impaired loans and is based on historical loss experience adjusted for current risk factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged off. Actual loan losses could differ significantly from the amounts estimated by management.

The Company’s risk-rated methodology includes segregating non-impaired watch list and past due loans from the general portfolio and allocating a loss percentage to these loans depending on their status. For example, watch list loans, which may be identified by the internal loan review risk-rating process or by regulatory examiner classification, are assigned a certain loss percentage while loans past due 30 days or more are assigned a different loss percentage. Each of these percentages considers past experience as well as current factors. The remainder of the general loan portfolio is segregated into portfolio segments having similar risk characteristics identified as follows: real estate loans, commercial loans, and consumer loans. Each of these portfolio segments is assigned a loss percentage based on their respective rolling historical loss rates, adjusted for qualitative risk factors. During the third quarter of 2013, the Company lengthened the look-back period it uses to determine historical loss rates to the previous 16 quarters from 12 quarters. The change in the look-back period is the result of the Company’s ongoing monitoring and evaluation of the adequacy of its allowance for loan losses. The longer look-back period better reflects the Company’s loss estimates based on current market conditions. Lengthening the look-back period resulted in a $320 thousand increase in the allowance for loan losses.

The qualitative risk factors used in the methodology are consistent with the guidance in the most recent Interagency Policy Statement on the Allowance for Loan Losses issued in 2006. Each factor is supported by a detailed analysis performed at each subsidiary bank and is both measureable and supportable. Some factors include a minimum allocation in some instances where loss levels are extremely low and it is determined to be prudent from a safety and soundness perspective. Qualitative risk factors that are used in the methodology include the following for each loan portfolio segment:

● Delinquency trends

● Trends in net charge-offs

● Trends in loan volume

● Lending philosophy risk

● Management experience risk

● Concentration of credit risk

● Economic conditions risk

A loan is impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. Loans for which the terms have been modified resulting in a concession, and for which the borrower is experiencing financial difficulties, are considered troubled debt restructurings and classified as impaired. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on 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.

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The Company accounts for impaired loans in accordance with Accounting Standards Codification (“ASC”) Topic 310, “Receivables.” ASC Topic 310 requires that impaired loans be measured at the present value of expected future cash flows, discounted at the loan’s effective interest rate, at the loan’s observable market price, or at the fair value of the collateral if the loan is collateral dependent. Impaired loans may also be classified as nonaccrual. In many circumstances, however, the Company continues to accrue interest on an impaired loan. Cash receipts on accruing impaired loans are applied to the recorded investment in the loan, including any accrued interest receivable. Cash payments received on nonaccrual impaired loans generally are applied to principal until qualifying for return to accrual status. Loans that are part of a large group of smaller-balance homogeneous loans, such as residential mortgage, consumer, and smaller-balance commercial loans, are collectively evaluated for impairment. Troubled debt restructurings are measured at the present value of estimated future cash flows using the loan’s effective interest rate at inception, or at the fair value of collateral. The Company determines the amount of reserve for troubled debt restructurings that subsequently default in accordance with its accounting policy for the allowance for loan losses.

5. Net Income Per Common Share

Basic net income per common share is determined by dividing net income available to common shareholders by the weighted average total number of common shares issued and outstanding. Net income available to common shareholders represents net income adjusted for preferred stock dividends including dividends declared, accretion of discounts on preferred stock issuances, and cumulative dividends related to the current dividend period that have not been declared as of the end of the period.

Diluted net income per common share is determined by dividing net income available to common shareholders by the total weighted average number of common shares issued and outstanding plus amounts representing the dilutive effect of stock options outstanding and outstanding warrants. The effects of stock options and outstanding warrants are excluded from the computation of diluted earnings per common share in periods in which the effect would be antidilutive. Dilutive potential common shares are calculated using the treasury stock method.

Net income per common share computations were as follows for the periods indicated.

	Three Months Ended September 30,		Nine Months Ended September 30,
(In thousands, except per share data)	2013	2012	2013	2012
Net income, basic and diluted	$3,035	$3,091	$10,374	$9,547
Less preferred stock dividends and discount accretion	489	481	1,461	1,439
Net income available to common shareholders, basic and diluted	$2,546	$2,610	$  8,913	$8,108
Average common shares issued and outstanding, basic and diluted	7,475	7,461	7,473	7,454
Net income per common share, basic and diluted	$    .34	$   .35	$   1.19	$ 1.09

Stock options for 22,049 and 24,049 shares of common stock were not included in the determination of diluted net income per common share for each period in 2013 and 2012, respectively, because they were antidilutive. There were 223,992 potential common shares associated with a warrant issued to the U.S. Treasury that were excluded from the computation of diluted net income per common share for 2012 because they were antidilutive. The Company repurchased the warrant from the Treasury during the third quarter of 2012.

6. Fair Value Measurements

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 of its financial assets or liabilities.

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ASC Topic 820 defines fair value as the 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. 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 for identical assets or liabilities in active markets that the entity has the ability to access at 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 for substantially the full term of the assets or liabilities.

Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions supported by little or no market activity, about the assumptions that market participants would use in pricing the asset or liability.

Following is a description of the valuation method used for financial instruments measured at fair value on a recurring basis. For this disclosure, the Company only has available for sale investment securities that meet the requirement.

Available for sale investment securities

Valued primarily by independent third party pricing services under the market valuation approach that include, but are not limited to, the following inputs:

● Mutual funds and equity securities are priced utilizing real-time data feeds from active market exchanges for identical securities and are considered Level 1 inputs.

● Government-sponsored agency debt securities, obligations of states and political subdivisions, mortgage-backed securities, corporate bonds, and other similar investment securities are priced with available market information through processes using benchmark yields, matrix pricing, prepayment speeds, cash flows, live trading data, and market spreads sourced from new issues, dealer quotes, and trade prices, among others sources and are considered Level 2 inputs.

Available for sale investment securities are the Company’s only balance sheet item that meets the disclosure requirements for instruments measured at fair value on a recurring basis. Disclosures as of September 30, 2013 and December 31, 2012 are as follows:

			Fair Value Measurements Using
(In thousands) Available For Sale Investment Securities	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
September 30, 2013
Obligations of U.S. government-sponsored entities	$	96,087	$	-	$	96,087	$	-
Obligations of states and political subdivisions		130,538		-		130,538		-
Mortgage-backed securities – residential		351,749		-		351,749		-
Corporate debt securities		5,776		-		5,776		-
Mutual funds and equity securities		1,903		1,903		-		-
Total	$	586,053	$	1,903	$	584,150	$	-

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			Fair Value Measurements Using
(In thousands) Available For Sale Investment Securities	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2012
Obligations of U.S. government-sponsored entities	$	76,095	$	-	$	76,095	$	-
Obligations of states and political subdivisions		118,755		-		118,755		-
Mortgage-backed securities – residential		370,439		-		370,439		-
Corporate debt securities		5,826		-		5,826		-
Mutual funds and equity securities		1,993		1,993		-		-
Total	$	573,108	$	1,993	$	571,115	$	-

The Company is required to measure and disclose certain other assets and liabilities at fair value on a nonrecurring basis in periods following their initial recognition. The Company’s disclosure about assets and liabilities measured at fair value on a nonrecurring basis consists of impaired loans and other real estate owned (“OREO”). The carrying value of these assets are adjusted to fair value on a nonrecurring basis through impairment charges as described more fully below.

Impairment charges on collateral-dependent loans are recorded by either an increase to the provision for loan losses and related allowance or by direct loan charge-offs. The fair value of collateral-dependent impaired loans with specific allocations of the allowance for loan losses is measured based on recent appraisals of the underlying collateral. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Appraisers take absorption rates into consideration and adjustments are routinely made in the appraisal process to identify differences between the comparable sales and income data available. Such adjustments consist mainly of estimated costs to sell that are not included in certain appraisals or to update appraised collateral values as a result of market declines of similar properties for which a newer appraisal is available. These adjustments can be significant and typically result in a Level 3 classification of the inputs for determining fair value.

OREO includes properties acquired by the Company through, or in lieu of, actual loan foreclosures and is carried at fair value less estimated costs to sell. Fair value of OREO at acquisition is generally based on third party appraisals of the property that include comparable sales data and are considered as Level 3 inputs. The carrying value of each OREO property is updated at least annually and more frequently when market conditions significantly impact the value of the property. If the carrying amount of the OREO exceeds fair value less estimated costs to sell, an impairment loss is recorded through noninterest expense.

The following tables represent the carrying amount of assets measured at fair value on a nonrecurring basis and still held by the Company as of the dates indicated. The amounts in the tables only represent assets whose carrying amount has been adjusted by impairment charges during the period in a manner as described above; therefore, these amounts will differ from the total amounts outstanding. Collateral-dependent impaired loan amounts in the tables below exclude restructured loans since they are measured based on present value techniques, which are outside the scope of the fair value reporting framework.

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			Fair Value Measurements Using
(In thousands) Description	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
September 30, 2013
Collateral-dependent Impaired Loans
Real estate mortgage – construction and land development	$	335	$	-	$	-	$	335
Real estate mortgage – residential		3,077		-		-		3,077
Real estate mortgage – farmland and other commercial enterprises		3,450		-		-		3,450
Commercial and industrial		88		-		-		88
Total	$	6,950	$	-	$	-	$	6,950
OREO
Construction and land development	$	11,454	$	-	$	-	$	11,454
Residential real estate		1,527		-		-		1,527
Farmland and other commercial enterprises		9,106		-		-		9,106
Total	$	22,087	$	-	$	-	$	22,087

			Fair Value Measurements Using
(In thousands) Description	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2012
Collateral-dependent Impaired Loans
Real estate mortgage – construction and land development	$	17,921	$	-	$	-	$	17,921
Real estate mortgage – residential		2,273		-		-		2,273
Real estate mortgage – farmland and other commercial enterprises		3,523		-		-		3,523
Commercial and industrial		9		-		-		9
Consumer – secured		4		-		-		4
Consumer – unsecured		113		-		-		113
Total	$	23,843	$	-	$	-	$	23,843
OREO
Construction and land development	$	15,873	$	-	$	-	$	15,873
Residential real estate		1,483		-		-		1,483
Farmland and other commercial enterprises		3,826		-		-		3,826
Total	$	21,182	$	-	$	-	$	21,182

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The following table represents impairment charges recorded in earnings for the periods indicated on assets measured at fair value on a nonrecurring basis. 

	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2013		2012		2013		2012
Impairment charges:
Collateral-dependent impaired loans	$	448	$	953	$	1,481	$	4,055
OREO		1,698		1,033		3,288		2,046
Total	$	2,146	$	1,986	$	4,769	$	6,101

The following table presents quantitative information about unobservable inputs for assets measured on a nonrecurring basis using Level 3 measurements.

(In thousands)	Fair Value at September 30, 2013		Valuation Technique	Unobservable Inputs	Range			Average
Collateral-dependent impaired loans	$	6,950	Discounted appraisals	Marketability discount	0%	-	6.3%		1.2	%
OREO	$	22,087	Discounted appraisals	Marketability discount	1.1%	-	32.4%		9.4	%

As previously discussed, the fair value of real estate securing collateral-dependent impaired loans and OREO are based on current third party appraisals. It is often necessary, however, for the Company to discount the appraisal amounts supporting its impaired loans and OREO. These discounts relate primarily to marketing and other holding costs that are not included in certain appraisals or to update values as a result of market declines of similar properties for which newer appraisals are available. Discounts also result from contracts to sell properties entered into during the period. The range of discounts is presented in the table above. The upper end of the range identified in the table above relates to outlier transactions. The weighted average column is more of an indicator of the discounts applied to the appraisals.

Fair Value of Financial Instruments

The table that follows represents the estimated fair values of the Company’s financial instruments made in accordance with the requirements of ASC 825, “Financial Instruments.” ASC 825 requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet for which it is practicable to estimate that value. The estimated fair value amounts have been determined by the Company using available market information and present value or other valuation techniques. These derived fair values are subjective in nature, involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. ASC 825 excludes certain financial instruments and all nonfinancial instruments from the disclosure requirements. Accordingly, the aggregate fair value amounts presented are not intended to represent the underlying value of the Company.

The following methods and assumptions were used to estimate the fair value of each of the financial instruments in the table that follows.

Cash and Cash Equivalents, Accrued Interest Receivable, and Accrued Interest Payable

The carrying amount is a reasonable estimate of fair value due to the relatively short time between the origination of the instrument and its expected realization or settlement.

Investment Securities Held to Maturity

Fair value is based on quoted market price, if available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities or with available market information through processes using benchmark yields, matrix pricing, prepayment speeds, cash flows, live trading data, and market spreads sourced from new issues, dealer quotes, and trade prices, among others sources.

Loans

The fair value of loans is estimated by discounting expected future cash flows using current discount rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. Expected future cash flows are projected based on contractual cash flows adjusted for estimated prepayments.

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Federal Home Loan Bank and Federal Reserve Bank Stock

It is not practical to determine the fair value of Federal Home Loan Bank and Federal Reserve Bank stock due to restrictions placed on its transferability.

Deposit Liabilities

The fair value of demand deposits, savings accounts, and certain money market deposits is the amount payable on demand at the reporting date and fair value approximates carrying value. The fair value of fixed maturity certificates of deposit is estimated by discounting the expected future cash flows using the rates currently offered for certificates of deposit with similar remaining maturities.

Federal Funds Purchased and Other Short-term Borrowings

The carrying amount is the estimated fair value for these borrowings which reprice frequently in the near term.

Securities Sold Under Agreements to Repurchase, Subordinated Notes Payable, and Other Long-term Borrowings

The fair value of these borrowings is estimated by discounting the expected future cash flows using rates currently available for debt with similar terms and remaining maturities. For subordinated notes payable, the Company uses its best estimate to determine an appropriate discount rate since active markets for similar debt transactions are very limited.

Commitments to Extend Credit and Standby Letters of Credit

Pricing of these financial instruments is based on the credit quality and relationship, fees, interest rates, probability of funding, compensating balance, and other covenants or requirements. Loan commitments generally have fixed expiration dates, variable interest rates and contain termination and other clauses that provide for relief from funding in the event there is a significant deterioration in the credit quality of the customer. Many loan commitments are expected to, and typically do, expire without being drawn upon. The rates and terms of the Company’s commitments to lend and standby letters of credit are competitive with others in the various markets in which the Company operates. There are no unamortized fees relating to these financial instruments, as such the carrying value and fair value are both zero.

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The following table presents the estimated fair values of the Company’s financial instruments and the level within the fair value hierarchy in which the fair value measurements fall at September 30, 2013 and December 31, 2012. Information for available for sale investment securities is presented within this footnote in greater detail above.

					Fair Value Measurements Using
(In thousands)	Carrying Amount		Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
September 30, 2013
Assets
Cash and cash equivalents	$	83,834	$	83,834	$	83,834	$	-	$	-
Held to maturity investment securities		820		871		-		871		-
Loans, net		988,182		985,969		-		-		985,969
Accrued interest receivable		6,033		6,033		-		6,033		-
Federal Home Loan Bank and Federal Reserve Bank Stock		9,516	N/A			-		-		-
Liabilities
Deposits		1,403,485		1,406,295		911,017		-		495,278
Federal funds purchased and other short-term borrowings		32,885		32,885		-		32,885		-
Securities sold under agreements to repurchase and other long-term borrowings		127,165		139,136		-		139,136		-
Subordinated notes payable to unconsolidated trusts		48,970		25,027		-		-		25,027
Accrued interest payable		1,161		1,161		-		1,161		-
December 31, 2012
Assets
Cash and cash equivalents	$	95,855	$	95,855	$	95,855	$	-	$	-
Held to maturity investment securities		820		956		-		956		-
Loans, net		980,550		979,301		-		-		979,301
Accrued interest receivable		6,074		6,074		-		6,074		-
Federal Home Loan Bank and Federal Reserve Bank Stock		9,516	N/A			-		-		-
Liabilities
Deposits		1,410,810		1,414,395		870,145		-		544,250
Federal funds purchased and other short-term borrowings		24,083		24,083		-		24,083		-
Securities sold under agreements to repurchase and other long-term borrowings		129,297		148,680		-		148,680		-
Subordinated notes payable to unconsolidated trusts		48,970		21,015		-		-		21,015
Accrued interest payable		1,370		1,370		-		1,370		-

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7. Investment Securities

The following tables summarize the amortized costs and estimated fair value of the securities portfolio at September 30, 2013 and December 31, 2012. The summary is divided into available for sale and held to maturity investment securities.

September 30, 2013 (In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available For Sale
Obligations of U.S. government-sponsored entities	$	98,239	$	163	$	2,315	$	96,087
Obligations of states and political subdivisions		130,441		2,266		2,169		130,538
Mortgage-backed securities – residential		348,935		6,282		3,468		351,749
Corporate debt securities		6,721		42		987		5,776
Mutual funds and equity securities		1,898		22		17		1,903
Total securities – available for sale	$	586,234	$	8,775	$	8,956	$	586,053
Held To Maturity
Obligations of states and political subdivisions	$	820	$	51	$	-	$	871

December 31, 2012 (In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available For Sale
Obligations of U.S. government-sponsored entities	$	75,945	$	216	$	66	$	76,095
Obligations of states and political subdivisions		113,986		4,943		174		118,755
Mortgage-backed securities – residential		360,099		10,596		256		370,439
Corporate debt securities		6,638		44		856		5,826
Mutual funds and equity securities		1,962		33		2		1,993
Total securities – available for sale	$	558,630	$	15,832	$	1,354	$	573,108
Held To Maturity
Obligations of states and political subdivisions	$	820	$	136	$	-	$	956

The amortized cost and estimated fair value of the debt securities portfolio at September 30, 2013, by contractual maturity, are detailed below. The summary is divided into available for sale and held to maturity securities. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Mutual funds and equity securities in the available for sale portfolio consist of investments attributed to the Company’s captive insurance subsidiary. These securities have no stated maturity and are not included in the maturity schedule that follows. Mortgage-backed securities are stated separately due to the nature of payment and prepayment characteristics, as principal is not due at a single date.

	Available For Sale				Held To Maturity
September 30, 2013 (In thousands)	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due in one year or less	$	2,681	$	2,694	$	-	$	-
Due after one year through five years		105,522		105,666		-		-
Due after five years through ten years		109,489		107,528		-		-
Due after ten years		17,709		16,513		820		871
Mortgage-backed securities		348,935		351,749		-		-
Total	$	584,336	$	584,150	$	820	$	871

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Gross realized gains and losses on the sale of available for sale investment securities were as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2013		2012		2013			2012
Gross realized gains	$	3	$	343	$	6		$	1,038
Gross realized losses		1		67		64			74
Net realized gain (loss)	$	2	$	276	$	(58	)	$	964

Investment securities with unrealized losses at September 30, 2013 and December 31, 2012 not recognized in income are presented in the tables below. The tables segregate investment securities that have been in a continuous unrealized loss position for less than twelve months from those that have been in a continuous unrealized loss position for twelve months or more. The tables also include the fair value of the related securities.

	Less than 12 Months				12 Months or More				Total
September 30, 2013 (In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Obligations of U.S. government-sponsored entities	$	76,817	$	2,315	$	-	$	-	$	76,817	$	2,315
Obligations of states and political subdivisions		57,780		1,891		3,135		278		60,915		2,169
Mortgage-backed securities – residential		116,427		2,894		12,336		574		128,763		3,468
Corporate debt securities		106		2		4,876		985		4,982		987
Mutual funds and equity securities		681		17		-		-		681		17
Total	$	251,811	$	7,119	$	20,347	$	1,837	$	272,158	$	8,956

	Less than 12 Months				12 Months or More				Total
December 31, 2012 (In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Obligations of U.S. government-sponsored entities	$	26,433	$	66	$	-	$	-	$	26,433	$	66
Obligations of states and political subdivisions		17,199		174		-		-		17,199		174
Mortgage-backed securities – residential		39,659		256		-		-		39,659		256
Corporate debt securities		-		-		4,994		856		4,994		856
Mutual funds and equity securities		299		2		-		-		299		2
Total	$	83,590	$	498	$	4,994	$	856	$	88,584	$	1,354

Unrealized losses included in the tables above have not been recognized in income since they have been identified as temporary. The Company evaluates investment securities for other-than-temporary impairment (“OTTI”) at least quarterly, and more frequently when economic or market conditions warrant. Many factors are considered, 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 effected by macroeconomic conditions, and (4) whether the Company has the intent to sell the security or more likely than not will be required to sell the security before its anticipated recovery. The assessment of whether an OTTI charge exists involves a high degree of subjectivity and judgment and is based on the information available to the Company at a point in time.

At September 30, 2013, the Company’s investment securities portfolio had gross unrealized losses of $9.0 million, an increase of $7.6 million from year-end 2012. Of the total gross unrealized losses at September 30, 2013, $1.8 million relates to investments that have been in a continuous loss position for 12 months or more. Unrealized losses on corporate debt securities and mortgage-backed securities make up $985 thousand and $574 thousand, respectively, of the unrealized loss on investment securities in a continuous loss position of 12 months or more.

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Corporate debt securities in the Company’s investment securities portfolio at September 30, 2013 include single-issuer trust preferred capital securities with a carrying value of $4.9 million. These securities were issued by a national and global financial services firm and purchased by the Company during 2007. The securities are currently performing and continue to be rated as investment grade by major rating agencies. The issuer of the securities announced in the first quarter of 2013 that it had passed stringent regulatory stress testing and received regulatory approval to both increase per share common dividend payments and increase its equity repurchase program. The Company does not intend to sell these securities nor does the Company believe it is likely that it will be required to sell these securities prior to their anticipated recovery. The Company believes these securities are not impaired due to reasons of credit quality or other factors, but rather the unrealized loss is primarily attributed to continuing uncertainties in both international and domestic economies and market volatility. The Company believes that it will collect all amounts due according to the contractual terms of these securities and that the fair values of these securities will continue to recover as they approach their maturity dates.

The Company attributes the unrealized losses in other sectors of its investment securities portfolio to changes in market interest rates and volatility. Market interest rates rose sharply during the second quarter of 2013 as measured by the yields on Treasury bonds, particularly for the five and ten year maturity periods. Investment securities with unrealized losses at September 30, 2013 are performing according to their contractual terms, and the Company does not expect to incur a loss on these securities unless they are sold prior to maturity. The Company does not have the intent to sell these securities and likely will not be required to sell these securities before their anticipated recovery. The Company does not consider any of the securities to be impaired due to reasons of credit quality or other factors.

8. Loans and Allowance for Loan Losses

Major classifications of loans outstanding are summarized as follows:

(In thousands)	September 30, 2013		December 31, 2012
Real Estate:
Real estate mortgage – construction and land development	$	106,870	$	102,454
Real estate mortgage – residential		371,292		368,762
Real estate mortgage – farmland and other commercial enterprises		418,690		425,477
Commercial:
Commercial and industrial		47,433		46,812
States and political subdivisions		22,849		21,472
Lease financing		1,268		2,732
Other		26,327		19,156
Consumer:
Secured		8,957		11,732
Unsecured		6,479		6,515
Total loans		1,010,165		1,005,112
Less unearned income		34		117
Total loans, net of unearned income	$	1,010,131	$	1,004,995

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Activity in the allowance for loan losses by portfolio segment was as follows for the periods indicated.

(In thousands)	Real Estate			Commercial			Consumer			Total
Three months ended September 30, 2013
Balance, beginning of period	$	20,240		$	2,177		$	526		$	22,943
Provision for loan losses		(528	)		(2	)		(56	)		(586	)
Recoveries		70			25			37			132
Loans charged off		(407	)		(98	)		(35	)		(540	)
Balance, end of period	$	19,375		$	2,102		$	472		$	21,949
Nine months ended September 30, 2013
Balance, beginning of period	$	22,254		$	1,513		$	678		$	24,445
Provision for loan losses		(2,028	)		615			(167	)		(1,580	)
Recoveries		254			122			187			563
Loans charged off		(1,105	)		(148	)		(226	)		(1,479	)
Balance, end of period	$	19,375		$	2,102		$	472		$	21,949

(In thousands)	Real Estate			Commercial			Consumer			Total
Three months ended September 30, 2012
Balance, beginning of period	$	24,221		$	2,137		$	755		$	27,113
Provision for loan losses		(1,114	)		591			267			(256	)
Recoveries		50			8			80			138
Loans charged off		(1,716	)		(36	)		(99	)		(1,851	)
Balance, end of period	$	21,441		$	2,700		$	1,003		$	25,144
Nine months ended September 30, 2012
Balance, beginning of period	$	23,538		$	3,508		$	1,218		$	28,264
Provision for loan losses		2,916			(790	)		(64	)		2,062
Recoveries		252			129			192			573
Loans charged off		(5,265	)		(147	)		(343	)		(5,755	)
Balance, end of period	$	21,441		$	2,700		$	1,003		$	25,144

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The following tables present individually impaired loans by class of loans for the dates indicated.

September 30, 2013 (In thousands)	Unpaid Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Allowance for Loan Losses Allocated
Real Estate
Real estate mortgage – construction and land development	$	18,422	$	10,952	$	4,701	$	15,653	$	921
Real estate mortgage – residential		12,554		2,626		9,805		12,431		1,557
Real estate mortgage – farmland and other commercial enterprises		33,285		12,574		20,628		33,202		1,617
Commercial
Commercial and industrial		911		-		915		915		823
Consumer
Secured		19		-		19		19		15
Unsecured		61		-		61		61		61
Total	$	65,252	$	26,152	$	36,129	$	62,281	$	4,994

December 31, 2102 (In thousands)	Unpaid Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Allowance for Loan Losses Allocated
Real Estate
Real estate mortgage – construction and land development	$	26,831	$	12,712	$	11,068	$	23,780	$	2,075
Real estate mortgage – residential		7,474		2,215		5,259		7,474		1,069
Real estate mortgage – farmland and other commercial enterprises		33,491		13,294		18,803		32,097		1,588
Commercial
Commercial and industrial		210		-		207		207		198
Consumer
Secured		21		-		21		21		17
Unsecured		309		-		310		310		196
Total	$	68,336	$	28,221	$	35,668	$	63,889	$	5,143

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Three Months Ended September 30, 2013 (In thousands)	Average		Interest Income Recognized		Cash Basis Interest Recognized
Real Estate
Real estate mortgage – construction and land development	$	16,815	$	128	$	109
Real estate mortgage – residential		11,799		94		105
Real estate mortgage – farmland and other commercial enterprises		33,925		329		318
Commercial
Commercial and industrial		1,037		4		4
Consumer
Secured		18		-		-
Unsecured		75		-		-
Total	$	63,669	$	555	$	536

Nine Months Ended September 30, 2013 (In thousands)	Average		Interest Income Recognized		Cash Basis Interest Recognized
Real Estate
Real estate mortgage – construction and land development	$	17,683	$	405	$	402
Real estate mortgage – residential		13,023		356		340
Real estate mortgage – farmland and other commercial enterprises		33,006		1,137		1,120
Commercial
Commercial and industrial		966		37		37
Consumer
Secured		20		1		1
Unsecured		167		6		6
Total	$	64,865	$	1,942	$	1,906

Three Months Ended September 30, 2012 (In thousands)	Average		Interest Income Recognized		Cash Basis Interest Recognized
Real Estate
Real estate mortgage – construction and land development	$	26,902	$	249	$	204
Real estate mortgage – residential		8,979		52		44
Real estate mortgage – farmland and other commercial enterprises		35,076		418		608
Commercial
Commercial and industrial		214		8		8
Consumer
Secured		22		-		-
Unsecured		374		8		7
Total	$	71,567	$	735	$	871

Nine Months Ended September 30, 2012 (In thousands)	Average		Interest Income Recognized		Cash Basis Interest Recognized
Real Estate
Real estate mortgage – construction and land development	$	37,921	$	630	$	573
Real estate mortgage – residential		14,744		308		298
Real estate mortgage – farmland and other commercial enterprises		38,967		1,419		1,437
Commercial
Commercial and industrial		426		22		22
Consumer
Secured		66		5		5
Unsecured		251		13		12
Total	$	92,375	$	2,397	$	2,347

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The following tables present the balance of the allowance for loan losses and the recorded investment in loans by portfolio segment based on impairment method as of September 30, 2013 and December 31, 2012.

September 30, 2013 (In thousands)	Real Estate		Commercial		Consumer		Total
Allowance for Loan Losses
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	4,095	$	823	$	76	$	4,994
Collectively evaluated for impairment		15,280		1,279		396		16,955
Total ending allowance balance	$	19,375	$	2,102	$	472	$	21,949
Loans
Loans individually evaluated for impairment	$	61,286	$	915	$	80	$	62,281
Loans collectively evaluated for impairment		835,566		96,928		15,356		947,850
Total ending loan balance, net of unearned income	$	896,852	$	97,843	$	15,436	$	1,010,131

December 31, 2012 (In thousands)	Real Estate		Commercial		Consumer		Total
Allowance for Loan Losses
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	4,732	$	198	$	213	$	5,143
Collectively evaluated for impairment		17,522		1,315		465		19,302
Total ending allowance balance	$	22,254	$	1,513	$	678	$	24,445
Loans
Loans individually evaluated for impairment	$	63,351	$	207	$	331	$	63,889
Loans collectively evaluated for impairment		833,342		89,848		17,916		941,106
Total ending loan balance, net of unearned income	$	896,693	$	90,055	$	18,247	$	1,004,995

The following tables present the recorded investment in nonperforming loans by class of loans as of September 30, 2013 and December 31, 2012.

September 30, 2013 (In thousands)	Nonaccrual		Restructured Loans		Loans Past Due 90 Days or More and Still Accruing
Real Estate:
Real estate mortgage – construction and land development	$	6,332	$	4,391	$	-
Real estate mortgage – residential		5,538		4,912		-
Real estate mortgage – farmland and other commercial enterprises		13,004		17,086		-
Commercial:
Commercial and industrial		138		-		-
Lease financing		29		-		-
Consumer:
Secured		22		8		-
Unsecured		-		38		-
Total	$	25,063	$	26,435	$	-

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December 31, 2012 (In thousands)	Nonaccrual		Restructured Loans		Loans Past Due 90 Days or More and Still Accruing
Real Estate:
Real estate mortgage – construction and land development	$	7,700	$	8,736	$	-
Real estate mortgage – residential		6,025		634		-
Real estate mortgage – farmland and other commercial enterprises		12,878		16,940		103
Commercial:
Commercial and industrial		649		-		-
Lease financing		53		-		-
Consumer:
Secured		9		-		-
Unsecured		94		39		-
Total	$	27,408	$	26,349	$	103

The Company has allocated $2.7 million and $2.9 million of specific reserves to customers whose loan terms have been modified in troubled debt restructurings and that are in compliance with those terms as of September 30, 2013 and December 31, 2012. The Company had no commitments to lend additional amounts to customers with outstanding loans that are classified as troubled debt restructurings at September 30, 2013 and December 31, 2012.

The Company had seven credits in 2013 that were modified as troubled debt restructurings. Six of these credits with an aggregate recorded investment of $331 thousand represent debt by borrowers discharged under Chapter 7 bankruptcy. The borrower in each case did not reaffirm their debt, and the release of personal liability by the court is deemed a concession. However, each borrower continues to make payments under the original terms of the loan agreement. The remaining restructuring consists of a credit secured by commercial real estate whereby the maturity date was extended 48 months.

During the first nine months of 2012, the Company had two credits that were modified as troubled debt restructurings. One restructuring includes a commercial real estate credit whereby the stated interest rate was reduced to 5.0% from 7.25% and repayment terms that include an initial six month interest only component. The other restructuring represents a residential real estate credit in which the stated interest rate on the loan was reduced to 4.125% from 6.0% and extending the due date by three months.

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The following tables present loans by class modified as troubled debt restructurings that occurred during the three and nine months ended September 30, 2013 and 2012.

(Dollars in thousands) Troubled Debt Restructurings:	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Three Months Ended September 30, 2013
Real Estate:
Real estate mortgage – farmland and other commercial enterprises		1	$	598	$	598
Consumer:
Secured		1		7		7
Total		2	$	605	$	605
Nine Months Ended September 30, 2013
Real Estate:
Real estate mortgage – residential		3	$	309	$	309
Real estate mortgage – farmland and other commercial enterprises		1		598		598
Commercial:
Commercial and industrial		1		13		13
Consumer:
Secured		2		9		9
Total		7	$	929	$	929

(Dollars in thousands) Troubled Debt Restructurings:	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Three Months Ended September 30, 2012
Real Estate:
Real estate mortgage – farmland and other commercial enterprises		1	$	8,796	$	8,717
Total		1	$	8,796	$	8,717
Nine Months Ended September 30, 2012
Real Estate:
Real estate mortgage – residential		1	$	72	$	72
Real estate mortgage – farmland and other commercial enterprises		1		8,796		8,717
Total		2	$	8,868	$	8,789

The troubled debt restructurings identified in the tables above increased the allowance for loan losses by $7 thousand and $30 thousand in the three and nine months ended September 30, 2013, respectively. Troubled debt restructurings increased the allowance for loan losses by $437 thousand and $442 thousand for the three and nine months ended September 30, 2012. There were no charge-offs related to loans restructured in 2013 and 2012.

For the nine months ended September 30, 2013, the Company had one restructured credit for which there was a payment default within twelve months following the modification. This credit is secured by residential real estate with an outstanding balance of $17 thousand. No charge-offs have been recorded for this credit. There were no payment defaults during the first nine months of 2012 for credits that were restructured during the previous twelve months.

The tables below present an age analysis of past due loans 30 days or more by class of loans as of the dates indicated. Past due loans that are also classified as nonaccrual are included in their respective past due category.

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September 30, 2013 (In thousands)	30-89 Days Past Due		90 Days or More Past Due		Total		Current		Total Loans
Real Estate:
Real estate mortgage – construction and land development	$	58	$	599	$	657	$	106,213	$	106,870
Real estate mortgage – residential		2,819		2,336		5,155		366,137		371,292
Real estate mortgage – farmland and other commercial enterprises		1,169		10,131		11,300		407,390		418,690
Commercial:
Commercial and industrial		-		53		53		47,380		47,433
States and political subdivisions		-		-		-		22,849		22,849
Lease financing, net		14		29		43		1,191		1,234
Other		93		-		93		26,234		26,327
Consumer:
Secured		53		7		60		8,897		8,957
Unsecured		68		-		68		6,411		6,479
Total	$	4,274	$	13,155	$	17,429	$	992,702	$	1,010,131

December 31, 2012 (In thousands)	30-89 Days Past Due		90 Days or More Past Due		Total		Current		Total Loans
Real Estate:
Real estate mortgage – construction and land development	$	908	$	1,361	$	2,269	$	100,185	$	102,454
Real estate mortgage – residential		2,303		2,500		4,803		363,959		368,762
Real estate mortgage – farmland and other commercial enterprises		1,990		10,724		12,714		412,763		425,477
Commercial:
Commercial and industrial		108		53		161		46,651		46,812
States and political subdivisions		-		-		-		21,472		21,472
Lease financing, net		1		53		54		2,561		2,615
Other		38		399		437		18,719		19,156
Consumer:
Secured		69		-		69		11,663		11,732
Unsecured		137		-		137		6,378		6,515
Total	$	5,554	$	15,090	$	20,644	$	984,351	$	1,004,995

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 and conditions. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis includes large-balance loans and non-homogeneous loans, such as commercial real estate and certain residential real estate loans. Loan rating grades, as described further below, are assigned based on a continuous process. The amount and adequacy of the allowance for loan loss is determined on a quarterly basis. The Company uses the following definitions for its 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 borrower’s repayment ability, weaken the collateral or inadequately protect the Company’s credit position at some future date. These credits pose elevated risk, but their weaknesses do not yet justify a substandard classification.

Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

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Doubtful. Loans classified as doubtful have all the weaknesses inherent of 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 which are analyzed individually as part of the above described process are considered to be pass rated loans, which are considered to have a low risk of loss. Based on the most recent analysis performed, the risk category of loans by class of loans is as follows for the dates indicated. Each of the following tables exclude immaterial amounts attributed to accrued interest receivable.

	Real Estate						Commercial
September 30, 2013 (In thousands)	Real Estate Mortgage –Construction and Land Development		Real Estate Mortgage –Residential		Real Estate Mortgage –Farmland and Other Commercial Enterprises		Commercial and Industrial		States and Political Subdivisions		Lease Financing, net		Other
Credit risk profile by internally assigned rating grades:
Pass	$	83,183	$	334,591	$	347,472	$	45,604	$	22,849	$	1,205	$	26,299
Special mention		6,282		14,925		29,307		351		-		-		-
Substandard		17,345		21,686		41,911		1,402		-		29		28
Doubtful		60		90		-		76		-		-		-
Total	$	106,870	$	371,292	$	418,690	$	47,433	$	22,849	$	1,234	$	26,327

	Real Estate						Commercial
December 31, 2012 (In thousands)	Real Estate Mortgage –Construction and Land Development		Real Estate Mortgage –Residential		Real Estate Mortgage –Farmland and Other Commercial Enterprises		Commercial and Industrial		States and Political Subdivisions		Lease Financing, net		Other
Credit risk profile by internally assigned rating grades:
Pass	$	68,721	$	328,214	$	348,918	$	41,527	$	21,472	$	2,615	$	18,592
Special mention		7,562		18,485		35,027		4,201		-		-		559
Substandard		26,171		21,984		41,532		1,008		-		-		5
Doubtful		-		79		-		76		-		-		-
Total	$	102,454	$	368,762	$	425,477	$	46,812	$	21,472	$	2,615	$	19,156

The Company considers the performance of the loan portfolio and its impact on the allowance for loan losses. For consumer loan classes, the Company evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity. The following table presents the consumer loans outstanding based on payment activity as of September 30, 2013 and December 31, 2012.

	September 30, 2013				December 31, 2012
	Consumer				Consumer
(In thousands)	Secured		Unsecured		Secured		Unsecured
Credit risk profile based on payment activity:
Performing	$	8,927	$	6,441	$	11,723	$	6,382
Nonperforming		30		38		9		133
Total	$	8,957	$	6,479	$	11,732	$	6,515

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9. Other Real Estate Owned

OREO was as follows as of the date indicated:

(In thousands)	September 30, 2013		December 31, 2012
Construction and land development	$	25,778	$	32,360
Residential real estate		2,868		4,605
Farmland and other commercial enterprises		13,015		15,597
Total	$	41,661	$	52,562

OREO activity for the nine months ended September 30, 2013 and 2012 was as follows:

Nine months ended September 30, (In thousands)	2013			2012
Beginning balance	$	52,562		$	38,157
Transfers from loans		5,589			21,914
Proceeds from sales		(12,695	)		(10,148	)
Loss on sales, net		(24	)		(241	)
Write downs and other decreases, net		(3,771	)		(2,202	)
Ending balance	$	41,661		$	47,480

10. Postretirement Medical Benefits

Prior to 2003, the Company provided lifetime medical and dental benefits upon retirement for certain employees meeting the eligibility requirements as of December 31, 1989 (Plan 1). During 2003, the Company implemented an additional postretirement health insurance program (Plan 2). Under Plan 2, any employee meeting the service requirement of 20 years of full time service to the Company and is at least age 55 years of age upon retirement is eligible to continue their health insurance coverage. Under both plans, retirees not yet eligible for Medicare have coverage identical to the coverage offered to active employees. Under both plans, Medicare-eligible retirees are provided with a Medicare Advantage plan. The Company pays 100% of the cost of Plan 1. The Company and the retirees each pay 50% of the cost under Plan 2. Both plans are unfunded.

The following disclosures of the net periodic benefit cost components of Plan 1 and Plan 2 were measured at January 1, 2013 and 2012.

	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2013		2012		2013		2012
Service cost	$	157	$	155	$	472	$	463
Interest cost		138		152		414		456
Amortization of transition obligation		-		24		-		76
Recognized prior service cost		65		65		193		193
Recognized net actuarial loss		-		14		-		42
Net periodic benefit cost	$	360	$	410	$	1,079	$	1,230

The Company expects benefit payments of $308 thousand for 2013, of which $64 thousand and $188 thousand have been made during the three and nine months ended September 30, 2013, respectively.

11. Regulatory Matters

The Company and its subsidiary banks are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements will initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the banks must meet specific capital guidelines that involve quantitative measures of the banks’ assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Company and its subsidiary banks’ capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

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The regulatory ratios of the consolidated Company and its subsidiary banks were as follows for the dates indicated:

	September 30, 2013									December 31, 2012
	Tier 1 Risk-based Capital1			Total Risk-based Capital1			Tier 1 Leverage2			Tier 1 Risk-based Capital1			Total Risk-based Capital1			Tier 1 Leverage2
Consolidated		18.57	%		19.82	%		11.80	%		18.27	%		19.53	%		11.24	%
Farmers Bank		17.99			19.25			10.04			17.94			19.20			9.68
United Bank		15.08			16.35			9.70			15.41			16.69			9.45
First Citizens		13.47			14.23			9.55			13.57			14.46			9.42
Citizens Northern		13.25			14.50			9.54			12.97			14.22			9.36

¹Tier 1 Risk-based and Total Risk-based Capital ratios are computed by dividing a bank’s Tier 1 or Total Capital, as defined by regulation, by a risk-weighted sum of the bank’s assets, with the risk weighting determined by general standards established by regulation. The safest assets (e.g., government obligations) are assigned a weighting of 0% with riskier assets receiving higher ratings (e.g., ordinary commercial loans are assigned a weighting of 100%).

²Tier 1 Leverage ratio is computed by dividing a bank’s Tier 1 Capital, as defined by regulation, by its total quarterly average assets.

Summary of Regulatory Agreements

Below is a summary of the regulatory agreements that the Parent Company and two of its subsidiary banks have entered into with their primary regulators. The agreement entered into during 2009 between Farmers Bank and its primary regulator was terminated in January 2013 as a result of satisfactory compliance.

Parent Company

Primarily due to the regulatory actions and capital requirements during 2009 at certain of the Company’s subsidiary banks (as discussed below), the Federal Reserve Bank of St. Louis (“FRB St. Louis”) and Kentucky Department of Financial Institutions (“KDFI”) proposed the Company enter into a Memorandum of Understanding (“Memorandum”). The Company’s board approved entry into the Memorandum at a regular board meeting during the fourth quarter of 2009. Pursuant to the Memorandum, the Company agreed that it would develop an acceptable capital plan to ensure that the consolidated organization remains well-capitalized and each of its subsidiary banks meet the capital requirements imposed by their regulator as summarized below.

The Company also agreed to reduce its common stock dividend in the fourth quarter of 2009 from $.25 per share down to $.10 per share and not make interest payments on the Company’s trust preferred securities or dividends on its common or preferred stock without prior approval from FRB St. Louis and KDFI. Representatives of the FRB St. Louis and KDFI have indicated that any such approval for the payment of dividends will be predicated on a demonstration of adequate, normalized earnings on the part of the Company’s subsidiaries sufficient to support quarterly payments on the Company’s trust preferred securities and quarterly dividends on the Company’s common and preferred stock.  While both regulatory agencies have granted approval of all subsequent quarterly Company requests to make interest payments on its trust preferred securities and dividends on its preferred stock, the Company has not (based on the assessment by Company management of both the Company’s capital position and the earnings of its subsidiaries) sought regulatory approval for the payment of common stock dividends since the fourth quarter of 2009.  Moreover, the Company will not pay any such dividends on its common stock in any subsequent quarter until the regulator’s assessment of the earnings of the Company’s subsidiaries, and the Company’s assessment of its capital position, both yield the conclusion that the payment of a Company common stock dividend is warranted. 

Other components in the regulatory order for the parent company include requesting and receiving regulatory approval for the payment of new salaries/bonuses or other compensation to insiders; assisting its subsidiary banks in addressing weaknesses identified in their reports of examinations; providing periodic reports detailing how it will meet its debt service obligations; and providing progress reports with its compliance with the regulatory Memorandum.

32

United Bank  

In November of 2009, the Federal Deposit Insurance Corporation (“FDIC”) and United Bank entered into a Cease and Desist Order (“C&D”) primarily as a result of its level of nonperforming assets.  The C&D was terminated in December 2011 coincident with the issuance of a Consent Order (“Consent Order”) entered into between the parties. The Consent Order is substantially the same as the C&D, with the primary exception being that United Bank must achieve and maintain a Tier 1 Leverage ratio of 9.0% and a Total Risk-based Capital ratio of 13.0% no later than March 31, 2012. 

Other components in the regulatory order include stricter oversight and reporting to its regulators in terms of complying with the Consent Order. It also includes an increase in the level of reporting by management to its board of directors of its financial results, budgeting, and liquidity analysis, as well as restricting the bank from extending additional credit to borrowers with credits classified as substandard, doubtful or special mention in the report of examination. There is also a requirement to obtain written consent prior to declaring or paying a dividend and to develop a written contingency plan if the bank is unable to meet the capital levels established in the Consent Order.

Citizens Northern  

The KDFI and the FDIC entered into a Memorandum with Citizens Northern on September 8, 2010.  The Memorandum was terminated July 7, 2013 upon the issuance of an updated Memorandum. The updated Memorandum contains many of the same provisions included in the terminated Memorandum, with a new requirement that Citizens Northern maintain a Tier 1 leverage ratio at or above 9.0%. In addition, the updated Memorandum requires having and retaining qualified management in the areas of loan administration and collection. It also requires Citizens Northern to address credit underwriting and administration weaknesses identified in the most recent examination of the bank by the KDFI and FDIC.

Other parts of the regulatory order include the development and documentation of plans for reducing problem loans, providing progress reports on compliance with the Memorandum, and for the development and implementation of a written profit plan and strategic plans. It also restricts the bank from extending additional credit to borrowers with credits classified as substandard, doubtful or special mention in the report of examination.

Farmers Bank 

In November of 2009, the KDFI and FRB St. Louis entered into a Memorandum with Farmers Bank.  The Memorandum was terminated in January 2013 following a joint examination by the KDFI and FRB St. Louis, which found satisfactory compliance with the terms of the Memorandum and overall improvement in financial condition.

Regulators continue to monitor the Company’s progress and compliance with the regulatory agreements through periodic on-site examinations, regular communications, and quarterly data analysis. At the Parent Company and at each of its bank subsidiaries, the Company believes it is adequately addressing all issues of the regulatory agreements to which it is subject. However, only the respective regulatory agencies can determine if compliance with the applicable regulatory agreements has been met. The Company believes that it and its subsidiary banks are in compliance with the requirements identified in the regulatory agreements.

The Parent Company maintains cash available to fund a certain amount of additional injections of capital to its bank subsidiaries as determined by management or if required by its regulators. If needed, further amounts in excess of available cash may be funded by future public or private sales of securities, although the Parent Company is currently under no directive by its regulators to raise any additional capital.

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

FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements with the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), under the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. Statements in this report that are not statements of historical fact are forward-looking statements. In general, forward-looking statements relate to a discussion of future financial results or projections, future economic performance, future operational plans and objectives, and statements regarding the underlying assumptions of such statements. Although management of Farmers Capital Bank Corporation (the “Company” or “Parent Company”) believes that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore, there can be no assurance that the forward-looking statements included herein will prove to be accurate.

Various risks and uncertainties may cause actual results to differ materially from those indicated by the Company’s forward-looking statements. In addition to the risks described under Part 1, Item 1A “Risk Factors” in the Company’s most recent annual report on Form 10-K, factors that could cause actual results to differ from the results discussed in the forward-looking statements include, but are not limited to: economic conditions (both generally and more specifically in the markets in which the Company and its subsidiaries operate) and lower interest margins; competition for the Company’s customers from other providers of financial services; deposit outflows or reduced demand for financial services and loan products; government legislation, regulation, and changes in monetary and fiscal policies (which changes from time to time and over which the Company has no control); changes in interest rates; changes in prepayment speeds of loans or investment securities; inflation; material unforeseen changes in the liquidity, results of operations, or financial condition of the Company’s customers; changes in the level of non-performing assets and charge-offs; changes in the number of common shares outstanding; the capability of the Company to successfully enter into a definitive agreement for and close anticipated transactions; unexpected claims or litigation against the Company; technological or operational difficulties; the impact of new accounting pronouncements and changes in policies and practices that may be adopted by regulatory agencies; acts of war or terrorism; the ability of the parent company to receive dividends from its subsidiaries; the impact of larger or similar financial institutions encountering difficulties, which may adversely affect the banking industry or the Company; the Company or its subsidiary banks’ ability to maintain required capital levels and adequate funding sources and liquidity; and other risks or uncertainties detailed in the Company’s filings with the Securities and Exchange Commission, all of which are difficult to predict and many of which are beyond the control of the Company.

The Company’s forward-looking statements are based on information available at the time such statements are made. The Company expressly disclaims any intent or obligation to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events, or other changes.

34

RESULTS OF OPERATIONS

Third Quarter 2013 Compared to Third Quarter 2012

The Company reported net income of $3.0 million for the quarter ended September 30, 2013, a decrease of $56 thousand or 1.8% compared to $3.1 million for the third quarter of 2012. On a per common share basis, net income was $.34 and $.35 for the current and year-ago quarters, respectively. This represents a decrease of $.01 or 2.9%. Selected income statement amounts and related data are presented in the table below.

(In thousands except per share data)
Three Months Ended September 30,	2013			2012			Increase (Decrease)
Interest income	$	16,563		$	17,578		$	(1,015	)
Interest expense		2,953			4,511			(1,558	)
Net interest income		13,610			13,067			543
Provision for loan losses		(586	)		(256	)		(330	)
Net interest income after provision for loan losses		14,196			13,323			873
Noninterest income		5,678			6,166			(488	)
Noninterest expenses		15,984			15,347			637
Income before income taxes		3,890			4,142			(252	)
Income tax expense		855			1,051			(196	)
Net income	$	3,035		$	3,091		$	(56	)
Less preferred stock dividends and discount accretion		489			481			8
Net income available to common shareholders	$	2,546		$	2,610		$	(64	)
Basic and diluted net income per common share	$	.34		$	.35		$	(.01	)
Weighted average common shares outstanding – basic and diluted		7,475			7,461			14
Return on average assets		.67	%		.66	%	1 bp
Return on average equity		7.33	%		7.38	%	(5) bp
bp = basis points.

Net Interest Income

The overall interest rate environment at September 30, 2013, as measured by the Treasury yield curve, remains at low levels in historical terms despite a spike in yields during the second quarter particularly for the five and ten year maturity periods. Yields were relatively unchanged during the current quarter with the exception of the 10 and 30 year maturity periods, which increased 12 and 19 basis points, respectively. At September 30, 2013, the short-term federal funds target interest rate remained between zero and 0.25%, which is unchanged since December 2008. The Federal Reserve Board has indicated an objective of holding short-term interest rates at exceptionally low levels at least as long as the unemployment rate remains above 6.5% and inflation remains within its long term goals. The national unemployment rate was 7.2% at the end of the third quarter 2013. The near historical low rate environment makes managing the Company’s net interest margin challenging.

Net interest income was $13.6 million for the current quarter, an increase of $543 thousand or 4.2% compared to $13.1 million for the prior-year third quarter. The improvement was made up of lower interest expense of $1.6 million or 34.5%, partially offset by a decrease in interest income of $1.0 million or 5.8%. The Company’s overall cost of funds was 0.87% for the current quarter compared to 1.26% from a year ago. The decrease to interest income and interest expense is attributed to both rate and volume declines of interest earning assets and interest paying liabilities. Rate and volume declines are the result of an overall slow growing economy and related competitive pressures combined with the Company’s strategy of being more selective in pricing its loans and deposits in an effort to improve credit quality, net interest margin, overall profitability, and capital position. The Company is generally earning and paying less interest from its earning assets and funding sources as the average rates earned and paid have decreased. This includes repricing of variable and floating rate assets and liabilities that have reset to overall lower amounts since their previous repricing date as well as activity related to new earning assets and funding sources in a low interest rate environment. In periods when loan demand is low, available funds are invested in lower yielding investment securities or cash equivalents.

35

Interest income and interest expense in nearly all categories of the Company’s earning assets and interest paying liabilities have declined in the quarterly comparison. The $1.0 million decrease from interest income in the comparison is primarily made up of lower interest from loans and investment securities of $570 thousand or 4.1% and $450 thousand or 12.3%, respectively. The decrease in interest income from loans was driven by both a lower average outstanding balance of $29.0 million or 2.8% and an 11 basis point decrease in the average rate earned to 5.3% from 5.4%. Average loans have decreased primarily from a lack of high quality loan demand.

Interest income on taxable investment securities decreased $506 thousand or 16.4% due to both a lower average balance outstanding of $63.0 million or 11.8% and a 12 basis point decrease in yield. Average taxable investment securities have decreased as a result of a decline in long-term borrowings and deposits. Proceeds received from maturing or sold investment securities not needed to fund higher-earning loans have either been reinvested more into nontaxable investment securities or used to manage liquidity, such as for deposit outflows or repayment of long-term debt obligations. Interest income from nontaxable investment securities increased $56 thousand or 9.8% due mainly to an increase in volume of $19.9 million or 21.4%. While the average yield on nontaxable investments decreased in the comparison, average balances have increased as the related tax equivalent yields are more attractive as well as fitting within overall asset/liability management strategies.

The $1.6 million decrease in interest expense resulted from a reduction of interest on long-term borrowings and deposits of $837 thousand or 35.7% and $718 thousand or 33.5%, which lowered overall cost of funds to 0.87%. The decrease in interest on long-term borrowings is due to a $53.2 million or 23.2% lower average balance outstanding and a 67 basis point decrease in the average rate paid. The decrease in the average balance reflects a $50.0 million principal repayment during the fourth quarter of 2012 related to the Company’s 2007 balance sheet leverage transaction. The average rate paid decreased mainly due to the repricing of $23.2 million of 6.60% fixed rate borrowings to a floating interest rate of three-month LIBOR plus 132 basis points, which occurred during the fourth quarter of 2012. The interest rate for this borrowing as of the last determination date during the quarter was 1.59%.

The $718 thousand decrease in interest expense on deposits is due to lower interest on time deposits of $726 thousand or 37.7%, which was driven downward as both the rates paid and volume have declined. The Company has repriced higher-rate maturing time deposits downward to lower market rates or allowed them to mature without renewal, as liquidity has been adequate. The average rate paid on time deposits was 0.95% and 1.3% for the current and year-ago periods, respectively. Average outstanding balances of time deposits were $499 million for the current quarter, a decrease of $74.8 million or 13.0% compared to a year earlier.

The net interest margin on a taxable equivalent basis increased 23 basis points to 3.36% for the current quarter compared to 3.13% for the same quarter of 2012. The increase in net interest margin was driven by a 28 basis point increase in the spread between the average rate earned on earning assets and the average rate paid on interest bearing liabilities to 3.19% from 2.91%. The increase in spread is attributed to a 39 basis point decrease in the overall cost of funds, which more than offset an 11 basis point decline in the overall yield on earning assets. The Company expects its net interest margin to remain relatively flat or trend downward in the near term according to internal modeling using expectations about future market interest rates, the maturity structure of the Company’s earning assets and liabilities, and other factors. Future results could be significantly different than expectations.

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The following tables present an analysis of net interest income for the quarterly periods ended September 30.

Distribution of Assets, Liabilities and Shareholders’ Equity: Interest Rates and Interest Differential

Three Months Ended September 30,	2013									2012
(In thousands)	Average Balance			Interest			Average Rate			Average Balance			Interest			Average Rate
Earning Assets
Investment securities
Taxable	$	469,585		$	2,578			2.18	%	$	532,577		$	3,084			2.30	%
Nontaxable1		112,494			932			3.29			92,634			843			3.62
Interest bearing deposits in banks, federal funds sold and securities purchased under agreements to resell		73,305			43			.23			64,181			38			.24
Loans1,2,3		1,003,905			13,433			5.31			1,032,914			14,073			5.42
Total earning assets		1,659,289		$	16,986			4.06	%		1,722,306		$	18,038			4.17	%
Allowance for loan losses		(22,650	)								(26,806	)
Total earning assets, net of allowance for loan losses		1,636,639									1,695,500
Nonearning Assets
Cash and due from banks		22,483									25,543
Premises and equipment, net		36,433									37,386
Other assets		109,271									96,380
Total assets	$	1,804,826								$	1,854,809
Interest Bearing Liabilities
Deposits
Interest bearing demand	$	305,989		$	53			.07	%	$	277,654		$	58			.08	%
Savings		339,660			170			.20			316,077			157			.20
Time		499,207			1,200			.95			574,044			1,926			1.33
Federal funds purchased and other short-term borrowings		30,768			21			.27			24,158			24			.40
Securities sold under agreements to repurchase and other long-term borrowings		176,149			1,509			3.40			229,380			2,346			4.07
Total interest bearing liabilities		1,351,773		$	2,953			.87	%		1,421,313		$	4,511			1.26	%
Noninterest Bearing Liabilities
Demand deposits		259,678									240,120
Other liabilities		29,121									26,654
Total liabilities		1,640,572									1,688,087
Shareholders’ equity		164,254									166,722
Total liabilities and shareholders’ equity	$	1,804,826								$	1,854,809
Net interest income					14,033									13,527
TE basis adjustment					(423	)								(460	)
Net interest income				$	13,610								$	13,067
Net interest spread								3.19	%								2.91	%
Impact of noninterest bearing sources of funds								.17									.22
Net interest margin								3.36	%								3.13	%

¹Income and yield stated at a fully tax equivalent basis using the marginal corporate Federal tax rate of 35%.

²Loan balances include principal balances on nonaccrual loans.

³Loan fees included in interest income amounted to $281 thousand and $235 thousand in 2013 and 2012, respectively.

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Analysis of Changes in Net Interest Income (tax equivalent basis)

(In thousands)	Variance			Variance Attributed to
Three Months Ended September 30,	2013/20121			Volume			Rate
Interest Income
Taxable investment securities	$	(506	)	$	(351	)	$	(155	)
Nontaxable investment securities2		89			492			(403	)
Interest bearing deposits in banks, federal funds sold and securities purchased under agreements to resell		5			13			(8	)
Loans2		(640	)		(372	)		(268	)
Total interest income		(1,052	)		(218	)		(834	)
Interest Expense
Interest bearing demand deposits		(5	)		23			(28	)
Savings deposits		13			13			-
Time deposits		(726	)		(227	)		(499	)
Federal funds purchased and other short-term borrowings		(3	)		27			(30	)
Securities sold under agreements to repurchase and other long-term borrowings		(837	)		(490	)		(347	)
Total interest expense		(1,558	)		(654	)		(904	)
Net interest income	$	506		$	436		$	70
Percentage change		100.0	%		86.2	%		13.8	%

¹The changes that are not solely due to rate or volume are allocated on a percentage basis using the absolute values of rate and volume variances as a basis for allocation.

²Income stated at fully tax equivalent basis using the marginal corporate Federal tax rate of 35%.

Provision for Loan Losses

The provision for loan losses represents charges (or credits) to earnings that are necessary to maintain an allowance for loan losses at an adequate level to cover credit losses specifically identified in the loan portfolio, as well as management’s best estimate of incurred probable loan losses in the remainder of the portfolio at the balance sheet date. The Company’s loan quality, while showing signs of improvement, has been negatively impacted by the lingering effects of the downturn of the overall economy and financial markets that began in late 2007 and more significantly during 2008 and which has not fully rebounded. This has led to declines in real estate values and deterioration in the financial condition of many of the Company’s borrowers, particularly borrowers in the commercial and real estate development industry. Declining real estate values resulted in loans becoming under collateralized, which has elevated nonperforming loans, net charge-offs, and the provision for loan losses in recent years, particularly toward the earlier part of the economic downturn. While the Company is experiencing improvement in overall credit quality, it has been necessary to lower the loan quality ratings on certain commercial and real estate development credits throughout the period of the economic downturn.

The Company recorded a credit to the provision for loan losses in the amount of $586 thousand in the third quarter of 2013, which represents an increase of $330 thousand or 129% compared to a credit of $256 thousand for the prior year. The allowance for loan losses as a percentage of outstanding loans (net of unearned income) was 2.17% at September 30, 2013 compared to 2.43% and 2.47% at year-end 2012 and September 30, 2102, respectively. The lower provision for loan losses is attributed to improving trends in the credit quality of the loan portfolio, an overall smaller loan portfolio, and an improvement in historical loss rates. Further information about improvements in the Company’s overall credit quality is included under the captions “Allowance for Loan Losses” and “Nonperforming Loans” that follows.

Net charge-offs were $408 thousand for the current quarter, a decrease of $1.3 million or 76.2% when compared to $1.7 million a year ago. On an annualized basis, quarterly net charge-offs were 0.16% of average loans outstanding for the current quarter compared to 0.66% for the same quarter a year earlier.

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Noninterest Income

The components of noninterest income are as follows for the periods indicated:

Three Months Ended September 30, (In thousands)	2013		2012		Increase (Decrease)
Service charges and fees on deposits	$	2,116	$	2,062	$	54
Allotment processing fees		1,217		1,304		(87	)
Other service charges, commissions, and fees		1,282		1,104		178
Trust income		497		469		28
Investment securities gains, net		2		276		(274	)
Gain on sale of mortgage loans, net		236		603		(367	)
Income from company-owned life insurance		244		301		(57	)
Other		84		47		37
Total noninterest income	$	5,678	$	6,166	$	(488	)

The $488 thousand or 7.9% decrease in noninterest income was driven mainly by a lower net gain from the sale of mortgage loans and investment securities of $367 thousand or 60.9% and $274 thousand or 99.3%, respectively, partially offset by higher non-deposit service charges, commissions, and fees of $178 thousand or 16.1%.

Net gains from the sale of mortgage loans decreased in the comparison as a result of a decline in sales volume of $8.7 million or 40.6%. The decrease in sales volume is attributed to higher market interest rates compared to a year ago which has slowed the demand for mortgage lending, combined with an upward spike in sales activity in the prior year. The prior year activity was fueled by an overall low interest rate environment, but which showed a temporary upward movement in rates that prompted many borrowers to refinance or purchase a home in anticipation that rates would rise further in the near term.

The net gain from the sale of investment securities decreased due to lower sales activity in the current period. Investment securities are sold at intermittent intervals based on current asset/liability strategies and the related net gain or loss fluctuates accordingly. Other service charges, commissions, and fees are up primarily due to an increase related to interchanges fees.

Noninterest Expense

The components of noninterest expense are as follows for the periods indicated:

Three Months Ended September 30, (In thousands)	2013		2012		Increase (Decrease)
Salaries and employee benefits	$	7,229	$	7,019	$	210
Occupancy expenses, net		1,247		1,235		12
Equipment expenses		619		576		43
Data processing and communication expense		929		1,059		(130	)
Bank franchise tax		603		605		(2	)
Amortization of intangibles		135		254		(119	)
Deposit insurance expense		559		667		(108	)
Other real estate expenses, net		2,404		1,531		873
Legal expenses		209		251		(42	)
Other		2,050		2,150		(100	)
Total noninterest expense	$	15,984	$	15,347	$	637

The $637 thousand or 4.2% increase in noninterest expense was primarily driven by higher expenses related to other real estate owned of $873 thousand or 57.0%. These expenses were partially offset by lower data processing and communication expense of $130 thousand or 12.3%, amortization of intangible assets of $119 thousand or 46.9%, and deposit insurance expense of $108 thousand or 16.2%.

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The increase in net other real estate expenses is attributed mainly to higher impairment charges of $682 thousand or 64.8%. Other real estate expenses for the quarter also include a $169 thousand increase in the net loss on the sale of repossessed properties. The Company had a single real estate construction property where in the current quarter it sold units with a carrying amount of $436 thousand at an aggregate loss of $204 thousand. This development was subsequently written down $700 thousand to its estimated fair value less estimated costs to sell, resulting in a carrying value of $4.1 million at September 30, 2013.

The decrease in data processing and communication expense is mainly due to cost savings initiated in 2012 to reduce debit card processing expenses. The decrease in amortization of intangible assets is attributed to actuarial determined reductions related to core deposit and customer relationship intangible assets arising from previous business acquisitions. Deposit insurance expense declined mainly from the improved risk rating by the Federal Deposit Insurance Corporation (“FDIC”) of one of the Company’s bank subsidiaries. The improved rating reduced the assessment rate applicable in determining the amount payable for deposit insurance.

Income Taxes

Income tax expense was $855 thousand for the current quarter, a decrease of $196 thousand or 18.6% compared to $1.1 million for the same quarter of 2012. The effective income tax rates were 22.0% and 25.4% for the current and year-ago quarters, respectively. The nontaxable portion of total revenues has increased more in proportion to taxable revenues. 

First Nine Months of 2013 Compared to First Nine Months of 2012

Net income was $10.4 million for the first nine months of 2013, an increase of $827 thousand or 8.7% compared with net income of $9.5 million for 2012. On a per common share basis, net income was $1.19 for the current nine months, an increase of $.10 or 9.2% compared to $1.09 for a year earlier. Selected income statement amounts and related data are presented in the table below.

(In thousands except per share data)
Nine Months Ended September 30,	2013			2012			Increase (Decrease)
Interest income	$	49,936		$	54,075		$	(4,139	)
Interest expense		9,157			14,434			(5,277	)
Net interest income		40,779			39,641			1,138
Provision for loan losses		(1,580	)		2,062			(3,642	)
Net interest income after provision for loan losses		42,359			37,579			4,780
Noninterest income		16,530			18,606			(2,076	)
Noninterest expenses		45,215			44,341			874
Income before income taxes		13,674			11,844			1,830
Income tax expense		3,300			2,297			1,003
Net income	$	10,374		$	9,547		$	827
Less preferred stock dividends and discount accretion		1,461			1,439			22
Net income available to common shareholders	$	8,913		$	8,108		$	805
Basic and diluted net income per common share	$	1.19		$	1.09		$	.10
Weighted average common shares outstanding – basic and diluted		7,473			7,454			19
Return on average assets		.77	%		.68	%	9 bp
Return on average equity		8.25	%		7.82	%	43 bp
bp = basis points.

Net Interest Income

Net interest income was $40.8 million for the first nine months of 2013, an increase of $1.1 million or 2.9% compared to $39.6 million for the first nine months of the prior year. The improvement was made up of lower interest expense of $5.3 million or 36.6%, partially offset by a decrease in interest income of $4.1 million or 7.7%. The Company’s overall cost of funds decreased to 0.90% compared to 1.33% for the prior year. Similar to the quarterly comparison, the decrease to interest income and interest expense is attributed to both rate and volume declines of interest earning assets and interest paying liabilities. Rate and volume declines are the result of an overall sluggish economy and competitive pressures combined with the Company’s strategy of being more selective in pricing its loans and deposits in an effort to improve credit quality, net interest margin, overall profitability, and capital position. In general, the Company is earning and paying less interest from its earning assets and funding sources as average rates earned and paid have decreased. This includes repricing of variable and floating rate assets and liabilities that have reset to overall lower amounts since their previous repricing date as well as activity related to new earning assets and funding sources in a low interest rate environment. In periods of low loan demand, available funds are invested in lower yielding investment securities or cash equivalents.

40

Nearly all of the Company’s interest income and interest expense categories have declined in the nine-month comparison. The $4.1 million decrease from interest income is primarily made up of lower interest from investment securities and loans of $2.2 million or 19.0% and $1.9 million or 4.6%, respectively. Interest income on taxable investment securities decreased $2.4 million or 24.3% due to both a 32 basis point decrease in yield and lower average balances outstanding of $70.0 million or 12.9%. Average taxable investment securities decreased from a year ago mainly due to a decline in long-term borrowings and deposits. Proceeds received from maturing or sold investment securities not needed to fund higher-earning loans have either been reinvested into nontaxable investment securities or used to manage liquidity, such as for deposit outflows or repayment of long-term debt obligations. A higher proportion of amounts reinvested into securities have been directed to nontaxable issues. Interest income from nontaxable investment securities increased $224 thousand or 13.5% due to higher volume. While the average yield on nontaxable investments decreased in the comparison, average balances have increased as the related tax equivalent yields are more attractive as well as fitting within overall asset/liability management strategies.

The decrease in interest income from loans was driven primarily by lower average balances outstanding of $37.0 million or 3.5%, primarily from a lack of high quality loan demand. The average rate earned on loans decreased eight basis points to 5.4%, which also contributed to the decrease in interest income to a lesser extent.

The $5.3 million decrease in interest expense is attributed to lower interest expense on long-term borrowings and deposits of $2.6 million or 36.3% and $2.7 million or 37.0%, respectively, which reduced the overall cost of funds to 0.90%. The decrease in interest on long-term borrowings is due to the combination of a $54.2 million or 23.5% lower average balance outstanding and a 68 basis point decrease in the average rate paid. The decrease in the average balance was driven by a $50.0 million principal repayment during the fourth quarter of 2012 related to the Company’s 2007 balance sheet leverage transaction. The average rate paid on long-term borrowings decreased in the comparison mainly due to the repricing of $23.2 million of 6.60% fixed rate borrowings to a floating interest rate of three-month LIBOR plus 132 basis points, which occurred during the fourth quarter of 2012. The interest rate for this borrowing as of the last determination date in the period was 1.59%.

The decrease in interest expense on deposits is due to a $2.7 million or 40.7% decline in interest on time deposits, which reflects both volume and rate declines. The Company has repriced higher-rate maturing time deposits downward to lower current market rates or allowed them to mature without renewal, as liquidity has been adequate. Average outstanding balances of time deposits were $514 million for the current period, a decrease of $87.4 million or 14.5% compared to a year ago. The average rate paid on time deposits was 1.0% and 1.5% for the current and prior year periods, respectively.

The net interest margin on a taxable equivalent basis was 3.40% for the first nine months of 2013, an increase of 24 basis points from 3.16% for the same period of 2012. The spread between the average rate earned on earning assets and the average rate paid on interest bearing liabilities was 3.24% and 2.94% for 2013 and 2012, respectively. The increase in spread was driven by a 43 basis point decrease in the overall cost of funds, which more than offset a 13 basis point decline in the overall yield on earning assets. The Company expects its net interest margin to remain relatively flat or trend downward in the near term according to internal modeling using expectations about future market interest rates, the maturity structure of the Company’s earning assets and liabilities, and other factors. Future results could be significantly different than expectations.

41

The following tables present an analysis of net interest income for the nine months ended September 30.

Distribution of Assets, Liabilities and Shareholders’ Equity: Interest Rates and Interest Differential

Nine Months Ended September 30,	2013									2012
(In thousands)	Average Balance			Interest			Average Rate			Average Balance			Interest			Average Rate
Earning Assets
Investment securities
Taxable	$	472,503		$	7,599			2.15	%	$	542,536		$	10,044			2.47	%
Nontaxable1		108,200			2,796			3.45			86,828			2,444			3.76
Interest bearing deposits in banks, federal funds sold and securities purchased under agreements to resell		66,851			117			.23			59,500			102			.23
Loans1,2,3		1,007,309			40,684			5.40			1,044,271			42,849			5.48
Total earning assets		1,654,863		$	51,196			4.14	%		1,733,135		$	55,439			4.27	%
Allowance for loan losses		(23,461	)								(27,400	)
Total earning assets, net of allowance for loan losses		1,631,402									1,705,735
Nonearning Assets
Cash and due from banks		23,336									24,814
Premises and equipment, net		36,266									37,968
Other assets		109,309									98,211
Total assets	$	1,800,313								$	1,866,728
Interest Bearing Liabilities
Deposits
Interest bearing demand	$	305,339		$	166			.07	%	$	279,357		$	183			.09	%
Savings		330,396			485			.20			308,452			466			.20
Time		513,771			3,959			1.03			601,147			6,671			1.48
Federal funds purchased and other short-term borrowings		28,521			60			.28			26,010			74			.38
Securities sold under agreements to repurchase and other long-term borrowings		176,397			4,487			3.40			230,556			7,040			4.08
Total interest bearing liabilities		1,354,424		$	9,157			.90	%		1,445,522		$	14,434			1.33	%
Noninterest Bearing Liabilities
Demand deposits		249,960									232,474
Other liabilities		27,730									25,591
Total liabilities		1,632,114									1,703,587
Shareholders’ equity		168,199									163,141
Total liabilities and shareholders’ equity	$	1,800,313								$	1,866,728
Net interest income					42,039									41,005
TE basis adjustment					(1,260	)								(1,364	)
Net interest income				$	40,779								$	39,641
Net interest spread								3.24	%								2.94	%
Impact of noninterest bearing sources of funds								.16									.22
Net interest margin								3.40	%								3.16	%

¹Income and yield stated at a fully tax equivalent basis using the marginal corporate Federal tax rate of 35%.

²Loan balances include principal balances on nonaccrual loans.

³Loan fees included in interest income amounted to $1.0 million and $931 thousand in 2013 and 2012, respectively.

42

Analysis of Changes in Net Interest Income (tax equivalent basis)

(In thousands)	Variance			Variance Attributed to
Nine Months Ended September 30,	2013/20121			Volume			Rate
Interest Income
Taxable investment securities	$	(2,445	)	$	(1,220	)	$	(1,225	)
Nontaxable investment securities2		352			667			(315	)
Interest bearing deposits in banks, federal funds sold and securities purchased under agreements to resell		15			15			-
Loans2		(2,165	)		(1,533	)		(632	)
Total interest income		(4,243	)		(2,071	)		(2,172	)
Interest Expense
Interest bearing demand deposits		(17	)		28			(45	)
Savings deposits		19			19			-
Time deposits		(2,712	)		(877	)		(1,835	)
Federal funds purchased and other short term borrowings		(14	)		11			(25	)
Securities sold under agreements to repurchase and other long-term borrowings		(2,553	)		(1,493	)		(1,060	)
Total interest expense		(5,277	)		(2,312	)		(2,965	)
Net interest income	$	1,034		$	241		$	793
Percentage change		100.0	%		23.3	%		76.7	%

¹The changes that are not solely due to rate or volume are allocated on a percentage basis using the absolute values of rate and volume variances as a basis for allocation.

²Income stated at fully tax equivalent basis using the marginal corporate Federal tax rate of 35%.

Provision for Loan Losses

The Company recorded a credit to the provision for loan losses in the amount of $1.6 million for the current nine months compared to a charge of $2.1 million for the prior year. The allowance for loan losses as a percentage of outstanding loans (net of unearned income) was 2.17% at September 30, 2013 compared to 2.43% and 2.47% at year-end 2012 and September 30, 2102, respectively. The decrease in the provision for loan losses is attributed to improving trends in the credit quality of the loan portfolio, improving historical loss rates, and a smaller loan portfolio. Further information about improvements in the Company’s overall credit quality is included under the captions “Allowance for Loan Losses” and “Nonperforming Loans” that follows.

Net charge-offs were $916 thousand for the current nine months, a decrease of $4.3 million or 82.3% compared to $5.2 million for 2012. On an annualized basis, net charge-offs were 0.12% of average loans outstanding for the current nine months compared to 0.66% for the prior year.

Noninterest Income

The components of noninterest income are as follows for the periods indicated:

Nine Months Ended September 30, (In thousands)	2013			2012		Increase (Decrease)
Service charges and fees on deposits	$	6,094		$	6,080	$	14
Allotment processing fees		3,724			3,932		(208	)
Other service charges, commissions, and fees		3,738			3,332		406
Trust income		1,451			1,404		47
Investment securities (losses) gains, net		(58	)		964		(1,022	)
Gain on sale of mortgage loans, net		867			1,364		(497	)
Income from company-owned life insurance		716			1,289		(573	)
Other		(2	)		241		(243	)
Total noninterest income	$	16,530		$	18,606	$	(2,076	)

43

The $208 thousand or 5.3% decrease in allotment processing fees is attributed primarily to volume declines, due in part to reductions in military troop levels and deployments. Other service charges, commissions, and fees are up $406 thousand or 12.2% primarily due to an increase related to interchange fees and loan servicing of $230 thousand or 13.2% and $68 thousand or 24.2%, respectively.

For investment securities, the net loss for the current year is mainly attributed to a single municipal bond where the issuer participated in the Build America Bond (“BAB”) program. BAB is a federal government program whereby the U.S. Treasury pays a direct subsidy to the issuer to support interest costs of qualified bonds. Federal budget sequestration events during 2013 reduced the subsidy to the issuer, triggering an extraordinary redemption feature related to such bonds. This bond had a carrying value in excess of its par value due to the unamortized premium. The issuer redeemed the bond at par value, which resulted in a loss. Given the current interest rate environment, the Company does not expect any of its remaining investments that are part of the BAB program to be called or refinanced prior to maturity that will result in a loss. The net gain recorded in the prior year is attributed to normal asset/liability management strategies, whereby the Company periodically sells investment securities to lock in gains, increase yield, restructure expected future cash flows, and/or enhance its capital position.

Net gains from the sale of mortgage loans decreased $497 thousand or 36.4% due to a decline in sales volume of $16.7 million or 28.4%. The decrease in sales volume is attributed to higher market interest rates in the current period, which has slowed the demand for mortgage lending, combined with an upward spike in sales activity of the prior year. The prior year activity was fueled by an overall low interest rate environment, but which showed a temporary upward movement in rates that prompted many borrowers to refinance or purchase a home in anticipation that rates would further rise.

Income from company-owned life insurance decreased mainly because the prior year includes a nonrecurring gain in the amount of $529 thousand related to death benefit proceeds. The $243 thousand decrease in other income is mainly due to lower data processing fees of $139 thousand or 64.7% and a higher loss related to the Company’s equity interest in a low income tax credit partnership of $81 thousand or 47.8%. The decline in data processing fees is attributed to the winding down of the depository services contract with the Commonwealth of Kentucky, which terminated in June 2012.

Noninterest Expense

The components of noninterest expense are as follows for the periods indicated:

Nine Months Ended September 30, (In thousands)	2013		2012		Increase (Decrease)
Salaries and employee benefits	$	21,784	$	20,999	$	785
Occupancy expenses, net		3,578		3,606		(28	)
Equipment expenses		1,760		1,757		3
Data processing and communication expense		2,972		3,211		(239	)
Bank franchise tax		1,803		1,793		10
Amortization of intangibles		405		761		(356	)
Deposit insurance expense		1,698		2,039		(341	)
Other real estate expenses, net		4,781		3,197		1,584
Legal expenses		575		989		(414	)
Other		5,859		5,989		(130	)
Total noninterest expense	$	45,215	$	44,341	$	874

The increase in salaries and employee benefits includes higher benefit expense of $400 thousand or 11.0%, which was mainly driven by higher health insurance claims related to the Company’s self-funded insurance plan. The $239 thousand or 7.4% decrease in data processing and communication expenses is attributed both to cost savings related to an agreement the Company announced during the first quarter of 2012 to reduce its debit card processing expenses and to cost reductions associated with the termination of the Company’s depository services contract with the Commonwealth of Kentucky.

Amortization of intangible assets declined as a result of actuarial determined reductions related to core deposit and customer relationship intangible assets arising from previous business acquisitions. Deposit insurance expense decreased primarily as a result of the improved risk rating by the FDIC of one of the Company’s bank subsidiaries, which reduced the assessment rate applicable in determining the amount payable for deposit insurance. The decrease in legal expenses relates primarily to problem loans in the normal course of business. The prior year also includes nonrecurring expenses of $122 thousand related to registering the Company’s Series A preferred shares to be sold by the U.S. Treasury to third party investors.

44

Net other real estate expenses include impairment charges of $3.8 million for the current year to adjust the carrying value down to estimated fair value less costs to sell. Impairment charges are $1.6 million or 72.4% higher in 2013 compared to a year ago. Impairment charges for 2013 include $2.4 million related to five larger-balance properties. Other real estate expenses also include a lower net loss on the sale of repossessed properties in the amount of $217 thousand, which offset higher operating expenses of $207 thousand or 27.5%.

Income Taxes

Income tax expense was $3.3 million for the first nine months of 2013, an increase of $1.0 million or 43.7% compared to $2.3 million for a year earlier. The effective income tax rates were 24.1% and 19.4% for 2013 and 2012, respectively. The increase in income tax expense and the effective tax rate for 2013 is attributed primarily to a combination of lower tax credits and the relative amount of tax-free income to total income. Tax credits that have been utilized by the Company over a number of years related to Qualified Zone Academy Bonds were fully exhausted during 2012. In addition, the taxable portion of total revenues has increased more in proportion to the nontaxable revenues.

FINANCIAL CONDITION

Total assets were $1.8 billion at September 30, 2013, relatively unchanged from year-end 2012. Investment securities and loans increased $12.9 million or 2.3% and $5.1 million or 0.5%, respectively. Cash and cash equivalents decreased $12.0 million or 12.5% and other real estate owned fell $10.9 million or 20.7%.

The increase in investment securities was driven by net purchases of $31.7 million, partially offset by a decrease in the unrealized gain on available for sale securities in the amount of $14.7 million or 101%. The decrease in the value of the available for sale investment securities portfolio is attributed to an overall increase in market interest rates occurring during 2013, primarily beginning during the second quarter. The decrease in other real estate owned was driven by the sale of repossessed properties with an aggregate recorded investment of $12.7 million. Additions of new repossessed properties totaled $5.6 million and impairment charges were $3.8 million.

Total liabilities were $1.6 billion at September 30, 2013, relatively unchanged from year-end 2012. Total deposits decreased $7.3 million or 0.5%, partially offset by higher borrowed funds of $6.7 million or 3.3%. All other liabilities increased $3.8 million or 14.6%, of which $1.9 million represents payment clearing amounts related to customer debit card activity.

Shareholders’ equity was $168 million at September 30, 2013, unchanged from year-end 2012. Fluctuations within total equity include a decrease in the after-tax unrealized gain on available for sale investment securities in the amount of $9.5 million partially offset by an increase in retained earnings of $8.9 million or 11.2%. All other elements of shareholders’ equity increased $594 thousand or 0.8% in the aggregate. The decrease in the market value of available for sale investment securities is attributed to a rise in longer-term market interest rates that spiked during the second quarter. The increase in retained earnings is attributed to net income of $10.4 million partially offset by dividends and accretion totaling $1.5 million on outstanding preferred shares.

45

Temporary Investments

Temporary investments consist of interest bearing deposits in other banks and federal funds sold and securities purchased under agreements to resell. The Company uses these funds in the management of liquidity and interest rate sensitivity or as a short-term holding prior to subsequent movement into other investments with higher yields or for other purposes. At September 30, 2013, temporary investments were $57.9 million, a decrease of $10.5 million or 15.4% compared to $68.4 million at year-end 2012. Temporary investments averaged $66.9 million for the current nine months, relatively unchanged compared to $66.8 million for the year ended December 31, 2012.

Investment Securities

The investment securities portfolio is comprised primarily of residential mortgage-backed securities, tax-exempt securities of states and political subdivisions, and debt securities issued by U.S. government-sponsored agencies. Substantially all of the Company’s investment securities are designated as available for sale. Proceeds received from maturing or called investment securities not needed to fund higher-earning loans are either reinvested in similar investments or used to manage liquidity, such as for deposit outflows or other payment obligations. Total investment securities had a carrying amount of $587 million at September 30, 2013, an increase of $12.9 million or 2.3% compared to $574 million at year-end 2012.

The increase in investment securities was driven by net purchases of $31.7 million, partially offset by a decrease in the unrealized gain on available for sale securities in the amount of $14.7 million or 101%. Premium amortization was $4.2 million for the first nine months of 2013 compared to $4.1 million for the comparable period of 2012. The decrease in the value of the available for sale securities portfolio is attributed to a general shift downward in bond prices, particularly for the longer term maturity periods. Bond prices fell sharply during the second quarter of 2013, but were relatively stable during the third quarter. The decrease in bond prices occurred primarily as a result of the market’s response to changing perceptions about monetary tightening by the Federal Reserve through its level and timing of bond purchasing activity. The resulting higher interest rates also increased volatility, which furthered the price declines. As market interest rates increase, the value of fixed rate investments decreases.

At September 30, 2013, investment securities include $5.9 million amortized cost amounts of single-issuer trust preferred capital securities of a U.S. based global financial services firm with an estimated fair value of $4.9 million. This represents a decrease in fair value of $118 thousand or 2.4% compared to $5.0 million at year-end 2012. These securities experienced recent high price points during the first and second quarters of 2013, with an improvement in market value of $112 thousand or 2.3% at the end of the third quarter compared to the linked quarter.

The Company’s investment in the single-issuer trust preferred capital securities continues to perform according to contractual terms and the issuer of these securities is rated as investment grade by major rating agencies. The issuer of the securities announced in the first quarter of 2013 that it had passed stringent regulatory stress testing and received regulatory approval to both increase per share common dividend payments and increase its equity repurchase program. The Company does not intend to sell its investment in these securities, nor does the Company believe it is likely that it will be required to sell these securities prior to their anticipated recovery. The Company believes these securities are not impaired due to reasons of credit quality or other factors, but rather the unrealized loss is primarily attributed to general uncertainties in both international and domestic economies and continuing market volatility. The Company believes that it will collect all amounts due according to the contractual terms of these securities and that the fair values of these securities will continue to recover as they approach their maturity dates.

Loans

Loans, net of unearned income, were $1.0 billion at September 30, 2013, an increase of $5.1 million or 0.5% from year-end 2012. While the Company continues its efforts to strengthen customer relationships and business development initiatives, high quality loan demand remains soft. The Company continues to take a measured and cautious approach to loan originations while working to reduce high levels of nonperforming assets in a slow growth economy.

46

The composition of the loan portfolio, net of unearned income, is summarized in the table below.

	September 30, 2013					December 31, 2012
(Dollars in thousands)	Amount		%			Amount		%
Commercial, financial, and agriculture	$	96,609		9.6	%	$	87,440		8.7	%
Real estate mortgage– construction and land development		106,870		10.6			102,454		10.2
Real estate mortgage - residential		371,292		36.8			368,762		36.7
Real estate mortgage - farmland and other commercial enterprises		418,690		41.4			425,477		42.3
Installment		15,436		1.5			18,247		1.8
Lease financing		1,234		.1			2,615		.3
Total	$	1,010,131		100.0	%	$	1,004,995		100.0	%

On an average basis, loans represented 60.9% of earning assets for the current nine month period, an increase of 75 basis points compared to 60.1% for the year 2012. The low level of loans as a percentage of earning assets reflects the overall lack of high quality loan demand for which the Company desires. As loan demand fluctuates, available funds are reallocated between loans and temporary investments or investment securities, which typically involve a decrease in credit risk and corresponding lower yields.

The Company does not have direct exposure to the subprime mortgage market. The Company does not originate subprime mortgages nor has it invested in bonds that are secured by such mortgages. Subprime mortgage lending is defined by the Company generally as lending to a borrower that would not qualify for a mortgage loan at prevailing market rates or whereby the underwriting decision is based on limited or no documentation of the ability to repay.

Allowance for Loan Losses

The allowance for loan losses is maintained at a level believed to be adequate by management to cover probable losses in the loan portfolio. The calculation of the appropriate level of allowance for loan losses requires significant judgment in order to reflect credit losses specifically identified in the Company’s loan portfolio as well as management's best estimate of probable incurred credit losses in the loan portfolio at the balance sheet date. The allowance for loan losses is a valuation allowance increased by the provision for loan losses and decreased by net charge-offs. Loan losses are charged against the allowance when management believes the uncollectibility of a loan is confirmed. Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses and the related provision for loan losses generally fluctuate as the relative level of nonperforming and impaired loans vary. However, other factors impact the amount of the allowance for loan losses such as the Company’s historical loss experience, the borrowers’ financial condition, general economic conditions, and other risk factors as described in greater detail in the Company’s most recent annual report on Form 10-K.

The allowance for loan losses was $21.9 million or 2.17% of outstanding loans (net of unearned income) at September 30, 2013. This compares to $24.4 million or 2.43% of net loans outstanding at year-end 2012. The decrease in the allowance as a percentage of net loans outstanding from year-end 2012 is the result of a low level of net charge-offs and a credit to the provision for loan losses of $1.6 million. As a percentage of nonperforming loans, the allowance for loan losses was 42.6% at September 30, 2013, a decrease of 277 basis points compared to 45.4% at year-end 2012.

The decrease in the allowance for loan losses from year-end 2012 is mainly the result of an improvement in the historical loss rates and current risk factors applied to the general portion of the loan portfolio. Specific reserve allocations on individually identified impaired loans also improved, decreasing $149 thousand or 2.9%. Historical loss rates have improved as lower recent charge-off activity has replaced the higher levels that had been included in the early part of the Company’s look-back period used in its allowance for loan losses methodology. During the third quarter of 2013, the Company lengthened the look-back period it uses to determine historical loss rates to the previous 16 quarters from 12 quarters. The change in the look-back period resulted from the Company’s ongoing monitoring and evaluation of the adequacy of its allowance for loan losses. The longer look-back period better reflects the Company’s loss estimates based on current market conditions. Lengthening the look-back period resulted in a $320 thousand increase in the allowance for loan losses. The decrease in historical loss rates and charge-off activity relate primarily to stabilization in the value of real estate, which serves as collateral for nearly 90% of the Company’s loan portfolio. The rapid declines in real estate values experienced beginning in 2008 and continuing through 2011 have leveled off, and the allowance for loan losses reflects this improvement.

47

The overall trend in the credit quality of the loan portfolio has improved during 2013. Certain credit quality measures are summarized in the table that follows.

(Dollars in thousands)	September 30, 2013		December 31, 2012		Increase (Decrease)			Percentage Change
Nonperforming loans	$	51,498	$	53,860	$	(2,362	)		(4.4	)%
Nonaccrual loans		25,063		27,408		(2,345	)		(8.6	)
Loans past due 30-89 days and still accruing		2,533		5,140		(2,607	)		(50.7	)
Loans graded substandard or below		82,627		90,855		(8,228	)		(9.1	)
Impaired loans		62,281		63,889		(1,608	)		(2.5	)
Loans, net of unearned income		1,010,131		1,004,995		5,136			.5

Nonperforming Loans

Nonperforming loans consist of nonaccrual loans, accruing restructured loans, and loans 90 days or more past due and still accruing interest. The accrual of interest on loans is discontinued when it is determined that the collection of interest or principal is doubtful, or when a default of interest or principal has existed for 90 days or more, unless such loan is well secured and in the process of collection. Restructured loans occur when a lender, because of economic or legal reasons related to a borrower’s financial difficulty, grants a concession to the borrower that it would not otherwise consider. Restructured loans typically include a reduction of the stated interest rate or an extension of the maturity date, among other possible concessions. The Company gives careful consideration to identifying which of its challenged credits merit a restructuring of terms that it believes will result in maximum loan repayments and mitigate possible losses. Cash flow projections are carefully scrutinized prior to restructuring any credits; past due credits are typically not granted concessions.

Nonperforming loans were $51.5 million at September 30, 2013, a decrease of $2.4 million or 4.4% compared to $53.9 million at year-end 2012. While nonperforming loan totals have shown improvement from year-end, the high level that still exists is a result of the ongoing weaknesses of a slow growth economy, which continues to strain many of the Company’s customers. Nonperforming loans have declined $56.4 million or 52.3% from their peak of $108 million, which occurred during the first quarter of 2010. Nonperforming loans at September 30, 2013 and December 31, 2012, presented by loan class, are summarized in the table that follows.

48

Nonperforming Loans

(In thousands)	September 30, 2013			December 31, 2012
Nonaccrual Loans
Real Estate:
Real estate mortgage - construction and land development	$	6,332		$	7,700
Real estate mortgage - residential		5,538			6,025
Real estate mortgage - farmland and other commercial enterprises		13,004			12,878
Commercial:
Commercial and industrial		138			649
Lease financing		29			53
Consumer:
Secured		22			9
Unsecured		-			94
Total nonaccrual loans	$	25,063		$	27,408
Restructured Loans
Real Estate:
Real estate mortgage - construction and land development	$	4,391		$	8,736
Real estate mortgage - residential		4,912			634
Real estate mortgage - farmland and other commercial enterprises		17,086			16,940
Consumer:
Secured		8			-
Unsecured		38			39
Total restructured loans	$	26,435		$	26,349
Past Due 90 Days or More and Still Accruing
Real Estate:
Real estate mortgage - farmland and other commercial enterprises	$	-		$	103
Total past due 90 days or more and still accruing	$	-		$	103
Total nonperforming loans	$	51,498		$	53,860
Ratio of total nonperforming loans to total loans (net of unearned income)		5.1	%		5.4	%

The most significant components of nonperforming loans include nonaccrual and restructured loans. Activity during 2013 related to these two components was as follows:

(In thousands)	Nonaccrual Loans			Restructured Loans
Balance at December 31, 2012	$	27,408		$	26,349
Loans placed on nonaccrual status		9,252			(18	)
Loans restructured		-			928
Principal paydowns		(5,376	)		(824	)
Transfers to performing status		(203	)		-
Transfers to other real estate owned		(4,981	)		-
Charge-offs		(1,037	)		-
Balance at September 30, 2013	$	25,063		$	26,435

49

The Company’s comprehensive risk-grading and loan review program includes a review of loans to assess risk and assign a grade to those loans, a review of delinquencies, and an assessment of loans for needed charge-offs or placement on nonaccrual status. The Company had loans in the amount of $82.9 million and $104 million at September 30, 2013 and year-end 2012, respectively, which were performing but considered potential problem loans and are not included in the nonperforming loan totals in the tables above. These loans, however, are considered in establishing an appropriate allowance for loan losses. The balance outstanding for potential problem credits is mainly a result of ongoing weaknesses in the overall economy that continue to strain many of the Company’s customers. Potential problem loans include a variety of borrowers and are secured primarily by various types of real estate including commercial, construction properties, and residential real estate developments. The $21.1 million or 20.3% decrease since year-end in the level of potential problem loans is attributed primarily to an overall improvement in credit quality. The five largest potential problem credits were $17.0 million and $18.2 million in the aggregate at September 30, 2013 and year-end 2012, respectively.

Potential problem loans are identified on the Company’s watch list and consist of loans that require close monitoring by management. Credits may be considered as a potential problem loan for reasons that are temporary or correctable, such as for a deficiency in loan documentation or absence of current financial statements of the borrower. Potential problem loans may also include credits where adverse circumstances are identified that may affect the borrower’s ability to comply with the contractual terms of the loan. Other factors which might indicate the existence of a potential problem loan include the delinquency of a scheduled loan payment, deterioration in a borrower’s financial condition identified in a review of periodic financial statements, a decrease in the value of the collateral securing the loan, or a change in the economic environment in which the borrower operates. Certain loans on the Company’s watch list are also considered impaired and specific allowances related to these loans were established in accordance with the appropriate accounting guidance.

Other Real Estate

Other real estate owned (“OREO”) includes real estate properties acquired by the Company through, or in lieu of, actual foreclosure. At September 30, 2013, OREO was $41.7 million, a decrease of $10.9 million or 20.7% compared with $52.6 million at year-end 2012. OREO activity for 2013 was as follows:

(In thousands)	Amount
Balance at December 31, 2012	$	52,562
Transfers from loans		5,589
Proceeds from sales		(12,695	)
Loss on sales, net		(24	)
Write downs and other decreases, net		(3,771	)
Balance at September 30, 2013	$	41,661

The decrease in OREO was driven primarily by the sale of ten larger-balance properties having an aggregate recorded investment of $7.7 million. This includes five real estate development projects totaling $4.2 million, three commercial real estate properties totaling $2.4 million, and two residential real estate properties totaling $1.1 million. The $3.8 million of write downs for the period include $2.4 million attributed to five separate properties, including $1.3 million related to two real estate construction projects and $1.1 million related to three commercial properties.

50

Deposits

A summary of the Company’s deposits are as follows for the periods indicated.

	End of Period							Average
(In thousands)	September 30, 2013		December 31, 2012		Increase (Decrease)			Nine Months September 30, 2013		Twelve Months December 31, 2012		Increase (Decrease)
Noninterest Bearing	$	267,270	$	254,912	$	12,358		$	249,960	$	238,443	$	11,517
Interest Bearing
Demand		301,920		296,931		4,989			305,339		281,076		24,263
Savings		341,827		318,302		23,525			330,396		311,724		18,672
Time		492,468		540,665		(48,197	)		513,771		588,544		(74,773	)
Total interest bearing		1,136,215		1,155,898		(19,683	)		1,149,506		1,181,344		(31,838	)
Total Deposits	$	1,403,485	$	1,410,810	$	(7,325	)	$	1,399,466	$	1,419,787	$	(20,321	)

The decrease in total end of period deposits was driven by lower time deposits of $48.2 million or 8.9%. The decrease in time deposits is a result of the Company’s overall liquidity position and reflects a strategy to lower the overall cost of funds, mainly by allowing higher-rate certificates of deposit to roll off or reprice at significantly lower interest rates. Many of those balances have been rolled into other types of interest bearing accounts or noninterest bearing demand accounts by the customer. As rates have decreased throughout the deposit portfolio, many customers have opted to transfer funds from maturing time deposits or investments from other sources into short-term demand or savings accounts. The Company has not sought out or accepted brokered deposits in the past nor does it have plans to do so in the future.

Borrowed Funds

Total borrowed funds were $209 million at September 30, 2013, up $6.7 million or 3.3% from $202 million at year-end 2012. Long-term borrowings decreased $2.1 million or 1.2% due to scheduled principal repayments of federal home loan bank borrowings. Short-term borrowings increased $8.8 million or 36.5%. Short-term borrowings primarily represent repurchase agreements entered into with commercial depositors and, to a lesser extent, federal funds purchased through relationships with downstream correspondent banks.

LIQUIDITY

The primary source of funds for the Parent Company is the receipt of dividends from its subsidiary banks, cash balances maintained, and borrowings from nonaffiliated sources. Payment of dividends by the Company’s subsidiary banks is subject to certain regulatory restrictions as set forth in national and state banking laws and regulations. In addition, United Bank & Trust Company (“United Bank”) and Citizens Bank of Northern Kentucky, Inc. (“Citizens Northern”) each must obtain regulatory approval to declare or pay dividends to the Parent Company as a result of increased capital required in connection with prior regulatory exams. Capital ratios at each of the Company’s four subsidiary banks exceed regulatory established “well-capitalized” status at September 30, 2013 under the prompt corrective action regulatory framework; however, United Bank and Citizens Northern are required to maintain capital ratios at higher levels as outlined in their regulatory agreements.

The Parent Company’s primary uses of cash include the payment of dividends to its preferred and common shareholders, injecting capital into subsidiaries, paying interest expense on borrowings, and paying for general operating expenses. Due to an agreement with its regulators, the Parent Company must obtain regulatory approval prior to making dividend payments on its preferred and common stock and interest payments on its trust preferred borrowings. While regulatory agencies have so far granted approval to all of the Company’s requests to make dividend payments on its preferred stock and interest payments on its trust preferred securities, the Company has not (based on the assessment by Company management of both the Company’s capital position and the earnings of its subsidiaries) sought regulatory approval to pay any dividend on its common stock since the fourth quarter of 2009.  Moreover, the Company will not pay any such dividend on its common stock in any future quarter until the regulator’s assessment of the earnings of the Company’s subsidiaries, and the Company’s assessment of its capital position, both yield the conclusion that the payment of a Company common stock dividend is warranted.

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The Parent Company had cash balances of $30.8 million at September 30, 2013, an increase of $6.1 million or 24.5% from $24.8 million at year-end 2012. Significant cash receipts of the Parent Company for the first nine months of 2013 include dividend payments from its bank subsidiaries of $8.4 million and management fees from subsidiaries of $2.8 million. Significant cash payments by the Parent Company for the same period include $1.8 million for salaries, payroll taxes, and employee benefits, $1.1 million for the payment of dividends on its outstanding preferred stock, and $652 thousand of interest on trust preferred borrowings.

The Company's objective as it relates to liquidity is to ensure that its subsidiary banks have funds available to meet deposit withdrawals and credit demands without unduly penalizing profitability. In order to maintain a proper level of liquidity, the subsidiary banks have several sources of funds available on a daily basis that can be used for liquidity purposes. For assets, those sources of funds include liquid assets that are readily marketable or that can be pledged, or which mature in the near future. These assets primarily include cash and due from banks, federal funds sold, and cash flow generated by the repayment of principal and interest on loans and investment securities. For liabilities, sources of funds primarily include the subsidiary banks' core deposits, Federal Home Loan Bank (“FHLB”) and other 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.

As of September 30, 2013, the Company had $258 million of additional borrowing capacity under various FHLB, federal funds, and other borrowing agreements. However, there is no guarantee that these sources of funds will continue to be available to the Company, or that current borrowings can be refinanced upon maturity, although the Company is not aware of any events or uncertainties that are likely to cause a decrease in the Company’s liquidity from these sources. The Company’s borrowing capacity has increased $38.9 million or 17.8% since year-end 2012 primarily as a result of additional amounts available from the FHLB due to improving credit quality of the Company’s loan portfolio.

For the longer term, the liquidity position is managed by balancing the maturity structure of the balance sheet. This process allows for an orderly flow of funds over an extended period of time. The Company’s Asset and Liability Management Committee, both at the bank subsidiary level and on a consolidated basis, meets regularly and monitors the composition of the balance sheet to ensure comprehensive management of interest rate risk and liquidity.

Liquid assets consist of cash, cash equivalents, and available for sale investment securities. At September 30, 2013, consolidated liquid assets were $670 million, relatively unchanged from year-end 2012. Cash and due from decreased $12.0 million or 12.9%, but were offset by a $12.9 million or 2.3% increase in available for sale investment securities. The Company’s liquidity position remains elevated mainly as a result of the Company’s overall net funding position and weak loan demand. The Company’s overall funding position changes as loan demand, deposit levels, and other sources and uses of funds fluctuate.

Net cash provided by operating activities was $22.5 million and $22.4 million for the first nine months of 2013 and 2012, respectively. Net cash used in investing activities was $32.8 million for 2013 compared to an overall net inflow of $37.3 million for the prior year. This represents a change of $70.1 million and is due primarily to loan and investment securities activity. For loans, the Company had net origination activity of $6.8 million for the first nine months of 2013 mainly as a result of an increase in loan demand occurring during the first quarter. For 2012, net principal collections were $31.1 million as paydowns exceeded origination activity. For investment securities, the Company had net cash outflows of $31.7 million for 2013 compared to $1.2 million for a year earlier. Net cash outflows for investment securities represent purchases made during the period, net of proceeds from sales, maturities, and calls. For 2013, excess cash flows were used more for purchasing investment securities, while in 2012 excess funds went more to fund deposit runoff and debt repayments.

Net cash used in financing activities was $1.7 million and $43.8 million for the first nine months of 2013 and 2012, respectively. This represents a decrease of $42.1 million or 96.2% in the comparison. The decrease in net cash used in financing activities relates primarily to deposit and borrowing activity. For 2013, net outflow related to deposit runoff was $7.3 million compared to $31.1 million for 2012. The Company received net cash of $8.8 million from short-term borrowings sources in 2013 compared to a net repayment of $1.3 million for 2012. For long-term borrowings, net principal repayments of $2.1 million were made for 2013 compared to $10.3 million for 2012.

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Commitments to extend credit are entered into with customers in the ordinary course of providing traditional banking services and are considered in addressing the Company’s liquidity management. The Company does not expect these commitments to significantly affect the liquidity position in future periods. The Company has not entered into any contracts for financial derivative instruments such as futures, swaps, options, or similar instruments.

CAPITAL RESOURCES

Shareholders’ equity was $168 million at September 30, 2013, unchanged from year-end 2012. The more significant changes within total equity include a decrease in the after-tax unrealized gain on available for sale investment securities in the amount of $9.5 million partially offset by an increase in retained earnings of $8.9 million or 11.2%. All other components of shareholders’ equity increased $594 thousand or 0.8% in the aggregate. The market value of available for sale investment securities decreased mainly due to higher longer-term market interest rates which spiked during the second quarter. The increase in retained earnings is attributed to net income of $10.4 million partially offset by dividends and accretion totaling $1.5 million on outstanding preferred shares.

On January 9, 2009, the Company issued 30 thousand shares of Series A, no par value cumulative perpetual preferred stock. The Series A preferred shares pay a cumulative cash dividend quarterly at 5% per annum during the first five years the preferred shares are outstanding and reset to 9% thereafter if not redeemed. The Company’s goal is to repurchase the preferred shares either in whole or in part prior to the dividend rate resetting to 9%, using internally generated cash flows for the potential repurchase. Redemption of the preferred shares is subject to approval by the Company’s banking regulators. While the Company may have sufficient funds to redeem part or all of the outstanding preferred shares prior to the dividend reset date in the first quarter of 2014, it is unlikely that banking regulators will grant approval until further progress is made under the current regulatory agreements in place at two of its bank subsidiaries. The amount of outstanding preferred shares redeemed, if any, will be determined by the level of funds available and both near and long term projections of liquidity and operating needs.

The Parent Company is under no directive by its regulators to raise any additional capital, although it periodically evaluates potential capital raising scenarios. However, no determination has been made as to if or when a capital raise will be completed. Net proceeds from a potential sale of securities could be used for any corporate purpose determined by the Company’s board of directors.

The Company’s tangible capital ratio was 9.23% at September 30, 2013 and year-end 2012. The tangible capital ratio is defined as tangible equity as a percentage of tangible assets and excludes intangible assets. Tangible common equity to tangible assets, which further excludes outstanding preferred stock, was 7.58% and 7.59% at quarter end and the prior year-end, respectively.

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Consistent with the objective of operating a sound financial organization, the Company’s goal is to maintain capital ratios well above the regulatory minimum requirements. The Company's capital ratios and the regulatory minimums are as follows as of the dates indicated.

	September 30, 2013									December 31, 2012
	Tier 1Risk-basedCapital1			Total Risk-basedCapital1			Tier 1 Leverage2			Tier 1Risk-basedCapital1			Total Risk-basedCapital1			Tier 1 Leverage2
Consolidated		18.57	%		19.82	%		11.80	%		18.27	%		19.53	%		11.24	%
Farmers Bank & Capital Trust Company		17.99			19.25			10.04			17.94			19.20			9.68
United Bank3		15.08			16.35			9.70			15.41			16.69			9.45
First Citizens Bank		13.47			14.23			9.55			13.57			14.46			9.42
Citizens Northern3		13.25			14.50			9.54			12.97			14.22			9.36
Regulatory minimum		4.00			8.00			4.00			4.00			8.00			4.00
Well-capitalized status		6.00			10.00			5.00			6.00			10.00			5.00

¹Tier 1 Risk-based and Total Risk-based Capital ratios are computed by dividing a bank’s Tier 1 or Total Capital, as defined by regulation, by a risk-weighted sum of the bank’s assets, with the risk weighting determined by general standards established by regulation. The safest assets (e.g., government obligations) are assigned a weighting of 0% with riskier assets receiving higher ratings (e.g., ordinary commercial loans are assigned a weighting of 100%).

²Tier 1 Leverage ratio is computed by dividing a bank’s Tier 1 Capital, as defined by regulation, by its total quarterly average assets.

³See Note 11 to the Company’s unaudited condensed consolidated financial statements included as part of this Form 10-Q for minimum capital ratios required as part of the banks regulatory agreement.

Regulatory Agreements

The Parent Company, United Bank, and Citizens Northern are each a party to supervisory agreements with their primary banking regulator. These agreements are summarized in Note 11 to the unaudited condensed consolidated financial statements of this Form 10-Q. These agreements are also discussed in significantly greater detail in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012 under the caption “Capital Resources” in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. An agreement entered into during 2009 between Farmers Bank & Capital Trust Company and its primarily regulator was terminated during the first quarter 2013 as a result of satisfactory compliance.

There have been no changes to the regulatory agreements during 2013 applicable to the Parent Company and United Bank. The Memorandum of Understanding (“Memorandum”) entered into by Citizens Northern with its banking regulators during 2010 was terminated in July 2013 upon the issuance of an updated Memorandum. Requirements of the updated Memorandum are detailed below. The Company believes it is adequately addressing all issues of the regulatory agreements to which it is subject and is in compliance with those agreements. However, only the respective regulatory agencies can determine if compliance with the applicable regulatory agreements has been met. Regulators continue to monitor the Company’s progress and compliance with the agreements through periodic on-site examinations, regular communications, and quarterly data analysis. The results of these examinations and communications show satisfactory progress toward meeting the requirements included in the regulatory agreements.

The Parent Company maintains cash available to fund a certain amount of additional injections of capital to its bank subsidiaries. If needed, further amounts in excess of available cash may be funded by future public or private sales of securities, although the Parent Company is currently under no directive by its regulators to raise any additional capital.

Citizens Northern. The Kentucky Department of Financial Institutions (“KDFI”) and the Federal Deposit Insurance Corporation (“FDIC”) entered into a Memorandum with Citizens Northern on September 8, 2010. That Memorandum was terminated July 7, 2013 upon the issuance of an updated Memorandum. The new Memorandum includes a few new items in addition to the items from the first Memorandum, including an increase in the required minimum Tier I Leverage to 9.0% from 8.0%. At September 30, 2013, Citizens Northern had a Tier I Leverage ratio of 9.54% and a Total Risk-based Capital ratio of 13.25%.

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In addition to the above capital requirement, under the Memorandum, Citizens Northern agreed to:

1. have and retain qualified management, with particular emphasis on its loan administration and collection needs. Every member of management shall have the qualifications and experience commensurate with his or her duties and responsibilities. The qualifications of management shall be assessed on management’s ability to:

a) Affect reasonable improvements to the condition of the institution, including improvements in asset quality and earnings;

b) Comply with applicable laws, rules, regulations, and regulatory policies; and

c) Comply with the requirements of this Memorandum;

2. within 60 days from the date of this memorandum, to formulate, adopt and submit to the Regional Director and the Commissioner for review and comment a written plan of action to lessen the risk position in each asset which was classified “Substandard” in the most recent examination, and which aggregated $250,000 or more. Such plan shall include:

a) dollar levels to which it will strive to reduce each line of credit within six and twelve months from the effective date of this Memorandum; and

b) provisions for the submission of monthly written progress reports to its board of directors for review and notation in the board of director’s minutes;

3. not extend any additional credit to, or for the benefit of, any borrower who is already obligated in any manner on any extension of credit (including any portion thereof) that:

a) has been charged off or classified “Loss” in the most recent examination or in any subsequent review by consultants or by a regulatory body so long as such credit remains uncollected; or

b) has been classified “Substandard” or “Doubtful” in the most recent examination, on the bank’s internal watch list, or in any subsequent review by its consultants, and is uncollected, unless the board of directors or loan committee has adopted, prior to such extension of credit, a detailed written statement giving reasons why such extension of credit is in the best interest of the bank. A copy of the statement, including a thorough financial analysis gauging the borrower’s financial condition and overall ability to service the existing and new debt, shall be placed in the appropriate loan file and shall be incorporated in the minutes of the applicable loan committee;

4. within 60 days from the date of this Memorandum, take all steps necessary to correct the credit underwriting and administration weaknesses listed in the most recent examination. Corrective actions will include a revision of procedures for assessing borrower repayment capacity. The revised procedures will include obtaining and evaluating current financial information; considering delinquent property taxes; and incorporating material changes to the balance sheet accounts such as account receivables, inventories, fixed assets, and accounts payable into cash flow analyses for commercial borrowers;

5. within 30 days from the date of this Memorandum, revise its Allowance for Loan and Lease Losses (ALLL) methodology consistent with the comments in the most recent examination. Ensure that when assessing impairment under Accounting Standards Codification Topic 310 using the fair value of collateral method, assessments are based on current valuations of the pledged collateral;

(Company Note: The ALLL methodology is structurally sound. The comments referred to in the most recent examination pertain to documentation exceptions for two impaired credit relationships consisting of eight real estate properties with an aggregate outstanding balance of $1.7 million. Documentation supporting certain of these properties was stale as of the examination date. However, appraisals received subsequent to the examination date confirm that the estimated discount applied to the stale appraisals resulted in an allowance that was adequate. Additional procedures for adhering to and monitoring compliance over the ALLL have been revisited and refined to assure that the ALLL is fully documented and adequately supported in a timely fashion.)

6. prior to submission or publication of all Reports of Condition and income required by the FDIC after the effective date of this Memorandum, the board of directors shall review the adequacy of the ALLL, shall provide an adequate allowance, and shall report such allowance on the Reports of Condition and income. The minutes of the board meeting at which such review is undertaken shall indicate the results of the review, the amount of increase in the allowance recommended, if any, and the basis for determination of the amount of the allowance provided;

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7. within 60 days from the date of this Memorandum, formulate and implement a written Profit Plan. The Profit Plan shall be consistent with the loan, investment and funds management policies. This Plan shall be submitted to the Regional Director and Commissioner for review and comment, and shall address, at a minimum, goals and strategies for improving and sustaining earnings including:

a) an identification of the major areas in, and means by which, the board will seek to improve the operating performance;

b) realistic and comprehensive budgets;

c) a budget review process to monitor the income and expenses to compare actual figures with budgetary projections;

d) a description of the operating assumptions that form the basis for, and adequately support, major projected income and expense components; and

e) periodic salary review;

8. within 30 days from the date of this Memorandum, take all steps necessary to correct the violations scheduled in the most recent examination. In addition, adopt procedures to assure future compliance with all applicable laws, rules and regulations;

9. while this Memorandum is in effect, maintain Tier I capital at a level equal to or exceeding 9.0% of the total assets which shall be calculated in accordance with Part 325 of the FDIC Rules and Regulations. If such ratio is less than 9.0% as of March 31, June 30, September 30 or December 31 of each calendar year, while this Memorandum is in effect, within 30 days of such dates, present to the Regional Director and Commissioner a plan for the augmentation of the capital accounts or other measures to bring the ratio to 9.0%;

10. while this Memorandum is in effect, written consent of the Regional Director and the Commissioner is required to declare or pay any dividends;

11. within 30 days following each calendar quarter after the date of this Memorandum, progress reports covering each of the provisions of this Memorandum shall be submitted to the Regional Director and Commissioner until notification by the supervisory authorities that the reports need no longer be submitted. The board of directors shall review all reports prior to submission and note their consideration in the minutes.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

The Company uses 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 the Company 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 the Company’s 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 the Company’s 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 September 30, 2013, the model indicated that if rates were to gradually increase by 75 basis points during the remainder of the calendar year, then net interest income and net income would decrease 0.1% and 0.3%, respectively for the year ending December 31, 2013 when compared to the forecasted results for the most likely rate environment. The model indicated that if rates were to gradually decrease by 75 basis points over the same period, then net interest income and net income would decrease 0.1% and 0.2%, respectively.

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Item 4. Controls and Procedures

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

The Company’s Chief Executive Officer and Chief Financial Officer have also concluded that there were no significant changes during the quarter ended September 30, 2013 in the Company’s internal control over financial reporting or in other factors that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

As of September 30, 2013, there were various pending legal actions and proceedings against the Company arising from the normal course of business and in which claims for damages are asserted. It is the opinion of management, after discussion with legal counsel, that the disposition or ultimate resolution of such claims and legal actions will not have a material effect upon the consolidated financial statements of the Company.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

At various times, the Company’s Board of Directors has authorized the purchase of shares of the Company’s outstanding common stock. No stated expiration dates have been established under any of the previous authorizations. There were no Company shares purchased during the quarter ended September 30, 2013. There are 84,971 shares that may still be purchased under the various authorizations. However, the Company must be granted permission by the Federal Reserve Bank of St. Louis and the KDFI before it can repurchase or redeem any of its outstanding common or preferred stock as a result of its regulatory agreement.

Item 6. Exhibits

List of Exhibits

3.1	Second Amended and Restated Articles of Incorporation of Farmers Capital Bank Corporation (incorporated by reference to the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2006 (File No. 000-14412)).
3.2	Articles of Amendment to Second Amended and Restated Articles of Incorporation of Farmers Capital Bank Corporation dated January 6, 2009 (incorporated by reference to the Current Report on Form 8-K dated January 13, 2009 (File No. 000-14412)).
3.3	Articles of Amendment to Second Amended and Restated Articles of Incorporation of Farmers Capital Bank Corporation dated November 16, 2009 (incorporated by reference to the Current Report on Form 8-K dated November 17, 2009 (File No. 000-14412)).
3.4	Amended and Restated Bylaws of Farmers Capital Bank Corporation (incorporated by reference to the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2009 (File No. 000-14412)).
4.1*	Junior Subordinated Indenture, dated as of July 21, 2005, between Farmers Capital Bank Corporation and Wilmington Trust Company, as Trustee, relating to unsecured junior subordinated deferrable interest notes that mature in 2035.
4.2*	Amended and Restated Trust Agreement, dated as of July 21, 2005, among Farmers Capital Bank Corporation, as Depositor, Wilmington Trust Company, as Property and Delaware Trustee, the Administrative Trustees (as named therein), and the Holders (as defined therein).
4.3*	Guarantee Agreement, dated as of July 21, 2005, between Farmers Capital Bank Corporation, as Guarantor, and Wilmington Trust Company, as Guarantee Trustee.

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4.4*	Junior Subordinated Indenture, dated as of July 26, 2005, between Farmers Capital Bank Corporation and Wilmington Trust Company, as Trustee, relating to unsecured junior subordinated deferrable interest notes that mature in 2035.
4.5*	Amended and Restated Trust Agreement, dated as of July 26, 2005, among Farmers Capital Bank Corporation, as Depositor, Wilmington Trust Company, as Property and Delaware Trustee, the Administrative Trustees (as named therein), and the Holders (as defined therein).
4.6*	Guarantee Agreement, dated as of July 26, 2005, between Farmers Capital Bank Corporation, as Guarantor, and Wilmington Trust Company, as Guarantee Trustee.
4.7*	Indenture, dated as of August 14, 2007 between Farmers Capital Bank Corporation, as Issuer, and Wilmington Trust Company, as Trustee, relating to fixed/floating rate junior subordinated debt due 2037.
4.8*	Amended and Restated Declaration of Trust, dated as of August 14, 2007, by Farmers Capital Bank Corporation, as Sponsor, Wilmington Trust Company, as Delaware and Institutional Trustee, the Administrative Trustees (as named therein), and the Holders (as defined therein).
4.9*	Guarantee Agreement, dated as of August 14, 2007, between Farmers Capital Bank Corporation, as Guarantor, and Wilmington Trust Company, as Guarantee Trustee.
4.10	Form of Certificate for Fixed Rate Cumulative Perpetual Preferred Stock, Series A (incorporated by reference to the Current Report on Form 8-K dated January 13, 2009 (File No. 000-14412)).
4.11	Letter Agreement, dated January 9, 2009, between Farmers Capital Bank Corporation and the United States Treasury, with respect to the issuance and sale of the Series A Preferred Stock and the Warrant, and Securities Purchase Agreement-Standard Terms attached thereto as Exhibit A (incorporated by reference to the Current Report on Form 8-K dated January 13, 2009 (File No. 000-14412)).
10.1	Employee Stock Purchase Plan of Farmers Capital Bank Corporation (incorporated by reference to Form S-8 effective June 24, 2004 (File No. 333-116801)).
10.2	Nonqualified Stock Option Plan of Farmers Capital Bank Corporation (incorporated by reference to Form S-8 effective September 8, 1998 (File No. 333-63037)).
10.3	Employment agreement dated December 10, 2012 between Farmers Capital Bank Corporation and Lloyd C. Hillard, Jr. (incorporated by reference to Exhibit 10.1 to Form 8-K/A filed December 26, 2012 (File No. 000-14412)).
31.1**	CEO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2**	CFO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32**	CEO & CFO Certifications Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101	Interactive Data Files

* Exhibit not included pursuant to Item 601(b)(4)(iii) and (v) of Regulation S-K. The Company will provide a copy of such exhibit to the Securities and Exchange Commission upon request.

** Filed with this Quarterly Report on Form 10-Q.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date:	November 6, 2013	/s/ Lloyd C. Hillard, Jr.
		Lloyd C. Hillard, Jr.
		President and CEO
		(Principal Executive Officer)
Date:	November 6, 2013	/s/ Doug Carpenter
		C. Douglas Carpenter
		Executive Vice President, Secretary, and CFO
		(Principal Financial and Accounting Officer)

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EX-31

Exhibit 31.1

CEO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Lloyd C. Hillard, Jr., certify that:

1. I have reviewed this quarterly report on Form 10-Q of Farmers Capital Bank Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	November 6, 2013	/s/ Lloyd C. Hillard, Jr.
		Lloyd C. Hillard, Jr.
		President and CEO

EX-31

Exhibit 31.2

CFO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, C. Douglas Carpenter, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Farmers Capital Bank Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	November 6, 2013	/s/ Doug Carpenter
		C. Douglas Carpenter
		Executive Vice President, Secretary, and CFO

EX-32

Exhibit 32

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the accompanying Quarterly Report of Farmers Capital Bank Corporation on Form 10-Q for the period ended September 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned hereby certifies in his capacity as officer of Farmers Capital Bank Corporation, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Date:	November 6, 2013	/s/ Lloyd C. Hillard, Jr.
		Lloyd C. Hillard, Jr.
		President and CEO
Date:	November 6, 2013	/s/ Doug Carpenter
		C. Douglas Carpenter
		Executive Vice President, Secretary, and CFO

A signed original of this written statement required by Section 906 has been provided to Farmers Capital Bank Corporation and will be retained by Farmers Capital Bank Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

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Note 8 - Loans and Allowance for Loan Losses

9 Months Ended

Sep. 30, 2013

Receivables [Abstract]

Financing Receivables [Text Block]

8. Loans and Allowance for Loan Losses

Major classifications of loans outstanding are summarized as follows:

(In thousands)	September 30, 2013		December 31, 2012
Real Estate:
Real estate mortgage – construction and land development	$	106,870	$	102,454
Real estate mortgage – residential		371,292		368,762
Real estate mortgage – farmland and other commercial enterprises		418,690		425,477
Commercial:
Commercial and industrial		47,433		46,812
States and political subdivisions		22,849		21,472
Lease financing		1,268		2,732
Other		26,327		19,156
Consumer:
Secured		8,957		11,732
Unsecured		6,479		6,515
Total loans		1,010,165		1,005,112
Less unearned income		34		117
Total loans, net of unearned income	$	1,010,131	$	1,004,995

Activity in the allowance for loan losses by portfolio segment was as follows for the periods indicated.

(In thousands)	Real Estate			Commercial			Consumer			Total
Three months ended September 30, 2013
Balance, beginning of period	$	20,240		$	2,177		$	526		$	22,943
Provision for loan losses		(528	)		(2	)		(56	)		(586	)
Recoveries		70			25			37			132
Loans charged off		(407	)		(98	)		(35	)		(540	)
Balance, end of period	$	19,375		$	2,102		$	472		$	21,949
Nine months ended September 30, 2013
Balance, beginning of period	$	22,254		$	1,513		$	678		$	24,445
Provision for loan losses		(2,028	)		615			(167	)		(1,580	)
Recoveries		254			122			187			563
Loans charged off		(1,105	)		(148	)		(226	)		(1,479	)
Balance, end of period	$	19,375		$	2,102		$	472		$	21,949

(In thousands)	Real Estate			Commercial			Consumer			Total
Three months ended September 30, 2012
Balance, beginning of period	$	24,221		$	2,137		$	755		$	27,113
Provision for loan losses		(1,114	)		591			267			(256	)
Recoveries		50			8			80			138
Loans charged off		(1,716	)		(36	)		(99	)		(1,851	)
Balance, end of period	$	21,441		$	2,700		$	1,003		$	25,144
Nine months ended September 30, 2012
Balance, beginning of period	$	23,538		$	3,508		$	1,218		$	28,264
Provision for loan losses		2,916			(790	)		(64	)		2,062
Recoveries		252			129			192			573
Loans charged off		(5,265	)		(147	)		(343	)		(5,755	)
Balance, end of period	$	21,441		$	2,700		$	1,003		$	25,144

The following tables present individually impaired loans by class of loans for the dates indicated.

September 30, 2013 (In thousands)	Unpaid Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Allowance for Loan Losses Allocated
Real Estate
Real estate mortgage – construction and land development	$	18,422	$	10,952	$	4,701	$	15,653	$	921
Real estate mortgage – residential		12,554		2,626		9,805		12,431		1,557
Real estate mortgage – farmland and other commercial enterprises		33,285		12,574		20,628		33,202		1,617
Commercial
Commercial and industrial		911		-		915		915		823
Consumer
Secured		19		-		19		19		15
Unsecured		61		-		61		61		61
Total	$	65,252	$	26,152	$	36,129	$	62,281	$	4,994

December 31, 2102 (In thousands)	Unpaid Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Allowance for Loan Losses Allocated
Real Estate
Real estate mortgage – construction and land development	$	26,831	$	12,712	$	11,068	$	23,780	$	2,075
Real estate mortgage – residential		7,474		2,215		5,259		7,474		1,069
Real estate mortgage – farmland and other commercial enterprises		33,491		13,294		18,803		32,097		1,588
Commercial
Commercial and industrial		210		-		207		207		198
Consumer
Secured		21		-		21		21		17
Unsecured		309		-		310		310		196
Total	$	68,336	$	28,221	$	35,668	$	63,889	$	5,143

Three Months Ended September 30, 2013 (In thousands)	Average		Interest Income Recognized		Cash Basis Interest Recognized
Real Estate
Real estate mortgage – construction and land development	$	16,815	$	128	$	109
Real estate mortgage – residential		11,799		94		105
Real estate mortgage – farmland and other commercial enterprises		33,925		329		318
Commercial
Commercial and industrial		1,037		4		4
Consumer
Secured		18		-		-
Unsecured		75		-		-
Total	$	63,669	$	555	$	536

Nine Months Ended September 30, 2013 (In thousands)	Average		Interest Income Recognized		Cash Basis Interest Recognized
Real Estate
Real estate mortgage – construction and land development	$	17,683	$	405	$	402
Real estate mortgage – residential		13,023		356		340
Real estate mortgage – farmland and other commercial enterprises		33,006		1,137		1,120
Commercial
Commercial and industrial		966		37		37
Consumer
Secured		20		1		1
Unsecured		167		6		6
Total	$	64,865	$	1,942	$	1,906

Three Months Ended September 30, 2012 (In thousands)	Average		Interest Income Recognized		Cash Basis Interest Recognized
Real Estate
Real estate mortgage – construction and land development	$	26,902	$	249	$	204
Real estate mortgage – residential		8,979		52		44
Real estate mortgage – farmland and other commercial enterprises		35,076		418		608
Commercial
Commercial and industrial		214		8		8
Consumer
Secured		22		-		-
Unsecured		374		8		7
Total	$	71,567	$	735	$	871

Nine Months Ended September 30, 2012 (In thousands)	Average		Interest Income Recognized		Cash Basis Interest Recognized
Real Estate
Real estate mortgage – construction and land development	$	37,921	$	630	$	573
Real estate mortgage – residential		14,744		308		298
Real estate mortgage – farmland and other commercial enterprises		38,967		1,419		1,437
Commercial
Commercial and industrial		426		22		22
Consumer
Secured		66		5		5
Unsecured		251		13		12
Total	$	92,375	$	2,397	$	2,347

The following tables present the balance of the allowance for loan losses and the recorded investment in loans by portfolio segment based on impairment method as of September 30, 2013 and December 31, 2012.

September 30, 2013 (In thousands)	Real Estate		Commercial		Consumer		Total
Allowance for Loan Losses
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	4,095	$	823	$	76	$	4,994
Collectively evaluated for impairment		15,280		1,279		396		16,955
Total ending allowance balance	$	19,375	$	2,102	$	472	$	21,949
Loans
Loans individually evaluated for impairment	$	61,286	$	915	$	80	$	62,281
Loans collectively evaluated for impairment		835,566		96,928		15,356		947,850
Total ending loan balance, net of unearned income	$	896,852	$	97,843	$	15,436	$	1,010,131

December 31, 2012 (In thousands)	Real Estate		Commercial		Consumer		Total
Allowance for Loan Losses
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	4,732	$	198	$	213	$	5,143
Collectively evaluated for impairment		17,522		1,315		465		19,302
Total ending allowance balance	$	22,254	$	1,513	$	678	$	24,445
Loans
Loans individually evaluated for impairment	$	63,351	$	207	$	331	$	63,889
Loans collectively evaluated for impairment		833,342		89,848		17,916		941,106
Total ending loan balance, net of unearned income	$	896,693	$	90,055	$	18,247	$	1,004,995

The following tables present the recorded investment in nonperforming loans by class of loans as of September 30, 2013 and December 31, 2012.

September 30, 2013 (In thousands)	Nonaccrual		Restructured Loans		Loans Past Due 90 Days or More and Still Accruing
Real Estate:
Real estate mortgage – construction and land development	$	6,332	$	4,391	$	-
Real estate mortgage – residential		5,538		4,912		-
Real estate mortgage – farmland and other commercial enterprises		13,004		17,086		-
Commercial:
Commercial and industrial		138		-		-
Lease financing		29		-		-
Consumer:
Secured		22		8		-
Unsecured		-		38		-
Total	$	25,063	$	26,435	$	-

December 31, 2012 (In thousands)	Nonaccrual		Restructured Loans		Loans Past Due 90 Days or More and Still Accruing
Real Estate:
Real estate mortgage – construction and land development	$	7,700	$	8,736	$	-
Real estate mortgage – residential		6,025		634		-
Real estate mortgage – farmland and other commercial enterprises		12,878		16,940		103
Commercial:
Commercial and industrial		649		-		-
Lease financing		53		-		-
Consumer:
Secured		9		-		-
Unsecured		94		39		-
Total	$	27,408	$	26,349	$	103

The Company has allocated $2.7 million and $2.9 million of specific reserves to customers whose loan terms have been modified in troubled debt restructurings and that are in compliance with those terms as of September 30, 2013 and December 31, 2012. The Company had no commitments to lend additional amounts to customers with outstanding loans that are classified as troubled debt restructurings at September 30, 2013 and December 31, 2012.

The Company had seven credits in 2013 that were modified as troubled debt restructurings. Six of these credits with an aggregate recorded investment of $331 thousand represent debt by borrowers discharged under Chapter 7 bankruptcy. The borrower in each case did not reaffirm their debt, and the release of personal liability by the court is deemed a concession. However, each borrower continues to make payments under the original terms of the loan agreement. The remaining restructuring consists of a credit secured by commercial real estate whereby the maturity date was extended 48 months.

During the first nine months of 2012, the Company had two credits that were modified as troubled debt restructurings. One restructuring includes a commercial real estate credit whereby the stated interest rate was reduced to 5.0% from 7.25% and repayment terms that include an initial six month interest only component. The other restructuring represents a residential real estate credit in which the stated interest rate on the loan was reduced to 4.125% from 6.0% and extending the due date by three months.

The following tables present loans by class modified as troubled debt restructurings that occurred during the three and nine months ended September 30, 2013 and 2012.

(Dollars in thousands) Troubled Debt Restructurings:	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Three Months Ended September 30, 2013
Real Estate:
Real estate mortgage – farmland and other commercial enterprises		1	$	598	$	598
Consumer:
Secured		1		7		7
Total		2	$	605	$	605
Nine Months Ended September 30, 2013
Real Estate:
Real estate mortgage – residential		3	$	309	$	309
Real estate mortgage – farmland and other commercial enterprises		1		598		598
Commercial:
Commercial and industrial		1		13		13
Consumer:
Secured		2		9		9
Total		7	$	929	$	929

(Dollars in thousands) Troubled Debt Restructurings:	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Three Months Ended September 30, 2012
Real Estate:
Real estate mortgage – farmland and other commercial enterprises		1	$	8,796	$	8,717
Total		1	$	8,796	$	8,717
Nine Months Ended September 30, 2012
Real Estate:
Real estate mortgage – residential		1	$	72	$	72
Real estate mortgage – farmland and other commercial enterprises		1		8,796		8,717
Total		2	$	8,868	$	8,789

The troubled debt restructurings identified in the tables above increased the allowance for loan losses by $7 thousand and $30 thousand in the three and nine months ended September 30, 2013, respectively. Troubled debt restructurings increased the allowance for loan losses by $437 thousand and $442 thousand for the three and nine months ended September 30, 2012. There were no charge-offs related to loans restructured in 2013 and 2012.

For the nine months ended September 30, 2013, the Company had one restructured credit for which there was a payment default within twelve months following the modification. This credit is secured by residential real estate with an outstanding balance of $17 thousand. No charge-offs have been recorded for this credit. There were no payment defaults during the first nine months of 2012 for credits that were restructured during the previous twelve months.

The tables below present an age analysis of past due loans 30 days or more by class of loans as of the dates indicated. Past due loans that are also classified as nonaccrual are included in their respective past due category.

September 30, 2013 (In thousands)	30-89 Days Past Due		90 Days or More Past Due		Total		Current		Total Loans
Real Estate:
Real estate mortgage – construction and land development	$	58	$	599	$	657	$	106,213	$	106,870
Real estate mortgage – residential		2,819		2,336		5,155		366,137		371,292
Real estate mortgage – farmland and other commercial enterprises		1,169		10,131		11,300		407,390		418,690
Commercial:
Commercial and industrial		-		53		53		47,380		47,433
States and political subdivisions		-		-		-		22,849		22,849
Lease financing, net		14		29		43		1,191		1,234
Other		93		-		93		26,234		26,327
Consumer:
Secured		53		7		60		8,897		8,957
Unsecured		68		-		68		6,411		6,479
Total	$	4,274	$	13,155	$	17,429	$	992,702	$	1,010,131

December 31, 2012 (In thousands)	30-89 Days Past Due		90 Days or More Past Due		Total		Current		Total Loans
Real Estate:
Real estate mortgage – construction and land development	$	908	$	1,361	$	2,269	$	100,185	$	102,454
Real estate mortgage – residential		2,303		2,500		4,803		363,959		368,762
Real estate mortgage – farmland and other commercial enterprises		1,990		10,724		12,714		412,763		425,477
Commercial:
Commercial and industrial		108		53		161		46,651		46,812
States and political subdivisions		-		-		-		21,472		21,472
Lease financing, net		1		53		54		2,561		2,615
Other		38		399		437		18,719		19,156
Consumer:
Secured		69		-		69		11,663		11,732
Unsecured		137		-		137		6,378		6,515
Total	$	5,554	$	15,090	$	20,644	$	984,351	$	1,004,995

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 and conditions. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis includes large-balance loans and non-homogeneous loans, such as commercial real estate and certain residential real estate loans. Loan rating grades, as described further below, are assigned based on a continuous process. The amount and adequacy of the allowance for loan loss is determined on a quarterly basis. The Company uses the following definitions for its 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 borrower’s repayment ability, weaken the collateral or inadequately protect the Company’s credit position at some future date. These credits pose elevated risk, but their weaknesses do not yet justify a substandard classification.

Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Doubtful. Loans classified as doubtful have all the weaknesses inherent of 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 which are analyzed individually as part of the above described process are considered to be pass rated loans, which are considered to have a low risk of loss. Based on the most recent analysis performed, the risk category of loans by class of loans is as follows for the dates indicated. Each of the following tables exclude immaterial amounts attributed to accrued interest receivable.

	Real Estate						Commercial
September 30, 2013 (In thousands)	Real Estate Mortgage –Construction and Land Development		Real Estate Mortgage –Residential		Real Estate Mortgage –Farmland and Other Commercial Enterprises		Commercial and Industrial		States and Political Subdivisions		Lease Financing, net		Other
Credit risk profile by internally assigned rating grades:
Pass	$	83,183	$	334,591	$	347,472	$	45,604	$	22,849	$	1,205	$	26,299
Special mention		6,282		14,925		29,307		351		-		-		-
Substandard		17,345		21,686		41,911		1,402		-		29		28
Doubtful		60		90		-		76		-		-		-
Total	$	106,870	$	371,292	$	418,690	$	47,433	$	22,849	$	1,234	$	26,327

	Real Estate						Commercial
December 31, 2012 (In thousands)	Real Estate Mortgage –Construction and Land Development		Real Estate Mortgage –Residential		Real Estate Mortgage –Farmland and Other Commercial Enterprises		Commercial and Industrial		States and Political Subdivisions		Lease Financing, net		Other
Credit risk profile by internally assigned rating grades:
Pass	$	68,721	$	328,214	$	348,918	$	41,527	$	21,472	$	2,615	$	18,592
Special mention		7,562		18,485		35,027		4,201		-		-		559
Substandard		26,171		21,984		41,532		1,008		-		-		5
Doubtful		-		79		-		76		-		-		-
Total	$	102,454	$	368,762	$	425,477	$	46,812	$	21,472	$	2,615	$	19,156

The Company considers the performance of the loan portfolio and its impact on the allowance for loan losses. For consumer loan classes, the Company evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity. The following table presents the consumer loans outstanding based on payment activity as of September 30, 2013 and December 31, 2012.

	September 30, 2013				December 31, 2012
	Consumer				Consumer
(In thousands)	Secured		Unsecured		Secured		Unsecured
Credit risk profile based on payment activity:
Performing	$	8,927	$	6,441	$	11,723	$	6,382
Nonperforming		30		38		9		133
Total	$	8,957	$	6,479	$	11,732	$	6,515

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Note 8 - Loans and Allowance for Loan Losses (Details) - Aging Analysis of Loans (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	$ 1,010,131	$ 1,004,995
Real Estate Construction And Land Development [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-89 Days Past Due	58	908
90 Days Or More Past Due	599	1,361
Total	657	2,269
Current	106,213	100,185
Total Loans	106,870	102,454
Real Estate Mortgage Residential [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-89 Days Past Due	2,819	2,303
90 Days Or More Past Due	2,336	2,500
Total	5,155	4,803
Current	366,137	363,959
Total Loans	371,292	368,762
Real Estate Mortgage Farmland And Other Commercial Enterprises [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-89 Days Past Due	1,169	1,990
90 Days Or More Past Due	10,131	10,724
Total	11,300	12,714
Current	407,390	412,763
Total Loans	418,690	425,477
Commercial And Industrial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-89 Days Past Due	0	108
90 Days Or More Past Due	53	53
Total	53	161
Current	47,380	46,651
Total Loans	47,433	46,812
States and Political Subdivisions [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-89 Days Past Due	0	0
90 Days Or More Past Due	0	0
Total	0	0
Current	22,849	21,472
Total Loans	22,849	21,472
Lease Financing [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-89 Days Past Due	14	1
90 Days Or More Past Due	29	53
Total	43	54
Current	1,191	2,561
Total Loans	1,234	2,615
Commercial Other [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-89 Days Past Due	93	38
90 Days Or More Past Due	0	399
Total	93	437
Current	26,234	18,719
Total Loans	26,327	19,156
Consumer Secured [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-89 Days Past Due	53	69
90 Days Or More Past Due	7	0
Total	60	69
Current	8,897	11,663
Total Loans	8,957	11,732
Consumer Unsecured [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-89 Days Past Due	68	137
90 Days Or More Past Due	0	0
Total	68	137
Current	6,411	6,378
Total Loans	6,479	6,515
Total [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-89 Days Past Due	4,274	5,554
90 Days Or More Past Due	13,155	15,090
Total	17,429	20,644
Current	992,702	984,351
Total Loans	$ 1,010,131	$ 1,004,995

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Unaudited Condensed Consolidated Statements of Income (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Interest Income
Interest and fees on loans	$ 13,313	$ 13,883	$ 40,335	$ 42,268
Interest on investment securities:
Taxable	2,578	3,084	7,599	10,044
Nontaxable	629	573	1,885	1,661
Interest on deposits in other banks	42	37	114	99
Interest on federal funds sold and securities purchased under agreements to resell	1	1	3	3
Total interest income	16,563	17,578	49,936	54,075
Interest Expense
Interest on deposits	1,423	2,141	4,610	7,320
Interest on federal funds purchased and other short-term borrowings	21	24	60	74
Interest on securities sold under agreements to repurchase and other long-term borrowings	1,292	1,828	3,837	5,481
Interest on subordinated notes payable to unconsolidated trusts	217	518	650	1,559
Total interest expense	2,953	4,511	9,157	14,434
Net interest income	13,610	13,067	40,779	39,641
Provision for loan losses	(586)	(256)	(1,580)	2,062
Net interest income after provision for loan losses	14,196	13,323	42,359	37,579
Noninterest Income
Service charges and fees on deposits	2,116	2,062	6,094	6,080
Allotment processing fees	1,217	1,304	3,724	3,932
Other service charges, commissions, and fees	1,282	1,104	3,738	3,332
Trust income	497	469	1,451	1,404
Investment securities gains (losses), net	2	276	(58)	964
Gains on sale of mortgage loans, net	236	603	867	1,364
Income from company-owned life insurance	244	301	716	1,289
Other	84	47	(2)	241
Total noninterest income	5,678	6,166	16,530	18,606
Noninterest Expense
Salaries and employee benefits	7,229	7,019	21,784	20,999
Occupancy expenses, net	1,247	1,235	3,578	3,606
Equipment expenses	619	576	1,760	1,757
Data processing and communication expenses	929	1,059	2,972	3,211
Bank franchise tax	603	605	1,803	1,793
Amortization of intangibles	135	254	405	761
Deposit insurance expense	559	667	1,698	2,039
Other real estate expenses, net	2,404	1,531	4,781	3,197
Legal expenses	209	251	575	989
Other	2,050	2,150	5,859	5,989
Total noninterest expense	15,984	15,347	45,215	44,341
Income before income taxes	3,890	4,142	13,674	11,844
Income tax expense	855	1,051	3,300	2,297
Net income	3,035	3,091	10,374	9,547
Less preferred stock dividends and discount accretion	489	481	1,461	1,439
Net income available to common shareholders	$ 2,546	$ 2,610	$ 8,913	$ 8,108
Per Common Share
Net income - basic and diluted (in Dollars per share)	$ 0.34	$ 0.35	$ 1.19	$ 1.09
Weighted Average Common Shares Outstanding
Basic and diluted (in Shares)	7,475	7,461	7,473	7,454

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Note 1 - Basis of Presentation and Nature of Operations

9 Months Ended

Sep. 30, 2013

Disclosure Text Block [Abstract]

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

1. Basis of Presentation and Nature of Operations

The condensed consolidated financial statements include the accounts of Farmers Capital Bank Corporation (the “Company” or “Parent Company”), a bank holding company, and its bank and nonbank subsidiaries. Bank subsidiaries include Farmers Bank & Capital Trust Company (“Farmers Bank”) in Frankfort, KY, United Bank & Trust Company (“United Bank”) in Versailles, KY, First Citizens Bank (“First Citizens”) in Elizabethtown, KY, and Citizens Bank of Northern Kentucky, Inc. (“Citizens Northern”) in Newport, KY.

Farmers Bank’s significant subsidiaries include EG Properties, Inc., Leasing One Corporation (“Leasing One”), and Farmers Capital Insurance Corporation (“Farmers Insurance”). EG Properties, Inc. is involved in real estate management and liquidation for certain repossessed properties of Farmers Bank. Leasing One is a commercial leasing company in Frankfort, KY, and Farmers Insurance is an insurance agency in Frankfort, KY. United Bank has one wholly-owned subsidiary, EGT Properties, Inc. EGT Properties, Inc. is involved in real estate management and liquidation for certain repossessed properties of United Bank. First Citizens has one wholly-owned subsidiary, HBJ Properties, LLC. HBJ Properties, LLC is involved in real estate management and liquidation for certain repossessed properties of First Citizens. Citizens Northern has one wholly-owned subsidiary, ENKY Properties, Inc. ENKY Properties, Inc. is involved in real estate management and liquidation for certain repossessed properties of Citizens Northern.

The Company has three active nonbank subsidiaries, FCB Services, Inc. (“FCB Services”), FFKT Insurance Services, Inc. (“FFKT Insurance”), and EKT Properties, Inc. (“EKT”). FCB Services is a data processing subsidiary located in Frankfort, KY that provides services to the Company’s banks as well as unaffiliated entities. FFKT Insurance is a captive property and casualty insurance company insuring primarily deductible exposures and uncovered liability related to properties of the Company. EKT was formed to manage and liquidate certain real estate properties repossessed by the Company. The Company has three subsidiaries organized as Delaware statutory trusts that are not consolidated into its financial statements. These trusts were formed for the purpose of issuing trust preferred securities. All significant intercompany transactions and balances are eliminated in consolidation.

The Company provides financial services at its 36 locations in 23 communities throughout Central and Northern Kentucky to individual, business, agriculture, government, and educational customers. Its primary deposit products are checking, savings, and term certificate accounts. Its primary lending products are residential mortgage, commercial lending, and consumer installment loans. Substantially all loans and leases are secured by specific items of collateral including business assets, consumer assets, and commercial and residential real estate. Commercial loans and leases are expected to be repaid from cash flow from operations of businesses. Other services include, but are not limited to, cash management services, issuing letters of credit, safe deposit box rental, and providing funds transfer services. Other financial instruments, which potentially represent concentrations of credit risk, include deposit accounts in other financial institutions and federal funds sold.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) 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. Estimates used in the preparation of the condensed financial statements are based on various factors including the current interest rate environment and the general strength of the local and state 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 condensed financial statements. The allowance for loan losses, carrying value of other real estate owned, actuarial assumptions used to calculate postretirement benefits, and the fair values of financial instruments are estimates that are particularly subject to change.

The condensed consolidated balance sheet as of December 31, 2012 has been derived from the audited financial statements of the Company as of that date. For further information, refer to the consolidated financial statements and footnotes thereto for the year ended December 31, 2012 included in the Company’s annual report on Form 10-K. The accompanying condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X and do not include all of the information and the footnotes required by U.S. GAAP for complete statements. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of such condensed 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. All significant intercompany transactions and balances are eliminated in consolidation.

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, 2012.

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Note 6 - Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2013

Fair Value Disclosures [Abstract]

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

			Fair Value Measurements Using
(In thousands) Available For Sale Investment Securities	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
September 30, 2013
Obligations of U.S. government-sponsored entities	$	96,087	$	-	$	96,087	$	-
Obligations of states and political subdivisions		130,538		-		130,538		-
Mortgage-backed securities – residential		351,749		-		351,749		-
Corporate debt securities		5,776		-		5,776		-
Mutual funds and equity securities		1,903		1,903		-		-
Total	$	586,053	$	1,903	$	584,150	$	-

			Fair Value Measurements Using
(In thousands) Available For Sale Investment Securities	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2012
Obligations of U.S. government-sponsored entities	$	76,095	$	-	$	76,095	$	-
Obligations of states and political subdivisions		118,755		-		118,755		-
Mortgage-backed securities – residential		370,439		-		370,439		-
Corporate debt securities		5,826		-		5,826		-
Mutual funds and equity securities		1,993		1,993		-		-
Total	$	573,108	$	1,993	$	571,115	$	-

Fair Value Measurements, Nonrecurring [Table Text Block]

			Fair Value Measurements Using
(In thousands) Description	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
September 30, 2013
Collateral-dependent Impaired Loans
Real estate mortgage – construction and land development	$	335	$	-	$	-	$	335
Real estate mortgage – residential		3,077		-		-		3,077
Real estate mortgage – farmland and other commercial enterprises		3,450		-		-		3,450
Commercial and industrial		88		-		-		88
Total	$	6,950	$	-	$	-	$	6,950
OREO
Construction and land development	$	11,454	$	-	$	-	$	11,454
Residential real estate		1,527		-		-		1,527
Farmland and other commercial enterprises		9,106		-		-		9,106
Total	$	22,087	$	-	$	-	$	22,087

			Fair Value Measurements Using
(In thousands) Description	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2012
Collateral-dependent Impaired Loans
Real estate mortgage – construction and land development	$	17,921	$	-	$	-	$	17,921
Real estate mortgage – residential		2,273		-		-		2,273
Real estate mortgage – farmland and other commercial enterprises		3,523		-		-		3,523
Commercial and industrial		9		-		-		9
Consumer – secured		4		-		-		4
Consumer – unsecured		113		-		-		113
Total	$	23,843	$	-	$	-	$	23,843
OREO
Construction and land development	$	15,873	$	-	$	-	$	15,873
Residential real estate		1,483		-		-		1,483
Farmland and other commercial enterprises		3,826		-		-		3,826
Total	$	21,182	$	-	$	-	$	21,182

Asset Impairment Charges [Text Block]

	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2013		2012		2013		2012
Impairment charges:
Collateral-dependent impaired loans	$	448	$	953	$	1,481	$	4,055
OREO		1,698		1,033		3,288		2,046
Total	$	2,146	$	1,986	$	4,769	$	6,101

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

(In thousands)	Fair Value at September 30, 2013		Valuation Technique	Unobservable Inputs	Range			Average
Collateral-dependent impaired loans	$	6,950	Discounted appraisals	Marketability discount	0%	-	6.3%		1.2	%
OREO	$	22,087	Discounted appraisals	Marketability discount	1.1%	-	32.4%		9.4	%

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

					Fair Value Measurements Using
(In thousands)	Carrying Amount		Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
September 30, 2013
Assets
Cash and cash equivalents	$	83,834	$	83,834	$	83,834	$	-	$	-
Held to maturity investment securities		820		871		-		871		-
Loans, net		988,182		985,969		-		-		985,969
Accrued interest receivable		6,033		6,033		-		6,033		-
Federal Home Loan Bank and Federal Reserve Bank Stock		9,516	N/A			-		-		-
Liabilities
Deposits		1,403,485		1,406,295		911,017		-		495,278
Federal funds purchased and other short-term borrowings		32,885		32,885		-		32,885		-
Securities sold under agreements to repurchase and other long-term borrowings		127,165		139,136		-		139,136		-
Subordinated notes payable to unconsolidated trusts		48,970		25,027		-		-		25,027
Accrued interest payable		1,161		1,161		-		1,161		-
December 31, 2012
Assets
Cash and cash equivalents	$	95,855	$	95,855	$	95,855	$	-	$	-
Held to maturity investment securities		820		956		-		956		-
Loans, net		980,550		979,301		-		-		979,301
Accrued interest receivable		6,074		6,074		-		6,074		-
Federal Home Loan Bank and Federal Reserve Bank Stock		9,516	N/A			-		-		-
Liabilities
Deposits		1,410,810		1,414,395		870,145		-		544,250
Federal funds purchased and other short-term borrowings		24,083		24,083		-		24,083		-
Securities sold under agreements to repurchase and other long-term borrowings		129,297		148,680		-		148,680		-
Subordinated notes payable to unconsolidated trusts		48,970		21,015		-		-		21,015
Accrued interest payable		1,370		1,370		-		1,370		-

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Note 9 - Other Real Estate Owned (Details) - Other Real Estate Owned (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012	Sep. 30, 2012	Dec. 31, 2011
Note 9 - Other Real Estate Owned (Details) - Other Real Estate Owned [Line Items]
Other Real Estate Owned	$ 41,661	$ 52,562	$ 47,480	$ 38,157
Construction and Land Development OREO [Member]
Note 9 - Other Real Estate Owned (Details) - Other Real Estate Owned [Line Items]
Other Real Estate Owned	25,778	32,360
Residential Real Estate OREO [Member]
Note 9 - Other Real Estate Owned (Details) - Other Real Estate Owned [Line Items]
Other Real Estate Owned	2,868	4,605
Farmland and Other Commercial Enterprises OREO [Member]
Note 9 - Other Real Estate Owned (Details) - Other Real Estate Owned [Line Items]
Other Real Estate Owned	13,015	15,597
Total OREO [Member]
Note 9 - Other Real Estate Owned (Details) - Other Real Estate Owned [Line Items]
Other Real Estate Owned	$ 41,661	$ 52,562

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Note 9 - Other Real Estate Owned

9 Months Ended

Sep. 30, 2013

Disclosure Text Block [Abstract]

Real Estate Owned [Text Block]

9.Other Real Estate Owned

OREO was as follows as of the date indicated:

(In thousands)	September 30, 2013		December 31, 2012
Construction and land development	$	25,778	$	32,360
Residential real estate		2,868		4,605
Farmland and other commercial enterprises		13,015		15,597
Total	$	41,661	$	52,562

OREO activity for the nine months ended September 30, 2013 and 2012 was as follows:

Nine months ended September 30, (In thousands)	2013			2012
Beginning balance	$	52,562		$	38,157
Transfers from loans		5,589			21,914
Proceeds from sales		(12,695	)		(10,148	)
Loss on sales, net		(24	)		(241	)
Write downs and other decreases, net		(3,771	)		(2,202	)
Ending balance	$	41,661		$	47,480

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Note 8 - Loans and Allowance for Loan Losses (Details) - Individually Impaired Loans By Class Of Loans (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	$ 65,252	$ 68,336
Recorded Investment With No Allowance	26,152	28,221
Recorded Investment With Allowance	36,129	35,668
Total Recorded Investment	62,281	63,889
Allowance for Loan Losses Allocated	4,994	5,143
Real Estate Construction And Land Development [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	18,422	26,831
Recorded Investment With No Allowance	10,952	12,712
Recorded Investment With Allowance	4,701	11,068
Total Recorded Investment	15,653	23,780
Allowance for Loan Losses Allocated	921	2,075
Real Estate Mortgage Residential [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	12,554	7,474
Recorded Investment With No Allowance	2,626	2,215
Recorded Investment With Allowance	9,805	5,259
Total Recorded Investment	12,431	7,474
Allowance for Loan Losses Allocated	1,557	1,069
Real Estate Mortgage Farmland And Other Commercial Enterprises [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	33,285	33,491
Recorded Investment With No Allowance	12,574	13,294
Recorded Investment With Allowance	20,628	18,803
Total Recorded Investment	33,202	32,097
Allowance for Loan Losses Allocated	1,617	1,588
Commercial And Industrial [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	911	210
Recorded Investment With No Allowance	0	0
Recorded Investment With Allowance	915	207
Total Recorded Investment	915	207
Allowance for Loan Losses Allocated	823	198
Consumer Secured [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	19	21
Recorded Investment With No Allowance	0	0
Recorded Investment With Allowance	19	21
Total Recorded Investment	19	21
Allowance for Loan Losses Allocated	15	17
Consumer Unsecured [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	61	309
Recorded Investment With No Allowance	0	0
Recorded Investment With Allowance	61	310
Total Recorded Investment	61	310
Allowance for Loan Losses Allocated	$ 61	$ 196

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Note 9 - Other Real Estate Owned (Details) - OREO Activity (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
OREO Activity [Abstract]
Beginning balance	$ 52,562	$ 38,157
Transfers from loans	5,589	21,914
Proceeds from sales	(12,695)	(10,148)
Loss on sales, net	(24)	(241)
Write downs and other decreases, net	(3,771)	(2,202)
Ending balance	$ 41,661	$ 47,480

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Note 6 - Fair Value Measurements (Details) - Quantitative Information About Unobservable Inputs for Assets Measured on A Nonrecurring Basis Using Level 3 Measurements (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2013	Dec. 31, 2012
OREO [Member] | Fair Value, Inputs, Level 3 [Member]
Note 6 - Fair Value Measurements (Details) - Quantitative Information About Unobservable Inputs for Assets Measured on A Nonrecurring Basis Using Level 3 Measurements [Line Items]
Fair Value (in Dollars)	$ 22,087	$ 21,182
Valuation Technique	Discounted appraisals
Unobservable Inputs	Marketability discount
OREO [Member]
Note 6 - Fair Value Measurements (Details) - Quantitative Information About Unobservable Inputs for Assets Measured on A Nonrecurring Basis Using Level 3 Measurements [Line Items]
Fair Value (in Dollars)	22,087	21,182
OREO [Member] | Minimum [Member] | Fair Value, Inputs, Level 3 [Member]
Note 6 - Fair Value Measurements (Details) - Quantitative Information About Unobservable Inputs for Assets Measured on A Nonrecurring Basis Using Level 3 Measurements [Line Items]
Range	1.10%
OREO [Member] | Maximum [Member] | Fair Value, Inputs, Level 3 [Member]
Note 6 - Fair Value Measurements (Details) - Quantitative Information About Unobservable Inputs for Assets Measured on A Nonrecurring Basis Using Level 3 Measurements [Line Items]
Range	32.40%
OREO [Member] | Weighted Average [Member] | Fair Value, Inputs, Level 3 [Member]
Note 6 - Fair Value Measurements (Details) - Quantitative Information About Unobservable Inputs for Assets Measured on A Nonrecurring Basis Using Level 3 Measurements [Line Items]
Range	9.40%
Impaired Loans [Member] | Fair Value, Inputs, Level 3 [Member]
Note 6 - Fair Value Measurements (Details) - Quantitative Information About Unobservable Inputs for Assets Measured on A Nonrecurring Basis Using Level 3 Measurements [Line Items]
Fair Value (in Dollars)	6,950	23,843
Valuation Technique	Discounted appraisals
Unobservable Inputs	Marketability discount
Impaired Loans [Member]
Note 6 - Fair Value Measurements (Details) - Quantitative Information About Unobservable Inputs for Assets Measured on A Nonrecurring Basis Using Level 3 Measurements [Line Items]
Fair Value (in Dollars)	$ 6,950	$ 23,843
Minimum [Member] | Impaired Loans [Member] | Fair Value, Inputs, Level 3 [Member]
Note 6 - Fair Value Measurements (Details) - Quantitative Information About Unobservable Inputs for Assets Measured on A Nonrecurring Basis Using Level 3 Measurements [Line Items]
Range	0.00%
Maximum [Member] | Impaired Loans [Member] | Fair Value, Inputs, Level 3 [Member]
Note 6 - Fair Value Measurements (Details) - Quantitative Information About Unobservable Inputs for Assets Measured on A Nonrecurring Basis Using Level 3 Measurements [Line Items]
Range	6.30%
Weighted Average [Member] | Impaired Loans [Member] | Fair Value, Inputs, Level 3 [Member]
Note 6 - Fair Value Measurements (Details) - Quantitative Information About Unobservable Inputs for Assets Measured on A Nonrecurring Basis Using Level 3 Measurements [Line Items]
Range	1.20%

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Note 9 - Other Real Estate Owned (Tables)

9 Months Ended

Sep. 30, 2013

Disclosure Text Block [Abstract]

OREO Detail [Table Text Block]

(In thousands)	September 30, 2013		December 31, 2012
Construction and land development	$	25,778	$	32,360
Residential real estate		2,868		4,605
Farmland and other commercial enterprises		13,015		15,597
Total	$	41,661	$	52,562

OREO Activity [Table Text Block]

Nine months ended September 30, (In thousands)	2013			2012
Beginning balance	$	52,562		$	38,157
Transfers from loans		5,589			21,914
Proceeds from sales		(12,695	)		(10,148	)
Loss on sales, net		(24	)		(241	)
Write downs and other decreases, net		(3,771	)		(2,202	)
Ending balance	$	41,661		$	47,480

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Note 8 - Loans and Allowance for Loan Losses (Tables)

9 Months Ended

Sep. 30, 2013

Note 8 - Loans and Allowance for Loan Losses (Tables) [Line Items]

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

(In thousands)	September 30, 2013		December 31, 2012
Real Estate:
Real estate mortgage – construction and land development	$	106,870	$	102,454
Real estate mortgage – residential		371,292		368,762
Real estate mortgage – farmland and other commercial enterprises		418,690		425,477
Commercial:
Commercial and industrial		47,433		46,812
States and political subdivisions		22,849		21,472
Lease financing		1,268		2,732
Other		26,327		19,156
Consumer:
Secured		8,957		11,732
Unsecured		6,479		6,515
Total loans		1,010,165		1,005,112
Less unearned income		34		117
Total loans, net of unearned income	$	1,010,131	$	1,004,995

Allowance for Credit Losses on Financing Receivables [Table Text Block]

(In thousands)	Real Estate			Commercial			Consumer			Total
Three months ended September 30, 2013
Balance, beginning of period	$	20,240		$	2,177		$	526		$	22,943
Provision for loan losses		(528	)		(2	)		(56	)		(586	)
Recoveries		70			25			37			132
Loans charged off		(407	)		(98	)		(35	)		(540	)
Balance, end of period	$	19,375		$	2,102		$	472		$	21,949
Nine months ended September 30, 2013
Balance, beginning of period	$	22,254		$	1,513		$	678		$	24,445
Provision for loan losses		(2,028	)		615			(167	)		(1,580	)
Recoveries		254			122			187			563
Loans charged off		(1,105	)		(148	)		(226	)		(1,479	)
Balance, end of period	$	19,375		$	2,102		$	472		$	21,949

(In thousands)	Real Estate			Commercial			Consumer			Total
Three months ended September 30, 2012
Balance, beginning of period	$	24,221		$	2,137		$	755		$	27,113
Provision for loan losses		(1,114	)		591			267			(256	)
Recoveries		50			8			80			138
Loans charged off		(1,716	)		(36	)		(99	)		(1,851	)
Balance, end of period	$	21,441		$	2,700		$	1,003		$	25,144
Nine months ended September 30, 2012
Balance, beginning of period	$	23,538		$	3,508		$	1,218		$	28,264
Provision for loan losses		2,916			(790	)		(64	)		2,062
Recoveries		252			129			192			573
Loans charged off		(5,265	)		(147	)		(343	)		(5,755	)
Balance, end of period	$	21,441		$	2,700		$	1,003		$	25,144

Impaired Financing Receivables [Table Text Block]

September 30, 2013 (In thousands)	Unpaid Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Allowance for Loan Losses Allocated
Real Estate
Real estate mortgage – construction and land development	$	18,422	$	10,952	$	4,701	$	15,653	$	921
Real estate mortgage – residential		12,554		2,626		9,805		12,431		1,557
Real estate mortgage – farmland and other commercial enterprises		33,285		12,574		20,628		33,202		1,617
Commercial
Commercial and industrial		911		-		915		915		823
Consumer
Secured		19		-		19		19		15
Unsecured		61		-		61		61		61
Total	$	65,252	$	26,152	$	36,129	$	62,281	$	4,994

December 31, 2102 (In thousands)	Unpaid Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Allowance for Loan Losses Allocated
Real Estate
Real estate mortgage – construction and land development	$	26,831	$	12,712	$	11,068	$	23,780	$	2,075
Real estate mortgage – residential		7,474		2,215		5,259		7,474		1,069
Real estate mortgage – farmland and other commercial enterprises		33,491		13,294		18,803		32,097		1,588
Commercial
Commercial and industrial		210		-		207		207		198
Consumer
Secured		21		-		21		21		17
Unsecured		309		-		310		310		196
Total	$	68,336	$	28,221	$	35,668	$	63,889	$	5,143

Loans and ALL Disaggregated Impairment Method [Table Text Block]

September 30, 2013 (In thousands)	Real Estate		Commercial		Consumer		Total
Allowance for Loan Losses
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	4,095	$	823	$	76	$	4,994
Collectively evaluated for impairment		15,280		1,279		396		16,955
Total ending allowance balance	$	19,375	$	2,102	$	472	$	21,949
Loans
Loans individually evaluated for impairment	$	61,286	$	915	$	80	$	62,281
Loans collectively evaluated for impairment		835,566		96,928		15,356		947,850
Total ending loan balance, net of unearned income	$	896,852	$	97,843	$	15,436	$	1,010,131

December 31, 2012 (In thousands)	Real Estate		Commercial		Consumer		Total
Allowance for Loan Losses
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	4,732	$	198	$	213	$	5,143
Collectively evaluated for impairment		17,522		1,315		465		19,302
Total ending allowance balance	$	22,254	$	1,513	$	678	$	24,445
Loans
Loans individually evaluated for impairment	$	63,351	$	207	$	331	$	63,889
Loans collectively evaluated for impairment		833,342		89,848		17,916		941,106
Total ending loan balance, net of unearned income	$	896,693	$	90,055	$	18,247	$	1,004,995

Non-performing Loans Including TDR's [Table Text Block]

September 30, 2013 (In thousands)	Nonaccrual		Restructured Loans		Loans Past Due 90 Days or More and Still Accruing
Real Estate:
Real estate mortgage – construction and land development	$	6,332	$	4,391	$	-
Real estate mortgage – residential		5,538		4,912		-
Real estate mortgage – farmland and other commercial enterprises		13,004		17,086		-
Commercial:
Commercial and industrial		138		-		-
Lease financing		29		-		-
Consumer:
Secured		22		8		-
Unsecured		-		38		-
Total	$	25,063	$	26,435	$	-

December 31, 2012 (In thousands)	Nonaccrual		Restructured Loans		Loans Past Due 90 Days or More and Still Accruing
Real Estate:
Real estate mortgage – construction and land development	$	7,700	$	8,736	$	-
Real estate mortgage – residential		6,025		634		-
Real estate mortgage – farmland and other commercial enterprises		12,878		16,940		103
Commercial:
Commercial and industrial		649		-		-
Lease financing		53		-		-
Consumer:
Secured		9		-		-
Unsecured		94		39		-
Total	$	27,408	$	26,349	$	103

Troubled Debt Restructurings on Financing Receivables [Table Text Block]

(Dollars in thousands) Troubled Debt Restructurings:	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Three Months Ended September 30, 2013
Real Estate:
Real estate mortgage – farmland and other commercial enterprises		1	$	598	$	598
Consumer:
Secured		1		7		7
Total		2	$	605	$	605
Nine Months Ended September 30, 2013
Real Estate:
Real estate mortgage – residential		3	$	309	$	309
Real estate mortgage – farmland and other commercial enterprises		1		598		598
Commercial:
Commercial and industrial		1		13		13
Consumer:
Secured		2		9		9
Total		7	$	929	$	929

(Dollars in thousands) Troubled Debt Restructurings:	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Three Months Ended September 30, 2012
Real Estate:
Real estate mortgage – farmland and other commercial enterprises		1	$	8,796	$	8,717
Total		1	$	8,796	$	8,717
Nine Months Ended September 30, 2012
Real Estate:
Real estate mortgage – residential		1	$	72	$	72
Real estate mortgage – farmland and other commercial enterprises		1		8,796		8,717
Total		2	$	8,868	$	8,789

Past Due Financing Receivables [Table Text Block]

September 30, 2013 (In thousands)	30-89 Days Past Due		90 Days or More Past Due		Total		Current		Total Loans
Real Estate:
Real estate mortgage – construction and land development	$	58	$	599	$	657	$	106,213	$	106,870
Real estate mortgage – residential		2,819		2,336		5,155		366,137		371,292
Real estate mortgage – farmland and other commercial enterprises		1,169		10,131		11,300		407,390		418,690
Commercial:
Commercial and industrial		-		53		53		47,380		47,433
States and political subdivisions		-		-		-		22,849		22,849
Lease financing, net		14		29		43		1,191		1,234
Other		93		-		93		26,234		26,327
Consumer:
Secured		53		7		60		8,897		8,957
Unsecured		68		-		68		6,411		6,479
Total	$	4,274	$	13,155	$	17,429	$	992,702	$	1,010,131

December 31, 2012 (In thousands)	30-89 Days Past Due		90 Days or More Past Due		Total		Current		Total Loans
Real Estate:
Real estate mortgage – construction and land development	$	908	$	1,361	$	2,269	$	100,185	$	102,454
Real estate mortgage – residential		2,303		2,500		4,803		363,959		368,762
Real estate mortgage – farmland and other commercial enterprises		1,990		10,724		12,714		412,763		425,477
Commercial:
Commercial and industrial		108		53		161		46,651		46,812
States and political subdivisions		-		-		-		21,472		21,472
Lease financing, net		1		53		54		2,561		2,615
Other		38		399		437		18,719		19,156
Consumer:
Secured		69		-		69		11,663		11,732
Unsecured		137		-		137		6,378		6,515
Total	$	5,554	$	15,090	$	20,644	$	984,351	$	1,004,995

Financing Receivable Credit Quality Indicators [Table Text Block]

	Real Estate						Commercial
September 30, 2013 (In thousands)	Real Estate Mortgage –Construction and Land Development		Real Estate Mortgage –Residential		Real Estate Mortgage –Farmland and Other Commercial Enterprises		Commercial and Industrial		States and Political Subdivisions		Lease Financing, net		Other
Credit risk profile by internally assigned rating grades:
Pass	$	83,183	$	334,591	$	347,472	$	45,604	$	22,849	$	1,205	$	26,299
Special mention		6,282		14,925		29,307		351		-		-		-
Substandard		17,345		21,686		41,911		1,402		-		29		28
Doubtful		60		90		-		76		-		-		-
Total	$	106,870	$	371,292	$	418,690	$	47,433	$	22,849	$	1,234	$	26,327

	Real Estate						Commercial
December 31, 2012 (In thousands)	Real Estate Mortgage –Construction and Land Development		Real Estate Mortgage –Residential		Real Estate Mortgage –Farmland and Other Commercial Enterprises		Commercial and Industrial		States and Political Subdivisions		Lease Financing, net		Other
Credit risk profile by internally assigned rating grades:
Pass	$	68,721	$	328,214	$	348,918	$	41,527	$	21,472	$	2,615	$	18,592
Special mention		7,562		18,485		35,027		4,201		-		-		559
Substandard		26,171		21,984		41,532		1,008		-		-		5
Doubtful		-		79		-		76		-		-		-
Total	$	102,454	$	368,762	$	425,477	$	46,812	$	21,472	$	2,615	$	19,156

Credit Quality Consumer Loans [Table Text Block]

	September 30, 2013				December 31, 2012
	Consumer				Consumer
(In thousands)	Secured		Unsecured		Secured		Unsecured
Credit risk profile based on payment activity:
Performing	$	8,927	$	6,441	$	11,723	$	6,382
Nonperforming		30		38		9		133
Total	$	8,957	$	6,479	$	11,732	$	6,515

Additional Information Regarding Impaired Loans [Member]

Note 8 - Loans and Allowance for Loan Losses (Tables) [Line Items]

Impaired Financing Receivables [Table Text Block]

Three Months Ended September 30, 2013 (In thousands)	Average		Interest Income Recognized		Cash Basis Interest Recognized
Real Estate
Real estate mortgage – construction and land development	$	16,815	$	128	$	109
Real estate mortgage – residential		11,799		94		105
Real estate mortgage – farmland and other commercial enterprises		33,925		329		318
Commercial
Commercial and industrial		1,037		4		4
Consumer
Secured		18		-		-
Unsecured		75		-		-
Total	$	63,669	$	555	$	536

Nine Months Ended September 30, 2013 (In thousands)	Average		Interest Income Recognized		Cash Basis Interest Recognized
Real Estate
Real estate mortgage – construction and land development	$	17,683	$	405	$	402
Real estate mortgage – residential		13,023		356		340
Real estate mortgage – farmland and other commercial enterprises		33,006		1,137		1,120
Commercial
Commercial and industrial		966		37		37
Consumer
Secured		20		1		1
Unsecured		167		6		6
Total	$	64,865	$	1,942	$	1,906

Three Months Ended September 30, 2012 (In thousands)	Average		Interest Income Recognized		Cash Basis Interest Recognized
Real Estate
Real estate mortgage – construction and land development	$	26,902	$	249	$	204
Real estate mortgage – residential		8,979		52		44
Real estate mortgage – farmland and other commercial enterprises		35,076		418		608
Commercial
Commercial and industrial		214		8		8
Consumer
Secured		22		-		-
Unsecured		374		8		7
Total	$	71,567	$	735	$	871

Nine Months Ended September 30, 2012 (In thousands)	Average		Interest Income Recognized		Cash Basis Interest Recognized
Real Estate
Real estate mortgage – construction and land development	$	37,921	$	630	$	573
Real estate mortgage – residential		14,744		308		298
Real estate mortgage – farmland and other commercial enterprises		38,967		1,419		1,437
Commercial
Commercial and industrial		426		22		22
Consumer
Secured		66		5		5
Unsecured		251		13		12
Total	$	92,375	$	2,397	$	2,347

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Note 8 - Loans and Allowance for Loan Losses (Details) - Major Classifications Of Loans Outstanding (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Major Classifications Of Loans Outstanding [Abstract]
Real estate mortgage – construction and land development	$ 106,870	$ 102,454
Real estate mortgage – residential	371,292	368,762
Real estate mortgage – farmland and other commercial enterprises	418,690	425,477
Commercial and industrial	47,433	46,812
States and political subdivisions	22,849	21,472
Lease financing	1,268	2,732
Other	26,327	19,156
Secured	8,957	11,732
Unsecured	6,479	6,515
Total loans	1,010,165	1,005,112
Less unearned income	34	117
Total loans, net of unearned income	$ 1,010,131	$ 1,004,995

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Note 5 - Net Income Per Common Share (Details) - Net Income Per Common Share Computations (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Net Income Per Common Share Computations [Abstract]
Net income, basic and diluted	$ 3,035	$ 3,091	$ 10,374	$ 9,547
Less preferred stock dividends and discount accretion	489	481	1,461	1,439
Net income available to common shareholders, basic and diluted	$ 2,546	$ 2,610	$ 8,913	$ 8,108
Average common shares issued and outstanding, basic and diluted (in Shares)	7,475	7,461	7,473	7,454
Net income per common share, basic and diluted (in Dollars per share)	$ 0.34	$ 0.35	$ 1.19	$ 1.09

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Note 7 - Investment Securities (Details) (USD $)	9 Months Ended	12 Months Ended
	Sep. 30, 2013	Dec. 31, 2012
Note 7 - Investment Securities (Details) [Line Items]
Available-for-sale Securities, Gross Unrealized Loss	$ 9,000,000
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Aggregate Loss	1,837,000	856,000
Available-for-sale Securities	586,053,000	573,108,000
AFS Gross Unrealized Losses [Member]
Note 7 - Investment Securities (Details) [Line Items]
Available-for-sale Securities, Change in Net Unrealized Holding Gain (Loss) before Taxes	(7,600,000)
Corporate Debt Securities [Member]
Note 7 - Investment Securities (Details) [Line Items]
Available-for-sale Securities, Gross Unrealized Loss	987,000	856,000
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Aggregate Loss	985,000	856,000
Available-for-sale Securities	5,776,000	5,826,000
Residential Mortgage Backed Securities [Member]
Note 7 - Investment Securities (Details) [Line Items]
Available-for-sale Securities, Gross Unrealized Loss	3,468,000	256,000
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Aggregate Loss	574,000	0
Available-for-sale Securities	351,749,000	370,439,000
Single Issuer Corporate Debt Security [Member]
Note 7 - Investment Securities (Details) [Line Items]
Available-for-sale Securities	$ 4,900,000

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Note 8 - Loans and Allowance for Loan Losses (Details) - Individually Impaired Loans By Class of Loans, Continued (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Financing Receivable, Impaired [Line Items]
Average	$ 63,669	$ 71,567	$ 64,865	$ 92,375
Interest Income Recognized	555	735	1,942	2,397
Cash Basis Interest Recognized	536	871	1,906	2,347
Real Estate Construction And Land Development [Member]
Financing Receivable, Impaired [Line Items]
Average	16,815	26,902	17,683	37,921
Interest Income Recognized	128	249	405	630
Cash Basis Interest Recognized	109	204	402	573
Real Estate Mortgage Residential [Member]
Financing Receivable, Impaired [Line Items]
Average	11,799	8,979	13,023	14,744
Interest Income Recognized	94	52	356	308
Cash Basis Interest Recognized	105	44	340	298
Real Estate Mortgage Farmland And Other Commercial Enterprises [Member]
Financing Receivable, Impaired [Line Items]
Average	33,925	35,076	33,006	38,967
Interest Income Recognized	329	418	1,137	1,419
Cash Basis Interest Recognized	318	608	1,120	1,437
Commercial And Industrial [Member]
Financing Receivable, Impaired [Line Items]
Average	1,037	214	966	426
Interest Income Recognized	4	8	37	22
Cash Basis Interest Recognized	4	8	37	22
Consumer Secured [Member]
Financing Receivable, Impaired [Line Items]
Average	18	22	20	66
Interest Income Recognized	0	0	1	5
Cash Basis Interest Recognized	0	0	1	5
Consumer Unsecured [Member]
Financing Receivable, Impaired [Line Items]
Average	75	374	167	251
Interest Income Recognized	0	8	6	13
Cash Basis Interest Recognized	$ 0	$ 7	$ 6	$ 12

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Note 2 - Adoption of New Accounting Standards (Details) - Amounts Reclassified out of Accumulated Other Comprehensive Income (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Note 2 - Adoption of New Accounting Standards (Details) - Amounts Reclassified out of Accumulated Other Comprehensive Income [Line Items]
	$ (855)	$ (1,051)	$ (3,300)	$ (2,297)
Net of Tax	2,546	2,610	8,913	8,108
	3,890	4,142	13,674	11,844
	(855)	(1,051)	(3,300)	(2,297)
Accumulated Net Unrealized Investment Gain (Loss) [Member] | Reclassification out of Accumulated Other Comprehensive Income [Member]
Note 2 - Adoption of New Accounting Standards (Details) - Amounts Reclassified out of Accumulated Other Comprehensive Income [Line Items]
Unrealized gains and losses on available for sale investment securities	2		58
	(1)		(20)
Net of Tax	1		38
	(1)		(20)
Accumulated Defined Benefit Plans Adjustment [Member] | Reclassification out of Accumulated Other Comprehensive Income [Member]
Note 2 - Adoption of New Accounting Standards (Details) - Amounts Reclassified out of Accumulated Other Comprehensive Income [Line Items]
	25		71
Net of Tax	(43)		(131)
Prior service costs	(65)		(193)
Actuarial losses	(3)		(9)
	(68)		(202)
	25		71
Reclassification out of Accumulated Other Comprehensive Income [Member]
Note 2 - Adoption of New Accounting Standards (Details) - Amounts Reclassified out of Accumulated Other Comprehensive Income [Line Items]
Net of Tax	$ (42)		$ (93)

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Note 7 - Investment Securities (Details) - Gross Realized Gains And Losses On The Sale Of Available For Sale Investment Securities (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Gross Realized Gains And Losses On The Sale Of Available For Sale Investment Securities [Abstract]
Gross realized gains	$ 3	$ 343	$ 6	$ 1,038
Gross realized losses	1	67	64	74
Net realized gain (loss)	$ 2	$ 276	$ (58)	$ 964

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Note 7 - Investment Securities (Tables)

9 Months Ended

Sep. 30, 2013

Investments, Debt and Equity Securities [Abstract]

Schedule of AFS and HTM Reconciliation [Table Text Block]

September 30, 2013 (In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available For Sale
Obligations of U.S. government-sponsored entities	$	98,239	$	163	$	2,315	$	96,087
Obligations of states and political subdivisions		130,441		2,266		2,169		130,538
Mortgage-backed securities – residential		348,935		6,282		3,468		351,749
Corporate debt securities		6,721		42		987		5,776
Mutual funds and equity securities		1,898		22		17		1,903
Total securities – available for sale	$	586,234	$	8,775	$	8,956	$	586,053
Held To Maturity
Obligations of states and political subdivisions	$	820	$	51	$	-	$	871

December 31, 2012 (In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available For Sale
Obligations of U.S. government-sponsored entities	$	75,945	$	216	$	66	$	76,095
Obligations of states and political subdivisions		113,986		4,943		174		118,755
Mortgage-backed securities – residential		360,099		10,596		256		370,439
Corporate debt securities		6,638		44		856		5,826
Mutual funds and equity securities		1,962		33		2		1,993
Total securities – available for sale	$	558,630	$	15,832	$	1,354	$	573,108
Held To Maturity
Obligations of states and political subdivisions	$	820	$	136	$	-	$	956

Investments Classified by Contractual Maturity Date [Table Text Block]

	Available For Sale				Held To Maturity
September 30, 2013 (In thousands)	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due in one year or less	$	2,681	$	2,694	$	-	$	-
Due after one year through five years		105,522		105,666		-		-
Due after five years through ten years		109,489		107,528		-		-
Due after ten years		17,709		16,513		820		871
Mortgage-backed securities		348,935		351,749		-		-
Total	$	584,336	$	584,150	$	820	$	871

Realized Gain (Loss) on Investments [Table Text Block]

	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2013		2012		2013			2012
Gross realized gains	$	3	$	343	$	6		$	1,038
Gross realized losses		1		67		64			74
Net realized gain (loss)	$	2	$	276	$	(58	)	$	964

Schedule of Unrealized Loss on Investments [Table Text Block]

	Less than 12 Months				12 Months or More				Total
September 30, 2013 (In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Obligations of U.S. government-sponsored entities	$	76,817	$	2,315	$	-	$	-	$	76,817	$	2,315
Obligations of states and political subdivisions		57,780		1,891		3,135		278		60,915		2,169
Mortgage-backed securities – residential		116,427		2,894		12,336		574		128,763		3,468
Corporate debt securities		106		2		4,876		985		4,982		987
Mutual funds and equity securities		681		17		-		-		681		17
Total	$	251,811	$	7,119	$	20,347	$	1,837	$	272,158	$	8,956

	Less than 12 Months				12 Months or More				Total
December 31, 2012 (In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Obligations of U.S. government-sponsored entities	$	26,433	$	66	$	-	$	-	$	26,433	$	66
Obligations of states and political subdivisions		17,199		174		-		-		17,199		174
Mortgage-backed securities – residential		39,659		256		-		-		39,659		256
Corporate debt securities		-		-		4,994		856		4,994		856
Mutual funds and equity securities		299		2		-		-		299		2
Total	$	83,590	$	498	$	4,994	$	856	$	88,584	$	1,354

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Unaudited Condensed Consolidated Statements of Comprehensive Income (Parentheticals) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Tax on net unrealized holding gain (loss) on available for sale securities arising during the period (in Dollars)	$ 912	$ 1,270	$ (5,110)	$ 1,861
Tax on reclassification adjustment for prior period unrealized gain recognized during current period (in Dollars)	1	97	20	275
Tax on change in unfunded portion of postretirement benefit obligation (in Dollars)	$ 25	$ 44	$ 71	$ 111

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Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity (Parentheticals) (USD $)	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Preferred stock dividends, per share (in Dollars per share)	$ 37.50	$ 37.50

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Note 2 - Adoption of New Accounting Standards

9 Months Ended

Sep. 30, 2013

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

New Accounting Pronouncements and Changes in Accounting Principles [Text Block]

2. Adoption of New Accounting Standards

Effective January 1, 2013, the Company adopted Accounting Standards Update (“ASU”) 2013-02, Comprehensive Income (Topic 220) – Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. This ASU requires additional disclosure about the changes in the components of accumulated other comprehensive income, including amounts reclassified and amounts due to current period other comprehensive income. The following table presents changes in accumulated other comprehensive income by component, net of tax, for the periods indicated.

	Three months ended September 30, 2013									Nine months ended September 30, 2013
(In thousands)	Unrealized Gains and Losses on Available for Sale Investment Securities			Postretirement Benefit Obligation			Total			Unrealized Gains and Losses on Available for Sale Investment Securities			Postretirement Benefit Obligation			Total
Beginning balance	$	(1,810	)	$	(2,454	)	$	(4,264	)	$	9,411		$	(2,542	)	$	6,869
Other comprehensive income (loss) before reclassifications		1,694			-			1,694			(9,490	)		-			(9,490	)
Amounts reclassified from accumulated other comprehensive income		(1	)		43			42			(38	)		131			93
Net current-period other comprehensive income (loss)		1,693			43			1,736			(9,528	)		131			(9,397	)
Ending balance	$	(117	)	$	(2,411	)	$	(2,528	)	$	(117	)	$	(2,411	)	$	(2,528	)

The following table presents amounts reclassified out of accumulated other comprehensive income by component for the period indicated. Line items in the statement of income affected by the reclassification are also presented.

	Amount Reclassified from Accumulated Other Comprehensive Income						Affected Line Item in the Statement Where Net Income is Presented
(In thousands)	Three months ended September 30, 2013			Nine months ended September 30, 2013
Unrealized gains and losses on available for sale investment securities	$	2		$	58		Investment securities gains, net
		(1	)		(20	)	Income tax expense
	$	1		$	38		Net of tax
Amortization related to postretirement benefits
Prior service costs	$	(65	)	$	(193	)	Salaries and employee benefits
Actuarial losses		(3	)		(9	)	Salaries and employee benefits
		(68	)		(202	)	Total before tax
		25			71		Income tax benefit
	$	(43	)	$	(131	)	Net of tax
Total reclassifications for the period	$	(42	)	$	(93	)	Net of tax

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Unaudited Condensed Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Cash Flows from Operating Activities
Net income	$ 10,374	$ 9,547
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	3,013	3,398
Net premium amortization of available for sale investment securities	4,068	3,921
Provision for loan losses	(1,580)	2,062
Deferred income tax expense	142	68
Noncash employee stock purchase plan expense	28	31
Mortgage loans originated for sale	(42,867)	(60,376)
Proceeds from sale of mortgage loans	42,948	60,099
Gain on sale of mortgage loans, net	(867)	(1,364)
Loss on disposals and write downs of premises and equipment, net	4	259
Net loss on sale and write downs of other real estate	3,820	2,443
Net loss (gain) on sale of available for sale investment securities	58	(964)
Increase in cash surrender value of company-owned life insurance	(689)	(732)
Death benefits in excess of cash surrender value on company-owned life insurance		(529)
Decrease in accrued interest receivable	41	714
(Increase) decrease in other assets	(3)	1,039
Decrease in accrued interest payable	(209)	(331)
Increase in other liabilities	4,208	3,089
Net cash provided by operating activities	22,489	22,374
Cash Flows from Investing Activities
Proceeds from maturities and calls of available for sale investment securities	102,757	144,364
Proceeds from sale of available for sale investment securities	948	125,308
Purchase of available for sale investment securities	(135,435)	(270,836)
Loans originated for investment, net of principal collected	(6,764)	31,063
Proceeds from death benefits of company-owned life insurance		1,051
Purchase of premises and equipment	(2,970)	(1,491)
Proceeds from sale of other real estate	8,604	7,427
Proceeds from disposals of equipment	31	427
Net cash (used in) provided by investing activities	(32,829)	37,313
Cash Flows from Financing Activities
Net decrease in deposits	(7,325)	(31,074)
Net increase (decrease) in federal funds purchased and other short-term borrowings	8,802	(1,282)
Repayments of securities sold under agreements to repurchase and other long-term borrowings	(2,132)	(10,314)
Dividends paid, preferred	(1,125)	(1,125)
Repurchase of common stock warrant		(75)
Shares issued under employee stock purchase plan	99	92
Net cash used in financing activities	(1,681)	(43,778)
Net (decrease) increase in cash and cash equivalents	(12,021)	15,909
Cash and cash equivalents at beginning of year	95,855	94,309
Cash and cash equivalents at end of period	83,834	110,218
Supplemental Disclosures
Interest	9,366	14,765
Income taxes	4,400	2,500
Transfers from loans to other real estate	5,589	21,914
Sale and financing of other real estate	4,091	2,721
Cash dividends payable, preferred	$ 188	$ 188

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Note 7 - Investment Securities (Details) - The Amortized Costs And Estimated Fair Value Of The Securities Portfolio (USD $) In Thousands, unless otherwise specified	9 Months Ended	12 Months Ended
	Sep. 30, 2013	Dec. 31, 2012
Available For Sale
Available for Sale Securities - Amortized Cost	$ 586,234	$ 558,630
Available for Sale Securities - Gross Unrealized Losses	9,000
Available for Sale Securities - Estimated Fair Value	586,053	573,108
Held To Maturity
Held to Maturity Securities - Amortized Cost	820	820
Held to Maturity Securities - Estimated Fair Value	871	956
US Government-sponsored Enterprises Debt Securities [Member]
Available For Sale
Available for Sale Securities - Amortized Cost	98,239	75,945
Available for Sale Securities - Gross Unrealized Gains	163	216
Available for Sale Securities - Gross Unrealized Losses	2,315	66
Available for Sale Securities - Estimated Fair Value	96,087	76,095
US States and Political Subdivisions Debt Securities [Member]
Available For Sale
Available for Sale Securities - Amortized Cost	130,441	113,986
Available for Sale Securities - Gross Unrealized Gains	2,266	4,943
Available for Sale Securities - Gross Unrealized Losses	2,169	174
Available for Sale Securities - Estimated Fair Value	130,538	118,755
Held To Maturity
Held to Maturity Securities - Amortized Cost	820	820
Held to Maturity Securities - Gross Unrealized Gains	51	136
Held to Maturity Securities - Gross Unrealized Losses	0	0
Held to Maturity Securities - Estimated Fair Value	871	956
Residential Mortgage Backed Securities [Member]
Available For Sale
Available for Sale Securities - Amortized Cost	348,935	360,099
Available for Sale Securities - Gross Unrealized Gains	6,282	10,596
Available for Sale Securities - Gross Unrealized Losses	3,468	256
Available for Sale Securities - Estimated Fair Value	351,749	370,439
Corporate Debt Securities [Member]
Available For Sale
Available for Sale Securities - Amortized Cost	6,721	6,638
Available for Sale Securities - Gross Unrealized Gains	42	44
Available for Sale Securities - Gross Unrealized Losses	987	856
Available for Sale Securities - Estimated Fair Value	5,776	5,826
Mutual Funds And Equity Securities [Member]
Available For Sale
Available for Sale Securities - Amortized Cost	1,898	1,962
Available for Sale Securities - Gross Unrealized Gains	22	33
Available for Sale Securities - Gross Unrealized Losses	17	2
Available for Sale Securities - Estimated Fair Value	1,903	1,993
Total [Member]
Available For Sale
Available for Sale Securities - Amortized Cost	586,234	558,630
Available for Sale Securities - Gross Unrealized Gains	8,775	15,832
Available for Sale Securities - Gross Unrealized Losses	8,956	1,354
Available for Sale Securities - Estimated Fair Value	$ 586,053	$ 573,108

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Note 10 - Postretirement Medical Benefits (Tables)

9 Months Ended

Sep. 30, 2013

Compensation and Retirement Disclosure [Abstract]

Schedule of Net Benefit Costs [Table Text Block]

	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2013		2012		2013		2012
Service cost	$	157	$	155	$	472	$	463
Interest cost		138		152		414		456
Amortization of transition obligation		-		24		-		76
Recognized prior service cost		65		65		193		193
Recognized net actuarial loss		-		14		-		42
Net periodic benefit cost	$	360	$	410	$	1,079	$	1,230

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Note 4 - Accounting Policy (Details) (Related to Lengthening Look-back Period [Member], USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2013
Related to Lengthening Look-back Period [Member]
Note 4 - Accounting Policy (Details) [Line Items]
Allowance for Loan and Lease Losses, Period Increase (Decrease) (in Dollars)	$ 320

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Note 6 - Fair Value Measurements (Details) - Impairment Charges on Assets Measured at Fair Value on a Nonrecurring Basis (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Impairment charges:
Impairment charges	$ 2,146	$ 1,986	$ 4,769	$ 6,101
OREO [Member]
Impairment charges:
Impairment charges	1,698	1,033	3,288	2,046
Impaired Loans [Member]
Impairment charges:
Impairment charges	$ 448	$ 953	$ 1,481	$ 4,055

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Note 8 - Loans and Allowance for Loan Losses (Details) - Risk Category of Loans by Class-Consumer (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Note 8 - Loans and Allowance for Loan Losses (Details) - Risk Category of Loans by Class-Consumer [Line Items]
Loans	$ 1,010,131	$ 1,004,995
Consumer Secured [Member] | Performing Financing Receivable [Member]
Note 8 - Loans and Allowance for Loan Losses (Details) - Risk Category of Loans by Class-Consumer [Line Items]
Loans	8,927	11,723
Consumer Secured [Member] | Nonperforming Financing Receivable [Member]
Note 8 - Loans and Allowance for Loan Losses (Details) - Risk Category of Loans by Class-Consumer [Line Items]
Loans	30	9
Consumer Secured [Member] | Total [Member]
Note 8 - Loans and Allowance for Loan Losses (Details) - Risk Category of Loans by Class-Consumer [Line Items]
Loans	8,957	11,732
Consumer Secured [Member]
Note 8 - Loans and Allowance for Loan Losses (Details) - Risk Category of Loans by Class-Consumer [Line Items]
Loans	8,957	11,732
Consumer Unsecured [Member] | Performing Financing Receivable [Member]
Note 8 - Loans and Allowance for Loan Losses (Details) - Risk Category of Loans by Class-Consumer [Line Items]
Loans	6,441	6,382
Consumer Unsecured [Member] | Nonperforming Financing Receivable [Member]
Note 8 - Loans and Allowance for Loan Losses (Details) - Risk Category of Loans by Class-Consumer [Line Items]
Loans	38	133
Consumer Unsecured [Member] | Total [Member]
Note 8 - Loans and Allowance for Loan Losses (Details) - Risk Category of Loans by Class-Consumer [Line Items]
Loans	6,479	6,515
Consumer Unsecured [Member]
Note 8 - Loans and Allowance for Loan Losses (Details) - Risk Category of Loans by Class-Consumer [Line Items]
Loans	$ 6,479	$ 6,515

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Note 8 - Loans and Allowance for Loan Losses (Details) - Allowance For Loan Losses And The Recorded Investment In Loans By Portfolio Segment (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Jun. 30, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Dec. 31, 2011
Note 8 - Loans and Allowance for Loan Losses (Details) - Allowance For Loan Losses And The Recorded Investment In Loans By Portfolio Segment [Line Items]
Total ending allowance balance	$ 21,949	$ 22,943	$ 24,445	$ 25,144	$ 27,113	$ 28,264
Total ending loan balance, net of unearned income	1,010,131		1,004,995
Real Estate Loans [Member]
Note 8 - Loans and Allowance for Loan Losses (Details) - Allowance For Loan Losses And The Recorded Investment In Loans By Portfolio Segment [Line Items]
Allowance for loan losses, individually evaluated for impairment,	4,095		4,732
Allowance for loan losses, collectively evaluated for impairment	15,280		17,522
Total ending allowance balance	19,375	20,240	22,254	21,441	24,221	23,538
Loans individually evaluated for impairment	61,286		63,351
Loans collectively evaluated for impairment	835,566		833,342
Total ending loan balance, net of unearned income	896,852		896,693
Commercial Portfolio Segment [Member]
Note 8 - Loans and Allowance for Loan Losses (Details) - Allowance For Loan Losses And The Recorded Investment In Loans By Portfolio Segment [Line Items]
Allowance for loan losses, individually evaluated for impairment,	823		198
Allowance for loan losses, collectively evaluated for impairment	1,279		1,315
Total ending allowance balance	2,102	2,177	1,513	2,700	2,137	3,508
Loans individually evaluated for impairment	915		207
Loans collectively evaluated for impairment	96,928		89,848
Total ending loan balance, net of unearned income	97,843		90,055
Consumer Portfolio Segment [Member]
Note 8 - Loans and Allowance for Loan Losses (Details) - Allowance For Loan Losses And The Recorded Investment In Loans By Portfolio Segment [Line Items]
Allowance for loan losses, individually evaluated for impairment,	76		213
Allowance for loan losses, collectively evaluated for impairment	396		465
Total ending allowance balance	472	526	678	1,003	755	1,218
Loans individually evaluated for impairment	80		331
Loans collectively evaluated for impairment	15,356		17,916
Total ending loan balance, net of unearned income	15,436		18,247
Total [Member]
Note 8 - Loans and Allowance for Loan Losses (Details) - Allowance For Loan Losses And The Recorded Investment In Loans By Portfolio Segment [Line Items]
Allowance for loan losses, individually evaluated for impairment,	4,994		5,143
Allowance for loan losses, collectively evaluated for impairment	16,955		19,302
Total ending allowance balance	21,949		24,445
Loans individually evaluated for impairment	62,281		63,889
Loans collectively evaluated for impairment	947,850		941,106
Total ending loan balance, net of unearned income	$ 1,010,131		$ 1,004,995

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Note 8 - Loans and Allowance for Loan Losses (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012
Note 8 - Loans and Allowance for Loan Losses (Details) [Line Items]
Impaired Financing Receivable, Related Allowance	$ 4,994,000		$ 4,994,000		$ 5,143,000
Financing Receivable, Modifications, Number of Contracts			7	2
Financing Receivables, Impaired, Troubled Debt Restructuring, Write-down			0	0
Financing Receivable, Modifications, Subsequent Default, Number of Contracts			1	0
Financing Receivable, Modifications, Subsequent Default, Recorded Investment			17,000
TDR Financing Receivable [Member]
Note 8 - Loans and Allowance for Loan Losses (Details) [Line Items]
Impaired Financing Receivable, Related Allowance	2,700,000		2,700,000		2,900,000
Loans and Leases Receivable, Impaired, Commitment to Lend	0		0		0
Allowance for Loan and Lease Losses, Period Increase (Decrease)	7,000	437,000	30,000	442,000
Interest Rate As Modified [Member] | Real Estate Mortgage Farmland And Other Commercial Enterprises [Member]
Note 8 - Loans and Allowance for Loan Losses (Details) [Line Items]
Debt Instrument, Interest Rate, Stated Percentage		5.00%		5.00%
Interest Rate As Modified [Member] | Real Estate Mortgage Residential [Member]
Note 8 - Loans and Allowance for Loan Losses (Details) [Line Items]
Debt Instrument, Interest Rate, Stated Percentage		4.125%		4.125%
Interest Rate Original [Member] | Real Estate Mortgage Farmland And Other Commercial Enterprises [Member]
Note 8 - Loans and Allowance for Loan Losses (Details) [Line Items]
Debt Instrument, Interest Rate, Stated Percentage		7.25%		7.25%
Interest Rate Original [Member] | Real Estate Mortgage Residential [Member]
Note 8 - Loans and Allowance for Loan Losses (Details) [Line Items]
Debt Instrument, Interest Rate, Stated Percentage		6.00%		6.00%
Debt by Borrowers Discharged under Chapter Seven Bankruptcy [Member]
Note 8 - Loans and Allowance for Loan Losses (Details) [Line Items]
Financing Receivable, Modifications, Number of Contracts			6
Financing Receivable, Modifications, Recorded Investment	331,000		331,000
Real Estate Mortgage Farmland And Other Commercial Enterprises [Member]
Note 8 - Loans and Allowance for Loan Losses (Details) [Line Items]
Financing Receivable, Modifications, Number of Contracts				1
Restructured Credit with a Subsequent Default [Member]
Note 8 - Loans and Allowance for Loan Losses (Details) [Line Items]
Financing Receivables, Impaired, Troubled Debt Restructuring, Write-down			$ 0

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Unaudited Condensed Consolidated Balance Sheets (Parentheticals) (USD $) In Thousands, except Share data, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Available for sale, amortized cost (in Dollars)	$ 586,234	$ 558,630
Held to maturity, fair value (in Dollars)	871	956
Preferred stock, par value (in Dollars per share)	$ 0	$ 0
Preferred stock, shares authorized (in Shares)	1,000,000	1,000,000
Preferred stock, Series A shares issued (in Shares)	30,000	30,000
Preferred stock, Series A shares outstanding (in Shares)	30,000	30,000
Preferred stock, Liquidation preference (in Dollars)	$ 30,000	$ 30,000
Common stock, par value per share (in Dollars per share)	$ 0.125	$ 0.125
Common stock, shares authorized (in Shares)	14,608,000	14,608,000
Common stock, shares issued (in Shares)	7,476,831	7,469,813
Common stock, shares outstanding (in Shares)	7,476,831	7,469,813

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Note 5 - Net Income Per Common Share

9 Months Ended

Sep. 30, 2013

Earnings Per Share [Abstract]

Earnings Per Share [Text Block]

5. Net Income Per Common Share

Basic net income per common share is determined by dividing net income available to common shareholders by the weighted average total number of common shares issued and outstanding. Net income available to common shareholders represents net income adjusted for preferred stock dividends including dividends declared, accretion of discounts on preferred stock issuances, and cumulative dividends related to the current dividend period that have not been declared as of the end of the period.

Diluted net income per common share is determined by dividing net income available to common shareholders by the total weighted average number of common shares issued and outstanding plus amounts representing the dilutive effect of stock options outstanding and outstanding warrants. The effects of stock options and outstanding warrants are excluded from the computation of diluted earnings per common share in periods in which the effect would be antidilutive. Dilutive potential common shares are calculated using the treasury stock method.

Net income per common share computations were as follows for the periods indicated.

	Three Months Ended September 30,		Nine Months Ended September 30,
(In thousands, except per share data)	2013	2012	2013	2012
Net income, basic and diluted	$3,035	$3,091	$10,374	$9,547
Less preferred stock dividends and discount accretion	489	481	1,461	1,439
Net income available to common shareholders, basic and diluted	$2,546	$2,610	$  8,913	$8,108
Average common shares issued and outstanding, basic and diluted	7,475	7,461	7,473	7,454
Net income per common share, basic and diluted	$    .34	$   .35	$   1.19	$ 1.09

Stock options for 22,049 and 24,049 shares of common stock were not included in the determination of diluted net income per common share for each period in 2013 and 2012, respectively, because they were antidilutive. There were 223,992 potential common shares associated with a warrant issued to the U.S. Treasury that were excluded from the computation of diluted net income per common share for 2012 because they were antidilutive. The Company repurchased the warrant from the Treasury during the third quarter of 2012.

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Unaudited Condensed Consolidated Statements of Comprehensive Income (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Net Income	$ 3,035	$ 3,091	$ 10,374	$ 9,547
Other comprehensive income (loss):
Unrealized holding gain (loss) on available for sale securities arising during the period on securities held at end of period, net of tax of $912, $1,270, $(5,110), and $1,861, respectively	1,694	2,359	(9,490)	3,456
Reclassification adjustment for prior period unrealized gain previously reported in other comprehensive income recognized during current period, net of tax of $1, $97, $20, and $275, respectively	(1)	(181)	(38)	(511)
Change in unfunded portion of postretirement benefit obligation, net of tax of $25, $44, $71, and $111, respectively	43	82	131	206
Other comprehensive income (loss)	1,736	2,260	(9,397)	3,151
Comprehensive income	$ 4,771	$ 5,351	$ 977	$ 12,698

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Note 10 - Postretirement Medical Benefits (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2013
Note 10 - Postretirement Medical Benefits (Details) [Line Items]
Employee Service Requirement	20 years	20 years
Employee Age Requirement	55 years	55 years
Defined Benefit Plans, Estimated Future Employer Contributions in Current Fiscal Year		$ 308
Other Postretirement Benefits Payments	$ 64	$ 188
Plan 1 [Member]
Note 10 - Postretirement Medical Benefits (Details) [Line Items]
Company Contributions Plan 1	100.00%	100.00%
Plan 2 [Member]
Note 10 - Postretirement Medical Benefits (Details) [Line Items]
Contributions Plan 2	50.00%	50.00%

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Unaudited Condensed Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Cash and cash equivalents:
Cash and due from banks	$ 25,936	$ 27,448
Interest bearing deposits in other banks	55,165	65,675
Federal funds sold and securities purchased under agreements to resell	2,733	2,732
Total cash and cash equivalents	83,834	95,855
Investment securities:
Available for sale, amortized cost of $586,234 (2013) and $558,630 (2012)	586,053	573,108
Held to maturity, fair value of $871 (2013) and $956 (2012)	820	820
Total investment securities	586,873	573,928
Loans, net of unearned income	1,010,131	1,004,995
Allowance for loan losses	(21,949)	(24,445)
Loans, net	988,182	980,550
Premises and equipment, net	36,636	36,183
Company-owned life insurance	28,662	27,973
Intangible assets, net	989	1,394
Other real estate owned	41,661	52,562
Other assets	43,516	38,787
Total assets	1,810,353	1,807,232
Deposits:
Noninterest bearing	267,270	254,912
Interest bearing	1,136,215	1,155,898
Total deposits	1,403,485	1,410,810
Federal funds purchased and other short-term borrowings	32,885	24,083
Securities sold under agreements to repurchase and other long-term borrowings	127,165	129,297
Subordinated notes payable to unconsolidated trusts	48,970	48,970
Dividends payable	188	188
Other liabilities	29,660	25,863
Total liabilities	1,642,353	1,639,211
Shareholders’ Equity
Preferred stock, no par value 1,000,000 shares authorized; 30,000 Series A shares issued and outstanding at September 30, 2013 and December 31, 2012; Liquidation preference of $30,000	29,873	29,537
Common stock, par value $.125 per share 14,608,000 shares authorized; 7,476,831 and 7,469,813 shares issued and outstanding at September 30, 2013 and December 31, 2012, respectively	935	934
Capital surplus	51,060	50,934
Retained earnings	88,660	79,747
Accumulated other comprehensive (loss) income	(2,528)	6,869
Total shareholders’ equity	168,000	168,021
Total liabilities and shareholders’ equity	$ 1,810,353	$ 1,807,232

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Note 8 - Loans and Allowance for Loan Losses (Details) - Recorded Investment In Nonperforming Loans By Class Of Loans (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Real Estate Construction And Land Development [Member]
Note 8 - Loans and Allowance for Loan Losses (Details) - Recorded Investment In Nonperforming Loans By Class Of Loans [Line Items]
Nonaccrual	$ 6,332	$ 7,700
Restructured Loans	4,391	8,736
Loans Past Due 90 Days Or More And Still Accruing	0	0
Real Estate Mortgage Residential [Member]
Note 8 - Loans and Allowance for Loan Losses (Details) - Recorded Investment In Nonperforming Loans By Class Of Loans [Line Items]
Nonaccrual	5,538	6,025
Restructured Loans	4,912	634
Loans Past Due 90 Days Or More And Still Accruing	0	0
Real Estate Mortgage Farmland And Other Commercial Enterprises [Member]
Note 8 - Loans and Allowance for Loan Losses (Details) - Recorded Investment In Nonperforming Loans By Class Of Loans [Line Items]
Nonaccrual	13,004	12,878
Restructured Loans	17,086	16,940
Loans Past Due 90 Days Or More And Still Accruing	0	103
Commercial And Industrial [Member]
Note 8 - Loans and Allowance for Loan Losses (Details) - Recorded Investment In Nonperforming Loans By Class Of Loans [Line Items]
Nonaccrual	138	649
Restructured Loans	0	0
Loans Past Due 90 Days Or More And Still Accruing	0	0
Lease Financing [Member]
Note 8 - Loans and Allowance for Loan Losses (Details) - Recorded Investment In Nonperforming Loans By Class Of Loans [Line Items]
Nonaccrual	29	53
Restructured Loans	0	0
Loans Past Due 90 Days Or More And Still Accruing	0	0
Consumer Secured [Member]
Note 8 - Loans and Allowance for Loan Losses (Details) - Recorded Investment In Nonperforming Loans By Class Of Loans [Line Items]
Nonaccrual	22	9
Restructured Loans	8	0
Loans Past Due 90 Days Or More And Still Accruing	0	0
Consumer Unsecured [Member]
Note 8 - Loans and Allowance for Loan Losses (Details) - Recorded Investment In Nonperforming Loans By Class Of Loans [Line Items]
Nonaccrual	0	94
Restructured Loans	38	39
Loans Past Due 90 Days Or More And Still Accruing	0	0
Total [Member]
Note 8 - Loans and Allowance for Loan Losses (Details) - Recorded Investment In Nonperforming Loans By Class Of Loans [Line Items]
Nonaccrual	25,063	27,408
Restructured Loans	26,435	26,349
Loans Past Due 90 Days Or More And Still Accruing	$ 0	$ 103

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Note 11 - Regulatory Matters (Tables)

9 Months Ended

Sep. 30, 2013

Disclosure Text Block [Abstract]

Schedule of Compliance with Regulatory Capital Requirements under Banking Regulations [Table Text Block]

	September 30, 2013									December 31, 2012
	Tier 1 Risk-based Capital1			Total Risk-based Capital1			Tier 1 Leverage2			Tier 1 Risk-based Capital1			Total Risk-based Capital1			Tier 1 Leverage2
Consolidated		18.57	%		19.82	%		11.80	%		18.27	%		19.53	%		11.24	%
Farmers Bank		17.99			19.25			10.04			17.94			19.20			9.68
United Bank		15.08			16.35			9.70			15.41			16.69			9.45
First Citizens		13.47			14.23			9.55			13.57			14.46			9.42
Citizens Northern		13.25			14.50			9.54			12.97			14.22			9.36

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Note 5 - Net Income Per Common Share (Tables)

9 Months Ended

Sep. 30, 2013

Earnings Per Share [Abstract]

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

	Three Months Ended September 30,		Nine Months Ended September 30,
(In thousands, except per share data)	2013	2012	2013	2012
Net income, basic and diluted	$3,035	$3,091	$10,374	$9,547
Less preferred stock dividends and discount accretion	489	481	1,461	1,439
Net income available to common shareholders, basic and diluted	$2,546	$2,610	$  8,913	$8,108
Average common shares issued and outstanding, basic and diluted	7,475	7,461	7,473	7,454
Net income per common share, basic and diluted	$    .34	$   .35	$   1.19	$ 1.09

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Note 7 - Investment Securities (Details) - Investment Securities With Unrealized Losses Not Recognized In Income (USD $) In Thousands, unless otherwise specified	9 Months Ended	12 Months Ended
	Sep. 30, 2013	Dec. 31, 2012
Note 7 - Investment Securities (Details) - Investment Securities With Unrealized Losses Not Recognized In Income [Line Items]
Less than 12 Months, Fair Value	$ 251,811	$ 83,590
Less than 12 Months, Unrealized Losses	7,119	498
12 Months or More, Fair Value	20,347	4,994
12 Months or More, Unrealized Losses	1,837	856
Total, Fair Value	272,158	88,584
Total, Unrealized Losses	8,956	1,354
US Government-sponsored Enterprises Debt Securities [Member]
Note 7 - Investment Securities (Details) - Investment Securities With Unrealized Losses Not Recognized In Income [Line Items]
Less than 12 Months, Fair Value	76,817	26,433
Less than 12 Months, Unrealized Losses	2,315	66
12 Months or More, Fair Value	0	0
12 Months or More, Unrealized Losses	0	0
Total, Fair Value	76,817	26,433
Total, Unrealized Losses	2,315	66
US States and Political Subdivisions Debt Securities [Member]
Note 7 - Investment Securities (Details) - Investment Securities With Unrealized Losses Not Recognized In Income [Line Items]
Less than 12 Months, Fair Value	57,780	17,199
Less than 12 Months, Unrealized Losses	1,891	174
12 Months or More, Fair Value	3,135	0
12 Months or More, Unrealized Losses	278	0
Total, Fair Value	60,915	17,199
Total, Unrealized Losses	2,169	174
Residential Mortgage Backed Securities [Member]
Note 7 - Investment Securities (Details) - Investment Securities With Unrealized Losses Not Recognized In Income [Line Items]
Less than 12 Months, Fair Value	116,427	39,659
Less than 12 Months, Unrealized Losses	2,894	256
12 Months or More, Fair Value	12,336	0
12 Months or More, Unrealized Losses	574	0
Total, Fair Value	128,763	39,659
Total, Unrealized Losses	3,468	256
Corporate Debt Securities [Member]
Note 7 - Investment Securities (Details) - Investment Securities With Unrealized Losses Not Recognized In Income [Line Items]
Less than 12 Months, Fair Value	106	0
Less than 12 Months, Unrealized Losses	2	0
12 Months or More, Fair Value	4,876	4,994
12 Months or More, Unrealized Losses	985	856
Total, Fair Value	4,982	4,994
Total, Unrealized Losses	987	856
Mutual Funds And Equity Securities [Member]
Note 7 - Investment Securities (Details) - Investment Securities With Unrealized Losses Not Recognized In Income [Line Items]
Less than 12 Months, Fair Value	681	299
Less than 12 Months, Unrealized Losses	17	2
12 Months or More, Fair Value	0	0
12 Months or More, Unrealized Losses	0	0
Total, Fair Value	681	299
Total, Unrealized Losses	$ 17	$ 2

XML

Note 8 - Loans and Allowance for Loan Losses (Details) - Risk Category of Loans by Class (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Financing Receivable, Recorded Investment [Line Items]
Loans	$ 1,010,131	$ 1,004,995
Real Estate Construction And Land Development [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	83,183	68,721
Real Estate Construction And Land Development [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	6,282	7,562
Real Estate Construction And Land Development [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	17,345	26,171
Real Estate Construction And Land Development [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	60	0
Real Estate Construction And Land Development [Member] | Total [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	106,870	102,454
Real Estate Construction And Land Development [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	106,870	102,454
Real Estate Mortgage Residential [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	334,591	328,214
Real Estate Mortgage Residential [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	14,925	18,485
Real Estate Mortgage Residential [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	21,686	21,984
Real Estate Mortgage Residential [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	90	79
Real Estate Mortgage Residential [Member] | Total [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	371,292	368,762
Real Estate Mortgage Residential [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	371,292	368,762
Real Estate Mortgage Farmland And Other Commercial Enterprises [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	347,472	348,918
Real Estate Mortgage Farmland And Other Commercial Enterprises [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	29,307	35,027
Real Estate Mortgage Farmland And Other Commercial Enterprises [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	41,911	41,532
Real Estate Mortgage Farmland And Other Commercial Enterprises [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	0	0
Real Estate Mortgage Farmland And Other Commercial Enterprises [Member] | Total [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	418,690	425,477
Real Estate Mortgage Farmland And Other Commercial Enterprises [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	418,690	425,477
Commercial And Industrial [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	45,604	41,527
Commercial And Industrial [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	351	4,201
Commercial And Industrial [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	1,402	1,008
Commercial And Industrial [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	76	76
Commercial And Industrial [Member] | Total [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	47,433	46,812
Commercial And Industrial [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	47,433	46,812
States and Political Subdivisions [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	22,849	21,472
States and Political Subdivisions [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	0	0
States and Political Subdivisions [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	0	0
States and Political Subdivisions [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	0	0
States and Political Subdivisions [Member] | Total [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	22,849	21,472
States and Political Subdivisions [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	22,849	21,472
Lease Financing [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	1,205	2,615
Lease Financing [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	0	0
Lease Financing [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	29	0
Lease Financing [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	0	0
Lease Financing [Member] | Total [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	1,234	2,615
Lease Financing [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	1,234	2,615
Commercial Other [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	26,299	18,592
Commercial Other [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	0	559
Commercial Other [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	28	5
Commercial Other [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	0	0
Commercial Other [Member] | Total [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	26,327	19,156
Commercial Other [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	$ 26,327	$ 19,156

XML

Note 6 - Fair Value Measurements (Details) - The Carrying Amounts and Estimated Fair Values of the Company’s Financial Instruments (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012	Sep. 30, 2012	Dec. 31, 2011
Assets
Cash and cash equivalents	$ 83,834	$ 95,855	$ 110,218	$ 94,309
Held to maturity investment securities	820	820
Held to maturity investment securities	871	956
Loans, net	988,182	980,550
Liabilities
Deposits	1,403,485	1,410,810
Federal funds purchased and other short-term borrowings	32,885	24,083
Securities sold under agreements to repurchase and other long-term borrowings	127,165	129,297
Subordinated notes payable to unconsolidated trusts	48,970	48,970
Fair Value, Inputs, Level 1 [Member]
Assets
Cash and cash equivalents	83,834	95,855
Held to maturity investment securities	0	0
Loans, net	0	0
Accrued interest receivable	0	0
Liabilities
Deposits	911,017	870,145
Federal funds purchased and other short-term borrowings	0	0
Securities sold under agreements to repurchase and other long-term borrowings	0	0
Subordinated notes payable to unconsolidated trusts	0	0
Accrued interest payable	0	0
Fair Value, Inputs, Level 2 [Member]
Assets
Cash and cash equivalents	0	0
Held to maturity investment securities	871	956
Loans, net	0	0
Accrued interest receivable	6,033	6,074
Liabilities
Deposits	0	0
Federal funds purchased and other short-term borrowings	32,885	24,083
Securities sold under agreements to repurchase and other long-term borrowings	139,136	148,680
Subordinated notes payable to unconsolidated trusts	0	0
Accrued interest payable	1,161	1,370
Fair Value, Inputs, Level 3 [Member]
Assets
Cash and cash equivalents	0	0
Held to maturity investment securities	0	0
Loans, net	985,969	979,301
Accrued interest receivable	0	0
Liabilities
Deposits	495,278	544,250
Federal funds purchased and other short-term borrowings	0	0
Securities sold under agreements to repurchase and other long-term borrowings	0	0
Subordinated notes payable to unconsolidated trusts	25,027	21,015
Accrued interest payable	0	0
Reported Value Measurement [Member]
Assets
Cash and cash equivalents	83,834	95,855
Held to maturity investment securities	820	820
Loans, net	988,182	980,550
Accrued interest receivable	6,033	6,074
Federal Home Loan Bank and Federal Reserve Bank Stock	9,516	9,516
Liabilities
Deposits	1,403,485	1,410,810
Federal funds purchased and other short-term borrowings	32,885	24,083
Securities sold under agreements to repurchase and other long-term borrowings	127,165	129,297
Subordinated notes payable to unconsolidated trusts	48,970	48,970
Accrued interest payable	1,161	1,370
Estimate of Fair Value Measurement [Member]
Assets
Cash and cash equivalents	83,834	95,855
Held to maturity investment securities	871	956
Loans, net	985,969	979,301
Accrued interest receivable	6,033	6,074
Liabilities
Deposits	1,406,295	1,414,395
Federal funds purchased and other short-term borrowings	32,885	24,083
Securities sold under agreements to repurchase and other long-term borrowings	139,136	148,680
Subordinated notes payable to unconsolidated trusts	25,027	21,015
Accrued interest payable	$ 1,161	$ 1,370

XML

Note 6 - Fair Value Measurements (Details) - Available For Sale Investment Securities Measured At Fair Value On A Recurring Basis (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Note 6 - Fair Value Measurements (Details) - Available For Sale Investment Securities Measured At Fair Value On A Recurring Basis [Line Items]
Available For Sale Investment Securities	$ 586,053	$ 573,108
US Government-sponsored Enterprises Debt Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Note 6 - Fair Value Measurements (Details) - Available For Sale Investment Securities Measured At Fair Value On A Recurring Basis [Line Items]
Available For Sale Investment Securities	0	0
US Government-sponsored Enterprises Debt Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Note 6 - Fair Value Measurements (Details) - Available For Sale Investment Securities Measured At Fair Value On A Recurring Basis [Line Items]
Available For Sale Investment Securities	96,087	76,095
US Government-sponsored Enterprises Debt Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Note 6 - Fair Value Measurements (Details) - Available For Sale Investment Securities Measured At Fair Value On A Recurring Basis [Line Items]
Available For Sale Investment Securities	0	0
US Government-sponsored Enterprises Debt Securities [Member]
Note 6 - Fair Value Measurements (Details) - Available For Sale Investment Securities Measured At Fair Value On A Recurring Basis [Line Items]
Available For Sale Investment Securities	96,087	76,095
US States and Political Subdivisions Debt Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Note 6 - Fair Value Measurements (Details) - Available For Sale Investment Securities Measured At Fair Value On A Recurring Basis [Line Items]
Available For Sale Investment Securities	0	0
US States and Political Subdivisions Debt Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Note 6 - Fair Value Measurements (Details) - Available For Sale Investment Securities Measured At Fair Value On A Recurring Basis [Line Items]
Available For Sale Investment Securities	130,538	118,755
US States and Political Subdivisions Debt Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Note 6 - Fair Value Measurements (Details) - Available For Sale Investment Securities Measured At Fair Value On A Recurring Basis [Line Items]
Available For Sale Investment Securities	0	0
US States and Political Subdivisions Debt Securities [Member]
Note 6 - Fair Value Measurements (Details) - Available For Sale Investment Securities Measured At Fair Value On A Recurring Basis [Line Items]
Available For Sale Investment Securities	130,538	118,755
Residential Mortgage Backed Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Note 6 - Fair Value Measurements (Details) - Available For Sale Investment Securities Measured At Fair Value On A Recurring Basis [Line Items]
Available For Sale Investment Securities	0	0
Residential Mortgage Backed Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Note 6 - Fair Value Measurements (Details) - Available For Sale Investment Securities Measured At Fair Value On A Recurring Basis [Line Items]
Available For Sale Investment Securities	351,749	370,439
Residential Mortgage Backed Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Note 6 - Fair Value Measurements (Details) - Available For Sale Investment Securities Measured At Fair Value On A Recurring Basis [Line Items]
Available For Sale Investment Securities	0	0
Residential Mortgage Backed Securities [Member]
Note 6 - Fair Value Measurements (Details) - Available For Sale Investment Securities Measured At Fair Value On A Recurring Basis [Line Items]
Available For Sale Investment Securities	351,749	370,439
Corporate Debt Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Note 6 - Fair Value Measurements (Details) - Available For Sale Investment Securities Measured At Fair Value On A Recurring Basis [Line Items]
Available For Sale Investment Securities	0	0
Corporate Debt Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Note 6 - Fair Value Measurements (Details) - Available For Sale Investment Securities Measured At Fair Value On A Recurring Basis [Line Items]
Available For Sale Investment Securities	5,776	5,826
Corporate Debt Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Note 6 - Fair Value Measurements (Details) - Available For Sale Investment Securities Measured At Fair Value On A Recurring Basis [Line Items]
Available For Sale Investment Securities	0	0
Corporate Debt Securities [Member]
Note 6 - Fair Value Measurements (Details) - Available For Sale Investment Securities Measured At Fair Value On A Recurring Basis [Line Items]
Available For Sale Investment Securities	5,776	5,826
Mutual Funds And Equity Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Note 6 - Fair Value Measurements (Details) - Available For Sale Investment Securities Measured At Fair Value On A Recurring Basis [Line Items]
Available For Sale Investment Securities	1,903	1,993
Mutual Funds And Equity Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Note 6 - Fair Value Measurements (Details) - Available For Sale Investment Securities Measured At Fair Value On A Recurring Basis [Line Items]
Available For Sale Investment Securities	0	0
Mutual Funds And Equity Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Note 6 - Fair Value Measurements (Details) - Available For Sale Investment Securities Measured At Fair Value On A Recurring Basis [Line Items]
Available For Sale Investment Securities	0	0
Mutual Funds And Equity Securities [Member]
Note 6 - Fair Value Measurements (Details) - Available For Sale Investment Securities Measured At Fair Value On A Recurring Basis [Line Items]
Available For Sale Investment Securities	1,903	1,993
Fair Value, Inputs, Level 1 [Member]
Note 6 - Fair Value Measurements (Details) - Available For Sale Investment Securities Measured At Fair Value On A Recurring Basis [Line Items]
Available For Sale Investment Securities	1,903	1,993
Fair Value, Inputs, Level 2 [Member]
Note 6 - Fair Value Measurements (Details) - Available For Sale Investment Securities Measured At Fair Value On A Recurring Basis [Line Items]
Available For Sale Investment Securities	584,150	571,115
Fair Value, Inputs, Level 3 [Member]
Note 6 - Fair Value Measurements (Details) - Available For Sale Investment Securities Measured At Fair Value On A Recurring Basis [Line Items]
Available For Sale Investment Securities	$ 0	$ 0

XML

Note 6 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Real Estate Construction And Land Development [Member] | Impaired Loans [Member] | Fair Value, Inputs, Level 1 [Member]
Note 6 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	$ 0	$ 0
Real Estate Construction And Land Development [Member] | Impaired Loans [Member] | Fair Value, Inputs, Level 2 [Member]
Note 6 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	0	0
Real Estate Construction And Land Development [Member] | Impaired Loans [Member] | Fair Value, Inputs, Level 3 [Member]
Note 6 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	335	17,921
Real Estate Construction And Land Development [Member] | Impaired Loans [Member]
Note 6 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	335	17,921
Real Estate Mortgage Residential [Member] | Impaired Loans [Member] | Fair Value, Inputs, Level 1 [Member]
Note 6 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	0	0
Real Estate Mortgage Residential [Member] | Impaired Loans [Member] | Fair Value, Inputs, Level 2 [Member]
Note 6 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	0	0
Real Estate Mortgage Residential [Member] | Impaired Loans [Member] | Fair Value, Inputs, Level 3 [Member]
Note 6 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	3,077	2,273
Real Estate Mortgage Residential [Member] | Impaired Loans [Member]
Note 6 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	3,077	2,273
Real Estate Mortgage Farmland And Other Commercial Enterprises [Member] | Impaired Loans [Member] | Fair Value, Inputs, Level 1 [Member]
Note 6 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	0	0
Real Estate Mortgage Farmland And Other Commercial Enterprises [Member] | Impaired Loans [Member] | Fair Value, Inputs, Level 2 [Member]
Note 6 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	0	0
Real Estate Mortgage Farmland And Other Commercial Enterprises [Member] | Impaired Loans [Member] | Fair Value, Inputs, Level 3 [Member]
Note 6 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	3,450	3,523
Real Estate Mortgage Farmland And Other Commercial Enterprises [Member] | Impaired Loans [Member]
Note 6 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	3,450	3,523
Commercial And Industrial [Member] | Impaired Loans [Member] | Fair Value, Inputs, Level 1 [Member]
Note 6 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	0	0
Commercial And Industrial [Member] | Impaired Loans [Member] | Fair Value, Inputs, Level 2 [Member]
Note 6 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	0	0
Commercial And Industrial [Member] | Impaired Loans [Member] | Fair Value, Inputs, Level 3 [Member]
Note 6 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	88	9
Commercial And Industrial [Member] | Impaired Loans [Member]
Note 6 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	88	9
Consumer Secured [Member] | Impaired Loans [Member] | Fair Value, Inputs, Level 1 [Member]
Note 6 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring		0
Consumer Secured [Member] | Impaired Loans [Member] | Fair Value, Inputs, Level 2 [Member]
Note 6 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring		0
Consumer Secured [Member] | Impaired Loans [Member] | Fair Value, Inputs, Level 3 [Member]
Note 6 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring		4
Consumer Secured [Member] | Impaired Loans [Member]
Note 6 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring		4
Consumer Unsecured [Member] | Impaired Loans [Member] | Fair Value, Inputs, Level 1 [Member]
Note 6 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring		0
Consumer Unsecured [Member] | Impaired Loans [Member] | Fair Value, Inputs, Level 2 [Member]
Note 6 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring		0
Consumer Unsecured [Member] | Impaired Loans [Member] | Fair Value, Inputs, Level 3 [Member]
Note 6 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring		113
Consumer Unsecured [Member] | Impaired Loans [Member]
Note 6 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring		113
Real Estate Construction And Land Development OREO [Member] | Fair Value, Inputs, Level 1 [Member]
Note 6 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	0	0
Real Estate Construction And Land Development OREO [Member] | Fair Value, Inputs, Level 2 [Member]
Note 6 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	0	0
Real Estate Construction And Land Development OREO [Member] | Fair Value, Inputs, Level 3 [Member]
Note 6 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	11,454	15,873
Real Estate Construction And Land Development OREO [Member]
Note 6 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	11,454	15,873
Real Estate Mortgage Residential OREO [Member] | Fair Value, Inputs, Level 1 [Member]
Note 6 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	0	0
Real Estate Mortgage Residential OREO [Member] | Fair Value, Inputs, Level 2 [Member]
Note 6 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	0	0
Real Estate Mortgage Residential OREO [Member] | Fair Value, Inputs, Level 3 [Member]
Note 6 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	1,527	1,483
Real Estate Mortgage Residential OREO [Member]
Note 6 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	1,527	1,483
Farmland and Other Commercial Enterprises OREO [Member] | Fair Value, Inputs, Level 1 [Member]
Note 6 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	0	0
Farmland and Other Commercial Enterprises OREO [Member] | Fair Value, Inputs, Level 2 [Member]
Note 6 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	0	0
Farmland and Other Commercial Enterprises OREO [Member] | Fair Value, Inputs, Level 3 [Member]
Note 6 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	9,106	3,826
Farmland and Other Commercial Enterprises OREO [Member]
Note 6 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	9,106	3,826
OREO [Member] | Fair Value, Inputs, Level 1 [Member]
Note 6 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	0	0
OREO [Member] | Fair Value, Inputs, Level 2 [Member]
Note 6 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	0	0
OREO [Member] | Fair Value, Inputs, Level 3 [Member]
Note 6 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	22,087	21,182
OREO [Member]
Note 6 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	22,087	21,182
Impaired Loans [Member] | Fair Value, Inputs, Level 1 [Member]
Note 6 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	0	0
Impaired Loans [Member] | Fair Value, Inputs, Level 2 [Member]
Note 6 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	0	0
Impaired Loans [Member] | Fair Value, Inputs, Level 3 [Member]
Note 6 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	6,950	23,843
Impaired Loans [Member]
Note 6 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	$ 6,950	$ 23,843

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Note 4 - Accounting Policy

9 Months Ended

Sep. 30, 2013

Accounting Policies [Abstract]

Significant Accounting Policies [Text Block]

4. Accounting Policy

Loans and Interest Income

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are reported at their unpaid principal amount outstanding adjusted for any charge-offs and deferred fees or costs on originated loans. Interest income on loans is recognized using the interest method based on loan principal amounts outstanding during the period. Interest income also includes amortization and accretion of any premiums or discounts over the expected life of acquired loans at the time of purchase or business acquisition. Loan origination fees, net of certain direct origination costs, are deferred and amortized as yield adjustments over the contractual term of the loans.

The Company disaggregates certain disclosure information related to loans, the related allowance for loan losses, and credit quality measures by either portfolio segment or by loan class. The Company segregates its loan portfolio segments based on similar risk characteristics as follows: real estate loans, commercial loans, and consumer loans. Portfolio segments are further disaggregated into classes for certain required disclosures as follows:

Portfolio Segment	Class
Real estate loans	Real estate mortgage - construction and land development Real estate mortgage - residential Real estate mortgage - farmland and other commercial enterprises
Commercial loans	Commercial and industrial Depository institutions Agriculture production and other loans to farmers States and political subdivisions Leases Other
Consumer loans	Secured Unsecured

The Company has a loan policy in place that is amended and approved from time to time as needed to reflect current economic conditions and product offerings in its markets. The policy establishes written procedures concerning areas such as the lending authorities of loan officers, committee review and approval of certain credit requests, underwriting criteria, policy exceptions, appraisal requirements, and loan review. Credit is extended to borrowers based primarily on their ability to repay as demonstrated by income and cash flow analysis.

Loans secured by real estate make up the largest segment of the Company’s loan portfolio. If a borrower fails to repay a loan secured by real estate, the Company may liquidate the collateral in order to satisfy the amount owed. Determining the value of real estate is a key component to the lending process for real estate backed loans. If the fair value of real estate (less estimated cost to sell) securing a collateral dependent loan declines below the outstanding loan amount, the Company will write down the carrying value of the loan and thereby incur a loss. The Company uses independent third party state certified or licensed appraisers in accordance with its loan policy to mitigate risk when underwriting real estate loans. Cash flow analysis of the borrower, loan to value limits as adopted by loan policy, and other customary underwriting standards are also in place which are designed to maximize credit quality and mitigate risks associated with real estate lending.

Commercial loans are made to businesses and are secured mainly by assets such as inventory, accounts receivable, machinery, fixtures and equipment, or other business assets. Commercial lending involves significant risk, as loan repayments are more dependent on the successful operation or management of the business and its cash flows. Consumer lending includes loans to individuals mainly for personal autos, boats, or a variety of other personal uses and may be secured or unsecured. Loan repayment associated with consumer loans is highly dependent upon the borrower’s continuing financial stability, which is heavily influenced by local unemployment rates. The Company mitigates its risk exposure to each of its loan segments by analyzing the borrower’s repayment capacity, imposing restrictions on the amount it will loan compared to estimated collateral values, limiting the payback periods, and following other customary underwriting practices as adopted in its loan policy.

The accrual of interest on loans is discontinued when it is determined that the collection of interest or principal is doubtful, or when a default of interest or principal has existed for 90 days or more, unless such loan is well secured and in the process of collection. Past due status is based on the contractual terms of the loan. Interest accrued but not received for a loan placed on nonaccrual status is reversed against interest income. Cash payments received on nonaccrual loans generally are applied to principal until qualifying for return to accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. The Company’s policy for placing a loan on nonaccrual status or subsequently returning a loan to accrual status does not differ based on its portfolio class or segment.

Commercial and real estate loans delinquent in excess of 120 days and consumer loans delinquent in excess of 180 days are charged off, unless the collateral securing the debt is of such value that any loss appears to be unlikely. In all cases, loans are charged off at an earlier date if classified as loss under its loan grading process or as a result of regulatory examination. The Company’s charge-off policy for impaired loans does not differ from the charge-off policy for loans outside the definition of impaired.

Provision and Allowance for Loan Losses

The provision for loan losses represents charges made to earnings to maintain an allowance for loan losses at a level considered adequate to provide for probable incurred credit losses at the balance sheet date. The allowance for loan losses is a valuation allowance increased by the provision for loan losses and decreased by net charge-offs. Loan losses are charged against the allowance when management believes the uncollectibility of a loan is confirmed. Subsequent recoveries, if any, are credited to the allowance.

The Company estimates the adequacy of the allowance using a risk-rated methodology which is based on the Company’s past loan loss experience, known and inherent risks in the loan portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral securing loans, composition of the loan portfolio, current economic conditions, and other relevant factors. This evaluation is inherently subjective as it requires significant judgment and the use of estimates that may be susceptible to change.

The allowance for loan losses consists of specific and general components. The specific component relates to loans that are individually classified as impaired. The general component covers non-impaired loans and is based on historical loss experience adjusted for current risk factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged off. Actual loan losses could differ significantly from the amounts estimated by management.

The Company’s risk-rated methodology includes segregating non-impaired watch list and past due loans from the general portfolio and allocating a loss percentage to these loans depending on their status. For example, watch list loans, which may be identified by the internal loan review risk-rating process or by regulatory examiner classification, are assigned a certain loss percentage while loans past due 30 days or more are assigned a different loss percentage. Each of these percentages considers past experience as well as current factors. The remainder of the general loan portfolio is segregated into portfolio segments having similar risk characteristics identified as follows: real estate loans, commercial loans, and consumer loans. Each of these portfolio segments is assigned a loss percentage based on their respective rolling historical loss rates, adjusted for qualitative risk factors. During the third quarter of 2013, the Company lengthened the look-back period it uses to determine historical loss rates to the previous 16 quarters from 12 quarters. The change in the look-back period is the result of the Company’s ongoing monitoring and evaluation of the adequacy of its allowance for loan losses. The longer look-back period better reflects the Company’s loss estimates based on current market conditions. Lengthening the look-back period resulted in a $320 thousand increase in the allowance for loan losses.

The qualitative risk factors used in the methodology are consistent with the guidance in the most recent Interagency Policy Statement on the Allowance for Loan Losses issued in 2006. Each factor is supported by a detailed analysis performed at each subsidiary bank and is both measureable and supportable. Some factors include a minimum allocation in some instances where loss levels are extremely low and it is determined to be prudent from a safety and soundness perspective. Qualitative risk factors that are used in the methodology include the following for each loan portfolio segment:

● Delinquency trends

● Trends in net charge-offs

● Trends in loan volume

● Lending philosophy risk

● Management experience risk

● Concentration of credit risk

● Economic conditions risk

A loan is impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. Loans for which the terms have been modified resulting in a concession, and for which the borrower is experiencing financial difficulties, are considered troubled debt restructurings and classified as impaired. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on 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.

The Company accounts for impaired loans in accordance with Accounting Standards Codification (“ASC”) Topic 310, “Receivables.” ASC Topic 310 requires that impaired loans be measured at the present value of expected future cash flows, discounted at the loan’s effective interest rate, at the loan’s observable market price, or at the fair value of the collateral if the loan is collateral dependent. Impaired loans may also be classified as nonaccrual. In many circumstances, however, the Company continues to accrue interest on an impaired loan. Cash receipts on accruing impaired loans are applied to the recorded investment in the loan, including any accrued interest receivable. Cash payments received on nonaccrual impaired loans generally are applied to principal until qualifying for return to accrual status. Loans that are part of a large group of smaller-balance homogeneous loans, such as residential mortgage, consumer, and smaller-balance commercial loans, are collectively evaluated for impairment. Troubled debt restructurings are measured at the present value of estimated future cash flows using the loan’s effective interest rate at inception, or at the fair value of collateral. The Company determines the amount of reserve for troubled debt restructurings that subsequently default in accordance with its accounting policy for the allowance for loan losses.

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Note 2 - Adoption of New Accounting Standards (Details) - Changes in Accumulated Other Comprehensive Income (USD $) In Thousands, unless otherwise specified	3 Months Ended	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2013
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	$ (4,264)	$ 6,869
Other comprehensive income (loss) before reclassifications	1,694	(9,490)
Amounts reclassified from accumulated other comprehensive income	42	93
Net current-period other comprehensive income (loss)	1,736	(9,397)
Ending balance	(2,528)	(2,528)
Accumulated Net Unrealized Investment Gain (Loss) [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	(1,810)	9,411
Other comprehensive income (loss) before reclassifications	1,694	(9,490)
Amounts reclassified from accumulated other comprehensive income	(1)	(38)
Net current-period other comprehensive income (loss)	1,693	(9,528)
Ending balance	(117)	(117)
Accumulated Defined Benefit Plans Adjustment [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	(2,454)	(2,542)
Other comprehensive income (loss) before reclassifications	0	0
Amounts reclassified from accumulated other comprehensive income	43	131
Net current-period other comprehensive income (loss)	43	131
Ending balance	$ (2,411)	$ (2,411)

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Note 7 - Investment Securities (Details) - The Amortized Cost And Estimated Fair Value Of The Securities Portfolio By Contractual Maturity (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
The Amortized Cost And Estimated Fair Value Of The Securities Portfolio By Contractual Maturity [Abstract]
Due in one year or less	$ 2,681
Due in one year or less	2,694
Due in one year or less	0
Due in one year or less	0
Due after one year through five years	105,522
Due after one year through five years	105,666
Due after one year through five years	0
Due after one year through five years	0
Due after five years through ten years	109,489
Due after five years through ten years	107,528
Due after five years through ten years	0
Due after five years through ten years	0
Due after ten years	17,709
Due after ten years	16,513
Due after ten years	820
Due after ten years	871
Mortgage-backed securities	348,935
Mortgage-backed securities	351,749
Mortgage-backed securities	0
Mortgage-backed securities	0
Total	584,336
Total	584,150
Total	820	820
Total	$ 871	$ 956

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Note 7 - Investment Securities

9 Months Ended

Sep. 30, 2013

Investments, Debt and Equity Securities [Abstract]

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

7. Investment Securities

The following tables summarize the amortized costs and estimated fair value of the securities portfolio at September 30, 2013 and December 31, 2012. The summary is divided into available for sale and held to maturity investment securities.

September 30, 2013 (In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available For Sale
Obligations of U.S. government-sponsored entities	$	98,239	$	163	$	2,315	$	96,087
Obligations of states and political subdivisions		130,441		2,266		2,169		130,538
Mortgage-backed securities – residential		348,935		6,282		3,468		351,749
Corporate debt securities		6,721		42		987		5,776
Mutual funds and equity securities		1,898		22		17		1,903
Total securities – available for sale	$	586,234	$	8,775	$	8,956	$	586,053
Held To Maturity
Obligations of states and political subdivisions	$	820	$	51	$	-	$	871

December 31, 2012 (In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available For Sale
Obligations of U.S. government-sponsored entities	$	75,945	$	216	$	66	$	76,095
Obligations of states and political subdivisions		113,986		4,943		174		118,755
Mortgage-backed securities – residential		360,099		10,596		256		370,439
Corporate debt securities		6,638		44		856		5,826
Mutual funds and equity securities		1,962		33		2		1,993
Total securities – available for sale	$	558,630	$	15,832	$	1,354	$	573,108
Held To Maturity
Obligations of states and political subdivisions	$	820	$	136	$	-	$	956

The amortized cost and estimated fair value of the debt securities portfolio at September 30, 2013, by contractual maturity, are detailed below. The summary is divided into available for sale and held to maturity securities. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Mutual funds and equity securities in the available for sale portfolio consist of investments attributed to the Company’s captive insurance subsidiary. These securities have no stated maturity and are not included in the maturity schedule that follows. Mortgage-backed securities are stated separately due to the nature of payment and prepayment characteristics, as principal is not due at a single date.

	Available For Sale				Held To Maturity
September 30, 2013 (In thousands)	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due in one year or less	$	2,681	$	2,694	$	-	$	-
Due after one year through five years		105,522		105,666		-		-
Due after five years through ten years		109,489		107,528		-		-
Due after ten years		17,709		16,513		820		871
Mortgage-backed securities		348,935		351,749		-		-
Total	$	584,336	$	584,150	$	820	$	871

Gross realized gains and losses on the sale of available for sale investment securities were as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2013		2012		2013			2012
Gross realized gains	$	3	$	343	$	6		$	1,038
Gross realized losses		1		67		64			74
Net realized gain (loss)	$	2	$	276	$	(58	)	$	964

Investment securities with unrealized losses at September 30, 2013 and December 31, 2012 not recognized in income are presented in the tables below. The tables segregate investment securities that have been in a continuous unrealized loss position for less than twelve months from those that have been in a continuous unrealized loss position for twelve months or more. The tables also include the fair value of the related securities.

	Less than 12 Months				12 Months or More				Total
September 30, 2013 (In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Obligations of U.S. government-sponsored entities	$	76,817	$	2,315	$	-	$	-	$	76,817	$	2,315
Obligations of states and political subdivisions		57,780		1,891		3,135		278		60,915		2,169
Mortgage-backed securities – residential		116,427		2,894		12,336		574		128,763		3,468
Corporate debt securities		106		2		4,876		985		4,982		987
Mutual funds and equity securities		681		17		-		-		681		17
Total	$	251,811	$	7,119	$	20,347	$	1,837	$	272,158	$	8,956

	Less than 12 Months				12 Months or More				Total
December 31, 2012 (In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Obligations of U.S. government-sponsored entities	$	26,433	$	66	$	-	$	-	$	26,433	$	66
Obligations of states and political subdivisions		17,199		174		-		-		17,199		174
Mortgage-backed securities – residential		39,659		256		-		-		39,659		256
Corporate debt securities		-		-		4,994		856		4,994		856
Mutual funds and equity securities		299		2		-		-		299		2
Total	$	83,590	$	498	$	4,994	$	856	$	88,584	$	1,354

Unrealized losses included in the tables above have not been recognized in income since they have been identified as temporary. The Company evaluates investment securities for other-than-temporary impairment (“OTTI”) at least quarterly, and more frequently when economic or market conditions warrant. Many factors are considered, 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 effected by macroeconomic conditions, and (4) whether the Company has the intent to sell the security or more likely than not will be required to sell the security before its anticipated recovery. The assessment of whether an OTTI charge exists involves a high degree of subjectivity and judgment and is based on the information available to the Company at a point in time.

At September 30, 2013, the Company’s investment securities portfolio had gross unrealized losses of $9.0 million, an increase of $7.6 million from year-end 2012. Of the total gross unrealized losses at September 30, 2013, $1.8 million relates to investments that have been in a continuous loss position for 12 months or more. Unrealized losses on corporate debt securities and mortgage-backed securities make up $985 thousand and $574 thousand, respectively, of the unrealized loss on investment securities in a continuous loss position of 12 months or more.

Corporate debt securities in the Company’s investment securities portfolio at September 30, 2013 include single-issuer trust preferred capital securities with a carrying value of $4.9 million. These securities were issued by a national and global financial services firm and purchased by the Company during 2007. The securities are currently performing and continue to be rated as investment grade by major rating agencies. The issuer of the securities announced in the first quarter of 2013 that it had passed stringent regulatory stress testing and received regulatory approval to both increase per share common dividend payments and increase its equity repurchase program. The Company does not intend to sell these securities nor does the Company believe it is likely that it will be required to sell these securities prior to their anticipated recovery. The Company believes these securities are not impaired due to reasons of credit quality or other factors, but rather the unrealized loss is primarily attributed to continuing uncertainties in both international and domestic economies and market volatility. The Company believes that it will collect all amounts due according to the contractual terms of these securities and that the fair values of these securities will continue to recover as they approach their maturity dates.

The Company attributes the unrealized losses in other sectors of its investment securities portfolio to changes in market interest rates and volatility. Market interest rates rose sharply during the second quarter of 2013 as measured by the yields on Treasury bonds, particularly for the five and ten year maturity periods. Investment securities with unrealized losses at September 30, 2013 are performing according to their contractual terms, and the Company does not expect to incur a loss on these securities unless they are sold prior to maturity. The Company does not have the intent to sell these securities and likely will not be required to sell these securities before their anticipated recovery. The Company does not consider any of the securities to be impaired due to reasons of credit quality or other factors.

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Note 3 - Reclassifications

9 Months Ended

Sep. 30, 2013

Disclosure Text Block [Abstract]

Reclassifications [Text Block]

3. Reclassifications

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

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Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity (USD $) In Thousands	Preferred Stock [Member]	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Total
Balance at Dec. 31, 2011	$ 29,115	$ 931	$ 50,848	$ 69,520	$ 6,643	$ 157,057
Balance (in Shares) at Dec. 31, 2011		7,446
Net income				9,547		9,547
Other comprehensive income (loss)					3,151	3,151
Cash dividends declared-preferred				(1,125)		(1,125)
Preferred stock discount accretion	314			(314)
Repurchase of common stock warrant			(75)			(75)
Shares issued pursuant to employee stock purchase plan		2	90			92
Shares issued pursuant to employee stock purchase plan (in Shares)		20
Expense related to employee stock purchase plan			31			31
Balance at Sep. 30, 2012	29,429	933	50,894	77,628	9,794	168,678
Balance (in Shares) at Sep. 30, 2012		7,466
Balance at Dec. 31, 2012	29,537	934	50,934	79,747	6,869	168,021
Balance (in Shares) at Dec. 31, 2012		7,470
Net income				10,374		10,374
Other comprehensive income (loss)					(9,397)	(9,397)
Cash dividends declared-preferred				(1,125)		(1,125)
Preferred stock discount accretion	336			(336)
Shares issued pursuant to employee stock purchase plan		1	98			99
Shares issued pursuant to employee stock purchase plan (in Shares)		7
Expense related to employee stock purchase plan			28			28
Balance at Sep. 30, 2013	$ 29,873	$ 935	$ 51,060	$ 88,660	$ (2,528)	$ 168,000
Balance (in Shares) at Sep. 30, 2013		7,477

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Note 8 - Loans and Allowance for Loan Losses (Details) - Loans by Class Modified as Troubled Debt Restructurings (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Financing Receivable, Modifications [Line Items]
Number of Loans			7	2
Real Estate Mortgage Farmland And Other Commercial Enterprises [Member] | TDR Identified Current Period [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans	1	1	1	1
Pre-ModificationOutstanding Recorded Investment	$ 598	$ 8,796	$ 598	$ 8,796
Post-Modification Outstanding Recorded Investment	598	8,717	598	8,717
Consumer Secured [Member] | TDR Identified Current Period [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans	1		2
Pre-ModificationOutstanding Recorded Investment	7		9
Post-Modification Outstanding Recorded Investment	7		9
Real Estate Mortgage Residential [Member] | TDR Identified Current Period [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans			3	1
Pre-ModificationOutstanding Recorded Investment			309	72
Post-Modification Outstanding Recorded Investment			309	72
Commercial And Industrial [Member] | TDR Identified Current Period [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans			1
Pre-ModificationOutstanding Recorded Investment			13
Post-Modification Outstanding Recorded Investment			13
TDR Identified Current Period [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans	2	1	7	2
Pre-ModificationOutstanding Recorded Investment	605	8,796	929	8,868
Post-Modification Outstanding Recorded Investment	$ 605	$ 8,717	$ 929	$ 8,789

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Note 8 - Loans and Allowance for Loan Losses (Details) - Activity In The Allowance For Loan Losses (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance at Beginning of Period	$ 22,943	$ 27,113	$ 24,445	$ 28,264
Provision for loan losses	(586)	(256)	(1,580)	2,062
Recoveries	132	138	563	573
Loans charged off	(540)	(1,851)	(1,479)	(5,755)
Balance at End of Period	21,949	25,144	21,949	25,144
Real Estate Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance at Beginning of Period	20,240	24,221	22,254	23,538
Provision for loan losses	(528)	(1,114)	(2,028)	2,916
Recoveries	70	50	254	252
Loans charged off	(407)	(1,716)	(1,105)	(5,265)
Balance at End of Period	19,375	21,441	19,375	21,441
Commercial Portfolio Segment [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance at Beginning of Period	2,177	2,137	1,513	3,508
Provision for loan losses	(2)	591	615	(790)
Recoveries	25	8	122	129
Loans charged off	(98)	(36)	(148)	(147)
Balance at End of Period	2,102	2,700	2,102	2,700
Consumer Portfolio Segment [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance at Beginning of Period	526	755	678	1,218
Provision for loan losses	(56)	267	(167)	(64)
Recoveries	37	80	187	192
Loans charged off	(35)	(99)	(226)	(343)
Balance at End of Period	$ 472	$ 1,003	$ 472	$ 1,003

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Note 5 - Net Income Per Common Share (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Equity Option [Member]
Note 5 - Net Income Per Common Share (Details) [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	22,049	24,049	22,049	24,049
Warrant [Member]
Note 5 - Net Income Per Common Share (Details) [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount		223,992		223,992

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Note 10 - Postretirement Medical Benefits (Details) - Components of Net Periodic Benefit Cost (Postretirement Medical Benefits [Member], USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Postretirement Medical Benefits [Member]
Note 10 - Postretirement Medical Benefits (Details) - Components of Net Periodic Benefit Cost [Line Items]
Service cost	$ 157	$ 155	$ 472	$ 463
Interest cost	138	152	414	456
Amortization of transition obligation	0	24	0	76
Recognized prior service cost	65	65	193	193
Recognized net actuarial loss	0	14	0	42
Net periodic benefit cost	$ 360	$ 410	$ 1,079	$ 1,230

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Note 10 - Postretirement Medical Benefits

9 Months Ended

Sep. 30, 2013

Compensation and Retirement Disclosure [Abstract]

Pension and Other Postretirement Benefits Disclosure [Text Block]

10.Postretirement Medical Benefits

Prior to 2003, the Company provided lifetime medical and dental benefits upon retirement for certain employees meeting the eligibility requirements as of December 31, 1989 (Plan 1). During 2003, the Company implemented an additional postretirement health insurance program (Plan 2). Under Plan 2, any employee meeting the service requirement of 20 years of full time service to the Company and is at least age 55 years of age upon retirement is eligible to continue their health insurance coverage. Under both plans, retirees not yet eligible for Medicare have coverage identical to the coverage offered to active employees. Under both plans, Medicare-eligible retirees are provided with a Medicare Advantage plan. The Company pays 100% of the cost of Plan 1. The Company and the retirees each pay 50% of the cost under Plan 2. Both plans are unfunded.

The following disclosures of the net periodic benefit cost components of Plan 1 and Plan 2 were measured at January 1, 2013 and 2012.

	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2013		2012		2013		2012
Service cost	$	157	$	155	$	472	$	463
Interest cost		138		152		414		456
Amortization of transition obligation		-		24		-		76
Recognized prior service cost		65		65		193		193
Recognized net actuarial loss		-		14		-		42
Net periodic benefit cost	$	360	$	410	$	1,079	$	1,230

The Company expects benefit payments of $308 thousand for 2013, of which $64 thousand and $188 thousand have been made during the three and nine months ended September 30, 2013, respectively.

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Note 6 - Fair Value Measurements

9 Months Ended

Sep. 30, 2013

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

6. Fair Value Measurements

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 of its 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 (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. 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 for identical assets or liabilities in active markets that the entity has the ability to access at 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 for substantially the full term of the assets or liabilities.

Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions supported by little or no market activity, about the assumptions that market participants would use in pricing the asset or liability.

Following is a description of the valuation method used for financial instruments measured at fair value on a recurring basis. For this disclosure, the Company only has available for sale investment securities that meet the requirement.

Available for sale investment securities

Valued primarily by independent third party pricing services under the market valuation approach that include, but are not limited to, the following inputs:

● Mutual funds and equity securities are priced utilizing real-time data feeds from active market exchanges for identical securities and are considered Level 1 inputs.

● Government-sponsored agency debt securities, obligations of states and political subdivisions, mortgage-backed securities, corporate bonds, and other similar investment securities are priced with available market information through processes using benchmark yields, matrix pricing, prepayment speeds, cash flows, live trading data, and market spreads sourced from new issues, dealer quotes, and trade prices, among others sources and are considered Level 2 inputs.

Available for sale investment securities are the Company’s only balance sheet item that meets the disclosure requirements for instruments measured at fair value on a recurring basis. Disclosures as of September 30, 2013 and December 31, 2012 are as follows:

			Fair Value Measurements Using
(In thousands) Available For Sale Investment Securities	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
September 30, 2013
Obligations of U.S. government-sponsored entities	$	96,087	$	-	$	96,087	$	-
Obligations of states and political subdivisions		130,538		-		130,538		-
Mortgage-backed securities – residential		351,749		-		351,749		-
Corporate debt securities		5,776		-		5,776		-
Mutual funds and equity securities		1,903		1,903		-		-
Total	$	586,053	$	1,903	$	584,150	$	-

			Fair Value Measurements Using
(In thousands) Available For Sale Investment Securities	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2012
Obligations of U.S. government-sponsored entities	$	76,095	$	-	$	76,095	$	-
Obligations of states and political subdivisions		118,755		-		118,755		-
Mortgage-backed securities – residential		370,439		-		370,439		-
Corporate debt securities		5,826		-		5,826		-
Mutual funds and equity securities		1,993		1,993		-		-
Total	$	573,108	$	1,993	$	571,115	$	-

The Company is required to measure and disclose certain other assets and liabilities at fair value on a nonrecurring basis in periods following their initial recognition. The Company’s disclosure about assets and liabilities measured at fair value on a nonrecurring basis consists of impaired loans and other real estate owned (“OREO”). The carrying value of these assets are adjusted to fair value on a nonrecurring basis through impairment charges as described more fully below.

Impairment charges on collateral-dependent loans are recorded by either an increase to the provision for loan losses and related allowance or by direct loan charge-offs. The fair value of collateral-dependent impaired loans with specific allocations of the allowance for loan losses is measured based on recent appraisals of the underlying collateral. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Appraisers take absorption rates into consideration and adjustments are routinely made in the appraisal process to identify differences between the comparable sales and income data available. Such adjustments consist mainly of estimated costs to sell that are not included in certain appraisals or to update appraised collateral values as a result of market declines of similar properties for which a newer appraisal is available. These adjustments can be significant and typically result in a Level 3 classification of the inputs for determining fair value.

OREO includes properties acquired by the Company through, or in lieu of, actual loan foreclosures and is carried at fair value less estimated costs to sell. Fair value of OREO at acquisition is generally based on third party appraisals of the property that include comparable sales data and are considered as Level 3 inputs. The carrying value of each OREO property is updated at least annually and more frequently when market conditions significantly impact the value of the property. If the carrying amount of the OREO exceeds fair value less estimated costs to sell, an impairment loss is recorded through noninterest expense.

The following tables represent the carrying amount of assets measured at fair value on a nonrecurring basis and still held by the Company as of the dates indicated. The amounts in the tables only represent assets whose carrying amount has been adjusted by impairment charges during the period in a manner as described above; therefore, these amounts will differ from the total amounts outstanding. Collateral-dependent impaired loan amounts in the tables below exclude restructured loans since they are measured based on present value techniques, which are outside the scope of the fair value reporting framework.

			Fair Value Measurements Using
(In thousands) Description	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
September 30, 2013
Collateral-dependent Impaired Loans
Real estate mortgage – construction and land development	$	335	$	-	$	-	$	335
Real estate mortgage – residential		3,077		-		-		3,077
Real estate mortgage – farmland and other commercial enterprises		3,450		-		-		3,450
Commercial and industrial		88		-		-		88
Total	$	6,950	$	-	$	-	$	6,950
OREO
Construction and land development	$	11,454	$	-	$	-	$	11,454
Residential real estate		1,527		-		-		1,527
Farmland and other commercial enterprises		9,106		-		-		9,106
Total	$	22,087	$	-	$	-	$	22,087

			Fair Value Measurements Using
(In thousands) Description	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2012
Collateral-dependent Impaired Loans
Real estate mortgage – construction and land development	$	17,921	$	-	$	-	$	17,921
Real estate mortgage – residential		2,273		-		-		2,273
Real estate mortgage – farmland and other commercial enterprises		3,523		-		-		3,523
Commercial and industrial		9		-		-		9
Consumer – secured		4		-		-		4
Consumer – unsecured		113		-		-		113
Total	$	23,843	$	-	$	-	$	23,843
OREO
Construction and land development	$	15,873	$	-	$	-	$	15,873
Residential real estate		1,483		-		-		1,483
Farmland and other commercial enterprises		3,826		-		-		3,826
Total	$	21,182	$	-	$	-	$	21,182

The following table represents impairment charges recorded in earnings for the periods indicated on assets measured at fair value on a nonrecurring basis. 

	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2013		2012		2013		2012
Impairment charges:
Collateral-dependent impaired loans	$	448	$	953	$	1,481	$	4,055
OREO		1,698		1,033		3,288		2,046
Total	$	2,146	$	1,986	$	4,769	$	6,101

The following table presents quantitative information about unobservable inputs for assets measured on a nonrecurring basis using Level 3 measurements.

(In thousands)	Fair Value at September 30, 2013		Valuation Technique	Unobservable Inputs	Range			Average
Collateral-dependent impaired loans	$	6,950	Discounted appraisals	Marketability discount	0%	-	6.3%		1.2	%
OREO	$	22,087	Discounted appraisals	Marketability discount	1.1%	-	32.4%		9.4	%

As previously discussed, the fair value of real estate securing collateral-dependent impaired loans and OREO are based on current third party appraisals. It is often necessary, however, for the Company to discount the appraisal amounts supporting its impaired loans and OREO. These discounts relate primarily to marketing and other holding costs that are not included in certain appraisals or to update values as a result of market declines of similar properties for which newer appraisals are available. Discounts also result from contracts to sell properties entered into during the period. The range of discounts is presented in the table above. The upper end of the range identified in the table above relates to outlier transactions. The weighted average column is more of an indicator of the discounts applied to the appraisals.

Fair Value of Financial Instruments

The table that follows represents the estimated fair values of the Company’s financial instruments made in accordance with the requirements of ASC 825, “Financial Instruments.” ASC 825 requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet for which it is practicable to estimate that value. The estimated fair value amounts have been determined by the Company using available market information and present value or other valuation techniques. These derived fair values are subjective in nature, involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. ASC 825 excludes certain financial instruments and all nonfinancial instruments from the disclosure requirements. Accordingly, the aggregate fair value amounts presented are not intended to represent the underlying value of the Company.

The following methods and assumptions were used to estimate the fair value of each of the financial instruments in the table that follows.

Cash and Cash Equivalents, Accrued Interest Receivable, and Accrued Interest Payable

The carrying amount is a reasonable estimate of fair value due to the relatively short time between the origination of the instrument and its expected realization or settlement.

Investment Securities Held to Maturity

Fair value is based on quoted market price, if available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities or with available market information through processes using benchmark yields, matrix pricing, prepayment speeds, cash flows, live trading data, and market spreads sourced from new issues, dealer quotes, and trade prices, among others sources.

Loans

The fair value of loans is estimated by discounting expected future cash flows using current discount rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. Expected future cash flows are projected based on contractual cash flows adjusted for estimated prepayments.

Federal Home Loan Bank and Federal Reserve Bank Stock

It is not practical to determine the fair value of Federal Home Loan Bank and Federal Reserve Bank stock due to restrictions placed on its transferability.

Deposit Liabilities

The fair value of demand deposits, savings accounts, and certain money market deposits is the amount payable on demand at the reporting date and fair value approximates carrying value. The fair value of fixed maturity certificates of deposit is estimated by discounting the expected future cash flows using the rates currently offered for certificates of deposit with similar remaining maturities.

Federal Funds Purchased and Other Short-term Borrowings

The carrying amount is the estimated fair value for these borrowings which reprice frequently in the near term.

Securities Sold Under Agreements to Repurchase, Subordinated Notes Payable, and Other Long-term Borrowings

The fair value of these borrowings is estimated by discounting the expected future cash flows using rates currently available for debt with similar terms and remaining maturities. For subordinated notes payable, the Company uses its best estimate to determine an appropriate discount rate since active markets for similar debt transactions are very limited.

Commitments to Extend Credit and Standby Letters of Credit

Pricing of these financial instruments is based on the credit quality and relationship, fees, interest rates, probability of funding, compensating balance, and other covenants or requirements. Loan commitments generally have fixed expiration dates, variable interest rates and contain termination and other clauses that provide for relief from funding in the event there is a significant deterioration in the credit quality of the customer. Many loan commitments are expected to, and typically do, expire without being drawn upon. The rates and terms of the Company’s commitments to lend and standby letters of credit are competitive with others in the various markets in which the Company operates. There are no unamortized fees relating to these financial instruments, as such the carrying value and fair value are both zero.

The following table presents the estimated fair values of the Company’s financial instruments and the level within the fair value hierarchy in which the fair value measurements fall at September 30, 2013 and December 31, 2012. Information for available for sale investment securities is presented within this footnote in greater detail above.

					Fair Value Measurements Using
(In thousands)	Carrying Amount		Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
September 30, 2013
Assets
Cash and cash equivalents	$	83,834	$	83,834	$	83,834	$	-	$	-
Held to maturity investment securities		820		871		-		871		-
Loans, net		988,182		985,969		-		-		985,969
Accrued interest receivable		6,033		6,033		-		6,033		-
Federal Home Loan Bank and Federal Reserve Bank Stock		9,516	N/A			-		-		-
Liabilities
Deposits		1,403,485		1,406,295		911,017		-		495,278
Federal funds purchased and other short-term borrowings		32,885		32,885		-		32,885		-
Securities sold under agreements to repurchase and other long-term borrowings		127,165		139,136		-		139,136		-
Subordinated notes payable to unconsolidated trusts		48,970		25,027		-		-		25,027
Accrued interest payable		1,161		1,161		-		1,161		-
December 31, 2012
Assets
Cash and cash equivalents	$	95,855	$	95,855	$	95,855	$	-	$	-
Held to maturity investment securities		820		956		-		956		-
Loans, net		980,550		979,301		-		-		979,301
Accrued interest receivable		6,074		6,074		-		6,074		-
Federal Home Loan Bank and Federal Reserve Bank Stock		9,516	N/A			-		-		-
Liabilities
Deposits		1,410,810		1,414,395		870,145		-		544,250
Federal funds purchased and other short-term borrowings		24,083		24,083		-		24,083		-
Securities sold under agreements to repurchase and other long-term borrowings		129,297		148,680		-		148,680		-
Subordinated notes payable to unconsolidated trusts		48,970		21,015		-		-		21,015
Accrued interest payable		1,370		1,370		-		1,370		-

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Note 2 - Adoption of New Accounting Standards (Tables)

9 Months Ended

Sep. 30, 2013

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

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

	Three months ended September 30, 2013									Nine months ended September 30, 2013
(In thousands)	Unrealized Gains and Losses on Available for Sale Investment Securities			Postretirement Benefit Obligation			Total			Unrealized Gains and Losses on Available for Sale Investment Securities			Postretirement Benefit Obligation			Total
Beginning balance	$	(1,810	)	$	(2,454	)	$	(4,264	)	$	9,411		$	(2,542	)	$	6,869
Other comprehensive income (loss) before reclassifications		1,694			-			1,694			(9,490	)		-			(9,490	)
Amounts reclassified from accumulated other comprehensive income		(1	)		43			42			(38	)		131			93
Net current-period other comprehensive income (loss)		1,693			43			1,736			(9,528	)		131			(9,397	)
Ending balance	$	(117	)	$	(2,411	)	$	(2,528	)	$	(117	)	$	(2,411	)	$	(2,528	)

Schedule of Amounts Recognized in Other Comprehensive Income (Loss) [Table Text Block]

	Amount Reclassified from Accumulated Other Comprehensive Income						Affected Line Item in the Statement Where Net Income is Presented
(In thousands)	Three months ended September 30, 2013			Nine months ended September 30, 2013
Unrealized gains and losses on available for sale investment securities	$	2		$	58		Investment securities gains, net
		(1	)		(20	)	Income tax expense
	$	1		$	38		Net of tax
Amortization related to postretirement benefits
Prior service costs	$	(65	)	$	(193	)	Salaries and employee benefits
Actuarial losses		(3	)		(9	)	Salaries and employee benefits
		(68	)		(202	)	Total before tax
		25			71		Income tax benefit
	$	(43	)	$	(131	)	Net of tax
Total reclassifications for the period	$	(42	)	$	(93	)	Net of tax

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Note 11 - Regulatory Matters

9 Months Ended

Sep. 30, 2013

Disclosure Text Block [Abstract]

Regulatory Capital Requirements under Banking Regulations [Text Block]

11. Regulatory Matters

The Company and its subsidiary banks are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements will initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the banks must meet specific capital guidelines that involve quantitative measures of the banks’ assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Company and its subsidiary banks’ capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

The regulatory ratios of the consolidated Company and its subsidiary banks were as follows for the dates indicated:

	September 30, 2013									December 31, 2012
	Tier 1 Risk-based Capital1			Total Risk-based Capital1			Tier 1 Leverage2			Tier 1 Risk-based Capital1			Total Risk-based Capital1			Tier 1 Leverage2
Consolidated		18.57	%		19.82	%		11.80	%		18.27	%		19.53	%		11.24	%
Farmers Bank		17.99			19.25			10.04			17.94			19.20			9.68
United Bank		15.08			16.35			9.70			15.41			16.69			9.45
First Citizens		13.47			14.23			9.55			13.57			14.46			9.42
Citizens Northern		13.25			14.50			9.54			12.97			14.22			9.36

¹Tier 1 Risk-based and Total Risk-based Capital ratios are computed by dividing a bank’s Tier 1 or Total Capital, as defined by regulation, by a risk-weighted sum of the bank’s assets, with the risk weighting determined by general standards established by regulation. The safest assets (e.g., government obligations) are assigned a weighting of 0% with riskier assets receiving higher ratings (e.g., ordinary commercial loans are assigned a weighting of 100%).

²Tier 1 Leverage ratio is computed by dividing a bank’s Tier 1 Capital, as defined by regulation, by its total quarterly average assets.

Summary of Regulatory Agreements

Below is a summary of the regulatory agreements that the Parent Company and two of its subsidiary banks have entered into with their primary regulators. The agreement entered into during 2009 between Farmers Bank and its primary regulator was terminated in January 2013 as a result of satisfactory compliance.

Parent Company

Primarily due to the regulatory actions and capital requirements during 2009 at certain of the Company’s subsidiary banks (as discussed below), the Federal Reserve Bank of St. Louis (“FRB St. Louis”) and Kentucky Department of Financial Institutions (“KDFI”) proposed the Company enter into a Memorandum of Understanding (“Memorandum”). The Company’s board approved entry into the Memorandum at a regular board meeting during the fourth quarter of 2009. Pursuant to the Memorandum, the Company agreed that it would develop an acceptable capital plan to ensure that the consolidated organization remains well-capitalized and each of its subsidiary banks meet the capital requirements imposed by their regulator as summarized below.

The Company also agreed to reduce its common stock dividend in the fourth quarter of 2009 from $.25 per share down to $.10 per share and not make interest payments on the Company’s trust preferred securities or dividends on its common or preferred stock without prior approval from FRB St. Louis and KDFI. Representatives of the FRB St. Louis and KDFI have indicated that any such approval for the payment of dividends will be predicated on a demonstration of adequate, normalized earnings on the part of the Company’s subsidiaries sufficient to support quarterly payments on the Company’s trust preferred securities and quarterly dividends on the Company’s common and preferred stock.  While both regulatory agencies have granted approval of all subsequent quarterly Company requests to make interest payments on its trust preferred securities and dividends on its preferred stock, the Company has not (based on the assessment by Company management of both the Company’s capital position and the earnings of its subsidiaries) sought regulatory approval for the payment of common stock dividends since the fourth quarter of 2009.  Moreover, the Company will not pay any such dividends on its common stock in any subsequent quarter until the regulator’s assessment of the earnings of the Company’s subsidiaries, and the Company’s assessment of its capital position, both yield the conclusion that the payment of a Company common stock dividend is warranted. 

Other components in the regulatory order for the parent company include requesting and receiving regulatory approval for the payment of new salaries/bonuses or other compensation to insiders; assisting its subsidiary banks in addressing weaknesses identified in their reports of examinations; providing periodic reports detailing how it will meet its debt service obligations; and providing progress reports with its compliance with the regulatory Memorandum.

United Bank  

In November of 2009, the Federal Deposit Insurance Corporation (“FDIC”) and United Bank entered into a Cease and Desist Order (“C&D”) primarily as a result of its level of nonperforming assets.  The C&D was terminated in December 2011 coincident with the issuance of a Consent Order (“Consent Order”) entered into between the parties. The Consent Order is substantially the same as the C&D, with the primary exception being that United Bank must achieve and maintain a Tier 1 Leverage ratio of 9.0% and a Total Risk-based Capital ratio of 13.0% no later than March 31, 2012. 

Other components in the regulatory order include stricter oversight and reporting to its regulators in terms of complying with the Consent Order. It also includes an increase in the level of reporting by management to its board of directors of its financial results, budgeting, and liquidity analysis, as well as restricting the bank from extending additional credit to borrowers with credits classified as substandard, doubtful or special mention in the report of examination. There is also a requirement to obtain written consent prior to declaring or paying a dividend and to develop a written contingency plan if the bank is unable to meet the capital levels established in the Consent Order.

Citizens Northern  

The KDFI and the FDIC entered into a Memorandum with Citizens Northern on September 8, 2010.  The Memorandum was terminated July 7, 2013 upon the issuance of an updated Memorandum. The updated Memorandum contains many of the same provisions included in the terminated Memorandum, with a new requirement that Citizens Northern maintain a Tier 1 leverage ratio at or above 9.0%. In addition, the updated Memorandum requires having and retaining qualified management in the areas of loan administration and collection. It also requires Citizens Northern to address credit underwriting and administration weaknesses identified in the most recent examination of the bank by the KDFI and FDIC.

Other parts of the regulatory order include the development and documentation of plans for reducing problem loans, providing progress reports on compliance with the Memorandum, and for the development and implementation of a written profit plan and strategic plans. It also restricts the bank from extending additional credit to borrowers with credits classified as substandard, doubtful or special mention in the report of examination.

Farmers Bank 

In November of 2009, the KDFI and FRB St. Louis entered into a Memorandum with Farmers Bank.  The Memorandum was terminated in January 2013 following a joint examination by the KDFI and FRB St. Louis, which found satisfactory compliance with the terms of the Memorandum and overall improvement in financial condition.

Regulators continue to monitor the Company’s progress and compliance with the regulatory agreements through periodic on-site examinations, regular communications, and quarterly data analysis. At the Parent Company and at each of its bank subsidiaries, the Company believes it is adequately addressing all issues of the regulatory agreements to which it is subject. However, only the respective regulatory agencies can determine if compliance with the applicable regulatory agreements has been met. The Company believes that it and its subsidiary banks are in compliance with the requirements identified in the regulatory agreements.

The Parent Company maintains cash available to fund a certain amount of additional injections of capital to its bank subsidiaries as determined by management or if required by its regulators. If needed, further amounts in excess of available cash may be funded by future public or private sales of securities, although the Parent Company is currently under no directive by its regulators to raise any additional capital.

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Document And Entity Information	9 Months Ended
	Sep. 30, 2013	Nov. 06, 2013
Document and Entity Information [Abstract]
Entity Registrant Name	FARMERS CAPITAL BANK CORP
Document Type	10-Q
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		7,476,831
Amendment Flag	false
Entity Central Index Key	0000713095
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Non-accelerated Filer
Entity Well-known Seasoned Issuer	No
Document Period End Date	Sep. 30, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q3

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Accounting Policies, by Policy (Policies)

9 Months Ended

Sep. 30, 2013

Accounting Policies [Abstract]

Finance, Loans and Leases Receivable, Policy [Policy Text Block]

Loans and Interest Income

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are reported at their unpaid principal amount outstanding adjusted for any charge-offs and deferred fees or costs on originated loans. Interest income on loans is recognized using the interest method based on loan principal amounts outstanding during the period. Interest income also includes amortization and accretion of any premiums or discounts over the expected life of acquired loans at the time of purchase or business acquisition. Loan origination fees, net of certain direct origination costs, are deferred and amortized as yield adjustments over the contractual term of the loans.

The Company disaggregates certain disclosure information related to loans, the related allowance for loan losses, and credit quality measures by either portfolio segment or by loan class. The Company segregates its loan portfolio segments based on similar risk characteristics as follows: real estate loans, commercial loans, and consumer loans. Portfolio segments are further disaggregated into classes for certain required disclosures as follows:

Portfolio Segment	Class
Real estate loans	Real estate mortgage - construction and land development Real estate mortgage - residential Real estate mortgage - farmland and other commercial enterprises
Commercial loans	Commercial and industrial Depository institutions Agriculture production and other loans to farmers States and political subdivisions Leases Other
Consumer loans	Secured Unsecured

The Company has a loan policy in place that is amended and approved from time to time as needed to reflect current economic conditions and product offerings in its markets. The policy establishes written procedures concerning areas such as the lending authorities of loan officers, committee review and approval of certain credit requests, underwriting criteria, policy exceptions, appraisal requirements, and loan review. Credit is extended to borrowers based primarily on their ability to repay as demonstrated by income and cash flow analysis.

Loans secured by real estate make up the largest segment of the Company’s loan portfolio. If a borrower fails to repay a loan secured by real estate, the Company may liquidate the collateral in order to satisfy the amount owed. Determining the value of real estate is a key component to the lending process for real estate backed loans. If the fair value of real estate (less estimated cost to sell) securing a collateral dependent loan declines below the outstanding loan amount, the Company will write down the carrying value of the loan and thereby incur a loss. The Company uses independent third party state certified or licensed appraisers in accordance with its loan policy to mitigate risk when underwriting real estate loans. Cash flow analysis of the borrower, loan to value limits as adopted by loan policy, and other customary underwriting standards are also in place which are designed to maximize credit quality and mitigate risks associated with real estate lending.

Commercial loans are made to businesses and are secured mainly by assets such as inventory, accounts receivable, machinery, fixtures and equipment, or other business assets. Commercial lending involves significant risk, as loan repayments are more dependent on the successful operation or management of the business and its cash flows. Consumer lending includes loans to individuals mainly for personal autos, boats, or a variety of other personal uses and may be secured or unsecured. Loan repayment associated with consumer loans is highly dependent upon the borrower’s continuing financial stability, which is heavily influenced by local unemployment rates. The Company mitigates its risk exposure to each of its loan segments by analyzing the borrower’s repayment capacity, imposing restrictions on the amount it will loan compared to estimated collateral values, limiting the payback periods, and following other customary underwriting practices as adopted in its loan policy.

The accrual of interest on loans is discontinued when it is determined that the collection of interest or principal is doubtful, or when a default of interest or principal has existed for 90 days or more, unless such loan is well secured and in the process of collection. Past due status is based on the contractual terms of the loan. Interest accrued but not received for a loan placed on nonaccrual status is reversed against interest income. Cash payments received on nonaccrual loans generally are applied to principal until qualifying for return to accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. The Company’s policy for placing a loan on nonaccrual status or subsequently returning a loan to accrual status does not differ based on its portfolio class or segment.

Commercial and real estate loans delinquent in excess of 120 days and consumer loans delinquent in excess of 180 days are charged off, unless the collateral securing the debt is of such value that any loss appears to be unlikely. In all cases, loans are charged off at an earlier date if classified as loss under its loan grading process or as a result of regulatory examination. The Company’s charge-off policy for impaired loans does not differ from the charge-off policy for loans outside the definition of impaired.

Loans and Leases Receivable, Allowance for Loan Losses Policy [Policy Text Block]

Provision and Allowance for Loan Losses

The provision for loan losses represents charges made to earnings to maintain an allowance for loan losses at a level considered adequate to provide for probable incurred credit losses at the balance sheet date. The allowance for loan losses is a valuation allowance increased by the provision for loan losses and decreased by net charge-offs. Loan losses are charged against the allowance when management believes the uncollectibility of a loan is confirmed. Subsequent recoveries, if any, are credited to the allowance.

The Company estimates the adequacy of the allowance using a risk-rated methodology which is based on the Company’s past loan loss experience, known and inherent risks in the loan portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral securing loans, composition of the loan portfolio, current economic conditions, and other relevant factors. This evaluation is inherently subjective as it requires significant judgment and the use of estimates that may be susceptible to change.

The allowance for loan losses consists of specific and general components. The specific component relates to loans that are individually classified as impaired. The general component covers non-impaired loans and is based on historical loss experience adjusted for current risk factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged off. Actual loan losses could differ significantly from the amounts estimated by management.

The Company’s risk-rated methodology includes segregating non-impaired watch list and past due loans from the general portfolio and allocating a loss percentage to these loans depending on their status. For example, watch list loans, which may be identified by the internal loan review risk-rating process or by regulatory examiner classification, are assigned a certain loss percentage while loans past due 30 days or more are assigned a different loss percentage. Each of these percentages considers past experience as well as current factors. The remainder of the general loan portfolio is segregated into portfolio segments having similar risk characteristics identified as follows: real estate loans, commercial loans, and consumer loans. Each of these portfolio segments is assigned a loss percentage based on their respective rolling historical loss rates, adjusted for qualitative risk factors. During the third quarter of 2013, the Company lengthened the look-back period it uses to determine historical loss rates to the previous 16 quarters from 12 quarters. The change in the look-back period is the result of the Company’s ongoing monitoring and evaluation of the adequacy of its allowance for loan losses. The longer look-back period better reflects the Company’s loss estimates based on current market conditions. Lengthening the look-back period resulted in a $320 thousand increase in the allowance for loan losses.

The qualitative risk factors used in the methodology are consistent with the guidance in the most recent Interagency Policy Statement on the Allowance for Loan Losses issued in 2006. Each factor is supported by a detailed analysis performed at each subsidiary bank and is both measureable and supportable. Some factors include a minimum allocation in some instances where loss levels are extremely low and it is determined to be prudent from a safety and soundness perspective. Qualitative risk factors that are used in the methodology include the following for each loan portfolio segment:

● Delinquency trends

● Trends in net charge-offs

● Trends in loan volume

● Lending philosophy risk

● Management experience risk

● Concentration of credit risk

● Economic conditions risk

A loan is impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. Loans for which the terms have been modified resulting in a concession, and for which the borrower is experiencing financial difficulties, are considered troubled debt restructurings and classified as impaired. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on 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.

The Company accounts for impaired loans in accordance with Accounting Standards Codification (“ASC”) Topic 310, “Receivables.” ASC Topic 310 requires that impaired loans be measured at the present value of expected future cash flows, discounted at the loan’s effective interest rate, at the loan’s observable market price, or at the fair value of the collateral if the loan is collateral dependent. Impaired loans may also be classified as nonaccrual. In many circumstances, however, the Company continues to accrue interest on an impaired loan. Cash receipts on accruing impaired loans are applied to the recorded investment in the loan, including any accrued interest receivable. Cash payments received on nonaccrual impaired loans generally are applied to principal until qualifying for return to accrual status. Loans that are part of a large group of smaller-balance homogeneous loans, such as residential mortgage, consumer, and smaller-balance commercial loans, are collectively evaluated for impairment. Troubled debt restructurings are measured at the present value of estimated future cash flows using the loan’s effective interest rate at inception, or at the fair value of collateral. The Company determines the amount of reserve for troubled debt restructurings that subsequently default in accordance with its accounting policy for the allowance for loan losses.

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Note 11 - Regulatory Matters (Details) - Regulatory Ratios of the Consolidated Company and its Subsidiary Banks	Sep. 30, 2013		Dec. 31, 2012
Consolidated [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Tier 1 Risk-based Capital	18.57%	[1]	18.27%	[1]
Total Risk-based Capital	19.82%	[1]	19.53%	[1]
Tier 1 Leverage	11.80%	[2]	11.24%	[2]
Farmers Bank [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Tier 1 Risk-based Capital	17.99%	[1]	17.94%	[1]
Total Risk-based Capital	19.25%	[1]	19.20%	[1]
Tier 1 Leverage	10.04%	[2]	9.68%	[2]
United Bank [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Tier 1 Risk-based Capital	15.08%	[1]	15.41%	[1]
Total Risk-based Capital	16.35%	[1]	16.69%	[1]
Tier 1 Leverage	9.70%	[2]	9.45%	[2]
First Citizens Bank [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Tier 1 Risk-based Capital	13.47%	[1]	13.57%	[1]
Total Risk-based Capital	14.23%	[1]	14.46%	[1]
Tier 1 Leverage	9.55%	[2]	9.42%	[2]
Citizens Northern [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Tier 1 Risk-based Capital	13.25%	[1]	12.97%	[1]
Total Risk-based Capital	14.50%	[1]	14.22%	[1]
Tier 1 Leverage	9.54%	[2]	9.36%	[2]

[1] Tier 1 Risk-based and Total Risk-based Capital ratios are computed by dividing a bank's Tier 1 or Total Capital, as defined by regulation, by a risk-weighted sum of the bank's assets, with the risk weighting determined by general standards established by regulation. The safest assets (e.g., government obligations) are assigned a weighting of 0% with riskier assets receiving higher ratings (e.g., ordinary commercial loans are assigned a weighting of 100%).

[2] Tier 1 Leverage ratio is computed by dividing a bank's Tier 1 Capital, as defined by regulation, by its total quarterly average assets.

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Note 11 - Regulatory Matters (Details) (USD $)	3 Months Ended
	Dec. 31, 2009	Sep. 30, 2009	Mar. 31, 2012 Compliance [Member] United Bank [Member]	Sep. 30, 2013 Compliance [Member] Citizens Northern [Member]	Sep. 30, 2013 United Bank [Member]		Dec. 31, 2012 United Bank [Member]		Sep. 30, 2013 Citizens Northern [Member]		Dec. 31, 2012 Citizens Northern [Member]		Sep. 30, 2013 Safest Assets [Member]	Sep. 30, 2013 Riskier Assets [Member]
Note 11 - Regulatory Matters (Details) [Line Items]
Risk Weighting of Assets													0.00%	100.00%
Common Stock, Dividends, Per Share, Declared (in Dollars per share)	$ 0.10	$ 0.25
Tier One Leverage Capital to Average Assets			9.00%	9.00%	9.70%	[1]	9.45%	[1]	9.54%	[1]	9.36%	[1]
Capital to Risk Weighted Assets			13.00%		16.35%	[2]	16.69%	[2]	14.50%	[2]	14.22%	[2]

[1] Tier 1 Leverage ratio is computed by dividing a bank's Tier 1 Capital, as defined by regulation, by its total quarterly average assets.

[2] Tier 1 Risk-based and Total Risk-based Capital ratios are computed by dividing a bank's Tier 1 or Total Capital, as defined by regulation, by a risk-weighted sum of the bank's assets, with the risk weighting determined by general standards established by regulation. The safest assets (e.g., government obligations) are assigned a weighting of 0% with riskier assets receiving higher ratings (e.g., ordinary commercial loans are assigned a weighting of 100%).