10-Q

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT

Pursuant to Section 13 OR 15(d) of

The Securities Exchange Act of 1934

For the quarterly period ended June 30, 2014

Farmers Capital Bank Corporation

(Exact name of registrant as specified in its charter)

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

P.O. Box 309 202 West Main St. Frankfort, KY	40601
(Address of principal executive offices)	(Zip Code)

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

Not Applicable

(Former name, former address and former fiscal year, 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 Web site, 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

7,484,702 shares outstanding at August 6, 2014

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 (Loss)	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	32
Item 3. Quantitative and Qualitative Disclosures About Market Risk	53
Item 4. Controls and Procedures	53
PART II - OTHER INFORMATION
Item 1. Legal Proceedings	54
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	54
Item 6. Exhibits	55
SIGNATURES	57

2

 PART I – FINANCIAL INFORMATION

 Item 1. Condensed Consolidated Financial Statements

 Unaudited Condensed Consolidated Balance Sheets

	June 30,			December 31,
(Dollars in thousands, except share data)	2014			2013
Assets
Cash and cash equivalents:
Cash and due from banks	$	26,874		$	22,925
Interest bearing deposits in other banks		39,352			41,749
Federal funds sold and securities purchased under agreements to resell		2,761			3,579
Total cash and cash equivalents		68,987			68,253
Investment securities:
Available for sale, amortized cost of $608,533 (2014) and $618,395 (2013)		616,256			612,820
Held to maturity, fair value of $3,963 (2014) and $827 (2013)		3,814			765
Total investment securities		620,070			613,585
Loans, net of unearned income		970,179			999,883
Allowance for loan losses		(17,123	)		(20,577	)
Loans, net		953,056			979,306
Premises and equipment, net		35,912			36,273
Company-owned life insurance		29,359			28,899
Intangible assets, net		652			854
Other real estate owned		39,034			37,826
Other assets		38,113			44,559
Total assets	$	1,785,183		$	1,809,555
Liabilities
Deposits:
Noninterest bearing	$	279,765		$	277,294
Interest bearing		1,102,908			1,132,921
Total deposits		1,382,673			1,410,215
Federal funds purchased and other short-term borrowings		24,230			29,123
Securities sold under agreements to repurchase and other long-term borrowings		127,797			127,880
Subordinated notes payable to unconsolidated trusts		48,970			48,970
Dividends payable		225			188
Other liabilities		25,319			23,124
Total liabilities		1,609,214			1,639,500
Shareholders’ Equity
Preferred stock, no par value 1,000,000 shares authorized; 20,000 and 30,000 Series A shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively; Liquidation preference of $20,000 at June 30, 2014		20,000			29,988
Common stock, par value $.125 per share 14,608,000 shares authorized; 7,483,967 and 7,478,706 shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively		935			935
Capital surplus		51,220			51,102
Retained earnings		98,336			91,242
Accumulated other comprehensive income (loss)		5,478			(3,212	)
Total shareholders’ equity		175,969			170,055
Total liabilities and shareholders’ equity	$	1,785,183		$	1,809,555

See accompanying notes to unaudited condensed consolidated financial statements.

3

 Unaudited Condensed Consolidated Statements of Income

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(In thousands, except per share data)	2014			2013			2014			2013
Interest Income
Interest and fees on loans	$	12,676		$	13,491		$	25,318		$	27,022
Interest on investment securities:
Taxable		2,980			2,459			6,060			5,021
Nontaxable		637			642			1,261			1,256
Interest on deposits in other banks		37			38			64			72
Interest on federal funds sold and securities purchased under agreements to resell		1			1			2			2
Total interest income		16,331			16,631			32,705			33,373
Interest Expense
Interest on deposits		1,104			1,524			2,307			3,187
Interest on federal funds purchased and other short-term borrowings		11			20			30			39
Interest on securities sold under agreements to repurchase and other long-term borrowings		1,279			1,278			2,543			2,545
Interest on subordinated notes payable to unconsolidated trusts		210			216			419			433
Total interest expense		2,604			3,038			5,299			6,204
Net interest income		13,727			13,593			27,406			27,169
Provision for loan losses		(1,388	)		(362	)		(1,256	)		(994	)
Net interest income after provision for loan losses		15,115			13,955			28,662			28,163
Noninterest Income
Service charges and fees on deposits		1,991			2,018			3,907			3,978
Allotment processing fees		1,274			1,241			2,519			2,507
Other service charges, commissions, and fees		1,399			1,264			2,634			2,456
Trust income		523			470			1,068			954
Investment securities losses, net		(84	)		(60	)		(75	)		(60	)
Gains on sale of mortgage loans, net		123			292			220			631
Income from company-owned life insurance		233			232			479			472
Other		532			(16	)		612			(86	)
Total noninterest income		5,991			5,441			11,364			10,852
Noninterest Expense
Salaries and employee benefits		7,342			7,231			14,693			14,555
Occupancy expenses, net		1,209			1,165			2,491			2,331
Equipment expenses		593			579			1,187			1,141
Data processing and communication expenses		969			945			1,974			2,043
Bank franchise tax		610			610			1,222			1,200
Amortization of intangibles		101			135			202			270
Deposit insurance expense		461			497			901			1,139
Other real estate expenses, net		938			1,485			2,002			2,377
Other		2,100			2,075			4,081			4,175
Total noninterest expense		14,323			14,722			28,753			29,231
Income before income taxes		6,783			4,674			11,273			9,784
Income tax expense		1,959			1,127			3,079			2,445
Net income		4,824			3,547			8,194			7,339
Less preferred stock dividends and discount accretion		563			487			1,100			972
Net income available to common shareholders	$	4,261		$	3,060		$	7,094		$	6,367
Per Common Share
Net income - basic and diluted	$	.57		$	.41		$	.95		$	.85
Cash dividends declared	N/A			N/A			N/A			N/A
Weighted Average Common Shares Outstanding
Basic and diluted		7,482			7,473			7,481			7,471

See accompanying notes to unaudited condensed consolidated financial statements.

4

Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(In thousands)	2014			2013			2014		2013
Net Income	$	4,824		$	3,547		$	8,194	$	7,339
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 $2,678, $(5,519), $4,618 and $(6,024), respectively		4,973			(10,250	)		8,577		(11,188	)
Reclassification adjustment for prior period unrealized (gain) loss previously reported in other comprehensive income recognized during current period, net of tax of $8, $22, $(36) and $18, respectively		(15	)		(40	)		67		(33	)
Change in unfunded portion of postretirement benefit obligation, net of tax of $13, $23, $25 and $46, respectively		23			44			46		88
Other comprehensive income (loss)		4,981			(10,246	)		8,690		(11,133	)
Comprehensive income (loss)	$	9,805		$	(6,699	)	$	16,884	$	(3,794	)

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
Six months ended	Preferred			Common Stock				Capital		Retained			Comprehensive			Shareholders’
June 30, 2014 and 2013	Stock			Shares		Amount		Surplus		Earnings			Income (Loss)			Equity
Balance at January 1, 2014	$	29,988			7,479	$	935	$	51,102	$	91,242		$	(3,212	)	$	170,055
Net income		-			-		-		-		8,194			-			8,194
Other comprehensive income		-			-		-		-		-			8,690			8,690
Cash dividends declared – preferred, $40.00 per share		-			-		-		-		(1,088	)		-			(1,088	)
Preferred stock discount accretion		12			-		-		-		(12	)		-			-
Redemption of preferred stock		(10,000	)		-		-		-		-			-			(10,000	)
Shares issued under director compensation plan		-			2		-		36		-			-			36
Shares issued pursuant to employee stock purchase plan		-			3		-		63		-			-			63
Expense related to employee stock purchase plan		-			-		-		19		-			-			19
Balance at June 30, 2014	$	20,000			7,484	$	935	$	51,220	$	98,336		$	5,478		$	175,969
Balance at January 1, 2013	$	29,537			7,470	$	934	$	50,934	$	79,747		$	6,869		$	168,021
Net income		-			-		-		-		7,339			-			7,339
Other comprehensive loss		-			-		-		-		-			(11,133	)		(11,133	)
Cash dividends declared – preferred, $25.00 per share		-			-		-		-		(750	)		-			(750	)
Preferred stock discount accretion		222			-		-		-		(222	)		-			-
Shares issued pursuant to employee stock purchase plan		-			5		-		69		-			-			69
Expense related to employee stock purchase plan		-			-		-		19		-			-			19
Balance at June 30, 2013	$	29,759			7,475	$	934	$	51,022	$	86,114		$	(4,264	)	$	163,565

See accompanying notes to unaudited condensed consolidated financial statements.

6

 Unaudited Condensed Consolidated Statements of Cash Flows

Six months ended June 30, (In thousands)	2014			2013
Cash Flows from Operating Activities
Net income	$	8,194		$	7,339
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		2,012			1,976
Net premium amortization of investment securities:
Available for sale		1,895			2,818
Held to maturity		16			-
Provision for loan losses		(1,256	)		(994	)
Deferred income tax expense		2			237
Noncash employee stock purchase plan expense		19			19
Noncash director fee compensation		36			-
Mortgage loans originated for sale		(12,584	)		(29,859	)
Proceeds from sale of mortgage loans		16,156			29,973
Gain on sale of mortgage loans, net		(220	)		(631	)
(Gain) loss on disposal and write downs of premises and equipment, net		(5	)		31
Net loss on sale and write downs of other real estate		1,508			1,782
Net loss on sale of available for sale investment securities		75			60
Increase in cash surrender value of company-owned life insurance		(460	)		(449	)
Decrease in accrued interest receivable		231			319
Decrease in other assets		977			383
Decrease in accrued interest payable		(72	)		(60	)
Increase in other liabilities		2,337			700
Net cash provided by operating activities		18,861			13,644
Cash Flows from Investing Activities
Proceeds from maturities and calls of available for sale investment securities		41,485			71,427
Proceeds from sale of available for sale investment securities		12,104			945
Purchase of investment securities:
Available for sale		(45,697	)		(80,910	)
Held to maturity		(3,065	)		-
Proceeds from sale of restricted stock investments, net		148			-
Principal collected (disbursed) on loans originated for investment, net		18,945			(2,677	)
Purchase of premises and equipment		(1,350	)		(1,612	)
Proceeds from sale of other real estate		2,803			7,255
Proceeds from disposals of premises and equipment		5			4
Net cash provided by (used in) investing activities		25,378			(5,568	)
Cash Flows from Financing Activities
Net decrease in deposits		(27,542	)		(8,295	)
Net (decrease) increase in federal funds purchased and other short-term borrowings		(4,893	)		4,727
Proceeds from securities sold under agreements to repurchase and other long-term borrowings		5			-
Repayments of securities sold under agreements to repurchase and other long-term borrowings		(88	)		(2,093	)
Redemption of preferred stock		(10,000	)		-
Dividends paid, preferred		(1,050	)		(750	)
Shares issued under employee stock purchase plan		63			69
Net cash used in financing activities		(43,505	)		(6,342	)
Net increase in cash and cash equivalents		734			1,734
Cash and cash equivalents at beginning of year		68,253			95,855
Cash and cash equivalents at end of period	$	68,987		$	97,589
Supplemental Disclosures
Cash paid during the period for:
Interest	$	5,371		$	6,264
Income taxes		750			3,000
Transfers from loans to other real estate		6,668			5,279
Sale and financing of other real estate		1,459			2,364
Cash dividends payable, preferred		225			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 consolidated balance sheet as of December 31, 2013 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, 2013 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, 2013.

2. Reclassifications

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

3. Accumulated 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 June 30,	2014							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	$	63		$	434	$	497	$	8,480		$	(2,498	)	$	5,982
Other comprehensive income (loss) before reclassifications		4,973			-		4,973		(10,250	)		-			(10,250	)
Amounts reclassified from accumulated other comprehensive income		(15	)		23		8		(40	)		44			4
Net current-period other comprehensive income (loss)		4,958			23		4,981		(10,290	)		44			(10,246	)
Ending balance	$	5,021		$	457	$	5,478	$	(1,810	)	$	(2,454	)	$	(4,264	)

Six months ended June 30,	2014								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	$	(3,623	)	$	411	$	(3,212	)	$	9,411		$	(2,542	)	$	6,869
Other comprehensive income (loss) before reclassifications		8,577			-		8,577			(11,188	)		-			(11,188	)
Amounts reclassified from accumulated other comprehensive income		67			46		113			(33	)		88			55
Net current-period other comprehensive income (loss)		8,644			46		8,690			(11,221	)		88			(11,133	)
Ending balance	$	5,021		$	457	$	5,478		$	(1,810	)	$	(2,454	)	$	(4,264	)

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
	Three months ended June 30,						Six months ended June 30,
(In thousands)	2014			2013			2014			2013
Unrealized gains and losses on available for sale investment securities	$	23		$	62		$	(103	)	$	51		Investment securities losses, net
		(8	)		(22	)		36			(18	)	Income tax expense
	$	15		$	40		$	(67	)	$	33		Net of tax
Amortization related to postretirement benefits
Prior service costs	$	(52	)	$	(64	)	$	(104	)	$	(128	)	Salaries and employee benefits
Actuarial gains (losses)		16			(3	)		33			(6	)	Salaries and employee benefits
		(36	)		(67	)		(71	)		(134	)	Total before tax
		13			23			25			46		Income tax benefit
	$	(23	)	$	(44	)	$	(46	)	$	(88	)	Net of tax
Total reclassifications for the period	$	(8	)	$	(4	)	$	(113	)	$	(55	)	Net of tax

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

10

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 or credits 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.

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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 sixteen quarter rolling historical loss rates, adjusted for qualitative risk factors.

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. 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.

Recently Issued Accounting Standards

In April 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360 - Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. This ASU changes the requirements for reporting discontinued operations and seeks to enhance the FASB and International Accounting Standards Board’s (“IASB”) convergence project regarding such reporting requirements. A discontinued operation may include a component of an entity, a group of components of an entity, a business or a non-profit activity. A disposal of a component of an entity or a group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has, or will have, a major effect on an entity’s operations and financial results. This ASU, which is intended to reduce the frequency of disposals reported as discontinued operations, requires additional disclosures regarding discontinued operations. Those disclosures include among others, the requirement that an entity present, for each comparative period, the assets and liabilities of a disposal group that includes a discontinued operation separately in the asset and liability sections, respectively, of the statement of financial position.

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For the Company, the guidance of ASU 2014-08 is effective prospectively for annual periods beginning on or after December 15, 2014, and interim periods within that year. The Company does not expect there to be a material impact on its consolidated financial position, results of operations, or cash flows upon adoption.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), as part of a joint project with the IASB to clarify revenue-recognition principles and develop a common revenue standard for U.S. GAAP and International Financial Reporting Standards (“IFRS”). ASU No. 2014-09 is expected to remove inconsistencies and weaknesses in revenue requirements and improve comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets. The scope of the new ASU includes all contracts with customers to provide goods or services in the ordinary course of business, except the following contracts that are specifically excluded from the scope:

● Lease contracts within the scope of ASC 840

● Insurance contracts within the scope of ASC 944

● Financial instruments and other contractual rights or obligations (e.g., receivables, debt and equity securities, derivatives)

● Guarantees (other than product or service warranties) within the scope of ASC 460

● Nonmonetary exchanges between entities in the same line of business to facilitate sales to customers other than the parties to the exchange

The primary principle of ASU 2014-09 is that entities should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this core principle, the guidance provides that an entity should apply the following steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, the entity satisfies a performance obligation.

The amendments in this ASU are effective for the Company in annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. Entities should apply the amendments either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying this ASU recognized at the date of initial application. If an entity elects the second method, then it should also provide the additional disclosures in reporting periods that include the date of initial application of (1) the amount by which each financial statement line item is affected in the current reporting period, as compared to the guidance that was in effect before the change, and (2) an explanation of the reasons for significant changes. The Company is currently evaluating the potential impact of ASU 2014-09 on its consolidated financial position, results of operations, and cash flows.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

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.

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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. The effects of stock options outstanding 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 June 30,				Six Months Ended June 30,
(In thousands, except per share data)	2014		2013		2014		2013
Net income, basic and diluted	$	4,824	$	3,547	$	8,194	$	7,339
Less preferred stock dividends and discount accretion		563		487		1,100		972
Net income available to common shareholders, basic and diluted	$	4,261	$	3,060	$	7,094	$	6,367
Average common shares issued and outstanding, basic and diluted		7,482		7,473		7,481		7,471
Net income per common share, basic and diluted	$	.57	$	.41	$	.95	$	.85

Stock options for 18,049 and 22,049 shares of common stock were not included in the determination of diluted net income per common share for each period in 2014 and 2013, respectively, because they were antidilutive.

6. Investment Securities

The following tables summarize the amortized costs and estimated fair value of the securities portfolio at June 30, 2014 and December 31, 2013. The summary is divided into available for sale and held to maturity investment securities.

June 30, 2014 (In thousands)	Amortized Cost		Gross UnrealizedGains		Gross UnrealizedLosses		Estimated Fair Value
Available For Sale
Obligations of U.S. government-sponsored entities	$	98,241	$	292	$	1,303	$	97,230
Obligations of states and political subdivisions		130,947		2,920		586		133,281
Mortgage-backed securities – residential		370,687		8,777		1,945		377,519
Mortgage-backed securities – commercial		741		-		26		715
Corporate debt securities		6,925		45		478		6,492
Mutual funds and equity securities		992		28		1		1,019
Total securities – available for sale	$	608,533	$	12,062	$	4,339	$	616,256
Held To Maturity
Obligations of states and political subdivisions	$	3,814	$	149	$	-	$	3,963

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December 31, 2013 (In thousands)	Amortized Cost		Gross UnrealizedGains		Gross UnrealizedLosses		Estimated Fair Value
Available For Sale
Obligations of U.S. government-sponsored entities	$	96,750	$	155	$	3,155	$	93,750
Obligations of states and political subdivisions		132,311		2,056		2,397		131,970
Mortgage-backed securities – residential		379,238		5,071		6,232		378,077
Mortgage-backed securities – commercial		748		-		59		689
Corporate debt securities		7,266		40		1,049		6,257
Mutual funds and equity securities		2,082		15		20		2,077
Total securities – available for sale	$	618,395	$	7,337	$	12,912	$	612,820
Held To Maturity
Obligations of states and political subdivisions	$	765	$	62	$	-	$	827

The amortized cost and estimated fair value of the debt securities portfolio at June 30, 2014, 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 of these securities, as principal is not due at a single date.

	Available For Sale				Held To Maturity
	Amortized		Estimated		Amortized		Estimated
June 30, 2014 (In thousands)	Cost		Fair Value		Cost		Fair Value
Due in one year or less	$	8,368	$	8,391	$	-	$	-
Due after one year through five years		123,957		124,798		-		-
Due after five years through ten years		86,163		86,514		765		846
Due after ten years		17,625		17,300		3,049		3,117
Mortgage-backed securities		371,428		378,234		-		-
Total	$	607,541	$	615,237	$	3,814	$	3,963

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

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(In thousands)	2014			2013			2014			2013
Gross realized gains	$	19		$	3		$	178		$	3
Gross realized losses		103			63			253			63
Net realized loss	$	(84	)	$	(60	)	$	(75	)	$	(60	)

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Investment securities with unrealized losses at June 30, 2014 and December 31, 2013 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
June 30, 2014 (In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Obligations of U.S. government-sponsored entities	$	3,391	$	12	$	66,769	$	1,291	$	70,160	$	1,303
Obligations of states and political subdivisions		9,739		17		31,756		569		41,495		586
Mortgage-backed securities – residential		10,303		37		101,240		1,908		111,543		1,945
Mortgage-backed securities – commercial		-		-		715		26		715		26
Corporate debt securities		-		-		5,395		478		5,395		478
Mutual funds and equity securities		-		-		154		1		154		1
Total	$	23,433	$	66	$	206,029	$	4,273	$	229,462	$	4,339

	Less than 12 Months				12 Months or More				Total
December 31, 2013 (In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Obligations of U.S. government-sponsored entities	$	65,094	$	2,434	$	11,830	$	721	$	76,924	$	3,155
Obligations of states and political subdivisions		48,715		1,594		15,095		803		63,810		2,397
Mortgage-backed securities – residential		219,032		5,199		16,306		1,033		235,338		6,232
Mortgage-backed securities – commercial		689		59		-		-		689		59
Corporate debt securities		80		-		4,816		1,049		4,896		1,049
Mutual funds and equity securities		716		17		22		3		738		20
Total	$	334,326	$	9,303	$	48,069	$	3,609	$	382,395	$	12,912

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 June 30, 2014, the Company’s investment securities portfolio had gross unrealized losses of $4.3 million, a decrease of $8.6 million or 66.4% compared with $12.9 million at year-end 2013. Gross unrealized losses include $4.3 million which have been in a continuous loss position of 12 months or more.

Corporate debt securities in the Company’s investment securities portfolio at June 30, 2014 include single-issuer trust preferred capital securities with an unrealized loss of $478 thousand and a carrying value of $5.4 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 2014 an increase in per share common dividend payments and authorization of a common equity repurchase plan. 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.

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The Company attributes the unrealized losses in other sectors of its investment securities portfolio to changes in market interest rates and volatility. Investment securities with unrealized losses at June 30, 2014 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 nor does it believe it is likely that it will be required to sell these securities prior to their anticipated recovery. The Company does not consider any of the securities to be impaired due to reasons of credit quality or other factors.

7. Loans and Allowance for Loan Losses

Major classifications of loans outstanding are summarized as follows:

(In thousands)	June 30, 2014		December 31, 2013
Real Estate:
Real estate mortgage - construction and land development	$	97,769	$	101,352
Real estate mortgage - residential		365,969		371,582
Real estate mortgage - farmland and other commercial enterprises		392,910		418,147
Commercial:
Commercial and industrial		52,713		47,426
States and political subdivisions		25,150		21,561
Lease financing		398		902
Other		20,769		23,840
Consumer:
Secured		8,836		8,579
Unsecured		5,670		6,513
Total loans		970,184		999,902
Less unearned income		5		19
Total loans, net of unearned income	$	970,179	$	999,883

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 June 30, 2014
Balance, beginning of period	$	17,114		$	1,201		$	375		$	18,690
Provision for loan losses		(1,603	)		205			10			(1,388	)
Recoveries		189			18			39			246
Loans charged off		(252	)		(86	)		(87	)		(425	)
Balance, end of period	$	15,448		$	1,338		$	337		$	17,123
Six months ended June 30, 2014
Balance, beginning of period	$	18,716		$	1,409		$	452		$	20,577
Provision for loan losses		(2,359	)		1,130			(27	)		(1,256	)
Recoveries		357			45			74			476
Loans charged off		(1,266	)		(1,246	)		(162	)		(2,674	)
Balance, end of period	$	15,448		$	1,338		$	337		$	17,123

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(In thousands)	Real Estate			Commercial			Consumer			Total
Three months ended June 30, 2013
Balance, beginning of period	$	21,402		$	1,558		$	603		$	23,563
Provision for loan losses		(848	)		624			(138	)		(362	)
Recoveries		48			14			114			176
Loans charged off		(362	)		(19	)		(53	)		(434	)
Balance, end of period	$	20,240		$	2,177		$	526		$	22,943
Six months ended June 30, 2013
Balance, beginning of period	$	22,254		$	1,513		$	678		$	24,445
Provision for loan losses		(1,500	)		617			(111	)		(994	)
Recoveries		184			97			150			431
Loans charged off		(698	)		(50	)		(191	)		(939	)
Balance, end of period	$	20,240		$	2,177		$	526		$	22,943

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

June 30, 2014 (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	$	15,753	$	8,566	$	4,400	$	12,966	$	856
Real estate mortgage - residential		10,930		3,980		6,645		10,625		1,195
Real estate mortgage - farmland and other commercial enterprises		25,833		7,126		18,600		25,726		1,278
Commercial
Commercial and industrial		240		23		217		240		195
Consumer
Unsecured		66		-		66		66		66
Total	$	52,822	$	19,695	$	29,928	$	49,623	$	3,590

December 31, 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	$	17,234	$	9,742	$	4,699	$	14,441	$	930
Real estate mortgage - residential		11,595		2,871		8,612		11,483		1,443
Real estate mortgage - farmland and other commercial enterprises		32,102		12,262		19,746		32,008		1,443
Commercial
Commercial and industrial		311		24		293		317		200
Consumer
Secured		18		-		18		18		15
Unsecured		71		-		72		72		71
Total	$	61,331	$	24,899	$	33,440	$	58,339	$	4,102

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Three Months Ended June 30,	2014						2013
(In thousands)	Average		Interest Income Recognized		Cash Basis Interest Recognized		Average		Interest Income Recognized		Cash Basis Interest Recognized
Real Estate
Real estate – construction and land development	$	15,452	$	120	$	118	$	24,159	$	338	$	347
Real estate mortgage – residential		11,059		147		141		10,836		87		83
Real estate mortgage – farmland and other commercial enterprises		26,295		359		346		28,209		236		236
Commercial
Commercial and industrial		245		3		3		1,154		29		29
Consumer
Secured		-		-		-		21		1		1
Unsecured		68		-		-		215		3		4
Total	$	53,119	$	629	$	608	$	64,594	$	694	$	700

Six Months Ended June 30,	2014						2013
(In thousands)	Average		Interest Income Recognized		Cash Basis Interest Recognized		Average		Interest Income Recognized		Cash Basis Interest Recognized
Real Estate
Real estate – construction and land development	$	15,537	$	233	$	229	$	25,047	$	691	$	689
Real estate mortgage – residential		11,384		262		250		9,569		172		163
Real estate mortgage – farmland and other commercial enterprises		30,222		745		722		29,692		484		478
Commercial
Commercial and industrial		247		4		3		930		33		33
Consumer
Secured		9		-		-		21		1		1
Unsecured		69		4		3		214		6		6
Total	$	57,468	$	1,248	$	1,207	$	65,473	$	1,387	$	1,370

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 June 30, 2014 and December 31, 2013.

June 30, 2014 (In thousands)	Real Estate		Commercial		Consumer		Total
Allowance for Loan Losses
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	3,329	$	195	$	66	$	3,590
Collectively evaluated for impairment		12,119		1,143		271		13,533
Total ending allowance balance	$	15,448	$	1,338	$	337	$	17,123
Loans
Loans individually evaluated for impairment	$	49,317	$	240	$	66	$	49,623
Loans collectively evaluated for impairment		807,331		98,785		14,440		920,556
Total ending loan balance, net of unearned income	$	856,648	$	99,025	$	14,506	$	970,179

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December 31, 2013 (In thousands)	Real Estate		Commercial		Consumer		Total
Allowance for Loan Losses
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	3,816	$	200	$	86	$	4,102
Collectively evaluated for impairment		14,900		1,209		366		16,475
Total ending allowance balance	$	18,716	$	1,409	$	452	$	20,577
Loans
Loans individually evaluated for impairment	$	57,932	$	317	$	90	$	58,339
Loans collectively evaluated for impairment		833,149		93,393		15,002		941,544
Total ending loan balance, net of unearned income	$	891,081	$	93,710	$	15,092	$	999,883

The following tables present the recorded investment in nonperforming loans by class of loans as of June 30, 2014 and December 31, 2013.

June 30, 2014 (In thousands)	Nonaccrual		Restructured Loans		Loans Past Due 90 Days or More and Still Accruing
Real Estate:
Real estate mortgage - construction and land development	$	4,794	$	4,219	$	-
Real estate mortgage - residential		5,149		4,532		-
Real estate mortgage - farmland and other commercial enterprises		7,937		16,657		-
Commercial:
Commercial and industrial		199		-		-
Other		11		-		-
Consumer:
Secured		5		-		-
Unsecured		-		48		-
Total	$	18,095	$	25,456	$	-

December 31, 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	$	5,821	$	4,391	$	-
Real estate mortgage - residential		5,154		4,826		10
Real estate mortgage - farmland and other commercial enterprises		12,677		16,987		434
Commercial:
Commercial and industrial		160		-		-
Lease financing		22		-		-
Consumer:
Secured		3		-		-
Unsecured		1		51		-
Total	$	23,838	$	26,255	$	444

The Company has allocated $2.5 million and $2.7 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 June 30, 2014 and December 31, 2013, respectively. The Company had no commitments to lend additional amounts to customers with outstanding loans that are classified as troubled debt restructurings at June 30, 2014 and December 31, 2013.

The Company had no credits during 2014 that were modified as troubled debt restructurings. The Company had five credits in 2013 that were modified as troubled debt restructurings. Each of these credits represents debt by a borrower which was 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.

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The following table presents loans by class modified as troubled debt restructurings that occurred during the three and six months ended June 30, 2013. There were no loans modified as troubled debt restructurings during 2014.

(Dollars in thousands) Troubled Debt Restructurings:	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Three Months Ended June 30, 2013
Real Estate:
Real estate mortgage – residential		1	$	18	$	18
Commercial:
Commercial and industrial		1		2		2
Consumer:
Secured		1		13		13
Total		3	$	33	$	33
Six Months Ended June 30, 2013
Real Estate:
Real estate mortgage – residential		3	$	309	$	309
Commercial:
Commercial and industrial		1		2		2
Consumer:
Secured		1		13		13
Total		5	$	324	$	324

The troubled debt restructurings identified above increased the allowance for loan losses by $15 thousand and $23 thousand in the three and six months periods ended June 30, 2013, respectively. There were no charge-offs related to these loans. There were no payment defaults during the first six months of 2014 or 2013 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.

June 30, 2014 (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	$	568	$	317	$	885	$	96,884	$	97,769
Real estate mortgage - residential		2,771		2,822		5,593		360,376		365,969
Real estate mortgage - farmland and other commercial enterprises		444		6,278		6,722		386,188		392,910
Commercial:
Commercial and industrial		45		176		221		52,492		52,713
States and political subdivisions		-		-		-		25,150		25,150
Lease financing, net		171		-		171		222		393
Other		25		-		25		20,744		20,769
Consumer:
Secured		56		2		58		8,778		8,836
Unsecured		58		-		58		5,612		5,670
Total	$	4,138	$	9,595	$	13,733	$	956,446	$	970,179

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December 31, 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	$	613	$	671	$	100,681	$	101,352
Real estate mortgage - residential		1,225		2,502		3,727		367,855		371,582
Real estate mortgage - farmland and other commercial enterprises		3,548		7,978		11,526		406,621		418,147
Commercial:
Commercial and industrial		71		53		124		47,302		47,426
States and political subdivisions		-		-		-		21,561		21,561
Lease financing, net		-		22		22		861		883
Other		56		-		56		23,784		23,840
Consumer:
Secured		41		3		44		8,535		8,579
Unsecured		58		1		59		6,454		6,513
Total	$	5,057	$	11,172	$	16,229	$	983,654	$	999,883

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.

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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 excludes immaterial amounts attributed to accrued interest receivable.

	Real Estate						Commercial
June 30, 2014 (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		Other
Credit risk profile by internally assigned rating grades:
Pass	$	75,835	$	332,358	$	345,066	$	50,930	$	25,150	$	393	$	20,691
Special Mention		7,207		12,219		16,532		785		-		-		59
Substandard		14,727		21,392		30,837		998		-		-		19
Doubtful		-		-		475		-		-		-		-
Total	$	97,769	$	365,969	$	392,910	$	52,713	$	25,150	$	393	$	20,769

	Real Estate						Commercial
December 31, 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		Other
Credit risk profile by internally assigned rating grades:
Pass	$	77,873	$	334,104	$	352,238	$	45,652	$	21,561	$	861	$	23,820
Special Mention		7,755		15,120		29,156		963		-		-		-
Substandard		15,724		22,358		36,753		735		-		22		20
Doubtful		-		-		-		76		-		-		-
Total	$	101,352	$	371,582	$	418,147	$	47,426	$	21,561	$	883	$	23,840

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 June 30, 2014 and December 31, 2013.

	June 30, 2014				December 31, 2013
	Consumer				Consumer
(In thousands)	Secured		Unsecured		Secured		Unsecured
Credit risk profile based on payment activity:
Performing	$	8,831	$	5,622	$	8,576	$	6,461
Nonperforming		5		48		3		52
Total	$	8,836	$	5,670	$	8,579	$	6,513

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8. Other Real Estate Owned

Other real estate owned (“OREO”) was as follows as of the date indicated:

(In thousands)	June 30, 2014		December 31, 2013
Construction and land development	$	21,106	$	23,504
Residential real estate		2,004		2,695
Farmland and other commercial enterprises		15,924		11,627
Total	$	39,034	$	37,826

OREO activity for the six months ended June 30, 2014 and 2013 was as follows:

Six months ended June 30, (In thousands)	2014			2013
Beginning balance	$	37,826		$	52,562
Transfers from loans and other increases		6,978			5,279
Proceeds from sales		(4,262	)		(9,619	)
(Loss) gain on sales, net		(94	)		280
Write downs and other decreases, net		(1,414	)		(2,037	)
Ending balance	$	39,034		$	46,465

9. 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, 2014 and 2013.

	Three Months Ended					Six Months Ended
	June 30,					June 30,
(In thousands)	2014			2013		2014			2013
Service cost	$	120		$	158	$	241		$	315
Interest cost		143			138		285			276
Recognized prior service cost		52			64		104			128
Recognized net actuarial gain		(16	)		-		(32	)		-
Net periodic benefit cost	$	299		$	360	$	598		$	719

The Company expects benefit payments of $340 thousand for 2014, of which $67 thousand and $133 thousand have been made during the three and six months ended June 30, 2014, respectively.

10. 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.

	June 30, 2014			December 31, 2013
	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	19.43%	20.69%	11.99%	18.95%	20.21%	11.90%
Farmers Bank	18.08	19.33	9.71	17.56	18.82	9.60
United Bank	16.16	17.43	10.31	15.06	16.33	9.67
First Citizens	13.39	14.07	9.20	12.92	13.67	9.03
Citizens Northern	14.12	15.37	9.81	13.57	14.82	9.67

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 agreements that two of the Company’s subsidiary banks have entered into with their primary banking regulators. The agreement entered into during 2009 between the Parent Company and its primary regulators was terminated in March 2014 as a result of continued satisfactory compliance, most notably from the progress made in lowering nonperforming assets and increasing capital levels. Therefore, the Company is no longer required to receive permission from its banking regulators to make interest payments on its trust preferred securities or to pay dividends on its common and preferred stock. However, the Company’s current goal is to redeem all of its outstanding preferred stock before considering the payment of a dividend on its common stock. The Company redeemed 10,000 shares, or one-third, of its outstanding preferred stock on May 15, 2014. Further redemptions, which require regulatory approval, will be based on satisfactory financial performance and take into consideration the Company’s capital position, earnings, asset quality, and other factors. The timing and amount of any further redemption by the Company of its remaining outstanding preferred stock will be disclosed when assured.

United Bank  

In November of 2009, the Federal Deposit Insurance Corporation (“FDIC”) and the Kentucky Department of Financial Institutions (“KDFI”) entered into a Cease and Desist Order (“C&D”) with United Bank 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%. 

During January 2014, the formal Consent Order entered into during 2011 with United Bank was terminated and replaced with a stepped-down enforcement action in the form of an informal Memorandum of Understanding (“Memorandum”). The informal Memorandum includes many of the same provisions covered by the Consent Order.

Other components in the regulatory order include oversight and reporting obligations to its regulators in terms of complying with the Memorandum. It also includes requirements 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 Memorandum.

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Citizens Northern  

The FDIC and KDFI 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 FDIC and KDFI.

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.

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. 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 each of its subsidiary banks are in compliance with the requirements identified in their regulatory agreements as of June 30, 2014.

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.

11. 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.

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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 June 30, 2014 and December 31, 2013 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)
June 30, 2014
Obligations of U.S. government-sponsored entities	$	97,230	$	-	$	97,230	$	-
Obligations of states and political subdivisions		133,281		-		133,281		-
Mortgage-backed securities – residential		377,519		-		377,519		-
Mortgage-backed securities – commercial		715		-		715		-
Corporate debt securities		6,492		-		6,492		-
Mutual funds and equity securities		1,019		1,019		-		-
Total	$	616,256	$	1,019	$	615,237	$	-

			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, 2013
Obligations of U.S. government-sponsored entities	$	93,750	$	-	$	93,750	$	-
Obligations of states and political subdivisions		131,970		-		131,970		-
Mortgage-backed securities – residential		378,077		-		378,077		-
Mortgage-backed securities – commercial		689		-		689		-
Corporate debt securities		6,257		-		6,257		-
Mutual funds and equity securities		2,077		2,077		-		-
Total	$	612,820	$	2,077	$	610,743	$	-

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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 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 includes comparable sales data and is 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 table represents 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 table 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)
June 30, 2014
Collateral-dependent Impaired Loans
Real estate mortgage – residential	$	1,219	$	-	$	-	$	1,219
Real estate mortgage – farmland and other commercial enterprises		7		-		-		7
Commercial and industrial		37		-		-		37
Total	$	1,263	$	-	$	-	$	1,263
OREO
Construction and land development	$	4,191	$	-	$	-	$	4,191
Residential real estate		934		-		-		934
Farmland and other commercial enterprises		1,887		-		-		1,887
Total	$	7,012	$	-	$	-	$	7,012

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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)
December 31, 2013
Collateral-dependent Impaired Loans
Real estate mortgage – construction and land development	$	334	$	-	$	-	$	334
Real estate mortgage – residential		2,085		-		-		2,085
Real estate mortgage – farmland and other commercial enterprises		3,152		-		-		3,152
Commercial and industrial		88		-		-		88
Total	$	5,659	$	-	$	-	$	5,659
OREO
Construction and land development	$	14,465	$	-	$	-	$	14,465
Residential real estate		1,116		-		-		1,116
Farmland and other commercial enterprises		9,152		-		-		9,152
Total	$	24,733	$	-	$	-	$	24,733

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				Six Months Ended
	June 30,				June 30,
(In thousands)	2014		2013		2014		2013
Impairment charges:
Collateral-dependent impaired loans	$	135	$	839	$	268	$	1,210
OREO		419		1,005		1,170		1,694
Total	$	554	$	1,844	$	1,438	$	2,904

The following table presents quantitative information about unobservable inputs for assets measured on a nonrecurring basis using Level 3 measurements. As previously discussed, the fair value of real estate securing 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 below for 2014.

(In thousands)	Fair Value at June 30, 2014		Valuation Technique	Unobservable Inputs	Range		Average
Collateral-dependent impaired loans	$	1,263	Discounted appraisals	Marketability discount		0% - 30.1%		13.0%
OREO	$	7,012	Discounted appraisals	Marketability discount		0.5% - 31.8%		8.1%

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.

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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.

30

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 June 30, 2014 and December 31, 2013. 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)
June 30, 2014
Assets
Cash and cash equivalents	$	68,987	$	68,987	$	68,987	$	-	$	-
Held to maturity investment securities		3,814		3,963		-		3,963		-
Loans, net		953,056		953,158		-		-		953,158
Accrued interest receivable		5,670		5,670		-		5,670		-
Federal Home Loan Bank and Federal Reserve Bank Stock		9,368	N/A			-		-		-
Liabilities
Deposits		1,382,673		1,384,661		947,958		-		436,703
Federal funds purchased and other short-term borrowings		24,230		24,230		-		24,230		-
Securities sold under agreements to repurchase and other long-term borrowings		127,797		138,251		-		138,251		-
Subordinated notes payable to unconsolidated trusts		48,970		23,794		-		-		23,794
Accrued interest payable		1,065		1,065		-		1,065		-
December 31, 2013
Assets
Cash and cash equivalents	$	68,253	$	68,253	$	68,253	$	-	$	-
Held to maturity investment securities		765		827		-		827		-
Loans, net		979,306		977,846		-		-		977,846
Accrued interest receivable		5,901		5,901		-		5,901		-
Federal Home Loan Bank and Federal Reserve Bank Stock		9,516	N/A			-		-		-
Liabilities
Deposits		1,410,215		1,412,572		938,700		-		473,872
Federal funds purchased and other short-term borrowings		29,123		29,123		-		29,123		-
Securities sold under agreements to repurchase and other long-term borrowings		127,880		139,375		-		139,375		-
Subordinated notes payable to unconsolidated trusts		48,970		26,070		-		-		26,070
Accrued interest payable		1,137		1,137		-		1,137		-

31

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; expected insurance recoveries; 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.

32

RESULTS OF OPERATIONS

Second Quarter 2014 Compared to Second Quarter 2013

The Company reported net income of $4.8 million for the quarter ended June 30, 2014, an increase of $1.3 million or 36.0% compared with net income of $3.5 million for the second quarter of 2013. On a per common share basis, net income was $.57 and $.41 for the current and year-ago quarters, respectively. This represents an increase of $.16 or 39.0%. Selected income statement amounts and related data are summarized in the table below.

(In thousands except per share data)
Three Months Ended June 30,	2014			2013			Increase (Decrease)
Interest income	$	16,331		$	16,631		$	(300	)
Interest expense		2,604			3,038			(434	)
Net interest income		13,727			13,593			134
Provision for loan losses		(1,388	)		(362	)		(1,026	)
Net interest income after provision for loan losses		15,115			13,955			1,160
Noninterest income		5,991			5,441			550
Noninterest expenses		14,323			14,722			(399	)
Income before income taxes		6,783			4,674			2,109
Income tax expense		1,959			1,127			832
Net income		4,824			3,547			1,277
Less preferred stock dividends and discount accretion		563			487			76
Net income available to common shareholders	$	4,261		$	3,060		$	1,201
Basic and diluted net income per common share	$	.57		$	.41		$	.16
Weighted average common shares outstanding – basic and diluted		7,482			7,473			9
Return on average assets		1.07	%		.79	%	28 bp
Return on average equity		10.98	%		8.30	%	268 bp

 bp = basis points.

The $1.3 million increase in net income is attributed primarily to a lower provision for loan losses of $1.0 million, an increase in noninterest income of $550 thousand or 10.1%, and lower noninterest expense of $399 thousand or 2.7%. Net interest income and income tax expense increased $134 thousand or 1.0% and $832 thousand or 73.8%, respectively. Further information related to the more significant components making up the increase in net income follows.

Net Interest Income

The overall interest rate environment at June 30, 2014, as measured by the Treasury yield curve, remains at very low levels when compared with historical trends. During the current quarter, yields on three-month, six-month, and three-year maturity periods were relatively unchanged. Yields on longer-term maturities declined 19 and 20 basis points for the ten and thirty-year maturity periods, respectively. At June 30, 2014, the short-term federal funds target interest rate remained between zero and 0.25%, unchanged since December 2008. The Federal Reserve Board has indicated that the low federal funds rate will likely be appropriate for a considerable period of time, particularly in light of current inflation projections and its longer-run goal of supporting maximum employment. At June 30, 2014, the national and Kentucky unemployment rate was 6.1% and 7.4%, respectively.

Net interest income was $13.7 million for the current quarter, an increase of $134 thousand or 1.0% compared to $13.6 million for the prior year second quarter. The improvement in net interest income was driven by lower interest expense of $434 thousand or 14.3%, which offset a decrease in interest income of $300 thousand or 1.8%. Interest expense on deposits and interest income on loans decreased $420 thousand or 27.6% and $815 thousand or 6.0%, respectively; interest on investment securities increased $516 thousand or 16.6%.

33

The decrease to interest income on loans is made up of both lower average balances outstanding and a decrease in rates. Interest income on investment securities is up due mainly to volume increases. The increase in volume of investment securities correlates with an overall lack of high quality loan demand. As loans have declined, available funds have been redirected more into investment securities. The decrease in interest expense on deposits was driven by rate declines and lower average outstanding balances. Rate declines on loans and deposits are the result of an overall slow growing economy and related low interest rate environment, competitive pressures, and the Company’s strategy of being more selective in pricing its loans and deposits. The goal of this strategy is to improve credit quality, net interest income, overall profitability, and the 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. The Company continues to reprice its higher-rate maturing time deposits downward to lower market rates or allowing them to mature without renewal, as liquidity has been adequate.

Average investment securities increased $46.9 million or 8.1% from a year ago mainly due to a decline in loans outstanding. In periods when quality loan demand is low, available funds are invested in lower yielding investment securities or cash equivalents or otherwise used to manage liquidity, such as for deposit outflows or for the repayment of long-term debt.

The net interest margin on a taxable equivalent basis was unchanged at 3.40% in the comparison. Net interest spread was up one basis point to 3.24% compared to 3.23% a year ago. The Company expects its net interest margin to remain relatively flat 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.

34

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

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

Three Months Ended June 30,	2014									2013
(In thousands)	Average Balance			Interest			Average Rate			Average Balance			Interest			Average Rate
Earning Assets
Investment securities
Taxable	$	509162		$	2,980			2.35	%	$	470,306		$	2,459			2.10	%
Nontaxable1		118,327			947			3.21			110,238			954			3.47
Interest bearing deposits in banks, federal funds sold and securities purchased under agreements to resell		60,815			38			.25			65,369			39			.24
Loans1,2,3		978,677			12,772			5.23			1,012,267			13,610			5.39
Total earning assets		1,666,981		$	16,737			4.03	%		1,658,180		$	17,062			4.13	%
Allowance for loan losses		(18,434	)								(23,364	)
Total earning assets, net of allowance for loan losses		1,648,547									1,634,816
Nonearning Assets
Cash and due from banks		22,772									23,225
Premises and equipment, net		36,011									36,228
Other assets		94,201									108,359
Total assets	$	1,801,531								$	1,802,628
Interest Bearing Liabilities
Deposits
Interest bearing demand	$	322,799		$	47			.06	%	$	310,360		$	57			.07	%
Savings		356,408			153			.17			328,199			158			.19
Time		443,065			904			.82			512,926			1,309			1.02
Federal funds purchased and other short-term borrowings		27,689			11			.16			29,061			20			.28
Securities sold under agreements to repurchase and other long-term borrowings		176,027			1,489			3.39			176,198			1,494			3.40
Total interest bearing liabilities		1,325,988		$	2,604			.79	%		1,356,744		$	3,038			.90	%
Noninterest Bearing Liabilities
Demand deposits		275,230									246,950
Other liabilities		24,105									27,538
Total liabilities		1,625,323									1,631,232
Shareholders’ equity		176,208									171,396
Total liabilities and shareholders’ equity	$	1,801,531								$	1,802,628
Net interest income					14,133									14,024
TE basis adjustment					(406	)								(431	)
Net interest income				$	13,727								$	13,593
Net interest spread								3.24	%								3.23	%
Impact of noninterest bearing sources of funds								.16									.17
Net interest margin								3.40	%								3.40	%

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 $427 thousand and $288 thousand in 2014 and 2013, respectively.

35

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

(In thousands)	Variance			Variance Attributed to
Three Months Ended June 30,	2014/20131			Volume			Rate
Interest Income
Taxable investment securities	$	521		$	213		$	308
Nontaxable investment securities2		(7	)		281			(288	)
Interest bearing deposits in banks, federal funds sold and securities purchased under agreements to resell		(1	)		(9	)		8
Loans2		(838	)		(442	)		(396	)
Total interest income		(325	)		43			(368	)
Interest Expense
Interest bearing demand deposits		(10	)		12			(22	)
Savings deposits		(5	)		57			(62	)
Time deposits		(405	)		(166	)		(239	)
Federal funds purchased and other short-term borrowings		(9	)		(1	)		(8	)
Securities sold under agreements to repurchase and other long-term borrowings		(5	)		(1	)		(4	)
Total interest expense		(434	)		(99	)		(335	)
Net interest income	$	109		$	142		$	(33	)
Percentage change		100.0	%		130.3	%		(30.3	)%

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 credit quality of the Company’s loan portfolio continues to improve, but remains hampered by the lingering effects of the downturn of the overall economy and financial markets that began in late 2007 and has not fully rebounded. Economic expansion remains slow and labor force participation rates are near 30-year lows.

The Company recorded a credit to the provision for loan losses in the amount of $1.4 million and $362 thousand in the current and year ago quarters, respectively. The allowance for loan losses as a percentage of outstanding loans (net of unearned income) was 1.76% at June 30, 2014 compared to 2.06% and 2.28% at year-end 2013 and June 30, 2013, respectively. The decrease in the provision for loan losses is attributed to continuing improvement in the credit quality of the loan portfolio and a decline in outstanding loans. Net charge-offs were $179 thousand in the current quarter, a decrease of $79 thousand or 30.6% compared to $258 thousand a year earlier. Nonperforming loans, early stage delinquencies, and watch list loans have each declined compared with a year earlier. Historical loss rates have also improved as lower recent charge-off activity has replaced the higher levels experienced in the early part of the Company’s rolling quarterly four year look-back period used when evaluating the allowance for loan losses. For further information about improvements in the Company’s overall credit quality, please refer to the discussion under the captions “Allowance for Loan Losses” and “Nonperforming Loans” that follows.

36

Noninterest Income

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

Three Months Ended June 30, (In thousands)	2014			2013			Increase (Decrease)			%
Service charges and fees on deposits	$	1,991		$	2,018		$	(27	)		(1.3	)%
Allotment processing fees		1,274			1,241			33			2.7
Other service charges, commissions, and fees		1,399			1,264			135			10.7
Trust income		523			470			53			11.3
Investment securities losses, net		(84	)		(60	)		(24	)		40.0
Gain on sale of mortgage loans, net		123			292			(169	)		(57.9	)
Income from company-owned life insurance		233			232			1			0.4
Other		532			(16	)		548		N/M
Total noninterest income	$	5,991		$	5,441		$	550			10.1	%

N/M – Not meaningful.

The increase in noninterest income is attributed mainly to the Company’s equity interest in its three tax credit partnerships. The Company recorded income of $418 thousand related to these partnerships in the current quarter compared with a loss of $54 thousand in the prior year second quarter. Service charges and fees on deposits decreased primarily due to lower overdraft charges related to volume declines. The increase in nondeposit service charges, commissions, and fees consists of many small dollar increases over numerous line item categories. The increase in trust income is due mainly to higher market values of managed assets, which is a component of the fee structure arrangement. The net decrease in gains on the sale of loans is attributed to a $7.3 million or 56.1% decrease in mortgage loan sales activity.

The net loss on investment securities for the current quarter includes $95 thousand attributed to a 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 reduced the subsidy to the issuer, triggering an extraordinary redemption feature related to these bonds. The issuer provided notice that it would exercise their extraordinary redemption privilege. Since the carrying value of the bond exceeded the par value due to unamortized premium, the Company recorded a loss on this investment. The remaining unamortized premium of BAB investments at June 30, 2014 was $46 thousand, with the related carrying amount of the investments totaling $2.6 million. The Company believes it is unlikely that other bond investments by the Company of issuers participating in the BAB program will be called in the current interest rate environment.

Noninterest Expense

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

Three Months Ended June 30, (In thousands)	2014		2013		Increase (Decrease)			%
Salaries and employee benefits	$	7,342	$	7,231	$	111			1.5	%
Occupancy expenses, net		1,209		1,165		44			3.8
Equipment expenses		593		579		14			2.4
Data processing and communication expense		969		945		24			2.5
Bank franchise tax		610		610		-			-
Amortization of intangibles		101		135		(34	)		(25.2	)
Deposit insurance expense		461		497		(36	)		(7.2	)
Other real estate expenses, net		938		1,485		(547	)		(36.8	)
Other		2,100		2,075		25			1.2
Total noninterest expense	$	14,323	$	14,722	$	(399	)		(2.7	)%

The decrease in noninterest expenses was driven mainly by lower expenses related to repossessed real estate of $547 thousand or 36.8%. The decrease in repossessed real estate expenses is attributed mainly to lower impairment charges of $521 thousand or 50.6%.

37

The increase in salaries and employee benefits primarily reflects normal employee pay increases and related payroll taxes of $198 thousand or 3.4%, partially offset by lower benefit costs of $87 thousand or 6.1%. The decrease in benefit costs was driven by lower actuary-determined postretirement medical costs. The Company had 510 full time equivalent employees at quarter-end compared to 514 a year earlier. The increase in occupancy expense was boosted by higher maintenance and utilities costs of $35 thousand or 22.0% and $14 thousand or 7.2%, respectively.

Amortization of intangible assets decreased as a result of actuarial determined reductions related to core deposit and customer relationship intangible assets arising from previous business acquisitions. Intangible assets are scheduled to fully amortize by 2015. The reduction in deposit insurance expense is due to the improvement in the risk ratings at the Company’s subsidiary banks, which is used in the determination of the amount payable.

Income Taxes

Income tax expense was $2.0 million for the current quarter, an increase of $832 thousand or 73.8% compared to $1.1 million for the same quarter of 2013. The effective income tax rates were 28.9% and 24.1% for the current and year-ago quarters, respectively. The effective income tax rate increase is mainly attributed to higher pretax income, with the taxable portion making up significantly all of the increase.

First Six Months of 2014 Compared to First Six Months of 2013

The Company reported net income of $8.2 million for the first six months of 2014, an increase of $855 thousand or 11.7% compared with net income of $7.3 million for 2013. On a per common share basis, net income for the current six months was $.95, an increase of $.10 or 11.8% compared to $.85 reported a year earlier. Selected income statement amounts and related data are presented in the table below.

(In thousands except per share data)
Six Months Ended June 30,	2014			2013			Increase (Decrease)
Interest income	$	32,705		$	33,373		$	(668	)
Interest expense		5,299			6,204			(905	)
Net interest income		27,406			27,169			237
Provision for loan losses		(1,256	)		(994	)		(262	)
Net interest income after provision for loan losses		28,662			28,163			499
Noninterest income		11,364			10,852			512
Noninterest expenses		28,753			29,231			(478	)
Income before income taxes		11,273			9,784			1,489
Income tax expense		3,079			2,445			634
Net income		8,194			7,339			855
Less preferred stock dividends and discount accretion		1,100			972			128
Net income available to common shareholders	$	7,094		$	6,367		$	727
Basic and diluted net income per common share	$	.95		$	.85		$	.10
Weighted average common shares outstanding – basic and diluted		7,481			7,471			10
Return on average assets		.91	%		.82	%	9 bp
Return on average equity		9.39	%		8.70	%	69 bp
bp = basis points.

The $855 thousand increase in net income is attributed primarily to an increase in noninterest income of $512 thousand or 4.7%, lower noninterest expenses of $478 thousand or 1.6%, and a decrease in the provision for loan losses of $262 thousand or 26.4%. Net interest income increased $237 thousand or 0.9%. Income tax expense was up $634 thousand or 25.9%. Further information related to the more significant components making up the increase in net income follows.

38

Net Interest Income

Net interest income was $27.4 million for the first six months of 2014, up $237 thousand or 0.9% compared to $27.2 million for the first six months of 2013. The improvement in net interest income was driven by a decrease in interest expense of $905 thousand or 14.6%, which offset lower interest income of $668 thousand or 2.0%. Interest expense on deposits and interest income on loans decreased $880 thousand or 27.6% and $1.7 million or 6.3%, respectively; interest on investment securities increased $1.0 million or 16.6%.

The decrease to interest income on loans was primarily driven by lower interest rates, although a decrease in average balances outstanding also contributed to a lesser extent. Interest income on investment securities increased mainly due to higher volume, which is primarily reflects a lack of high quality loan demand. The decrease in interest expense on deposits was driven by rate declines combined with lower average outstanding balances. Rate declines on both loans and deposits are the result of an overall slow growing economy and related low interest rate environment, competitive pressures, and the Company’s strategy of being more selective in pricing its loans and deposits. The goal of this strategy is to improve credit quality, net interest income, 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. The Company continues to reprice its higher-rate maturing time deposits downward to lower market rates or allowing them to mature without renewal, as liquidity has been adequate.

Average investment securities increased $45.1 million or 7.8% mainly as a result of a decline in loans outstanding. In periods when quality loan demand is low, available funds are invested in lower yielding investment securities or cash equivalents or otherwise used to manage liquidity, such as for deposit outflows or for the repayment of long-term debt.

The net interest margin on a taxable equivalent basis was unchanged at 3.41% in the comparison. Net interest spread was also unchanged at 3.25%. The Company expects its net interest margin to remain relatively flat 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.

39

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

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

Six Months Ended June 30,	2014									2013
(In thousands)	Average Balance			Interest			Average Rate			Average Balance			Interest			Average Rate
Earning Assets
Investment securities
Taxable	$	508,088		$	6,060			2.41	%	$	473,963		$	5,021			2.14	%
Nontaxable1		117,057			1,873			3.23			106,053			1,864			3.54
Interest bearing deposits in banks, federal funds sold and securities purchased under agreements to resell		58,453			66			.23			63,624			74			.23
Loans1,2,3		986,321			25,499			5.21			1,009,039			27,251			5.45
Total earning assets		1,669,919		$	33,498			4.05	%		1,652,679		$	34,210			4.17	%
Allowance for loan losses		(19,016	)								(23,867	)
Total earning assets, net of allowance for loan losses		1,650,903									1,628,812
Nonearning Assets
Cash and due from banks		23,035									23,763
Premises and equipment, net		36,092									36,183
Other assets		97,023									109,261
Total assets	$	1,807,053								$	1,798,019
Interest Bearing Liabilities
Deposits
Interest bearing demand	$	322,884		$	97			.06	%	$	305,014		$	113			.07	%
Savings		352,947			311			.18			325,764			315			.19
Time		452,848			1,899			.85			521,011			2,759			1.07
Federal funds purchased and other short-term borrowings		30,721			30			.20			27,397			39			.29
Securities sold under agreements to repurchase and other long-term borrowings		176,049			2,962			3.39			176,521			2,978			3.40
Total interest bearing liabilities		1,335,449		$	5,299			.80	%		1,355,707		$	6,204			.92	%
Noninterest Bearing Liabilities
Demand deposits		271,084									245,101
Other liabilities		24,472									27,007
Total liabilities		1,631,005									1,627,815
Shareholders’ equity		176,048									170,204
Total liabilities and shareholders’ equity	$	1,807,053								$	1,798,019
Net interest income					28,199									28,006
TE basis adjustment					(793	)								(837	)
Net interest income				$	27,406								$	27,169
Net interest spread								3.25	%								3.25	%
Impact of noninterest bearing sources of funds								.16									.16
Net interest margin								3.41	%								3.41	%

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 $666 thousand and $762 thousand in 2014 and 2013, respectively.

40

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

(In thousands)	Variance			Variance Attributed to
Six Months Ended June 30,	2014/20131			Volume			Rate
Interest Income
Taxable investment securities	$	1,039		$	377		$	662
Nontaxable investment securities2		9			362			(353	)
Interest bearing deposits in banks, federal funds sold and securities purchased under agreements to resell		(8	)		(8	)		-
Loans2		(1,752	)		(593	)		(1,159	)
Total interest income		(712	)		138			(850	)
Interest Expense
Interest bearing demand deposits		(16	)		14			(30	)
Savings deposits		(4	)		38			(42	)
Time deposits		(860	)		(334	)		(526	)
Federal funds purchased and other short-term borrowings		(9	)		12			(21	)
Securities sold under agreements to repurchase and other long-term borrowings		(16	)		(8	)		(8	)
Total interest expense		(905	)		(278	)		(627	)
Net interest income	$	193		$	416		$	(223	)
Percentage change		100.0	%		215.5	%		(115.5	)%

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 $1.3 million and $994 thousand for the current and prior year first six months, respectively. The allowance for loan losses as a percentage of outstanding loans (net of unearned income) was 1.76% at June 30, 2014 compared to 2.06% and 2.28% at year-end 2013 and June 30, 2013, respectively. The decrease in the provision for loan losses is attributed to further improving credit quality trends and a decline in outstanding loans. Nonperforming loans, early stage delinquencies, and watch list loans have each declined compared with a year earlier. Historical loss rates have also improved as lower recent charge-off activity has replaced the higher levels experienced in the early part of the Company’s rolling quarterly four year look-back period used when evaluating the allowance for loan losses. For further information about improvements in the Company’s overall credit quality, please refer to the discussion under the captions “Allowance for Loan Losses” and “Nonperforming Loans” that follows.

Noninterest Income

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

Six Months Ended June 30, (In thousands)	2014			2013			Increase (Decrease)			%
Service charges and fees on deposits	$	3,907		$	3,978		$	(71	)		(1.8	)%
Allotment processing fees		2,519			2,507			12			0.5
Other service charges, commissions, and fees		2,634			2,456			178			7.2
Trust income		1,068			954			114			11.9
Investment securities losses, net		(75	)		(60	)		(15	)		25.0
Gain on sale of mortgage loans, net		220			631			(411	)		(65.1	)
Income from company-owned life insurance		479			472			7			1.5
Other		612			(86	)		698		N/M
Total noninterest income	$	11,364		$	10,852		$	512			4.7	%

N/M – Not meaningful.

41

The increase in noninterest income is attributed mainly to the Company’s equity interest in its three tax credit partnerships. The Company recorded income of $358 thousand related to these partnerships in the current period compared with a loss of $190 thousand in the prior year. The decrease in service charges and fees on deposits was driven by lower overdraft fees of $43 thousand or 1.8% due to volume declines. The increase in nondeposit service charges, commissions, and fees was led by higher interchanges fees of $62 thousand or 4.5% combined with other smaller dollar increases related to numerous line item categories. The increase in trust income is due mainly to higher market values of managed assets, which is a component of the fee structure arrangement. The decrease in net gains on the sale of loans is primarily attributed to a $13.4 million or 45.7% decrease in mortgage loan sales activity.

The net loss on investment securities for the current period includes $95 thousand attributed to a municipal bond issuer participating in the Build America Bond program. The issuer provided notice that it would exercise their extraordinary redemption privilege, which was triggered by Federal budget sequestration events. Since the carrying value of the bond exceeded the par value due to unamortized premium, the Company recorded a loss on this investment. The remaining unamortized premium of BAB investments at June 30, 2014 was $46 thousand, with the related carrying amount of the investments totaling $2.6 million. The Company believes it is unlikely that other bond investments by the Company of issuers participating in the BAB program will be called in the current interest rate environment.

Noninterest Expense

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

Six Months Ended June 30, (In thousands)	2014		2013		Increase (Decrease)			%
Salaries and employee benefits	$	14,693	$	14,555	$	138			0.9	%
Occupancy expenses, net		2,491		2,331		160			6.9
Equipment expenses		1,187		1,141		46			4.0
Data processing and communication expense		1,974		2,043		(69	)		(3.4	)
Bank franchise tax		1,222		1,200		22			1.8
Amortization of intangibles		202		270		(68	)		(25.2	)
Deposit insurance expense		901		1,139		(238	)		(20.9	)
Other real estate expenses, net		2,002		2,377		(375	)		(15.8	)
Other		4,081		4,175		(94	)		(2.3	)
Total noninterest expense	$	28,753	$	29,231	$	(478	)		(1.6	)%

The decrease in noninterest expenses was driven mainly by lower expenses related to repossessed real estate of $375 thousand or 15.8% and a decrease to deposit insurance expense of $238 thousand or 20.9%. The decrease in repossessed real estate expenses is attributed mainly to lower impairment charges of $648 thousand or 31.4%. The current year also includes a $94 thousand net loss on the sale of repossessed real estate compared to a net gain of $280 thousand in the prior year. The decrease in deposit insurance expense is due to an improvement in the risk ratings at the Company’s subsidiary banks, which is used to calculate the amount payable.

The increase in salaries and employee benefits primarily reflects normal employee pay increases and related payroll taxes of $360 thousand or 3.1%, partially offset by lower benefit costs of $221 thousand or 8.0%. The decrease in benefit costs was driven by lower actuary-determined postretirement medical costs. The Company had 510 full time equivalent employees at the end of the period compared to 514 a year earlier. The increase in occupancy expense was driven by higher maintenance and utilities costs of $84 thousand or 26.8% and $60 thousand or 15.1%, respectively.

The decrease in data processing and communication expense is primarily attributed to ongoing efforts to reduce operating costs and improve efficiency. Amortization of intangible assets decreased as a result of actuarial determined reductions related to core deposit and customer relationship intangible assets arising from previous business acquisitions. Intangible assets are scheduled to fully amortize by 2015.

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Income Taxes

Income tax expense was $3.1 million for the current six months, an increase of $634 thousand or 25.9% compared to $2.4 million for the prior year. The effective income tax rates were 27.3% and 25.0% for the current and year-ago periods, respectively. The increase in the effective income tax rate is mainly attributed to higher pretax income, driven by a higher mix of taxable versus tax-exempt sources of revenue.

FINANCIAL CONDITION

Total assets were $1.8 billion at June 30, 2014, a decrease of $24.4 million or 1.3% from year-end 2013. Loans (net of unearned income) decreased $29.7 million or 3.0%. Investment securities and other real estate owned increased $6.5 million or 1.1% and $1.2 million or 3.2%, respectively, partially offset by a decrease in deferred income taxes of $4.7 million or 21.8%.

Generating high quality loan demand remains a challenge, and the decrease in outstanding loans has been accelerated by early payoffs of several larger balance credits. Loan totals have also declined as a result of a decrease in nonperforming loans. The increase in investment securities was driven by an increase in the unrealized gain on available for sale investment securities, which was fueled by favorable changes in market interest rates. The decrease in deferred income taxes is primarily attributed to the change in the market value of the available for sale investment securities portfolio. The portfolio improved from an unrealized loss position at year end 2013 to an unrealized gain as of the end of the current period. Other real estate owned increased primarily by the repossession of two larger balance properties totaling $6.2 million during the second quarter.

Total liabilities were $1.6 billion at June 30, 2014, a decrease of $30.3 million or 1.8% compared to December 31, 2013. The decrease in total liabilities is mainly attributed to a $27.5 million or 2.0% reduction in total deposits, primarily time deposits. Short term borrowings decreased $4.9 million or 16.8%.

Shareholders’ equity was $176 million at June 30, 2014, an increase of $5.9 million or 3.5% compared to $170 million at year-end 2013. The increase in shareholders’ equity was driven by the after-tax increase in the unrealized gain on investment securities in the amount of $8.6 million and is attributed to a decrease in longer-term market interest rates. Net income added $8.2 million to shareholders’ equity during the period. The Company redeemed a portion of its preferred stock in the amount of $10.0 million during the second quarter.

43

Selected balance sheet amounts and related data are presented in the table below and discussion that follows.

(Dollars in thousands)	June 30, 2014		December 31, 2013			Increase (Decrease)			%
Cash and cash equivalents	$	68,987	$	68,253		$	734			1.1	%
Investment securities		620,070		613,585			6,485			1.1
Loans, net of allowance of $17,123 and $20,577		953,056		979,306			(26,250	)		(2.7	)
Other real estate owned		39,034		37,826			1,208			3.2
Other assets		104,036		110,585			(6,549	)		(5.9	)
Total assets	$	1,785,183	$	1,809,555		$	(24,372	)		(1.3	)%
Deposits	$	1,382,673	$	1,410,215		$	(27,542	)		(2.0	)%
Federal funds purchased and other short-term borrowings		24,230		29,123			(4,893	)		(16.8	)
Other borrowings		176,767		176,850			(83	)		-
Other liabilities		25,544		23,312			2,232			9.6
Total liabilities		1,609,214		1,639,500			(30,286	)		(1.8	)
Preferred stock		20,000		29,988			(9,988	)		(33.3	)
Common stock		935		935			-			-
Capital surplus		51,220		51,102			118			0.2
Retained earnings		98,336		91,242			7,094			7.8
Accumulated other comprehensive income (loss)		5,478		(3,212	)		8,690			(270.5	)
Total shareholders’ equity		175,969		170,055			5,914			3.5
Total liabilities and shareholders’ equity	$	1,785,183	$	1,809,555		$	(24,372	)		(1.3	)%
End of period tangible book value per common share1	$	20.75	$	18.61		$	2.14			11.5	%
End of period per common share closing price		22.59		21.75			.84			3.9

¹Represents total common equity less intangible assets divided by the number of common shares outstanding at the end of the period.

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 June 30, 2014, temporary investments were $42.1 million, a decrease of $3.2 million or 7.1% from year-end 2013.

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 $620 million at June 30, 2014, an increase of $6.5 million or 1.1% compared to $614 million at year-end 2013.

The increase in investment securities was driven by a $13.3 million increase in the market value adjustment related to the available for sale portfolio, which exceeded net sales, maturities, and calls totaling $4.8 million. Net premium amortization was $1.9 million and $2.8 million in the current and year ago periods. The increase in the value of the available for sale securities portfolio is attributed to higher bond prices related to longer term maturity periods. Yields for the five, ten, and 30-year Treasury securities declined 11, 50, and 61 basis points, respectively, during the first six months of 2014. Generally, as market interest rates decrease, the value of fixed rate investments increases.

Investment securities include single-issuer trust preferred capital securities of a U.S. based global financial services firm. The amortized cost and estimated fair value of this investment at June 30, 2014 was $5.9 million and $5.4 million, respectively. This represents an increase in fair value of $579 thousand or 12.0% compared to $4.8 million at year-end 2013. These securities reached a twelve-month high price point during the current quarter.

44

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 2014 an increase in per share common dividend payments and authorization of a common equity repurchase plan. 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.

Loans

Loans, net of unearned income, were $970 million at June 30, 2014, a decrease of $29.7 million or 3.0% compared to year-end 2013. High quality loan demand remains weak, and the Company continues a measured and cautious approach to loan originations while working to further reduce its level of nonperforming assets in a slow growth economy. Generating high quality loan demand continues to be a challenge, and the decrease in outstanding loans has been accelerated by early payoffs of several larger balance credits. The larger early payoffs relate to nonbank competitors willing to offer nonrecourse and other terms that are significantly below the Company’s underwriting standards. Other significant factors contributing to the decrease in loans include the migration of nonaccrual loans to other real estate owned in the amount of $6.7 million and principal paydowns on nonaccrual loans of $2.3 million.

The composition of the loan portfolio is summarized in the table below.

	June 30, 2014					December 31, 2013
(Dollars in thousands)	Amount		%			Amount		%
Real estate mortgage - construction and land development	$	97,769		10.1	%	$	101,352		10.1	%
Real estate mortgage - residential		365,969		37.7			371,582		37.2
Real estate mortgage - farmland and other commercial enterprises		392,910		40.5			418,147		41.8
Commercial, financial, and agriculture		98,632		10.2			92,827		9.3
Installment		14,506		1.5			15,092		1.5
Lease financing		393		-			883		.1
Total	$	970,179		100.0	%	$	999,883		100.0	%

On an average basis, loans represented 59.1% of earning assets for the current six month period, a decrease of 155 basis points compared to 60.6% for the year 2013. The decrease in the 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 changes, available funds are reallocated between temporary investments or investment securities, which typically involve a decrease in credit risk and result in lower yields.

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.

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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 $17.1 million or 1.76% of outstanding loans (net of unearned income) at June 30, 2014. This compares to $20.6 million or 2.06% of net loans outstanding at year-end 2013. The decrease in the allowance as a percentage of net loans outstanding from the prior year-end is mainly attributed to net charge-offs of $2.2 million combined with a credit to the provision for loan losses of $1.3 million. As a percentage of nonperforming loans, the allowance for loan losses was 39.3% at June 30, 2014 compared to 40.7% at year-end 2013. Nonperforming loans include $25.5 million and $26.3 million of accruing restructured loans at June 30, 2014 and year-end 2013, respectively. As a percentage of nonaccrual loans and loans past due 90 days or more, the allowance for loan losses was 94.6% and 84.7% for the current quarter and year-end 2013, respectively.

The $2.2 million of net charge-offs in the current year is primarily made up of two events: charge-offs totaling $1.0 million related to a group of fraudulent loans made by a former loan officer and a charge-off of $755 thousand related to one credit secured by commercial real estate.

The overall improvement in the credit quality of the loan portfolio experienced during 2013 continued during the first six months of 2014. Certain credit quality measures are summarized in the table that follows for the periods indicated. Several of these measures are at the best level in the last three years.

(In thousands)	June 30, 2014		December 31, 2013		June 30, 2013		Three-year High		Three-year Low
Nonperforming loans	$	43,551	$	50,537	$	47,497	$	89,066	$	43,551
Nonaccrual loans		18,095		23,838		21,259		61,358		18,095
Loans past due 30-89 days and still accruing		3,651		1,460		7,831		11,745		1,460
Loans graded substandard or below		68,448		75,688		82,442		169,369		68,448
Impaired loans		49,623		58,339		61,490		150,561		49,623
Loans, net of unearned income		970,179		999,883		1,004,766		1,101,099		970,179

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 $43.6 million at June 30, 2014, a decrease of $7.0 million or 13.8% compared to $50.5 million at year-end 2013. Nonperforming loans have decreased to the lowest level since the first quarter of 2009, but remain elevated and reflect continuing weaknesses of a slow growing economy and its impact on many of the Company’s customers. Approximately 58% of the Company’s nonperforming loans consist of accruing restructured loans at June 30, 2014. Nonperforming loans, presented by class, were as follows for the periods indicated.

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Nonperforming Loans

(In thousands)	June 30, 2014			December 31, 2013
Nonaccrual Loans
Real Estate:
Real estate mortgage - construction and land development	$	4,794		$	5,821
Real estate mortgage - residential		5,149			5,154
Real estate mortgage - farmland and other commercial enterprises		7,937			12,677
Commercial:
Commercial and industrial		199			160
Lease financing		-			22
Other		11			-
Consumer:
Secured		5			3
Unsecured		-			1
Total nonaccrual loans	$	18,095		$	23,838
Restructured Loans
Real Estate:
Real estate mortgage - construction and land development	$	4,219		$	4,391
Real estate mortgage - residential		4,532			4,826
Real estate mortgage - farmland and other commercial enterprises		16,657			16,987
Consumer:
Unsecured		48			51
Total restructured loans	$	25,456		$	26,255
Past Due 90 Days or More and Still Accruing
Real Estate:
Real estate mortgage - residential	$	-		$	10
Real estate mortgage - farmland and other commercial enterprises		-			434
Total past due 90 days or more and still accruing	$	-		$	444
Total nonperforming loans	$	43,551		$	50,537
Ratio of total nonperforming loans to total loans (net of unearned income)		4.5	%		5.1	%

The most significant components of nonperforming loans include nonaccrual and restructured loans. Activity during 2014 related to these two components was as follows:

(In thousands)	Nonaccrual Loans			Restructured Loans
Balance at December 31, 2013	$	23,838		$	26,255
Loans placed on nonaccrual status		4,262			-
Loans restructured		-			-
Principal paydowns		(2,338	)		(799	)
Transfers to performing status		(413	)		-
Transfers to other real estate owned/other foreclosed assets		(6,718	)		-
Charge-offs		(536	)		-
Balance at June 30, 2014	$	18,095		$	25,456

47

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 $70.4 million and $79.0 million at June 30, 2014 and year-end 2013, respectively, which were performing but considered potential problem loans and are not included in the nonperforming loan totals in the table above. These loans, however, are considered in establishing an appropriate allowance for loan losses. The balance outstanding for potential problem credits is mainly attributed to continuing weaknesses in the overall economy which 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. At June 30, 2014, the five largest potential problem credits were $15.6 million in the aggregate compared to $16.7 million at year-end 2013.

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 are 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 June 30, 2014, OREO was $39.0 million, an increase of $1.2 million or 3.2% compared to $37.8 million at year-end 2013. Although up from the prior year-end, OREO is $13.5 million or 25.7% lower than its peak of $52.6 million at year-end 2012. The increase in the current year relates primarily to the repossession of collateral previously securing two larger-balance nonaccrual commercial real estate credits during the second quarter totaling $6.2 million in the aggregate.

(In thousands)	Amount
Balance at December 31, 2013	$	37,826
Transfers from loans		6,978
Proceeds from sales		(4,262	)
Net loss on sales		(94	)
Write-downs and other decreases, net		(1,414	)
Balance at June 30, 2014	$	39,034

Deposits

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

	End of Period							Average
(In thousands)	June 30, 2014		December 31, 2013		Increase (Decrease)			Six Months June 30, 2014		Twelve Months December 31, 2013		Increase (Decrease)
Noninterest Bearing	$	279,765	$	277,294	$	2,471		$	271,084	$	256,518	$	14,566
Interest Bearing
Demand		313,621		320,503		(6,882	)		322,884		306,945		15,939
Savings		354,572		340,903		13,669			352,947		333,457		19,490
Time		434,715		471,515		(36,800	)		452,848		505,738		(52,890	)
Total interest bearing		1,102,908		1,132,921		(30,013	)		1,128,679		1,146,140		(17,461	)
Total Deposits	$	1,382,673	$	1,410,215	$	(27,542	)	$	1,399,763	$	1,402,658	$	(2,895	)

48

The decrease in total end of period deposits was driven by lower time deposits of $36.8 million or 7.8%. The decrease in time deposits is a result of the Company’s overall high liquidity position and a strategy to lower overall funding costs, mainly by allowing higher-rate certificates of deposit to roll off or reprice at lower interest rates. Many of those balances have been rolled into either interest bearing 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 $201 million at June 30, 2014, a decrease of $5.0 million or 2.4% from year-end 2013. The decrease in borrowed funds was driven by a $4.9 million or 16.8% decrease in short-term borrowings. Short-term borrowings primarily represent funds that have been swept out of the deposit accounts of certain qualifying commercial customers and into repurchase agreements and accounted for as secured borrowings by the Company. Long-term borrowings, which consist of long-term repurchase agreements, subordinated notes payable, and federal home loan borrowings, were virtually unchanged at $177 million.

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 June 30, 2014 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 capital ratios at these two banks also exceeded those required higher amounts at June 30, 2014.

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. The regulatory agreement entered into during 2009 between the Company and its primary banking regulators was terminated in March 2014. Therefore, the Company is no longer required to receive permission from its banking regulators to make interest payments on its trust preferred securities or to pay dividends on its common and preferred stock. However, the Company’s current goal is to redeem all of its outstanding preferred stock before considering the payment of a dividend on its common stock. The Company redeemed 10,000 shares, or one-third, of its outstanding preferred stock on May 15, 2014. Further redemptions, which require regulatory approval, will be based on satisfactory financial performance and take into consideration the Company’s capital position, earnings, asset quality, and other factors. The timing and amount of any further redemption by the Company of its remaining outstanding preferred stock will be disclosed when it is assured.

The Parent Company had cash balances of $33.7 million and $36.5 million at June 30, 2014 and year-end 2013, respectively. Significant cash receipts of the Parent Company for 2014 include dividend payments from its bank and nonbanking subsidiaries of $6.0 million and $1.5 million, respectively, a return of capital from a nonbank subsidiary in the amount of $1.0 million, and management fees from subsidiaries of $1.8 million. Significant cash payments by the Parent Company in 2014 include $10.0 million to redeem a portion of its outstanding preferred stock, $1.3 million for salaries, payroll taxes, and employee benefits, and $1.1 million for the payment of dividends on outstanding preferred stock.

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. 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.

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As of June 30, 2014, 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 $30.0 million or 13.2% since year-end 2013 primarily by entering into a new $20.0 million unsecured federal funds line agreement during the second quarter.

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 June 30, 2014, consolidated liquid assets were $685 million, relatively unchanged from $681 million at year-end 2013. The Company’s liquidity position remains elevated mainly as a result of the Company’s overall net funding position and weak loan demand. The overall funding position of the Company changes as loan demand, deposit levels, and other sources and uses of funds fluctuate.

Net cash provided by operating activities was $18.9 million and $13.6 million for the first six months of 2014 and 2013, respectively. This represents an increase of $5.2 million or 38.2%, driven mainly by an increase in net mortgage loans sold. Net cash flow from investing activities was $25.4 million for 2014 compared with a net use of $5.6 million for 2013. This represents a change of $30.9 million and was driven by net loan and investment securities activity. The Company had net loan repayment activity of $18.9 million for 2014 as overall paydowns exceeded new demand. For 2013, an increase in loan demand resulted in net origination activity of $2.7 million. For investment securities, the Company had net cash inflows of $5.0 million for 2014 compared to net cash outflows of $8.5 million in the year earlier. Net cash inflows from investments represent proceeds received from the sale, maturity, and calls of investment securities, net of purchases during the period. For 2014, excess cash flows were used more to fund deposit runoff, along with debt repayments and the redemption of a portion of the Company’s preferred stock. In 2013, investment cash inflows went more to purchase additional investment securities.

Net cash used in financing activities was $43.5 million for the first six months of 2014, an increase of $37.2 million compared with $6.3 million for 2013. The increase in net cash used in financing activities relates primarily to deposits and short-term borrowing activity combined with the redemption a portion of the Company’s preferred stock outstanding in the amount of $10.0 million. Net outflows related to deposits were $27.5 million for the first six months of 2014, up $19.2 million when compared to $8.3 million for a year earlier. Net repayments on short-term borrowings were $4.9 million for 2014 compared to net proceeds received of $4.7 million for 2013.

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 $176 million at June 30, 2014, an increase of $5.9 million or 3.5% compared to $170 million at year-end 2013. The increase in shareholders’ equity was driven by net income and other comprehensive income of $8.2 million and $8.7 million, respectively, partially offset by the redemption of preferred stock in the amount of $10.0 million. The increase in other comprehensive income was driven by an $8.6 million increase in the after-tax value of the available for sale investment securities portfolio, which occurred as a result of favorable changes in market interest rates during the quarter, primarily on longer dated maturities. Generally, as market interest rates fall, the value of fixed rate investments increases.

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On January 9, 2009, the Company issued 30 thousand shares of Series A, no par value cumulative perpetual preferred stock. The dividend rate on the preferred shares increased to 9% from 5% on February 15, 2014. During the second quarter of 2014, the Company redeemed 10 thousand, or one-third, of the preferred shares for $10.0 million plus accrued dividends. The redemption of the shares mitigates the impact of the rate increase on earnings per common share. The amount of dividends payable for a full quarter without the redemption would have resulted in an increase of $300 thousand, equal to $.04 per common share per quarter. After the redemption, the increase in dividends for a full quarter amount to only $75 thousand or $.01 per common share per quarter. The Company’s goal is to redeem the remaining outstanding preferred shares as soon as its capital position, earnings, asset quality, and other factors indicate it is warranted. Further redemptions, however, will also require the approval of banking regulators. The timing and amount of any further redemption by the Company of its remaining outstanding preferred shares will be disclosed when it is assured.

During the first quarter of 2014, the Parent Company received notice that it was no longer subject to the regulatory agreement that had been in place since the fourth quarter of 2009. The agreement was terminated as a result of continued satisfactory compliance, most notably from the progress made in lowering nonperforming assets and increasing capital levels. Since the agreement has been terminated, the Company is no longer required to receive permission from its banking regulators to make interest payments on its trust preferred securities or to pay dividends on its common and preferred stock. However, the Company’s current goal is to redeem all of its outstanding preferred stock before considering the payment of a dividend on its common stock.

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.

At June 30, 2014, the Company’s tangible capital ratio was 9.82%, an increase of 47 basis points compared to 9.35% at year-end 2013. 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 8.70% and 7.70% at June 30, 2014 and year-end 2013, respectively. This represents an increase of 100 basis points in the comparison.

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.

	June 30, 2014									December 31, 2013
	Tier 1Risk-basedCapital1			Total Risk-basedCapital1			Tier 1 Leverage2			Tier 1Risk-basedCapital1			Total Risk-basedCapital1			Tier 1 Leverage2
Consolidated		19.43	%		20.69	%		11.99	%		18.95	%		20.21	%		11.90	%
Farmers Bank & Capital Trust Company		18.08			19.33			9.71			17.56			18.82			9.60
United Bank3		16.16			17.43			10.31			15.06			16.33			9.67
First Citizens Bank		13.39			14.07			9.20			12.92			13.67			9.03
Citizens Northern3		14.12			15.37			9.81			13.57			14.82			9.67
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 10 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.

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Regulatory Agreements

United Bank and Citizens Northern are each a party to supervisory agreements with their primary banking regulator. These agreements are summarized in Note 10 to the unaudited condensed consolidated financial statements of this Form 10-Q. These agreements are discussed in significantly greater detail in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 under the caption “Capital Resources” in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The agreement entered into during 2009 between the Parent Company and its primarily regulators was terminated during the first quarter 2014 as a result of continued satisfactory compliance.

There have been no changes to the regulatory agreement at Citizens Northern in 2014. For United Bank, the Consent Order it was under with its regulators was terminated and replaced in the first quarter of 2014 with a stepped-down enforcement action in the form of an informal Memorandum of Understanding. 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 have 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 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.

RECENTLY ISSUED ACCOUNTING STANDARDS

In April 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360 - Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. This ASU changes the requirements for reporting discontinued operations and seeks to enhance the FASB and International Accounting Standards Board’s (“IASB”) convergence project regarding such reporting requirements. A discontinued operation may include a component of an entity, a group of components of an entity, a business or a non-profit activity. A disposal of a component of an entity or a group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has, or will have, a major effect on an entity’s operations and financial results. This ASU, which is intended to reduce the frequency of disposals reported as discontinued operations, requires additional disclosures regarding discontinued operations. Those disclosures include among others, the requirement that an entity present, for each comparative period, the assets and liabilities of a disposal group that includes a discontinued operation separately in the asset and liability sections, respectively, of the statement of financial position.

For the Company, the guidance of ASU 2014-08 is effective prospectively for annual periods beginning on or after December 15, 2014, and interim periods within that year. The Company does not expect there to be a material impact on its consolidated financial position, results of operations, or cash flows upon adoption.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), as part of a joint project with the IASB to clarify revenue-recognition principles and develop a common revenue standard for U.S. Generally Accepted Accounting Principles (“GAAP”) and International Financial Reporting Standards (“IFRS”). ASU No. 2014-09 is expected to remove inconsistencies and weaknesses in revenue requirements and improve comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets. The scope of the new ASU includes all contracts with customers to provide goods or services in the ordinary course of business, except the following contracts that are specifically excluded from the scope:

● Lease contracts within the scope of ASC 840

● Insurance contracts within the scope of ASC 944

● Financial instruments and other contractual rights or obligations (e.g., receivables, debt and equity securities, derivatives)

● Guarantees (other than product or service warranties) within the scope of ASC 460

● Nonmonetary exchanges between entities in the same line of business to facilitate sales to customers other than the parties to the exchange

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The primary principle of ASU 2014-09 is that entities should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this core principle, the guidance provides that an entity should apply the following steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, the entity satisfies a performance obligation.

For the Company, the amendments in this ASU are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period, and early application is not permitted. Entities should apply the amendments either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying this ASU recognized at the date of initial application. If an entity elects the second method, then it should also provide the additional disclosures in reporting periods that include the date of initial application of (1) the amount by which each financial statement line item is affected in the current reporting period, as compared to the guidance that was in effect before the change, and (2) an explanation of the reasons for significant changes. The Company is currently evaluating the potential impact of ASU 2014-09 on its consolidated financial position, results of operations, and cash flows.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

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 June 30, 2014, the model indicated that if rates were to gradually increase by 150 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, 2014 when compared to the forecasted results for the most likely rate environment. The model indicated that if rates were to gradually decrease by 150 basis points over the same period, then net interest income and net income would decrease 0.4% and 0.9%, respectively.

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 June 30, 2014 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.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

As of June 30, 2014, 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

Beginning January 1, 2014, the Company changed the payment form of its board meeting fees and quarterly fees from 100% cash to 50% in cash and 50% in Company common stock. The shares are issued as part of a plan adopted by the board of directors. Each director has elected to participate by entering an agreement with the Company to accept common stock in lieu of cash for 50% of the director’s board meeting and quarterly fees. As the shares are only issued to directors as part of a plan approved by the board, the shares are exempt from the registration requirements of the Securities Act of 1933, as amended (the “1933 Act”), as a sale not involving any public offering under Section 4(2) of the 1933 Act. The value of the shares issued in payment is determined by the closing price of the Company’s common stock on the NASDAQ Global Select Market on the business trading day immediately preceding the meeting day for board meeting fees and the business trading day immediately preceding the first meeting of the quarter for each quarterly fee. Attendance for committee meetings will continue to be paid completely in cash. As employee directors are not paid director’s fees, only non-employee directors receive stock under this plan.

In the quarter ended June 30, 2014, the Company issued a total of 871 shares of common stock to its non-employee directors under this plan as compensation for $18 thousand of director fees. Since January 1, 2014, the Company has issued a total of 1,780 shares of common stock to its directors under this plan as compensation for $36 thousand of director fees. The cash retained by the Company by issuing common stock in lieu of paying cash is used for general corporate purposes. There are no brokers involved in the issuance of stock to directors and no commissions or other broker fees are paid.

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 June 30, 2014. There are 84,971 shares that may still be purchased under the various authorizations.

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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.
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)).

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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)).
10.4	Amendment No. 1 to 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 filed December 30, 2013 (File No. 000-14412)).
10.5	Employment agreement dated December 17, 2013 between Farmers Capital Bank Corporation and Rickey D. Harp (incorporated by reference to Exhibit 10.1 to Form 8-K filed December 30, 2013 (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:	August 7, 2014	/s/ Lloyd C. Hillard, Jr.
		Lloyd C. Hillard, Jr.
		President and CEO
		(Principal Executive Officer)
Date:	August 7, 2014	/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:	August 7, 2014	/s/ Lloyd C. Hillard, Jr.
		Lloyd C. Hillard, Jr.
		President and CEO

1

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:	August 7, 2014	/s/ Doug Carpenter
		C. Douglas Carpenter
		Executive Vice President, Secretary, and CFO

1 

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 June 30, 2014 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:	August 7, 2014	/s/ Lloyd C. Hillard, Jr.
		Lloyd C. Hillard, Jr.
		President and CEO
Date:	August 7, 2014	/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.

1

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Note 7 - Loans and Allowance for Loan Losses (Details) (USD $)	3 Months Ended	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013
Note 7 - Loans and Allowance for Loan Losses (Details) [Line Items]
Impaired Financing Receivable, Related Allowance		$ 3,590,000		$ 4,102,000
Financing Receivable, Modifications, Number of Contracts		0
Financing Receivables, Impaired, Troubled Debt Restructuring, Write-down	0		0
Financing Receivable, Modifications, Subsequent Default, Number of Contracts		0	0
Debt by Borrowers Discharged under Chapter Seven Bankruptcy [Member]
Note 7 - Loans and Allowance for Loan Losses (Details) [Line Items]
Financing Receivable, Modifications, Number of Contracts			5
TDR Financing Receivable [Member]
Note 7 - Loans and Allowance for Loan Losses (Details) [Line Items]
Impaired Financing Receivable, Related Allowance		2,500,000		2,700,000
Loans and Leases Receivable, Impaired, Commitment to Lend		0		0
Allowance for Loan and Lease Losses, Period Increase (Decrease)	$ 15,000		$ 23,000

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Note 10 - Regulatory Matters (Details)	0 Months Ended
	May 15, 2014 Preferred Stock [Member]	Jun. 30, 2014 Compliance [Member] United Bank [Member]	Jun. 30, 2014 Compliance [Member] Citizens Northern [Member]	Jun. 30, 2014 Safest Assets [Member]	Jun. 30, 2014 Riskier Assets [Member]	Jun. 30, 2014 United Bank [Member]		Dec. 31, 2013 United Bank [Member]		Jun. 30, 2014 Citizens Northern [Member]		Dec. 31, 2013 Citizens Northern [Member]
Note 10 - Regulatory Matters (Details) [Line Items]
Risk Weighting of Assets				0.00%	100.00%
Stock Redeemed or Called During Period, Shares (in Shares)	10,000
Tier One Leverage Capital to Average Assets		9.00%	9.00%			10.31%	[1]	9.67%	[1]	9.81%	[1]	9.67%	[1]
Capital to Risk Weighted Assets		13.00%				17.43%	[2]	16.33%	[2]	15.37%	[2]	14.82%	[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%).

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Note 7 - Loans and Allowance for Loan Losses (Details) - Risk Category of Loans by Class (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Financing Receivable, Recorded Investment [Line Items]
Loans	$ 970,179	$ 999,883
Real Estate Construction And Land Development [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	75,835	77,873
Real Estate Construction And Land Development [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	7,207	7,755
Real Estate Construction And Land Development [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	14,727	15,724
Real Estate Construction And Land Development [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	0	0
Real Estate Construction And Land Development [Member] | Total [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	97,769	101,352
Real Estate Construction And Land Development [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	97,769	101,352
Real Estate Mortgage Residential [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	332,358	334,104
Real Estate Mortgage Residential [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	12,219	15,120
Real Estate Mortgage Residential [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	21,392	22,358
Real Estate Mortgage Residential [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	0	0
Real Estate Mortgage Residential [Member] | Total [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	365,969	371,582
Real Estate Mortgage Residential [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	365,969	371,582
Real Estate Mortgage Farmland And Other Commercial Enterprises [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	345,066	352,238
Real Estate Mortgage Farmland And Other Commercial Enterprises [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	16,532	29,156
Real Estate Mortgage Farmland And Other Commercial Enterprises [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	30,837	36,753
Real Estate Mortgage Farmland And Other Commercial Enterprises [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	475	0
Real Estate Mortgage Farmland And Other Commercial Enterprises [Member] | Total [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	392,910	418,147
Real Estate Mortgage Farmland And Other Commercial Enterprises [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	392,910	418,147
Commercial And Industrial [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	50,930	45,652
Commercial And Industrial [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	785	963
Commercial And Industrial [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	998	735
Commercial And Industrial [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	0	76
Commercial And Industrial [Member] | Total [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	52,713	47,426
Commercial And Industrial [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	52,713	47,426
States and Political Subdivisions [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	25,150	21,561
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	25,150	21,561
States and Political Subdivisions [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	25,150	21,561
Lease Financing [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	393	861
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	0	22
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	393	883
Lease Financing [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	393	883
Commercial Other [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	20,691	23,820
Commercial Other [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	59	0
Commercial Other [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	19	20
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	20,769	23,840
Commercial Other [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	$ 20,769	$ 23,840

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Note 10 - Regulatory Matters (Details) - Regulatory Ratios of the Consolidated Company and its Subsidiary Banks	Jun. 30, 2014		Dec. 31, 2013
Consolidated [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Tier 1 Risk-based Capital	19.43%	[1]	18.95%	[1]
Total Risk-based Capital	20.69%	[1]	20.21%	[1]
Tier 1 Leverage	11.99%	[2]	11.90%	[2]
Farmers Bank [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Tier 1 Risk-based Capital	18.08%	[1]	17.56%	[1]
Total Risk-based Capital	19.33%	[1]	18.82%	[1]
Tier 1 Leverage	9.71%	[2]	9.60%	[2]
United Bank [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Tier 1 Risk-based Capital	16.16%	[1]	15.06%	[1]
Total Risk-based Capital	17.43%	[1]	16.33%	[1]
Tier 1 Leverage	10.31%	[2]	9.67%	[2]
First Citizens Bank [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Tier 1 Risk-based Capital	13.39%	[1]	12.92%	[1]
Total Risk-based Capital	14.07%	[1]	13.67%	[1]
Tier 1 Leverage	9.20%	[2]	9.03%	[2]
Citizens Northern [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Tier 1 Risk-based Capital	14.12%	[1]	13.57%	[1]
Total Risk-based Capital	15.37%	[1]	14.82%	[1]
Tier 1 Leverage	9.81%	[2]	9.67%	[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 7 - Loans and Allowance for Loan Losses (Details) - Loans by Class Modified as Troubled Debt Restructurings (USD $) In Thousands, unless otherwise specified	6 Months Ended	3 Months Ended	6 Months Ended	3 Months Ended	6 Months Ended	3 Months Ended	6 Months Ended	3 Months Ended	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013 TDR Identified Current Period [Member] Real Estate Mortgage Residential [Member]	Jun. 30, 2013 TDR Identified Current Period [Member] Real Estate Mortgage Residential [Member]	Jun. 30, 2013 TDR Identified Current Period [Member] Commercial And Industrial [Member]	Jun. 30, 2013 TDR Identified Current Period [Member] Commercial And Industrial [Member]	Jun. 30, 2013 TDR Identified Current Period [Member] Consumer Secured [Member]	Jun. 30, 2013 TDR Identified Current Period [Member] Consumer Secured [Member]	Jun. 30, 2013 TDR Identified Current Period [Member]	Jun. 30, 2013 TDR Identified Current Period [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans	0	1	3	1	1	1	1	3	5
Pre-ModificationOutstanding Recorded Investment		$ 18	$ 309	$ 2	$ 2	$ 13	$ 13	$ 33	$ 324
Post-Modification Outstanding Recorded Investment		$ 18	$ 309	$ 2	$ 2	$ 13	$ 13	$ 33	$ 324

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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		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Net Income Per Common Share Computations [Abstract]
Net income, basic and diluted	$ 4,824	$ 3,547	$ 8,194	$ 7,339
Less preferred stock dividends and discount accretion	563	487	1,100	972
Net income available to common shareholders, basic and diluted	$ 4,261	$ 3,060	$ 7,094	$ 6,367
Average common shares issued and outstanding, basic and diluted (in Shares)	7,482	7,473	7,481	7,471
Net income per common share, basic and diluted (in Dollars per share)	$ 0.57	$ 0.41	$ 0.95	$ 0.85

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Note 11 - Fair Value Measurements (Details) - Available For Sale Investment Securities Measured At Fair Value On A Recurring Basis (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Note 11 - Fair Value Measurements (Details) - Available For Sale Investment Securities Measured At Fair Value On A Recurring Basis [Line Items]
Available For Sale Investment Securities	$ 616,256	$ 612,820
US Government-sponsored Enterprises Debt Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Note 11 - 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 11 - Fair Value Measurements (Details) - Available For Sale Investment Securities Measured At Fair Value On A Recurring Basis [Line Items]
Available For Sale Investment Securities	97,230	93,750
US Government-sponsored Enterprises Debt Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Note 11 - 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 11 - Fair Value Measurements (Details) - Available For Sale Investment Securities Measured At Fair Value On A Recurring Basis [Line Items]
Available For Sale Investment Securities	97,230	93,750
US States and Political Subdivisions Debt Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Note 11 - 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 11 - Fair Value Measurements (Details) - Available For Sale Investment Securities Measured At Fair Value On A Recurring Basis [Line Items]
Available For Sale Investment Securities	133,281	131,970
US States and Political Subdivisions Debt Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Note 11 - 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 11 - Fair Value Measurements (Details) - Available For Sale Investment Securities Measured At Fair Value On A Recurring Basis [Line Items]
Available For Sale Investment Securities	133,281	131,970
Residential Mortgage Backed Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Note 11 - 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 11 - Fair Value Measurements (Details) - Available For Sale Investment Securities Measured At Fair Value On A Recurring Basis [Line Items]
Available For Sale Investment Securities	377,519	378,077
Residential Mortgage Backed Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Note 11 - 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 11 - Fair Value Measurements (Details) - Available For Sale Investment Securities Measured At Fair Value On A Recurring Basis [Line Items]
Available For Sale Investment Securities	377,519	378,077
Commercial Mortgage Backed Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Note 11 - 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
Commercial Mortgage Backed Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Note 11 - Fair Value Measurements (Details) - Available For Sale Investment Securities Measured At Fair Value On A Recurring Basis [Line Items]
Available For Sale Investment Securities	715	689
Commercial Mortgage Backed Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Note 11 - 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
Commercial Mortgage Backed Securities [Member]
Note 11 - Fair Value Measurements (Details) - Available For Sale Investment Securities Measured At Fair Value On A Recurring Basis [Line Items]
Available For Sale Investment Securities	715	689
Corporate Debt Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Note 11 - 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 11 - Fair Value Measurements (Details) - Available For Sale Investment Securities Measured At Fair Value On A Recurring Basis [Line Items]
Available For Sale Investment Securities	6,492	6,257
Corporate Debt Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Note 11 - 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 11 - Fair Value Measurements (Details) - Available For Sale Investment Securities Measured At Fair Value On A Recurring Basis [Line Items]
Available For Sale Investment Securities	6,492	6,257
Mutual Funds And Equity Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Note 11 - Fair Value Measurements (Details) - Available For Sale Investment Securities Measured At Fair Value On A Recurring Basis [Line Items]
Available For Sale Investment Securities	1,019	2,077
Mutual Funds And Equity Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Note 11 - 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 11 - 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 11 - Fair Value Measurements (Details) - Available For Sale Investment Securities Measured At Fair Value On A Recurring Basis [Line Items]
Available For Sale Investment Securities	1,019	2,077
Fair Value, Inputs, Level 1 [Member]
Note 11 - Fair Value Measurements (Details) - Available For Sale Investment Securities Measured At Fair Value On A Recurring Basis [Line Items]
Available For Sale Investment Securities	1,019	2,077
Fair Value, Inputs, Level 2 [Member]
Note 11 - Fair Value Measurements (Details) - Available For Sale Investment Securities Measured At Fair Value On A Recurring Basis [Line Items]
Available For Sale Investment Securities	615,237	610,743
Fair Value, Inputs, Level 3 [Member]
Note 11 - 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

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Note 7 - Loans and Allowance for Loan Losses (Tables)

6 Months Ended

Jun. 30, 2014

Note 7 - Loans and Allowance for Loan Losses (Tables) [Line Items]

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

(In thousands)	June 30, 2014		December 31, 2013
Real Estate:
Real estate mortgage - construction and land development	$	97,769	$	101,352
Real estate mortgage - residential		365,969		371,582
Real estate mortgage - farmland and other commercial enterprises		392,910		418,147
Commercial:
Commercial and industrial		52,713		47,426
States and political subdivisions		25,150		21,561
Lease financing		398		902
Other		20,769		23,840
Consumer:
Secured		8,836		8,579
Unsecured		5,670		6,513
Total loans		970,184		999,902
Less unearned income		5		19
Total loans, net of unearned income	$	970,179	$	999,883

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

(In thousands)	Real Estate			Commercial			Consumer			Total
Three months ended June 30, 2014
Balance, beginning of period	$	17,114		$	1,201		$	375		$	18,690
Provision for loan losses		(1,603	)		205			10			(1,388	)
Recoveries		189			18			39			246
Loans charged off		(252	)		(86	)		(87	)		(425	)
Balance, end of period	$	15,448		$	1,338		$	337		$	17,123
Six months ended June 30, 2014
Balance, beginning of period	$	18,716		$	1,409		$	452		$	20,577
Provision for loan losses		(2,359	)		1,130			(27	)		(1,256	)
Recoveries		357			45			74			476
Loans charged off		(1,266	)		(1,246	)		(162	)		(2,674	)
Balance, end of period	$	15,448		$	1,338		$	337		$	17,123

(In thousands)	Real Estate			Commercial			Consumer			Total
Three months ended June 30, 2013
Balance, beginning of period	$	21,402		$	1,558		$	603		$	23,563
Provision for loan losses		(848	)		624			(138	)		(362	)
Recoveries		48			14			114			176
Loans charged off		(362	)		(19	)		(53	)		(434	)
Balance, end of period	$	20,240		$	2,177		$	526		$	22,943
Six months ended June 30, 2013
Balance, beginning of period	$	22,254		$	1,513		$	678		$	24,445
Provision for loan losses		(1,500	)		617			(111	)		(994	)
Recoveries		184			97			150			431
Loans charged off		(698	)		(50	)		(191	)		(939	)
Balance, end of period	$	20,240		$	2,177		$	526		$	22,943

Impaired Financing Receivables [Table Text Block]

June 30, 2014 (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	$	15,753	$	8,566	$	4,400	$	12,966	$	856
Real estate mortgage - residential		10,930		3,980		6,645		10,625		1,195
Real estate mortgage - farmland and other commercial enterprises		25,833		7,126		18,600		25,726		1,278
Commercial
Commercial and industrial		240		23		217		240		195
Consumer
Unsecured		66		-		66		66		66
Total	$	52,822	$	19,695	$	29,928	$	49,623	$	3,590

December 31, 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	$	17,234	$	9,742	$	4,699	$	14,441	$	930
Real estate mortgage - residential		11,595		2,871		8,612		11,483		1,443
Real estate mortgage - farmland and other commercial enterprises		32,102		12,262		19,746		32,008		1,443
Commercial
Commercial and industrial		311		24		293		317		200
Consumer
Secured		18		-		18		18		15
Unsecured		71		-		72		72		71
Total	$	61,331	$	24,899	$	33,440	$	58,339	$	4,102

Loans and ALL Disaggregated Impairment Method [Table Text Block]

June 30, 2014 (In thousands)	Real Estate		Commercial		Consumer		Total
Allowance for Loan Losses
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	3,329	$	195	$	66	$	3,590
Collectively evaluated for impairment		12,119		1,143		271		13,533
Total ending allowance balance	$	15,448	$	1,338	$	337	$	17,123
Loans
Loans individually evaluated for impairment	$	49,317	$	240	$	66	$	49,623
Loans collectively evaluated for impairment		807,331		98,785		14,440		920,556
Total ending loan balance, net of unearned income	$	856,648	$	99,025	$	14,506	$	970,179

December 31, 2013 (In thousands)	Real Estate		Commercial		Consumer		Total
Allowance for Loan Losses
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	3,816	$	200	$	86	$	4,102
Collectively evaluated for impairment		14,900		1,209		366		16,475
Total ending allowance balance	$	18,716	$	1,409	$	452	$	20,577
Loans
Loans individually evaluated for impairment	$	57,932	$	317	$	90	$	58,339
Loans collectively evaluated for impairment		833,149		93,393		15,002		941,544
Total ending loan balance, net of unearned income	$	891,081	$	93,710	$	15,092	$	999,883

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

June 30, 2014 (In thousands)	Nonaccrual		Restructured Loans		Loans Past Due 90 Days or More and Still Accruing
Real Estate:
Real estate mortgage - construction and land development	$	4,794	$	4,219	$	-
Real estate mortgage - residential		5,149		4,532		-
Real estate mortgage - farmland and other commercial enterprises		7,937		16,657		-
Commercial:
Commercial and industrial		199		-		-
Other		11		-		-
Consumer:
Secured		5		-		-
Unsecured		-		48		-
Total	$	18,095	$	25,456	$	-

December 31, 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	$	5,821	$	4,391	$	-
Real estate mortgage - residential		5,154		4,826		10
Real estate mortgage - farmland and other commercial enterprises		12,677		16,987		434
Commercial:
Commercial and industrial		160		-		-
Lease financing		22		-		-
Consumer:
Secured		3		-		-
Unsecured		1		51		-
Total	$	23,838	$	26,255	$	444

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 June 30, 2013
Real Estate:
Real estate mortgage – residential		1	$	18	$	18
Commercial:
Commercial and industrial		1		2		2
Consumer:
Secured		1		13		13
Total		3	$	33	$	33
Six Months Ended June 30, 2013
Real Estate:
Real estate mortgage – residential		3	$	309	$	309
Commercial:
Commercial and industrial		1		2		2
Consumer:
Secured		1		13		13
Total		5	$	324	$	324

Past Due Financing Receivables [Table Text Block]

June 30, 2014 (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	$	568	$	317	$	885	$	96,884	$	97,769
Real estate mortgage - residential		2,771		2,822		5,593		360,376		365,969
Real estate mortgage - farmland and other commercial enterprises		444		6,278		6,722		386,188		392,910
Commercial:
Commercial and industrial		45		176		221		52,492		52,713
States and political subdivisions		-		-		-		25,150		25,150
Lease financing, net		171		-		171		222		393
Other		25		-		25		20,744		20,769
Consumer:
Secured		56		2		58		8,778		8,836
Unsecured		58		-		58		5,612		5,670
Total	$	4,138	$	9,595	$	13,733	$	956,446	$	970,179

December 31, 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	$	613	$	671	$	100,681	$	101,352
Real estate mortgage - residential		1,225		2,502		3,727		367,855		371,582
Real estate mortgage - farmland and other commercial enterprises		3,548		7,978		11,526		406,621		418,147
Commercial:
Commercial and industrial		71		53		124		47,302		47,426
States and political subdivisions		-		-		-		21,561		21,561
Lease financing, net		-		22		22		861		883
Other		56		-		56		23,784		23,840
Consumer:
Secured		41		3		44		8,535		8,579
Unsecured		58		1		59		6,454		6,513
Total	$	5,057	$	11,172	$	16,229	$	983,654	$	999,883

Financing Receivable Credit Quality Indicators [Table Text Block]

	Real Estate						Commercial
June 30, 2014 (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		Other
Credit risk profile by internally assigned rating grades:
Pass	$	75,835	$	332,358	$	345,066	$	50,930	$	25,150	$	393	$	20,691
Special Mention		7,207		12,219		16,532		785		-		-		59
Substandard		14,727		21,392		30,837		998		-		-		19
Doubtful		-		-		475		-		-		-		-
Total	$	97,769	$	365,969	$	392,910	$	52,713	$	25,150	$	393	$	20,769

	Real Estate						Commercial
December 31, 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		Other
Credit risk profile by internally assigned rating grades:
Pass	$	77,873	$	334,104	$	352,238	$	45,652	$	21,561	$	861	$	23,820
Special Mention		7,755		15,120		29,156		963		-		-		-
Substandard		15,724		22,358		36,753		735		-		22		20
Doubtful		-		-		-		76		-		-		-
Total	$	101,352	$	371,582	$	418,147	$	47,426	$	21,561	$	883	$	23,840

Credit Quality Consumer Loans [Table Text Block]

	June 30, 2014				December 31, 2013
	Consumer				Consumer
(In thousands)	Secured		Unsecured		Secured		Unsecured
Credit risk profile based on payment activity:
Performing	$	8,831	$	5,622	$	8,576	$	6,461
Nonperforming		5		48		3		52
Total	$	8,836	$	5,670	$	8,579	$	6,513

Additional Information Regarding Impaired Loans [Member]

Note 7 - Loans and Allowance for Loan Losses (Tables) [Line Items]

Impaired Financing Receivables [Table Text Block]

Three Months Ended June 30,	2014						2013
(In thousands)	Average		Interest Income Recognized		Cash Basis Interest Recognized		Average		Interest Income Recognized		Cash Basis Interest Recognized
Real Estate
Real estate – construction and land development	$	15,452	$	120	$	118	$	24,159	$	338	$	347
Real estate mortgage – residential		11,059		147		141		10,836		87		83
Real estate mortgage – farmland and other commercial enterprises		26,295		359		346		28,209		236		236
Commercial
Commercial and industrial		245		3		3		1,154		29		29
Consumer
Secured		-		-		-		21		1		1
Unsecured		68		-		-		215		3		4
Total	$	53,119	$	629	$	608	$	64,594	$	694	$	700

Six Months Ended June 30,	2014						2013
(In thousands)	Average		Interest Income Recognized		Cash Basis Interest Recognized		Average		Interest Income Recognized		Cash Basis Interest Recognized
Real Estate
Real estate – construction and land development	$	15,537	$	233	$	229	$	25,047	$	691	$	689
Real estate mortgage – residential		11,384		262		250		9,569		172		163
Real estate mortgage – farmland and other commercial enterprises		30,222		745		722		29,692		484		478
Commercial
Commercial and industrial		247		4		3		930		33		33
Consumer
Secured		9		-		-		21		1		1
Unsecured		69		4		3		214		6		6
Total	$	57,468	$	1,248	$	1,207	$	65,473	$	1,387	$	1,370

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Note 8 - Other Real Estate Owned (Details) - Other Real Estate Owned (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013	Jun. 30, 2013	Dec. 31, 2012
Note 8 - Other Real Estate Owned (Details) - Other Real Estate Owned [Line Items]
Other Real Estate Owned	$ 39,034	$ 37,826	$ 46,465	$ 52,562
Construction and Land Development OREO [Member]
Note 8 - Other Real Estate Owned (Details) - Other Real Estate Owned [Line Items]
Other Real Estate Owned	21,106	23,504
Residential Real Estate OREO [Member]
Note 8 - Other Real Estate Owned (Details) - Other Real Estate Owned [Line Items]
Other Real Estate Owned	2,004	2,695
Farmland and Other Commercial Enterprises OREO [Member]
Note 8 - Other Real Estate Owned (Details) - Other Real Estate Owned [Line Items]
Other Real Estate Owned	15,924	11,627
OREO [Member]
Note 8 - Other Real Estate Owned (Details) - Other Real Estate Owned [Line Items]
Other Real Estate Owned	$ 39,034	$ 37,826

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Note 7 - Loans and Allowance for Loan Losses (Details) - Individually Impaired Loans By Class Of Loans (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	$ 52,822	$ 61,331
Recorded Investment With No Allowance	19,695	24,899
Recorded Investment With Allowance	29,928	33,440
Total Recorded Investment	49,623	58,339
Allowance for Loan Losses Allocated	3,590	4,102
Real Estate Construction And Land Development [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	15,753	17,234
Recorded Investment With No Allowance	8,566	9,742
Recorded Investment With Allowance	4,400	4,699
Total Recorded Investment	12,966	14,441
Allowance for Loan Losses Allocated	856	930
Real Estate Mortgage Residential [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	10,930	11,595
Recorded Investment With No Allowance	3,980	2,871
Recorded Investment With Allowance	6,645	8,612
Total Recorded Investment	10,625	11,483
Allowance for Loan Losses Allocated	1,195	1,443
Real Estate Mortgage Farmland And Other Commercial Enterprises [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	25,833	32,102
Recorded Investment With No Allowance	7,126	12,262
Recorded Investment With Allowance	18,600	19,746
Total Recorded Investment	25,726	32,008
Allowance for Loan Losses Allocated	1,278	1,443
Commercial And Industrial [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	240	311
Recorded Investment With No Allowance	23	24
Recorded Investment With Allowance	217	293
Total Recorded Investment	240	317
Allowance for Loan Losses Allocated	195	200
Consumer Unsecured [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	66	71
Recorded Investment With No Allowance	0	0
Recorded Investment With Allowance	66	72
Total Recorded Investment	66	72
Allowance for Loan Losses Allocated	66	71
Consumer Secured [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance		18
Recorded Investment With No Allowance		0
Recorded Investment With Allowance		18
Total Recorded Investment		18
Allowance for Loan Losses Allocated		$ 15

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Note 6 - 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		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Gross Realized Gains And Losses On The Sale Of Available For Sale Investment Securities [Abstract]
Gross realized gains	$ 19	$ 3	$ 178	$ 3
Gross realized losses	103	63	253	63
Net realized loss	$ (84)	$ (60)	$ (75)	$ (60)

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Note 9 - Postretirement Medical Benefits (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2014
Note 9 - Postretirement Medical Benefits (Details) [Line Items]
Employee Service Requirement		20 years
Employee Age Requirement		55 years
Defined Benefit Plans, Estimated Future Employer Contributions in Current Fiscal Year		$ 340
Other Postretirement Benefits Payments	$ 67	$ 133
Plan 1 [Member]
Note 9 - Postretirement Medical Benefits (Details) [Line Items]
Company Contributions Plan 1	100.00%	100.00%
Plan 2 [Member]
Note 9 - Postretirement Medical Benefits (Details) [Line Items]
Contributions Plan 2	50.00%	50.00%

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Note 11 - Fair Value Measurements (Details) - The Carrying Amounts and Estimated Fair Values of the Company’s Financial Instruments (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013	Jun. 30, 2013	Dec. 31, 2012
Assets
Cash and cash equivalents	$ 68,987	$ 68,253	$ 97,589	$ 95,855
Held to maturity investment securities	3,814	765
Held to maturity investment securities	3,963	827
Loans, net	953,056	979,306
Liabilities
Deposits	1,382,673	1,410,215
Federal funds purchased and other short-term borrowings	24,230	29,123
Securities sold under agreements to repurchase and other long-term borrowings	127,797	127,880
Subordinated notes payable to unconsolidated trusts	48,970	48,970
Fair Value, Inputs, Level 1 [Member]
Assets
Cash and cash equivalents	68,987	68,253
Held to maturity investment securities	0	0
Loans, net	0	0
Accrued interest receivable	0	0
Federal Home Loan Bank and Federal Reserve Bank Stock
Liabilities
Deposits	947,958	938,700
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	3,963	827
Loans, net	0	0
Accrued interest receivable	5,670	5,901
Federal Home Loan Bank and Federal Reserve Bank Stock
Liabilities
Deposits	0	0
Federal funds purchased and other short-term borrowings	24,230	29,123
Securities sold under agreements to repurchase and other long-term borrowings	138,251	139,375
Subordinated notes payable to unconsolidated trusts	0	0
Accrued interest payable	1,065	1,137
Fair Value, Inputs, Level 3 [Member]
Assets
Cash and cash equivalents	0	0
Held to maturity investment securities	0	0
Loans, net	953,158	977,846
Accrued interest receivable	0	0
Federal Home Loan Bank and Federal Reserve Bank Stock
Liabilities
Deposits	436,703	473,872
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	23,794	26,070
Accrued interest payable	0	0
Reported Value Measurement [Member]
Assets
Cash and cash equivalents	68,987	68,253
Held to maturity investment securities	3,814	765
Loans, net	953,056	979,306
Accrued interest receivable	5,670	5,901
Federal Home Loan Bank and Federal Reserve Bank Stock	9,368	9,516
Liabilities
Deposits	1,382,673	1,410,215
Federal funds purchased and other short-term borrowings	24,230	29,123
Securities sold under agreements to repurchase and other long-term borrowings	127,797	127,880
Subordinated notes payable to unconsolidated trusts	48,970	48,970
Accrued interest payable	1,065	1,137
Estimate of Fair Value Measurement [Member]
Assets
Cash and cash equivalents	68,987	68,253
Held to maturity investment securities	3,963	827
Loans, net	953,158	977,846
Accrued interest receivable	5,670	5,901
Federal Home Loan Bank and Federal Reserve Bank Stock
Liabilities
Deposits	1,384,661	1,412,572
Federal funds purchased and other short-term borrowings	24,230	29,123
Securities sold under agreements to repurchase and other long-term borrowings	138,251	139,375
Subordinated notes payable to unconsolidated trusts	23,794	26,070
Accrued interest payable	$ 1,065	$ 1,137

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Note 7 - Loans and Allowance for Loan Losses (Details) - Aging Analysis of Loans (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	$ 970,179	$ 999,883
Real Estate Construction And Land Development [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-89 Days Past Due	568	58
90 Days Or More Past Due	317	613
Total	885	671
Current	96,884	100,681
Total Loans	97,769	101,352
Real Estate Mortgage Residential [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-89 Days Past Due	2,771	1,225
90 Days Or More Past Due	2,822	2,502
Total	5,593	3,727
Current	360,376	367,855
Total Loans	365,969	371,582
Real Estate Mortgage Farmland And Other Commercial Enterprises [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-89 Days Past Due	444	3,548
90 Days Or More Past Due	6,278	7,978
Total	6,722	11,526
Current	386,188	406,621
Total Loans	392,910	418,147
Commercial And Industrial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-89 Days Past Due	45	71
90 Days Or More Past Due	176	53
Total	221	124
Current	52,492	47,302
Total Loans	52,713	47,426
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	25,150	21,561
Total Loans	25,150	21,561
Lease Financing [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-89 Days Past Due	171	0
90 Days Or More Past Due	0	22
Total	171	22
Current	222	861
Total Loans	393	883
Commercial Other [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-89 Days Past Due	25	56
90 Days Or More Past Due	0	0
Total	25	56
Current	20,744	23,784
Total Loans	20,769	23,840
Consumer Secured [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-89 Days Past Due	56	41
90 Days Or More Past Due	2	3
Total	58	44
Current	8,778	8,535
Total Loans	8,836	8,579
Consumer Unsecured [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-89 Days Past Due	58	58
90 Days Or More Past Due	0	1
Total	58	59
Current	5,612	6,454
Total Loans	5,670	6,513
Total [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-89 Days Past Due	4,138	5,057
90 Days Or More Past Due	9,595	11,172
Total	13,733	16,229
Current	956,446	983,654
Total Loans	$ 970,179	$ 999,883

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Unaudited Condensed Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Cash Flows from Operating Activities
Net income	$ 8,194	$ 7,339
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	2,012	1,976
Net premium amortization of investment securities:
Provision for loan losses	(1,256)	(994)
Deferred income tax expense	2	237
Mortgage loans originated for sale	(12,584)	(29,859)
Proceeds from sale of mortgage loans	16,156	29,973
Gain on sale of mortgage loans, net	(220)	(631)
(Gain) loss on disposal and write downs of premises and equipment, net	(5)	31
Net loss on sale and write downs of other real estate	1,508	1,782
Net loss on sale of available for sale investment securities	75	60
Increase in cash surrender value of company-owned life insurance	(460)	(449)
Decrease in accrued interest receivable	231	319
Decrease in other assets	977	383
Decrease in accrued interest payable	(72)	(60)
Increase in other liabilities	2,337	700
Net cash provided by operating activities	18,861	13,644
Cash Flows from Investing Activities
Proceeds from maturities and calls of available for sale investment securities	41,485	71,427
Proceeds from sale of available for sale investment securities	12,104	945
Purchase of investment securities:
Available for sale	(45,697)	(80,910)
Held to maturity	(3,065)	0
Proceeds from sale of restricted stock investments, net	148	0
Principal collected (disbursed) on loans originated for investment, net	18,945	(2,677)
Purchase of premises and equipment	(1,350)	(1,612)
Proceeds from sale of other real estate	2,803	7,255
Proceeds from disposals of premises and equipment	5	4
Net cash provided by (used in) investing activities	25,378	(5,568)
Cash Flows from Financing Activities
Net decrease in deposits	(27,542)	(8,295)
Net (decrease) increase in federal funds purchased and other short-term borrowings	(4,893)	4,727
Proceeds from securities sold under agreements to repurchase and other long-term borrowings	5	0
Repayments of securities sold under agreements to repurchase and other long-term borrowings	(88)	(2,093)
Redemption of preferred stock	(10,000)	0
Dividends paid, preferred	(1,050)	(750)
Shares issued under employee stock purchase plan	63	69
Net cash used in financing activities	(43,505)	(6,342)
Net increase in cash and cash equivalents	734	1,734
Cash and cash equivalents at beginning of year	68,253	95,855
Cash and cash equivalents at end of period	68,987	97,589
Cash paid during the period for:
Interest	5,371	6,264
Income taxes	750	3,000
Transfers from loans to other real estate	6,668	5,279
Sale and financing of other real estate	1,459	2,364
Cash dividends payable, preferred	225	188
Available-for-sale Securities [Member]
Net premium amortization of investment securities:
Net premuim amortization of investment securities	1,895	2,818
Held-to-maturity Securities [Member]
Net premium amortization of investment securities:
Net premuim amortization of investment securities	16	0
Employee Stock Purchase Plan Expense [Member]
Net premium amortization of investment securities:
Noncash compensation expense	19	19
Director Fee Compensation [Member]
Net premium amortization of investment securities:
Noncash compensation expense	$ 36	$ 0

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Note 7 - Loans and Allowance for Loan Losses (Details) - Individually Impaired Loans By Class of Loans, Continued (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Financing Receivable, Impaired [Line Items]
Average	$ 53,119	$ 64,594	$ 57,468	$ 65,473
Interest Income Recognized	629	694	1,248	1,387
Cash Basis Interest Recognized	608	700	1,207	1,370
Real Estate Construction And Land Development [Member]
Financing Receivable, Impaired [Line Items]
Average	15,452	24,159	15,537	25,047
Interest Income Recognized	120	338	233	691
Cash Basis Interest Recognized	118	347	229	689
Real Estate Mortgage Residential [Member]
Financing Receivable, Impaired [Line Items]
Average	11,059	10,836	11,384	9,569
Interest Income Recognized	147	87	262	172
Cash Basis Interest Recognized	141	83	250	163
Real Estate Mortgage Farmland And Other Commercial Enterprises [Member]
Financing Receivable, Impaired [Line Items]
Average	26,295	28,209	30,222	29,692
Interest Income Recognized	359	236	745	484
Cash Basis Interest Recognized	346	236	722	478
Commercial And Industrial [Member]
Financing Receivable, Impaired [Line Items]
Average	245	1,154	247	930
Interest Income Recognized	3	29	4	33
Cash Basis Interest Recognized	3	29	3	33
Consumer Secured [Member]
Financing Receivable, Impaired [Line Items]
Average	0	21	9	21
Interest Income Recognized	0	1	0	1
Cash Basis Interest Recognized	0	1	0	1
Consumer Unsecured [Member]
Financing Receivable, Impaired [Line Items]
Average	68	215	69	214
Interest Income Recognized	0	3	4	6
Cash Basis Interest Recognized	$ 0	$ 4	$ 3	$ 6

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Note 11 - Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2014

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)
June 30, 2014
Obligations of U.S. government-sponsored entities	$	97,230	$	-	$	97,230	$	-
Obligations of states and political subdivisions		133,281		-		133,281		-
Mortgage-backed securities – residential		377,519		-		377,519		-
Mortgage-backed securities – commercial		715		-		715		-
Corporate debt securities		6,492		-		6,492		-
Mutual funds and equity securities		1,019		1,019		-		-
Total	$	616,256	$	1,019	$	615,237	$	-

			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, 2013
Obligations of U.S. government-sponsored entities	$	93,750	$	-	$	93,750	$	-
Obligations of states and political subdivisions		131,970		-		131,970		-
Mortgage-backed securities – residential		378,077		-		378,077		-
Mortgage-backed securities – commercial		689		-		689		-
Corporate debt securities		6,257		-		6,257		-
Mutual funds and equity securities		2,077		2,077		-		-
Total	$	612,820	$	2,077	$	610,743	$	-

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)
June 30, 2014
Collateral-dependent Impaired Loans
Real estate mortgage – residential	$	1,219	$	-	$	-	$	1,219
Real estate mortgage – farmland and other commercial enterprises		7		-		-		7
Commercial and industrial		37		-		-		37
Total	$	1,263	$	-	$	-	$	1,263
OREO
Construction and land development	$	4,191	$	-	$	-	$	4,191
Residential real estate		934		-		-		934
Farmland and other commercial enterprises		1,887		-		-		1,887
Total	$	7,012	$	-	$	-	$	7,012

			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, 2013
Collateral-dependent Impaired Loans
Real estate mortgage – construction and land development	$	334	$	-	$	-	$	334
Real estate mortgage – residential		2,085		-		-		2,085
Real estate mortgage – farmland and other commercial enterprises		3,152		-		-		3,152
Commercial and industrial		88		-		-		88
Total	$	5,659	$	-	$	-	$	5,659
OREO
Construction and land development	$	14,465	$	-	$	-	$	14,465
Residential real estate		1,116		-		-		1,116
Farmland and other commercial enterprises		9,152		-		-		9,152
Total	$	24,733	$	-	$	-	$	24,733

Asset Impairment Charges [Text Block]

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands)	2014		2013		2014		2013
Impairment charges:
Collateral-dependent impaired loans	$	135	$	839	$	268	$	1,210
OREO		419		1,005		1,170		1,694
Total	$	554	$	1,844	$	1,438	$	2,904

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

(In thousands)	Fair Value at June 30, 2014		Valuation Technique	Unobservable Inputs	Range		Average
Collateral-dependent impaired loans	$	1,263	Discounted appraisals	Marketability discount		0% - 30.1%		13.0%
OREO	$	7,012	Discounted appraisals	Marketability discount		0.5% - 31.8%		8.1%

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)
June 30, 2014
Assets
Cash and cash equivalents	$	68,987	$	68,987	$	68,987	$	-	$	-
Held to maturity investment securities		3,814		3,963		-		3,963		-
Loans, net		953,056		953,158		-		-		953,158
Accrued interest receivable		5,670		5,670		-		5,670		-
Federal Home Loan Bank and Federal Reserve Bank Stock		9,368	N/A			-		-		-
Liabilities
Deposits		1,382,673		1,384,661		947,958		-		436,703
Federal funds purchased and other short-term borrowings		24,230		24,230		-		24,230		-
Securities sold under agreements to repurchase and other long-term borrowings		127,797		138,251		-		138,251		-
Subordinated notes payable to unconsolidated trusts		48,970		23,794		-		-		23,794
Accrued interest payable		1,065		1,065		-		1,065		-
December 31, 2013
Assets
Cash and cash equivalents	$	68,253	$	68,253	$	68,253	$	-	$	-
Held to maturity investment securities		765		827		-		827		-
Loans, net		979,306		977,846		-		-		977,846
Accrued interest receivable		5,901		5,901		-		5,901		-
Federal Home Loan Bank and Federal Reserve Bank Stock		9,516	N/A			-		-		-
Liabilities
Deposits		1,410,215		1,412,572		938,700		-		473,872
Federal funds purchased and other short-term borrowings		29,123		29,123		-		29,123		-
Securities sold under agreements to repurchase and other long-term borrowings		127,880		139,375		-		139,375		-
Subordinated notes payable to unconsolidated trusts		48,970		26,070		-		-		26,070
Accrued interest payable		1,137		1,137		-		1,137		-

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Note 10 - Regulatory Matters (Tables)

6 Months Ended

Jun. 30, 2014

Disclosure Text Block [Abstract]

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

	June 30, 2014			December 31, 2013
	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	19.43%	20.69%	11.99%	18.95%	20.21%	11.90%
Farmers Bank	18.08	19.33	9.71	17.56	18.82	9.60
United Bank	16.16	17.43	10.31	15.06	16.33	9.67
First Citizens	13.39	14.07	9.20	12.92	13.67	9.03
Citizens Northern	14.12	15.37	9.81	13.57	14.82	9.67

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Note 11 - Fair Value Measurements (Details) (USD $)	Jun. 30, 2014	Dec. 31, 2013
Note 11 - Fair Value Measurements (Details) [Line Items]
Loans and Leases Receivable, Deferred Income	$ 5,000	$ 19,000
Commitments to Extend Credit [Member]
Note 11 - Fair Value Measurements (Details) [Line Items]
Loans and Leases Receivable, Deferred Income	0
Fair Value Disclosure, Off-balance Sheet Risks, Amount, Liability	0
Financial Standby Letter of Credit [Member]
Note 11 - Fair Value Measurements (Details) [Line Items]
Loans and Leases Receivable, Deferred Income	0
Fair Value Disclosure, Off-balance Sheet Risks, Amount, Liability	$ 0

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Note 7 - 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	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012
Note 7 - 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,	$ 3,590		$ 4,102
Allowance for loan losses, collectively evaluated for impairment	13,533		16,475
Total ending allowance balance	17,123	18,690	20,577	22,943	23,563	24,445
Loans individually evaluated for impairment	49,623		58,339
Loans collectively evaluated for impairment	920,556		941,544
Total ending loan balance, net of unearned income	970,179		999,883
Real Estate Loans [Member]
Note 7 - 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,	3,329		3,816
Allowance for loan losses, collectively evaluated for impairment	12,119		14,900
Total ending allowance balance	15,448	17,114	18,716	20,240	21,402	22,254
Loans individually evaluated for impairment	49,317		57,932
Loans collectively evaluated for impairment	807,331		833,149
Total ending loan balance, net of unearned income	856,648		891,081
Commercial Portfolio Segment [Member]
Note 7 - 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,	195		200
Allowance for loan losses, collectively evaluated for impairment	1,143		1,209
Total ending allowance balance	1,338	1,201	1,409	2,177	1,558	1,513
Loans individually evaluated for impairment	240		317
Loans collectively evaluated for impairment	98,785		93,393
Total ending loan balance, net of unearned income	99,025		93,710
Consumer Portfolio Segment [Member]
Note 7 - 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,	66		86
Allowance for loan losses, collectively evaluated for impairment	271		366
Total ending allowance balance	337	375	452	526	603	678
Loans individually evaluated for impairment	66		90
Loans collectively evaluated for impairment	14,440		15,002
Total ending loan balance, net of unearned income	$ 14,506		$ 15,092

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Note 3 - Accumulated Other Comprehensive Income (Details) - Changes in Accumulated Other Comprehensive Income by Component (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	$ 497	$ 5,982	$ (3,212)	$ 6,869
Other comprehensive income (loss) before reclassifications	4,973	(10,250)	8,577	(11,188)
Amounts reclassified from accumulated other comprehensive income	8	4	113	55
Net current-period other comprehensive income (loss)	4,981	(10,246)	8,690	(11,133)
Ending balance	5,478	(4,264)	5,478	(4,264)
Accumulated Net Unrealized Investment Gain (Loss) [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	63	8,480	(3,623)	9,411
Other comprehensive income (loss) before reclassifications	4,973	(10,250)	8,577	(11,188)
Amounts reclassified from accumulated other comprehensive income	(15)	(40)	67	(33)
Net current-period other comprehensive income (loss)	4,958	(10,290)	8,644	(11,221)
Ending balance	5,021	(1,810)	5,021	(1,810)
Accumulated Defined Benefit Plans Adjustment [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	434	(2,498)	411	(2,542)
Other comprehensive income (loss) before reclassifications	0	0	0	0
Amounts reclassified from accumulated other comprehensive income	23	44	46	88
Net current-period other comprehensive income (loss)	23	44	46	88
Ending balance	$ 457	$ (2,454)	$ 457	$ (2,454)

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Note 3 - Accumulated Other Comprehensive Income (Details) - Amounts Reclassified out of Accumulated Other Comprehensive Income by Component (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items]
Income tax expense	$ (1,959)	$ (1,127)	$ (3,079)	$ (2,445)
Net of tax	4,261	3,060	7,094	6,367
	6,783	4,674	11,273	9,784
Reclassification out of Accumulated Other Comprehensive Income [Member] | Accumulated Net Unrealized Investment Gain (Loss) [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items]
Unrealized gains and losses on available for sale investment securities	23	62	(103)	51
Income tax expense	(8)	(22)	36	(18)
Net of tax	15	40	(67)	33
Reclassification out of Accumulated Other Comprehensive Income [Member] | Accumulated Defined Benefit Plans Adjustment [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items]
Income tax expense	13	23	25	46
Net of tax	(23)	(44)	(46)	(88)
Prior service costs	(52)	(64)	(104)	(128)
Actuarial gains (losses)	16	(3)	33	(6)
	(36)	(67)	(71)	(134)
Reclassification out of Accumulated Other Comprehensive Income [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items]
Net of tax	$ (8)	$ (4)	$ (113)	$ (55)

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Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity (Parentheticals) (USD $)	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Preferred stock dividends, per share	$ 40.00	$ 25.00

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Note 5 - Net Income Per Common Share (Details) (Equity Option [Member])	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Equity Option [Member]
Note 5 - Net Income Per Common Share (Details) [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	18,049	22,049	18,049	22,049

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Note 7 - Loans and Allowance for Loan Losses (Details) - Major Classifications Of Loans Outstanding (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Major Classifications Of Loans Outstanding [Abstract]
Real estate mortgage - construction and land development	$ 97,769	$ 101,352
Real estate mortgage - residential	365,969	371,582
Real estate mortgage - farmland and other commercial enterprises	392,910	418,147
Commercial and industrial	52,713	47,426
States and political subdivisions	25,150	21,561
Lease financing	398	902
Other	20,769	23,840
Secured	8,836	8,579
Unsecured	5,670	6,513
Total loans	970,184	999,902
Less unearned income	5	19
Total loans, net of unearned income	$ 970,179	$ 999,883

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Note 9 - Postretirement Medical Benefits (Details) - Components of Net Periodic Benefit Cost (Postretirement Medical Benefits [Member], USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Postretirement Medical Benefits [Member]
Note 9 - Postretirement Medical Benefits (Details) - Components of Net Periodic Benefit Cost [Line Items]
Service cost	$ 120	$ 158	$ 241	$ 315
Interest cost	143	138	285	276
Recognized prior service cost	52	64	104	128
Recognized net actuarial gain	(16)	0	(32)	0
Net periodic benefit cost	$ 299	$ 360	$ 598	$ 719

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Unaudited Condensed Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Cash and cash equivalents:
Cash and due from banks	$ 26,874	$ 22,925
Interest bearing deposits in other banks	39,352	41,749
Federal funds sold and securities purchased under agreements to resell	2,761	3,579
Total cash and cash equivalents	68,987	68,253
Investment securities:
Available for sale, amortized cost of $608,533 (2014) and $618,395 (2013)	616,256	612,820
Held to maturity, fair value of $3,963 (2014) and $827 (2013)	3,814	765
Total investment securities	620,070	613,585
Loans, net of unearned income	970,179	999,883
Allowance for loan losses	(17,123)	(20,577)
Loans, net	953,056	979,306
Premises and equipment, net	35,912	36,273
Company-owned life insurance	29,359	28,899
Intangible assets, net	652	854
Other real estate owned	39,034	37,826
Other assets	38,113	44,559
Total assets	1,785,183	1,809,555
Deposits:
Noninterest bearing	279,765	277,294
Interest bearing	1,102,908	1,132,921
Total deposits	1,382,673	1,410,215
Federal funds purchased and other short-term borrowings	24,230	29,123
Securities sold under agreements to repurchase and other long-term borrowings	127,797	127,880
Subordinated notes payable to unconsolidated trusts	48,970	48,970
Dividends payable	225	188
Other liabilities	25,319	23,124
Total liabilities	1,609,214	1,639,500
Shareholders’ Equity
Common stock, par value $.125 per share 14,608,000 shares authorized; 7,483,967 and 7,478,706 shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively	935	935
Capital surplus	51,220	51,102
Retained earnings	98,336	91,242
Accumulated other comprehensive income (loss)	5,478	(3,212)
Total shareholders’ equity	175,969	170,055
Total liabilities and shareholders’ equity	1,785,183	1,809,555
Series A Preferred Stock [Member]
Shareholders’ Equity
Preferred stock, no par value 1,000,000 shares authorized; 20,000 and 30,000 Series A shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively; Liquidation preference of $20,000 at June 30, 2014	$ 20,000	$ 29,988

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Note 7 - Loans and Allowance for Loan Losses (Details) - Recorded Investment In Nonperforming Loans By Class Of Loans (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Real Estate Construction And Land Development [Member]
Note 7 - Loans and Allowance for Loan Losses (Details) - Recorded Investment In Nonperforming Loans By Class Of Loans [Line Items]
Nonaccrual	$ 4,794	$ 5,821
Restructured Loans	4,219	4,391
Loans Past Due 90 Days Or More And Still Accruing	0	0
Real Estate Mortgage Residential [Member]
Note 7 - Loans and Allowance for Loan Losses (Details) - Recorded Investment In Nonperforming Loans By Class Of Loans [Line Items]
Nonaccrual	5,149	5,154
Restructured Loans	4,532	4,826
Loans Past Due 90 Days Or More And Still Accruing	0	10
Real Estate Mortgage Farmland And Other Commercial Enterprises [Member]
Note 7 - Loans and Allowance for Loan Losses (Details) - Recorded Investment In Nonperforming Loans By Class Of Loans [Line Items]
Nonaccrual	7,937	12,677
Restructured Loans	16,657	16,987
Loans Past Due 90 Days Or More And Still Accruing	0	434
Commercial And Industrial [Member]
Note 7 - Loans and Allowance for Loan Losses (Details) - Recorded Investment In Nonperforming Loans By Class Of Loans [Line Items]
Nonaccrual	199	160
Restructured Loans	0	0
Loans Past Due 90 Days Or More And Still Accruing	0	0
Commercial Other [Member]
Note 7 - Loans and Allowance for Loan Losses (Details) - Recorded Investment In Nonperforming Loans By Class Of Loans [Line Items]
Nonaccrual	11
Restructured Loans	0
Loans Past Due 90 Days Or More And Still Accruing	0
Consumer Secured [Member]
Note 7 - Loans and Allowance for Loan Losses (Details) - Recorded Investment In Nonperforming Loans By Class Of Loans [Line Items]
Nonaccrual	5	3
Restructured Loans	0	0
Loans Past Due 90 Days Or More And Still Accruing	0	0
Consumer Unsecured [Member]
Note 7 - Loans and Allowance for Loan Losses (Details) - Recorded Investment In Nonperforming Loans By Class Of Loans [Line Items]
Nonaccrual	0	1
Restructured Loans	48	51
Loans Past Due 90 Days Or More And Still Accruing	0	0
Total [Member]
Note 7 - Loans and Allowance for Loan Losses (Details) - Recorded Investment In Nonperforming Loans By Class Of Loans [Line Items]
Nonaccrual	18,095	23,838
Restructured Loans	25,456	26,255
Loans Past Due 90 Days Or More And Still Accruing	0	444
Lease Financing [Member]
Note 7 - Loans and Allowance for Loan Losses (Details) - Recorded Investment In Nonperforming Loans By Class Of Loans [Line Items]
Nonaccrual		22
Restructured Loans		0
Loans Past Due 90 Days Or More And Still Accruing		$ 0

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Unaudited Condensed Consolidated Statements of Comprehensive Income (Parentheticals) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Tax on net unrealized holding gain (loss) on available for sale securities arising during the period	$ 2,678	$ (5,519)	$ 4,618	$ (6,024)
Tax on reclassification adjustment for prior period unrealized (gain) loss recognized during current period	8	22	(36)	18
Tax on change in unfunded portion of postretirement benefit obligation	$ 13	$ 23	$ 25	$ 46

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Note 11 - 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		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Impairment charges:
Impairment charges	$ 554	$ 1,844	$ 1,438	$ 2,904
OREO [Member]
Impairment charges:
Impairment charges	419	1,005	1,170	1,694
Impaired Loans [Member]
Impairment charges:
Impairment charges	$ 135	$ 839	$ 268	$ 1,210

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Note 6 - Investment Securities (Details) - The Amortized Costs And Estimated Fair Value Of The Securities Portfolio (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Available For Sale
Available for Sale Securities - Amortized Cost	$ 608,533	$ 618,395
Available for Sale Securities - Gross Unrealized Losses	4,300	12,900
Available for Sale Securities - Estimated Fair Value	616,256	612,820
Held To Maturity
Held to Maturity Securities - Amortized Cost	3,814	765
Held to Maturity Securities - Estimated Fair Value	3,963	827
US Government-sponsored Enterprises Debt Securities [Member]
Available For Sale
Available for Sale Securities - Amortized Cost	98,241	96,750
Available for Sale Securities - Gross Unrealized Gains	292	155
Available for Sale Securities - Gross Unrealized Losses	1,303	3,155
Available for Sale Securities - Estimated Fair Value	97,230	93,750
US States and Political Subdivisions Debt Securities [Member]
Available For Sale
Available for Sale Securities - Amortized Cost	130,947	132,311
Available for Sale Securities - Gross Unrealized Gains	2,920	2,056
Available for Sale Securities - Gross Unrealized Losses	586	2,397
Available for Sale Securities - Estimated Fair Value	133,281	131,970
Held To Maturity
Held to Maturity Securities - Amortized Cost	3,814	765
Held to Maturity Securities - Gross Unrealized Gains	149	62
Held to Maturity Securities - Gross Unrealized Losses	0	0
Held to Maturity Securities - Estimated Fair Value	3,963	827
Residential Mortgage Backed Securities [Member]
Available For Sale
Available for Sale Securities - Amortized Cost	370,687	379,238
Available for Sale Securities - Gross Unrealized Gains	8,777	5,071
Available for Sale Securities - Gross Unrealized Losses	1,945	6,232
Available for Sale Securities - Estimated Fair Value	377,519	378,077
Commercial Mortgage Backed Securities [Member]
Available For Sale
Available for Sale Securities - Amortized Cost	741	748
Available for Sale Securities - Gross Unrealized Gains	0	0
Available for Sale Securities - Gross Unrealized Losses	26	59
Available for Sale Securities - Estimated Fair Value	715	689
Corporate Debt Securities [Member]
Available For Sale
Available for Sale Securities - Amortized Cost	6,925	7,266
Available for Sale Securities - Gross Unrealized Gains	45	40
Available for Sale Securities - Gross Unrealized Losses	478	1,049
Available for Sale Securities - Estimated Fair Value	6,492	6,257
Mutual Funds And Equity Securities [Member]
Available For Sale
Available for Sale Securities - Amortized Cost	992	2,082
Available for Sale Securities - Gross Unrealized Gains	28	15
Available for Sale Securities - Gross Unrealized Losses	1	20
Available for Sale Securities - Estimated Fair Value	1,019	2,077
Total [Member]
Available For Sale
Available for Sale Securities - Amortized Cost	608,533	618,395
Available for Sale Securities - Gross Unrealized Gains	12,062	7,337
Available for Sale Securities - Gross Unrealized Losses	4,339	12,912
Available for Sale Securities - Estimated Fair Value	$ 616,256	$ 612,820

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Note 3 - Accumulated Other Comprehensive Income (Tables)

6 Months Ended

Jun. 30, 2014

Disclosure Text Block [Abstract]

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

Three months ended June 30,	2014							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	$	63		$	434	$	497	$	8,480		$	(2,498	)	$	5,982
Other comprehensive income (loss) before reclassifications		4,973			-		4,973		(10,250	)		-			(10,250	)
Amounts reclassified from accumulated other comprehensive income		(15	)		23		8		(40	)		44			4
Net current-period other comprehensive income (loss)		4,958			23		4,981		(10,290	)		44			(10,246	)
Ending balance	$	5,021		$	457	$	5,478	$	(1,810	)	$	(2,454	)	$	(4,264	)

Six months ended June 30,	2014								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	$	(3,623	)	$	411	$	(3,212	)	$	9,411		$	(2,542	)	$	6,869
Other comprehensive income (loss) before reclassifications		8,577			-		8,577			(11,188	)		-			(11,188	)
Amounts reclassified from accumulated other comprehensive income		67			46		113			(33	)		88			55
Net current-period other comprehensive income (loss)		8,644			46		8,690			(11,221	)		88			(11,133	)
Ending balance	$	5,021		$	457	$	5,478		$	(1,810	)	$	(2,454	)	$	(4,264	)

Reclassification out of Accumulated Other Comprehensive Income [Table Text Block]

	Amount Reclassified from Accumulated Other Comprehensive Income												Affected Line Item in the Statement Where Net Income is Presented
	Three months ended June 30,						Six months ended June 30,
(In thousands)	2014			2013			2014			2013
Unrealized gains and losses on available for sale investment securities	$	23		$	62		$	(103	)	$	51		Investment securities losses, net
		(8	)		(22	)		36			(18	)	Income tax expense
	$	15		$	40		$	(67	)	$	33		Net of tax
Amortization related to postretirement benefits
Prior service costs	$	(52	)	$	(64	)	$	(104	)	$	(128	)	Salaries and employee benefits
Actuarial gains (losses)		16			(3	)		33			(6	)	Salaries and employee benefits
		(36	)		(67	)		(71	)		(134	)	Total before tax
		13			23			25			46		Income tax benefit
	$	(23	)	$	(44	)	$	(46	)	$	(88	)	Net of tax
Total reclassifications for the period	$	(8	)	$	(4	)	$	(113	)	$	(55	)	Net of tax

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Note 6 - Investment Securities (Details) - The Amortized Cost And Estimated Fair Value Of The Securities Portfolio By Contractual Maturity (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
The Amortized Cost And Estimated Fair Value Of The Securities Portfolio By Contractual Maturity [Abstract]
Due in one year or less	$ 8,368
Due in one year or less	8,391
Due in one year or less	0
Due in one year or less	0
Due after one year through five years	123,957
Due after one year through five years	124,798
Due after one year through five years	0
Due after one year through five years	0
Due after five years through ten years	86,163
Due after five years through ten years	86,514
Due after five years through ten years	765
Due after five years through ten years	846
Due after ten years	17,625
Due after ten years	17,300
Due after ten years	3,049
Due after ten years	3,117
Mortgage-backed securities	371,428
Mortgage-backed securities	378,234
Mortgage-backed securities	0
Mortgage-backed securities	0
Total	607,541
Total	615,237
Total	3,814	765
Total	$ 3,963	$ 827

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Note 6 - Investment Securities (Tables)

6 Months Ended

Jun. 30, 2014

Investments, Debt and Equity Securities [Abstract]

Schedule of AFS and HTM Reconciliation [Table Text Block]

June 30, 2014 (In thousands)	Amortized Cost		Gross UnrealizedGains		Gross UnrealizedLosses		Estimated Fair Value
Available For Sale
Obligations of U.S. government-sponsored entities	$	98,241	$	292	$	1,303	$	97,230
Obligations of states and political subdivisions		130,947		2,920		586		133,281
Mortgage-backed securities – residential		370,687		8,777		1,945		377,519
Mortgage-backed securities – commercial		741		-		26		715
Corporate debt securities		6,925		45		478		6,492
Mutual funds and equity securities		992		28		1		1,019
Total securities – available for sale	$	608,533	$	12,062	$	4,339	$	616,256
Held To Maturity
Obligations of states and political subdivisions	$	3,814	$	149	$	-	$	3,963

December 31, 2013 (In thousands)	Amortized Cost		Gross UnrealizedGains		Gross UnrealizedLosses		Estimated Fair Value
Available For Sale
Obligations of U.S. government-sponsored entities	$	96,750	$	155	$	3,155	$	93,750
Obligations of states and political subdivisions		132,311		2,056		2,397		131,970
Mortgage-backed securities – residential		379,238		5,071		6,232		378,077
Mortgage-backed securities – commercial		748		-		59		689
Corporate debt securities		7,266		40		1,049		6,257
Mutual funds and equity securities		2,082		15		20		2,077
Total securities – available for sale	$	618,395	$	7,337	$	12,912	$	612,820
Held To Maturity
Obligations of states and political subdivisions	$	765	$	62	$	-	$	827

Investments Classified by Contractual Maturity Date [Table Text Block]

	Available For Sale				Held To Maturity
	Amortized		Estimated		Amortized		Estimated
June 30, 2014 (In thousands)	Cost		Fair Value		Cost		Fair Value
Due in one year or less	$	8,368	$	8,391	$	-	$	-
Due after one year through five years		123,957		124,798		-		-
Due after five years through ten years		86,163		86,514		765		846
Due after ten years		17,625		17,300		3,049		3,117
Mortgage-backed securities		371,428		378,234		-		-
Total	$	607,541	$	615,237	$	3,814	$	3,963

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

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(In thousands)	2014			2013			2014			2013
Gross realized gains	$	19		$	3		$	178		$	3
Gross realized losses		103			63			253			63
Net realized loss	$	(84	)	$	(60	)	$	(75	)	$	(60	)

Schedule of Unrealized Loss on Investments [Table Text Block]

	Less than 12 Months				12 Months or More				Total
June 30, 2014 (In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Obligations of U.S. government-sponsored entities	$	3,391	$	12	$	66,769	$	1,291	$	70,160	$	1,303
Obligations of states and political subdivisions		9,739		17		31,756		569		41,495		586
Mortgage-backed securities – residential		10,303		37		101,240		1,908		111,543		1,945
Mortgage-backed securities – commercial		-		-		715		26		715		26
Corporate debt securities		-		-		5,395		478		5,395		478
Mutual funds and equity securities		-		-		154		1		154		1
Total	$	23,433	$	66	$	206,029	$	4,273	$	229,462	$	4,339

	Less than 12 Months				12 Months or More				Total
December 31, 2013 (In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Obligations of U.S. government-sponsored entities	$	65,094	$	2,434	$	11,830	$	721	$	76,924	$	3,155
Obligations of states and political subdivisions		48,715		1,594		15,095		803		63,810		2,397
Mortgage-backed securities – residential		219,032		5,199		16,306		1,033		235,338		6,232
Mortgage-backed securities – commercial		689		59		-		-		689		59
Corporate debt securities		80		-		4,816		1,049		4,896		1,049
Mutual funds and equity securities		716		17		22		3		738		20
Total	$	334,326	$	9,303	$	48,069	$	3,609	$	382,395	$	12,912

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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, 2012	$ 29,537	$ 934	$ 50,934	$ 79,747	$ 6,869	$ 168,021
Balance (in Shares) at Dec. 31, 2012		7,470
Net income				7,339		7,339
Other comprehensive income (loss)					(11,133)	(11,133)
Cash dividends declared-preferred				(750)		(750)
Preferred stock discount accretion	222			(222)
Shares issued pursuant to employee stock purchase plan			69			69
Shares issued pursuant to employee stock purchase plan (in Shares)		5
Expense related to employee stock purchase plan			19			19
Balance at Jun. 30, 2013	29,759	934	51,022	86,114	(4,264)	163,565
Balance (in Shares) at Jun. 30, 2013		7,475
Balance at Dec. 31, 2013	29,988	935	51,102	91,242	(3,212)	170,055
Balance (in Shares) at Dec. 31, 2013		7,479
Net income				8,194		8,194
Other comprehensive income (loss)					8,690	8,690
Cash dividends declared-preferred				(1,088)		(1,088)
Preferred stock discount accretion	12			(12)
Redemption of preferred stock	(10,000)					(10,000)
Shares issued under director compensation plan			36			36
Shares issued under director compensation plan (in Shares)		2
Shares issued pursuant to employee stock purchase plan			63			63
Shares issued pursuant to employee stock purchase plan (in Shares)		3
Expense related to employee stock purchase plan			19			19
Balance at Jun. 30, 2014	$ 20,000	$ 935	$ 51,220	$ 98,336	$ 5,478	$ 175,969
Balance (in Shares) at Jun. 30, 2014		7,484

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Unaudited Condensed Consolidated Balance Sheets (Parentheticals) (USD $) In Thousands, except Share data, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Available for sale, amortized cost (in Dollars)	$ 608,533	$ 618,395
Held to maturity, fair value (in Dollars)	3,963	827
Common stock, par value per share (in Dollars per share)	$ 0.125	$ 0.125
Common stock, shares authorized	14,608,000	14,608,000
Common stock, shares issued	7,483,967	7,478,706
Common stock, shares outstanding	7,483,967	7,478,706
Series A Preferred Stock [Member]
Preferred stock, par value (in Dollars per share)	$ 0	$ 0
Preferred stock, shares authorized	1,000,000	1,000,000
Preferred stock, Series A shares issued	20,000	30,000
Preferred stock, Series A shares outstanding	20,000	30,000
Preferred stock, Liquidation preference (in Dollars)	$ 20,000

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Note 8 - Other Real Estate Owned

6 Months Ended

Jun. 30, 2014

Disclosure Text Block [Abstract]

Real Estate Owned [Text Block]

8.Other Real Estate Owned

Other real estate owned (“OREO”) was as follows as of the date indicated:

(In thousands)	June 30, 2014		December 31, 2013
Construction and land development	$	21,106	$	23,504
Residential real estate		2,004		2,695
Farmland and other commercial enterprises		15,924		11,627
Total	$	39,034	$	37,826

OREO activity for the six months ended June 30, 2014 and 2013 was as follows:

Six months ended June 30, (In thousands)	2014			2013
Beginning balance	$	37,826		$	52,562
Transfers from loans and other increases		6,978			5,279
Proceeds from sales		(4,262	)		(9,619	)
(Loss) gain on sales, net		(94	)		280
Write downs and other decreases, net		(1,414	)		(2,037	)
Ending balance	$	39,034		$	46,465

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Document And Entity Information	6 Months Ended
	Jun. 30, 2014	Aug. 06, 2014
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		7,484,702
Amendment Flag	false
Entity Central Index Key	0000713095
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Accelerated Filer
Entity Well-known Seasoned Issuer	No
Document Period End Date	Jun. 30, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q2

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Note 9 - Postretirement Medical Benefits

6 Months Ended

Jun. 30, 2014

Compensation and Retirement Disclosure [Abstract]

Pension and Other Postretirement Benefits Disclosure [Text Block]

9.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, 2014 and 2013.

	Three Months Ended					Six Months Ended
	June 30,					June 30,
(In thousands)	2014			2013		2014			2013
Service cost	$	120		$	158	$	241		$	315
Interest cost		143			138		285			276
Recognized prior service cost		52			64		104			128
Recognized net actuarial gain		(16	)		-		(32	)		-
Net periodic benefit cost	$	299		$	360	$	598		$	719

The Company expects benefit payments of $340 thousand for 2014, of which $67 thousand and $133 thousand have been made during the three and six months ended June 30, 2014, respectively.

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Unaudited Condensed Consolidated Statements of Income (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Interest Income
Interest and fees on loans	$ 12,676	$ 13,491	$ 25,318	$ 27,022
Interest on investment securities:
Taxable	2,980	2,459	6,060	5,021
Nontaxable	637	642	1,261	1,256
Interest on deposits in other banks	37	38	64	72
Interest on federal funds sold and securities purchased under agreements to resell	1	1	2	2
Total interest income	16,331	16,631	32,705	33,373
Interest Expense
Interest on deposits	1,104	1,524	2,307	3,187
Interest on federal funds purchased and other short-term borrowings	11	20	30	39
Interest on securities sold under agreements to repurchase and other long-term borrowings	1,279	1,278	2,543	2,545
Interest on subordinated notes payable to unconsolidated trusts	210	216	419	433
Total interest expense	2,604	3,038	5,299	6,204
Net interest income	13,727	13,593	27,406	27,169
Provision for loan losses	(1,388)	(362)	(1,256)	(994)
Net interest income after provision for loan losses	15,115	13,955	28,662	28,163
Noninterest Income
Service charges and fees on deposits	1,991	2,018	3,907	3,978
Allotment processing fees	1,274	1,241	2,519	2,507
Other service charges, commissions, and fees	1,399	1,264	2,634	2,456
Trust income	523	470	1,068	954
Investment securities losses, net	(84)	(60)	(75)	(60)
Gains on sale of mortgage loans, net	123	292	220	631
Income from company-owned life insurance	233	232	479	472
Other	532	(16)	612	(86)
Total noninterest income	5,991	5,441	11,364	10,852
Noninterest Expense
Salaries and employee benefits	7,342	7,231	14,693	14,555
Occupancy expenses, net	1,209	1,165	2,491	2,331
Equipment expenses	593	579	1,187	1,141
Data processing and communication expenses	969	945	1,974	2,043
Bank franchise tax	610	610	1,222	1,200
Amortization of intangibles	101	135	202	270
Deposit insurance expense	461	497	901	1,139
Other real estate expenses, net	938	1,485	2,002	2,377
Other	2,100	2,075	4,081	4,175
Total noninterest expense	14,323	14,722	28,753	29,231
Income before income taxes	6,783	4,674	11,273	9,784
Income tax expense	1,959	1,127	3,079	2,445
Net income	4,824	3,547	8,194	7,339
Less preferred stock dividends and discount accretion	563	487	1,100	972
Net income available to common shareholders	$ 4,261	$ 3,060	$ 7,094	$ 6,367
Per Common Share
Net income - basic and diluted (in Dollars per share)	$ 0.57	$ 0.41	$ 0.95	$ 0.85
Cash dividends declared (in Dollars per share)	$ 0	$ 0	$ 0	$ 0
Weighted Average Common Shares Outstanding
Basic and diluted (in Shares)	7,482	7,473	7,481	7,471

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Note 3 - Accumulated Other Comprehensive Income

6 Months Ended

Jun. 30, 2014

Disclosure Text Block [Abstract]

Comprehensive Income (Loss) Note [Text Block]

3. Accumulated 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 June 30,	2014							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	$	63		$	434	$	497	$	8,480		$	(2,498	)	$	5,982
Other comprehensive income (loss) before reclassifications		4,973			-		4,973		(10,250	)		-			(10,250	)
Amounts reclassified from accumulated other comprehensive income		(15	)		23		8		(40	)		44			4
Net current-period other comprehensive income (loss)		4,958			23		4,981		(10,290	)		44			(10,246	)
Ending balance	$	5,021		$	457	$	5,478	$	(1,810	)	$	(2,454	)	$	(4,264	)

Six months ended June 30,	2014								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	$	(3,623	)	$	411	$	(3,212	)	$	9,411		$	(2,542	)	$	6,869
Other comprehensive income (loss) before reclassifications		8,577			-		8,577			(11,188	)		-			(11,188	)
Amounts reclassified from accumulated other comprehensive income		67			46		113			(33	)		88			55
Net current-period other comprehensive income (loss)		8,644			46		8,690			(11,221	)		88			(11,133	)
Ending balance	$	5,021		$	457	$	5,478		$	(1,810	)	$	(2,454	)	$	(4,264	)

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
	Three months ended June 30,						Six months ended June 30,
(In thousands)	2014			2013			2014			2013
Unrealized gains and losses on available for sale investment securities	$	23		$	62		$	(103	)	$	51		Investment securities losses, net
		(8	)		(22	)		36			(18	)	Income tax expense
	$	15		$	40		$	(67	)	$	33		Net of tax
Amortization related to postretirement benefits
Prior service costs	$	(52	)	$	(64	)	$	(104	)	$	(128	)	Salaries and employee benefits
Actuarial gains (losses)		16			(3	)		33			(6	)	Salaries and employee benefits
		(36	)		(67	)		(71	)		(134	)	Total before tax
		13			23			25			46		Income tax benefit
	$	(23	)	$	(44	)	$	(46	)	$	(88	)	Net of tax
Total reclassifications for the period	$	(8	)	$	(4	)	$	(113	)	$	(55	)	Net of tax

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Note 2 - Reclassifications

6 Months Ended

Jun. 30, 2014

Disclosure Text Block [Abstract]

Reclassifications [Text Block]

2. Reclassifications

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

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Note 5 - Net Income Per Common Share (Tables)

6 Months Ended

Jun. 30, 2014

Earnings Per Share [Abstract]

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

	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands, except per share data)	2014		2013		2014		2013
Net income, basic and diluted	$	4,824	$	3,547	$	8,194	$	7,339
Less preferred stock dividends and discount accretion		563		487		1,100		972
Net income available to common shareholders, basic and diluted	$	4,261	$	3,060	$	7,094	$	6,367
Average common shares issued and outstanding, basic and diluted		7,482		7,473		7,481		7,471
Net income per common share, basic and diluted	$	.57	$	.41	$	.95	$	.85

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Note 10 - Regulatory Matters

6 Months Ended

Jun. 30, 2014

Disclosure Text Block [Abstract]

Regulatory Capital Requirements under Banking Regulations [Text Block]

10. 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.

	June 30, 2014			December 31, 2013
	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	19.43%	20.69%	11.99%	18.95%	20.21%	11.90%
Farmers Bank	18.08	19.33	9.71	17.56	18.82	9.60
United Bank	16.16	17.43	10.31	15.06	16.33	9.67
First Citizens	13.39	14.07	9.20	12.92	13.67	9.03
Citizens Northern	14.12	15.37	9.81	13.57	14.82	9.67

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 agreements that two of the Company’s subsidiary banks have entered into with their primary banking regulators. The agreement entered into during 2009 between the Parent Company and its primary regulators was terminated in March 2014 as a result of continued satisfactory compliance, most notably from the progress made in lowering nonperforming assets and increasing capital levels. Therefore, the Company is no longer required to receive permission from its banking regulators to make interest payments on its trust preferred securities or to pay dividends on its common and preferred stock. However, the Company’s current goal is to redeem all of its outstanding preferred stock before considering the payment of a dividend on its common stock. The Company redeemed 10,000 shares, or one-third, of its outstanding preferred stock on May 15, 2014. Further redemptions, which require regulatory approval, will be based on satisfactory financial performance and take into consideration the Company’s capital position, earnings, asset quality, and other factors. The timing and amount of any further redemption by the Company of its remaining outstanding preferred stock will be disclosed when assured.

United Bank  

In November of 2009, the Federal Deposit Insurance Corporation (“FDIC”) and the Kentucky Department of Financial Institutions (“KDFI”) entered into a Cease and Desist Order (“C&D”) with United Bank 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%. 

During January 2014, the formal Consent Order entered into during 2011 with United Bank was terminated and replaced with a stepped-down enforcement action in the form of an informal Memorandum of Understanding (“Memorandum”). The informal Memorandum includes many of the same provisions covered by the Consent Order.

Other components in the regulatory order include oversight and reporting obligations to its regulators in terms of complying with the Memorandum. It also includes requirements 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 Memorandum.

Citizens Northern  

The FDIC and KDFI 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 FDIC and KDFI.

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.

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. 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 each of its subsidiary banks are in compliance with the requirements identified in their regulatory agreements as of June 30, 2014.

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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Note 6 - Investment Securities

6 Months Ended

Jun. 30, 2014

Investments, Debt and Equity Securities [Abstract]

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

6. Investment Securities

The following tables summarize the amortized costs and estimated fair value of the securities portfolio at June 30, 2014 and December 31, 2013. The summary is divided into available for sale and held to maturity investment securities.

June 30, 2014 (In thousands)	Amortized Cost		Gross UnrealizedGains		Gross UnrealizedLosses		Estimated Fair Value
Available For Sale
Obligations of U.S. government-sponsored entities	$	98,241	$	292	$	1,303	$	97,230
Obligations of states and political subdivisions		130,947		2,920		586		133,281
Mortgage-backed securities – residential		370,687		8,777		1,945		377,519
Mortgage-backed securities – commercial		741		-		26		715
Corporate debt securities		6,925		45		478		6,492
Mutual funds and equity securities		992		28		1		1,019
Total securities – available for sale	$	608,533	$	12,062	$	4,339	$	616,256
Held To Maturity
Obligations of states and political subdivisions	$	3,814	$	149	$	-	$	3,963

December 31, 2013 (In thousands)	Amortized Cost		Gross UnrealizedGains		Gross UnrealizedLosses		Estimated Fair Value
Available For Sale
Obligations of U.S. government-sponsored entities	$	96,750	$	155	$	3,155	$	93,750
Obligations of states and political subdivisions		132,311		2,056		2,397		131,970
Mortgage-backed securities – residential		379,238		5,071		6,232		378,077
Mortgage-backed securities – commercial		748		-		59		689
Corporate debt securities		7,266		40		1,049		6,257
Mutual funds and equity securities		2,082		15		20		2,077
Total securities – available for sale	$	618,395	$	7,337	$	12,912	$	612,820
Held To Maturity
Obligations of states and political subdivisions	$	765	$	62	$	-	$	827

The amortized cost and estimated fair value of the debt securities portfolio at June 30, 2014, 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 of these securities, as principal is not due at a single date.

	Available For Sale				Held To Maturity
	Amortized		Estimated		Amortized		Estimated
June 30, 2014 (In thousands)	Cost		Fair Value		Cost		Fair Value
Due in one year or less	$	8,368	$	8,391	$	-	$	-
Due after one year through five years		123,957		124,798		-		-
Due after five years through ten years		86,163		86,514		765		846
Due after ten years		17,625		17,300		3,049		3,117
Mortgage-backed securities		371,428		378,234		-		-
Total	$	607,541	$	615,237	$	3,814	$	3,963

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

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(In thousands)	2014			2013			2014			2013
Gross realized gains	$	19		$	3		$	178		$	3
Gross realized losses		103			63			253			63
Net realized loss	$	(84	)	$	(60	)	$	(75	)	$	(60	)

Investment securities with unrealized losses at June 30, 2014 and December 31, 2013 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
June 30, 2014 (In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Obligations of U.S. government-sponsored entities	$	3,391	$	12	$	66,769	$	1,291	$	70,160	$	1,303
Obligations of states and political subdivisions		9,739		17		31,756		569		41,495		586
Mortgage-backed securities – residential		10,303		37		101,240		1,908		111,543		1,945
Mortgage-backed securities – commercial		-		-		715		26		715		26
Corporate debt securities		-		-		5,395		478		5,395		478
Mutual funds and equity securities		-		-		154		1		154		1
Total	$	23,433	$	66	$	206,029	$	4,273	$	229,462	$	4,339

	Less than 12 Months				12 Months or More				Total
December 31, 2013 (In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Obligations of U.S. government-sponsored entities	$	65,094	$	2,434	$	11,830	$	721	$	76,924	$	3,155
Obligations of states and political subdivisions		48,715		1,594		15,095		803		63,810		2,397
Mortgage-backed securities – residential		219,032		5,199		16,306		1,033		235,338		6,232
Mortgage-backed securities – commercial		689		59		-		-		689		59
Corporate debt securities		80		-		4,816		1,049		4,896		1,049
Mutual funds and equity securities		716		17		22		3		738		20
Total	$	334,326	$	9,303	$	48,069	$	3,609	$	382,395	$	12,912

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 June 30, 2014, the Company’s investment securities portfolio had gross unrealized losses of $4.3 million, a decrease of $8.6 million or 66.4% compared with $12.9 million at year-end 2013. Gross unrealized losses include $4.3 million which have been in a continuous loss position of 12 months or more.

Corporate debt securities in the Company’s investment securities portfolio at June 30, 2014 include single-issuer trust preferred capital securities with an unrealized loss of $478 thousand and a carrying value of $5.4 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 2014 an increase in per share common dividend payments and authorization of a common equity repurchase plan. 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. Investment securities with unrealized losses at June 30, 2014 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 nor does it believe it is likely that it will be required to sell these securities prior to 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 11 - 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	6 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
OREO [Member] | Fair Value, Inputs, Level 3 [Member]
Note 11 - 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)	$ 7,012	$ 24,733
Valuation Technique	Discounted appraisals
Unobservable Inputs	Marketability discount
OREO [Member] | Fair Value, Inputs, Level 3 [Member] | Minimum [Member]
Note 11 - Fair Value Measurements (Details) - Quantitative Information About Unobservable Inputs for Assets Measured on A Nonrecurring Basis Using Level 3 Measurements [Line Items]
Range	0.50%
OREO [Member] | Fair Value, Inputs, Level 3 [Member] | Maximum [Member]
Note 11 - Fair Value Measurements (Details) - Quantitative Information About Unobservable Inputs for Assets Measured on A Nonrecurring Basis Using Level 3 Measurements [Line Items]
Range	31.80%
OREO [Member] | Fair Value, Inputs, Level 3 [Member] | Weighted Average [Member]
Note 11 - Fair Value Measurements (Details) - Quantitative Information About Unobservable Inputs for Assets Measured on A Nonrecurring Basis Using Level 3 Measurements [Line Items]
Range	8.10%
OREO [Member]
Note 11 - 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)	7,012	24,733
Fair Value, Inputs, Level 3 [Member] | Impaired Loans [Member]
Note 11 - 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)	1,263	5,659
Valuation Technique	Discounted appraisals
Unobservable Inputs	Marketability discount
Fair Value, Inputs, Level 3 [Member] | Impaired Loans [Member] | Minimum [Member]
Note 11 - 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%
Fair Value, Inputs, Level 3 [Member] | Impaired Loans [Member] | Maximum [Member]
Note 11 - Fair Value Measurements (Details) - Quantitative Information About Unobservable Inputs for Assets Measured on A Nonrecurring Basis Using Level 3 Measurements [Line Items]
Range	30.10%
Fair Value, Inputs, Level 3 [Member] | Impaired Loans [Member] | Weighted Average [Member]
Note 11 - Fair Value Measurements (Details) - Quantitative Information About Unobservable Inputs for Assets Measured on A Nonrecurring Basis Using Level 3 Measurements [Line Items]
Range	13.00%
Impaired Loans [Member]
Note 11 - 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)	$ 1,263	$ 5,659

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Note 4 - Accounting Policy

6 Months Ended

Jun. 30, 2014

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 or credits 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 sixteen quarter rolling historical loss rates, adjusted for qualitative risk factors.

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. 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.

Recently Issued AccountingStandards

In April 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360 - Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. This ASU changes the requirements for reporting discontinued operations and seeks to enhance the FASB and International Accounting Standards Board’s (“IASB”) convergence project regarding such reporting requirements. A discontinued operation may include a component of an entity, a group of components of an entity, a business or a non-profit activity. A disposal of a component of an entity or a group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has, or will have, a major effect on an entity’s operations and financial results. This ASU, which is intended to reduce the frequency of disposals reported as discontinued operations, requires additional disclosures regarding discontinued operations. Those disclosures include among others, the requirement that an entity present, for each comparative period, the assets and liabilities of a disposal group that includes a discontinued operation separately in the asset and liability sections, respectively, of the statement of financial position.

For the Company, the guidance of ASU 2014-08 is effective prospectively for annual periods beginning on or after December 15, 2014, and interim periods within that year. The Company does not expect there to be a material impact on its consolidated financial position, results of operations, or cash flows upon adoption.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), as part of a joint project with the IASB to clarify revenue-recognition principles and develop a common revenue standard for U.S. GAAP and International Financial Reporting Standards (“IFRS”). ASU No. 2014-09 is expected to remove inconsistencies and weaknesses in revenue requirements and improve comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets. The scope of the new ASU includes all contracts with customers to provide goods or services in the ordinary course of business, except the following contracts that are specifically excluded from the scope:

● Lease contracts within the scope of ASC 840

● Insurance contracts within the scope of ASC 944

● Financial instruments and other contractual rights or obligations (e.g., receivables, debt and equity securities, derivatives)

● Guarantees (other than product or service warranties) within the scope of ASC 460

● Nonmonetary exchanges between entities in the same line of business to facilitate sales to customers other than the parties to the exchange

The primary principle of ASU 2014-09 is that entities should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this core principle, the guidance provides that an entity should apply the following steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, the entity satisfies a performance obligation.

The amendments in this ASU are effective for the Company in annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. Entities should apply the amendments either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying this ASU recognized at the date of initial application. If an entity elects the second method, then it should also provide the additional disclosures in reporting periods that include the date of initial application of (1) the amount by which each financial statement line item is affected in the current reporting period, as compared to the guidance that was in effect before the change, and (2) an explanation of the reasons for significant changes. The Company is currently evaluating the potential impact of ASU 2014-09 on its consolidated financial position, results of operations, and cash flows.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

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Note 5 - Net Income Per Common Share

6 Months Ended

Jun. 30, 2014

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. The effects of stock options outstanding 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 June 30,				Six Months Ended June 30,
(In thousands, except per share data)	2014		2013		2014		2013
Net income, basic and diluted	$	4,824	$	3,547	$	8,194	$	7,339
Less preferred stock dividends and discount accretion		563		487		1,100		972
Net income available to common shareholders, basic and diluted	$	4,261	$	3,060	$	7,094	$	6,367
Average common shares issued and outstanding, basic and diluted		7,482		7,473		7,481		7,471
Net income per common share, basic and diluted	$	.57	$	.41	$	.95	$	.85

Stock options for 18,049 and 22,049 shares of common stock were not included in the determination of diluted net income per common share for each period in 2014 and 2013, respectively, because they were antidilutive.

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Note 7 - Loans and Allowance for Loan Losses

6 Months Ended

Jun. 30, 2014

Receivables [Abstract]

Financing Receivables [Text Block]

7. Loans and Allowance for Loan Losses

Major classifications of loans outstanding are summarized as follows:

(In thousands)	June 30, 2014		December 31, 2013
Real Estate:
Real estate mortgage - construction and land development	$	97,769	$	101,352
Real estate mortgage - residential		365,969		371,582
Real estate mortgage - farmland and other commercial enterprises		392,910		418,147
Commercial:
Commercial and industrial		52,713		47,426
States and political subdivisions		25,150		21,561
Lease financing		398		902
Other		20,769		23,840
Consumer:
Secured		8,836		8,579
Unsecured		5,670		6,513
Total loans		970,184		999,902
Less unearned income		5		19
Total loans, net of unearned income	$	970,179	$	999,883

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 June 30, 2014
Balance, beginning of period	$	17,114		$	1,201		$	375		$	18,690
Provision for loan losses		(1,603	)		205			10			(1,388	)
Recoveries		189			18			39			246
Loans charged off		(252	)		(86	)		(87	)		(425	)
Balance, end of period	$	15,448		$	1,338		$	337		$	17,123
Six months ended June 30, 2014
Balance, beginning of period	$	18,716		$	1,409		$	452		$	20,577
Provision for loan losses		(2,359	)		1,130			(27	)		(1,256	)
Recoveries		357			45			74			476
Loans charged off		(1,266	)		(1,246	)		(162	)		(2,674	)
Balance, end of period	$	15,448		$	1,338		$	337		$	17,123

(In thousands)	Real Estate			Commercial			Consumer			Total
Three months ended June 30, 2013
Balance, beginning of period	$	21,402		$	1,558		$	603		$	23,563
Provision for loan losses		(848	)		624			(138	)		(362	)
Recoveries		48			14			114			176
Loans charged off		(362	)		(19	)		(53	)		(434	)
Balance, end of period	$	20,240		$	2,177		$	526		$	22,943
Six months ended June 30, 2013
Balance, beginning of period	$	22,254		$	1,513		$	678		$	24,445
Provision for loan losses		(1,500	)		617			(111	)		(994	)
Recoveries		184			97			150			431
Loans charged off		(698	)		(50	)		(191	)		(939	)
Balance, end of period	$	20,240		$	2,177		$	526		$	22,943

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

June 30, 2014 (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	$	15,753	$	8,566	$	4,400	$	12,966	$	856
Real estate mortgage - residential		10,930		3,980		6,645		10,625		1,195
Real estate mortgage - farmland and other commercial enterprises		25,833		7,126		18,600		25,726		1,278
Commercial
Commercial and industrial		240		23		217		240		195
Consumer
Unsecured		66		-		66		66		66
Total	$	52,822	$	19,695	$	29,928	$	49,623	$	3,590

December 31, 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	$	17,234	$	9,742	$	4,699	$	14,441	$	930
Real estate mortgage - residential		11,595		2,871		8,612		11,483		1,443
Real estate mortgage - farmland and other commercial enterprises		32,102		12,262		19,746		32,008		1,443
Commercial
Commercial and industrial		311		24		293		317		200
Consumer
Secured		18		-		18		18		15
Unsecured		71		-		72		72		71
Total	$	61,331	$	24,899	$	33,440	$	58,339	$	4,102

Three Months Ended June 30,	2014						2013
(In thousands)	Average		Interest Income Recognized		Cash Basis Interest Recognized		Average		Interest Income Recognized		Cash Basis Interest Recognized
Real Estate
Real estate – construction and land development	$	15,452	$	120	$	118	$	24,159	$	338	$	347
Real estate mortgage – residential		11,059		147		141		10,836		87		83
Real estate mortgage – farmland and other commercial enterprises		26,295		359		346		28,209		236		236
Commercial
Commercial and industrial		245		3		3		1,154		29		29
Consumer
Secured		-		-		-		21		1		1
Unsecured		68		-		-		215		3		4
Total	$	53,119	$	629	$	608	$	64,594	$	694	$	700

Six Months Ended June 30,	2014						2013
(In thousands)	Average		Interest Income Recognized		Cash Basis Interest Recognized		Average		Interest Income Recognized		Cash Basis Interest Recognized
Real Estate
Real estate – construction and land development	$	15,537	$	233	$	229	$	25,047	$	691	$	689
Real estate mortgage – residential		11,384		262		250		9,569		172		163
Real estate mortgage – farmland and other commercial enterprises		30,222		745		722		29,692		484		478
Commercial
Commercial and industrial		247		4		3		930		33		33
Consumer
Secured		9		-		-		21		1		1
Unsecured		69		4		3		214		6		6
Total	$	57,468	$	1,248	$	1,207	$	65,473	$	1,387	$	1,370

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 June 30, 2014 and December 31, 2013.

June 30, 2014 (In thousands)	Real Estate		Commercial		Consumer		Total
Allowance for Loan Losses
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	3,329	$	195	$	66	$	3,590
Collectively evaluated for impairment		12,119		1,143		271		13,533
Total ending allowance balance	$	15,448	$	1,338	$	337	$	17,123
Loans
Loans individually evaluated for impairment	$	49,317	$	240	$	66	$	49,623
Loans collectively evaluated for impairment		807,331		98,785		14,440		920,556
Total ending loan balance, net of unearned income	$	856,648	$	99,025	$	14,506	$	970,179

December 31, 2013 (In thousands)	Real Estate		Commercial		Consumer		Total
Allowance for Loan Losses
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	3,816	$	200	$	86	$	4,102
Collectively evaluated for impairment		14,900		1,209		366		16,475
Total ending allowance balance	$	18,716	$	1,409	$	452	$	20,577
Loans
Loans individually evaluated for impairment	$	57,932	$	317	$	90	$	58,339
Loans collectively evaluated for impairment		833,149		93,393		15,002		941,544
Total ending loan balance, net of unearned income	$	891,081	$	93,710	$	15,092	$	999,883

The following tables present the recorded investment in nonperforming loans by class of loans as of June 30, 2014 and December 31, 2013.

June 30, 2014 (In thousands)	Nonaccrual		Restructured Loans		Loans Past Due 90 Days or More and Still Accruing
Real Estate:
Real estate mortgage - construction and land development	$	4,794	$	4,219	$	-
Real estate mortgage - residential		5,149		4,532		-
Real estate mortgage - farmland and other commercial enterprises		7,937		16,657		-
Commercial:
Commercial and industrial		199		-		-
Other		11		-		-
Consumer:
Secured		5		-		-
Unsecured		-		48		-
Total	$	18,095	$	25,456	$	-

December 31, 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	$	5,821	$	4,391	$	-
Real estate mortgage - residential		5,154		4,826		10
Real estate mortgage - farmland and other commercial enterprises		12,677		16,987		434
Commercial:
Commercial and industrial		160		-		-
Lease financing		22		-		-
Consumer:
Secured		3		-		-
Unsecured		1		51		-
Total	$	23,838	$	26,255	$	444

The Company has allocated $2.5 million and $2.7 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 June 30, 2014 and December 31, 2013, respectively. The Company had no commitments to lend additional amounts to customers with outstanding loans that are classified as troubled debt restructurings at June 30, 2014 and December 31, 2013.

The Company had no credits during 2014 that were modified as troubled debt restructurings. The Company had five credits in 2013 that were modified as troubled debt restructurings. Each of these credits represents debt by a borrower which was 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 following table presents loans by class modified as troubled debt restructurings that occurred during the three and six months ended June 30, 2013. There were no loans modified as troubled debt restructurings during 2014.

(Dollars in thousands) Troubled Debt Restructurings:	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Three Months Ended June 30, 2013
Real Estate:
Real estate mortgage – residential		1	$	18	$	18
Commercial:
Commercial and industrial		1		2		2
Consumer:
Secured		1		13		13
Total		3	$	33	$	33
Six Months Ended June 30, 2013
Real Estate:
Real estate mortgage – residential		3	$	309	$	309
Commercial:
Commercial and industrial		1		2		2
Consumer:
Secured		1		13		13
Total		5	$	324	$	324

The troubled debt restructurings identified above increased the allowance for loan losses by $15 thousand and $23 thousand in the three and six months periods ended June 30, 2013, respectively. There were no charge-offs related to these loans. There were no payment defaults during the first six months of 2014 or 2013 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.

June 30, 2014 (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	$	568	$	317	$	885	$	96,884	$	97,769
Real estate mortgage - residential		2,771		2,822		5,593		360,376		365,969
Real estate mortgage - farmland and other commercial enterprises		444		6,278		6,722		386,188		392,910
Commercial:
Commercial and industrial		45		176		221		52,492		52,713
States and political subdivisions		-		-		-		25,150		25,150
Lease financing, net		171		-		171		222		393
Other		25		-		25		20,744		20,769
Consumer:
Secured		56		2		58		8,778		8,836
Unsecured		58		-		58		5,612		5,670
Total	$	4,138	$	9,595	$	13,733	$	956,446	$	970,179

December 31, 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	$	613	$	671	$	100,681	$	101,352
Real estate mortgage - residential		1,225		2,502		3,727		367,855		371,582
Real estate mortgage - farmland and other commercial enterprises		3,548		7,978		11,526		406,621		418,147
Commercial:
Commercial and industrial		71		53		124		47,302		47,426
States and political subdivisions		-		-		-		21,561		21,561
Lease financing, net		-		22		22		861		883
Other		56		-		56		23,784		23,840
Consumer:
Secured		41		3		44		8,535		8,579
Unsecured		58		1		59		6,454		6,513
Total	$	5,057	$	11,172	$	16,229	$	983,654	$	999,883

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 excludes immaterial amounts attributed to accrued interest receivable.

	Real Estate						Commercial
June 30, 2014 (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		Other
Credit risk profile by internally assigned rating grades:
Pass	$	75,835	$	332,358	$	345,066	$	50,930	$	25,150	$	393	$	20,691
Special Mention		7,207		12,219		16,532		785		-		-		59
Substandard		14,727		21,392		30,837		998		-		-		19
Doubtful		-		-		475		-		-		-		-
Total	$	97,769	$	365,969	$	392,910	$	52,713	$	25,150	$	393	$	20,769

	Real Estate						Commercial
December 31, 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		Other
Credit risk profile by internally assigned rating grades:
Pass	$	77,873	$	334,104	$	352,238	$	45,652	$	21,561	$	861	$	23,820
Special Mention		7,755		15,120		29,156		963		-		-		-
Substandard		15,724		22,358		36,753		735		-		22		20
Doubtful		-		-		-		76		-		-		-
Total	$	101,352	$	371,582	$	418,147	$	47,426	$	21,561	$	883	$	23,840

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 June 30, 2014 and December 31, 2013.

	June 30, 2014				December 31, 2013
	Consumer				Consumer
(In thousands)	Secured		Unsecured		Secured		Unsecured
Credit risk profile based on payment activity:
Performing	$	8,831	$	5,622	$	8,576	$	6,461
Nonperforming		5		48		3		52
Total	$	8,836	$	5,670	$	8,579	$	6,513

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Note 6 - Investment Securities (Details) (USD $)	6 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
Note 6 - Investment Securities (Details) [Line Items]
Available-for-sale Securities, Accumulated Gross Unrealized Loss, before Tax	$ 4,300,000	$ 12,900,000
Percentage Decrease in Securities With Gross Unrealized Losses	66.40%
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss	4,273,000	3,609,000
Available-for-sale Securities	616,256,000	612,820,000
AFS Gross Unrealized Losses [Member]
Note 6 - Investment Securities (Details) [Line Items]
Available-for-sale Securities, Change in Net Unrealized Holding Gain (Loss) before Taxes	8,600,000
Single Issuer Corporate Debt Security [Member]
Note 6 - Investment Securities (Details) [Line Items]
Available-for-sale Securities, Accumulated Gross Unrealized Loss, before Tax	478,000
Available-for-sale Securities	$ 5,400,000

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Note 8 - Other Real Estate Owned (Details) - OREO Activity (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
OREO Activity [Abstract]
Beginning balance	$ 37,826	$ 52,562
Transfers from loans and other increases	6,978	5,279
Proceeds from sales	(4,262)	(9,619)
(Loss) gain on sales, net	(94)	280
Write downs and other decreases, net	(1,414)	(2,037)
Ending balance	$ 39,034	$ 46,465

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Accounting Policies, by Policy (Policies)

6 Months Ended

Jun. 30, 2014

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 or credits 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 sixteen quarter rolling historical loss rates, adjusted for qualitative risk factors.

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. 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.

New Accounting Pronouncements, Policy [Policy Text Block]

Recently Issued AccountingStandards

In April 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360 - Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. This ASU changes the requirements for reporting discontinued operations and seeks to enhance the FASB and International Accounting Standards Board’s (“IASB”) convergence project regarding such reporting requirements. A discontinued operation may include a component of an entity, a group of components of an entity, a business or a non-profit activity. A disposal of a component of an entity or a group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has, or will have, a major effect on an entity’s operations and financial results. This ASU, which is intended to reduce the frequency of disposals reported as discontinued operations, requires additional disclosures regarding discontinued operations. Those disclosures include among others, the requirement that an entity present, for each comparative period, the assets and liabilities of a disposal group that includes a discontinued operation separately in the asset and liability sections, respectively, of the statement of financial position.

For the Company, the guidance of ASU 2014-08 is effective prospectively for annual periods beginning on or after December 15, 2014, and interim periods within that year. The Company does not expect there to be a material impact on its consolidated financial position, results of operations, or cash flows upon adoption.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), as part of a joint project with the IASB to clarify revenue-recognition principles and develop a common revenue standard for U.S. GAAP and International Financial Reporting Standards (“IFRS”). ASU No. 2014-09 is expected to remove inconsistencies and weaknesses in revenue requirements and improve comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets. The scope of the new ASU includes all contracts with customers to provide goods or services in the ordinary course of business, except the following contracts that are specifically excluded from the scope:

● Lease contracts within the scope of ASC 840

● Insurance contracts within the scope of ASC 944

● Financial instruments and other contractual rights or obligations (e.g., receivables, debt and equity securities, derivatives)

● Guarantees (other than product or service warranties) within the scope of ASC 460

● Nonmonetary exchanges between entities in the same line of business to facilitate sales to customers other than the parties to the exchange

The primary principle of ASU 2014-09 is that entities should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this core principle, the guidance provides that an entity should apply the following steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, the entity satisfies a performance obligation.

The amendments in this ASU are effective for the Company in annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. Entities should apply the amendments either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying this ASU recognized at the date of initial application. If an entity elects the second method, then it should also provide the additional disclosures in reporting periods that include the date of initial application of (1) the amount by which each financial statement line item is affected in the current reporting period, as compared to the guidance that was in effect before the change, and (2) an explanation of the reasons for significant changes. The Company is currently evaluating the potential impact of ASU 2014-09 on its consolidated financial position, results of operations, and cash flows.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

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Note 8 - Other Real Estate Owned (Tables)

6 Months Ended

Jun. 30, 2014

Disclosure Text Block [Abstract]

OREO Detail [Table Text Block]

(In thousands)	June 30, 2014		December 31, 2013
Construction and land development	$	21,106	$	23,504
Residential real estate		2,004		2,695
Farmland and other commercial enterprises		15,924		11,627
Total	$	39,034	$	37,826

OREO Activity [Table Text Block]

Six months ended June 30, (In thousands)	2014			2013
Beginning balance	$	37,826		$	52,562
Transfers from loans and other increases		6,978			5,279
Proceeds from sales		(4,262	)		(9,619	)
(Loss) gain on sales, net		(94	)		280
Write downs and other decreases, net		(1,414	)		(2,037	)
Ending balance	$	39,034		$	46,465

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Note 7 - Loans and Allowance for Loan Losses (Details) - Risk Category of Loans by Class-Consumer (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Note 7 - Loans and Allowance for Loan Losses (Details) - Risk Category of Loans by Class-Consumer [Line Items]
Loans	$ 970,179	$ 999,883
Consumer Secured [Member] | Performing Financing Receivable [Member]
Note 7 - Loans and Allowance for Loan Losses (Details) - Risk Category of Loans by Class-Consumer [Line Items]
Loans	8,831	8,576
Consumer Secured [Member] | Nonperforming Financing Receivable [Member]
Note 7 - Loans and Allowance for Loan Losses (Details) - Risk Category of Loans by Class-Consumer [Line Items]
Loans	5	3
Consumer Secured [Member] | Total [Member]
Note 7 - Loans and Allowance for Loan Losses (Details) - Risk Category of Loans by Class-Consumer [Line Items]
Loans	8,836	8,579
Consumer Secured [Member]
Note 7 - Loans and Allowance for Loan Losses (Details) - Risk Category of Loans by Class-Consumer [Line Items]
Loans	8,836	8,579
Consumer Unsecured [Member] | Performing Financing Receivable [Member]
Note 7 - Loans and Allowance for Loan Losses (Details) - Risk Category of Loans by Class-Consumer [Line Items]
Loans	5,622	6,461
Consumer Unsecured [Member] | Nonperforming Financing Receivable [Member]
Note 7 - Loans and Allowance for Loan Losses (Details) - Risk Category of Loans by Class-Consumer [Line Items]
Loans	48	52
Consumer Unsecured [Member] | Total [Member]
Note 7 - Loans and Allowance for Loan Losses (Details) - Risk Category of Loans by Class-Consumer [Line Items]
Loans	5,670	6,513
Consumer Unsecured [Member]
Note 7 - Loans and Allowance for Loan Losses (Details) - Risk Category of Loans by Class-Consumer [Line Items]
Loans	$ 5,670	$ 6,513

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Note 7 - Loans and Allowance for Loan Losses (Details) - Activity In The Allowance For Loan Losses (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance at Beginning of Period	$ 18,690	$ 23,563	$ 20,577	$ 24,445
Balance at End of Period	17,123	22,943	17,123	22,943
Provision for loan losses	(1,388)	(362)	(1,256)	(994)
Recoveries	246	176	476	431
Loans charged off	(425)	(434)	(2,674)	(939)
Real Estate Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance at Beginning of Period	17,114	21,402	18,716	22,254
Balance at End of Period	15,448	20,240	15,448	20,240
Provision for loan losses	(1,603)	(848)	(2,359)	(1,500)
Recoveries	189	48	357	184
Loans charged off	(252)	(362)	(1,266)	(698)
Commercial Portfolio Segment [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance at Beginning of Period	1,201	1,558	1,409	1,513
Balance at End of Period	1,338	2,177	1,338	2,177
Provision for loan losses	205	624	1,130	617
Recoveries	18	14	45	97
Loans charged off	(86)	(19)	(1,246)	(50)
Consumer Portfolio Segment [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance at Beginning of Period	375	603	452	678
Balance at End of Period	337	526	337	526
Provision for loan losses	10	(138)	(27)	(111)
Recoveries	39	114	74	150
Loans charged off	$ (87)	$ (53)	$ (162)	$ (191)

XML

Unaudited Condensed Consolidated Statements of Comprehensive Income (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Net Income	$ 4,824	$ 3,547	$ 8,194	$ 7,339
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 $2,678, $(5,519), $4,618 and $(6,024), respectively	4,973	(10,250)	8,577	(11,188)
Reclassification adjustment for prior period unrealized (gain) loss previously reported in other comprehensive income recognized during current period, net of tax of $8, $22, $(36) and $18, respectively	(15)	(40)	67	(33)
Change in unfunded portion of postretirement benefit obligation, net of tax of $13, $23, $25 and $46, respectively	23	44	46	88
Other comprehensive income (loss)	4,981	(10,246)	8,690	(11,133)
Comprehensive income (loss)	$ 9,805	$ (6,699)	$ 16,884	$ (3,794)

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Note 1 - Basis of Presentation and Nature of Operations

6 Months Ended

Jun. 30, 2014

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 consolidated balance sheet as of December 31, 2013 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, 2013 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, 2013.

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Note 11 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Construction and Land Development OREO [Member] | Fair Value, Inputs, Level 1 [Member]
Note 11 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	$ 0	$ 0
Construction and Land Development OREO [Member] | Fair Value, Inputs, Level 2 [Member]
Note 11 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	0	0
Construction and Land Development OREO [Member] | Fair Value, Inputs, Level 3 [Member]
Note 11 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	4,191	14,465
Construction and Land Development OREO [Member]
Note 11 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	4,191	14,465
Residential Real Estate OREO [Member] | Fair Value, Inputs, Level 1 [Member]
Note 11 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	0	0
Residential Real Estate OREO [Member] | Fair Value, Inputs, Level 2 [Member]
Note 11 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	0	0
Residential Real Estate OREO [Member] | Fair Value, Inputs, Level 3 [Member]
Note 11 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	934	1,116
Residential Real Estate OREO [Member]
Note 11 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	934	1,116
Farmland and Other Commercial Enterprises OREO [Member] | Fair Value, Inputs, Level 1 [Member]
Note 11 - 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 11 - 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 11 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	1,887	9,152
Farmland and Other Commercial Enterprises OREO [Member]
Note 11 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	1,887	9,152
OREO [Member] | Fair Value, Inputs, Level 1 [Member]
Note 11 - 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 11 - 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 11 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	7,012	24,733
OREO [Member]
Note 11 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	7,012	24,733
Real Estate Mortgage Residential [Member] | Fair Value, Inputs, Level 1 [Member] | Impaired Loans [Member]
Note 11 - 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] | Fair Value, Inputs, Level 2 [Member] | Impaired Loans [Member]
Note 11 - 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] | Fair Value, Inputs, Level 3 [Member] | Impaired Loans [Member]
Note 11 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	1,219	2,085
Real Estate Mortgage Residential [Member] | Impaired Loans [Member]
Note 11 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	1,219	2,085
Real Estate Mortgage Farmland And Other Commercial Enterprises [Member] | Fair Value, Inputs, Level 1 [Member] | Impaired Loans [Member]
Note 11 - 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] | Fair Value, Inputs, Level 2 [Member] | Impaired Loans [Member]
Note 11 - 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] | Fair Value, Inputs, Level 3 [Member] | Impaired Loans [Member]
Note 11 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	7	3,152
Real Estate Mortgage Farmland And Other Commercial Enterprises [Member] | Impaired Loans [Member]
Note 11 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	7	3,152
Commercial And Industrial [Member] | Fair Value, Inputs, Level 1 [Member] | Impaired Loans [Member]
Note 11 - 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] | Fair Value, Inputs, Level 2 [Member] | Impaired Loans [Member]
Note 11 - 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] | Fair Value, Inputs, Level 3 [Member] | Impaired Loans [Member]
Note 11 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	37	88
Commercial And Industrial [Member] | Impaired Loans [Member]
Note 11 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	37	88
Real Estate Construction And Land Development [Member] | Fair Value, Inputs, Level 1 [Member] | Impaired Loans [Member]
Note 11 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring		0
Real Estate Construction And Land Development [Member] | Fair Value, Inputs, Level 2 [Member] | Impaired Loans [Member]
Note 11 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring		0
Real Estate Construction And Land Development [Member] | Fair Value, Inputs, Level 3 [Member] | Impaired Loans [Member]
Note 11 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring		334
Real Estate Construction And Land Development [Member] | Impaired Loans [Member]
Note 11 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring		334
Fair Value, Inputs, Level 1 [Member] | Impaired Loans [Member]
Note 11 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	0	0
Fair Value, Inputs, Level 2 [Member] | Impaired Loans [Member]
Note 11 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	0	0
Fair Value, Inputs, Level 3 [Member] | Impaired Loans [Member]
Note 11 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	1,263	5,659
Impaired Loans [Member]
Note 11 - Fair Value Measurements (Details) - Carrying Amount of Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Assets fair value, nonrecurring	$ 1,263	$ 5,659

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Note 9 - Postretirement Medical Benefits (Tables)

6 Months Ended

Jun. 30, 2014

Compensation and Retirement Disclosure [Abstract]

Schedule of Net Benefit Costs [Table Text Block]

	Three Months Ended					Six Months Ended
	June 30,					June 30,
(In thousands)	2014			2013		2014			2013
Service cost	$	120		$	158	$	241		$	315
Interest cost		143			138		285			276
Recognized prior service cost		52			64		104			128
Recognized net actuarial gain		(16	)		-		(32	)		-
Net periodic benefit cost	$	299		$	360	$	598		$	719

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Note 6 - Investment Securities (Details) - Investment Securities With Unrealized Losses Not Recognized In Income (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Note 6 - Investment Securities (Details) - Investment Securities With Unrealized Losses Not Recognized In Income [Line Items]
Less than 12 Months, Fair Value	$ 23,433	$ 334,326
Less than 12 Months, Unrealized Losses	66	9,303
12 Months or More, Fair Value	206,029	48,069
12 Months or More, Unrealized Losses	4,273	3,609
Total, Fair Value	229,462	382,395
Total, Unrealized Losses	4,339	12,912
US Government-sponsored Enterprises Debt Securities [Member]
Note 6 - Investment Securities (Details) - Investment Securities With Unrealized Losses Not Recognized In Income [Line Items]
Less than 12 Months, Fair Value	3,391	65,094
Less than 12 Months, Unrealized Losses	12	2,434
12 Months or More, Fair Value	66,769	11,830
12 Months or More, Unrealized Losses	1,291	721
Total, Fair Value	70,160	76,924
Total, Unrealized Losses	1,303	3,155
US States and Political Subdivisions Debt Securities [Member]
Note 6 - Investment Securities (Details) - Investment Securities With Unrealized Losses Not Recognized In Income [Line Items]
Less than 12 Months, Fair Value	9,739	48,715
Less than 12 Months, Unrealized Losses	17	1,594
12 Months or More, Fair Value	31,756	15,095
12 Months or More, Unrealized Losses	569	803
Total, Fair Value	41,495	63,810
Total, Unrealized Losses	586	2,397
Residential Mortgage Backed Securities [Member]
Note 6 - Investment Securities (Details) - Investment Securities With Unrealized Losses Not Recognized In Income [Line Items]
Less than 12 Months, Fair Value	10,303	219,032
Less than 12 Months, Unrealized Losses	37	5,199
12 Months or More, Fair Value	101,240	16,306
12 Months or More, Unrealized Losses	1,908	1,033
Total, Fair Value	111,543	235,338
Total, Unrealized Losses	1,945	6,232
Commercial Mortgage Backed Securities [Member]
Note 6 - Investment Securities (Details) - Investment Securities With Unrealized Losses Not Recognized In Income [Line Items]
Less than 12 Months, Fair Value	0	689
Less than 12 Months, Unrealized Losses	0	59
12 Months or More, Fair Value	715	0
12 Months or More, Unrealized Losses	26	0
Total, Fair Value	715	689
Total, Unrealized Losses	26	59
Corporate Debt Securities [Member]
Note 6 - Investment Securities (Details) - Investment Securities With Unrealized Losses Not Recognized In Income [Line Items]
Less than 12 Months, Fair Value	0	80
Less than 12 Months, Unrealized Losses	0	0
12 Months or More, Fair Value	5,395	4,816
12 Months or More, Unrealized Losses	478	1,049
Total, Fair Value	5,395	4,896
Total, Unrealized Losses	478	1,049
Mutual Funds And Equity Securities [Member]
Note 6 - Investment Securities (Details) - Investment Securities With Unrealized Losses Not Recognized In Income [Line Items]
Less than 12 Months, Fair Value	0	716
Less than 12 Months, Unrealized Losses	0	17
12 Months or More, Fair Value	154	22
12 Months or More, Unrealized Losses	1	3
Total, Fair Value	154	738
Total, Unrealized Losses	$ 1	$ 20

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Note 11 - Fair Value Measurements

6 Months Ended

Jun. 30, 2014

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

11. 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 June 30, 2014 and December 31, 2013 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)
June 30, 2014
Obligations of U.S. government-sponsored entities	$	97,230	$	-	$	97,230	$	-
Obligations of states and political subdivisions		133,281		-		133,281		-
Mortgage-backed securities – residential		377,519		-		377,519		-
Mortgage-backed securities – commercial		715		-		715		-
Corporate debt securities		6,492		-		6,492		-
Mutual funds and equity securities		1,019		1,019		-		-
Total	$	616,256	$	1,019	$	615,237	$	-

			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, 2013
Obligations of U.S. government-sponsored entities	$	93,750	$	-	$	93,750	$	-
Obligations of states and political subdivisions		131,970		-		131,970		-
Mortgage-backed securities – residential		378,077		-		378,077		-
Mortgage-backed securities – commercial		689		-		689		-
Corporate debt securities		6,257		-		6,257		-
Mutual funds and equity securities		2,077		2,077		-		-
Total	$	612,820	$	2,077	$	610,743	$	-

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 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 includes comparable sales data and is 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 table represents 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 table 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)
June 30, 2014
Collateral-dependent Impaired Loans
Real estate mortgage – residential	$	1,219	$	-	$	-	$	1,219
Real estate mortgage – farmland and other commercial enterprises		7		-		-		7
Commercial and industrial		37		-		-		37
Total	$	1,263	$	-	$	-	$	1,263
OREO
Construction and land development	$	4,191	$	-	$	-	$	4,191
Residential real estate		934		-		-		934
Farmland and other commercial enterprises		1,887		-		-		1,887
Total	$	7,012	$	-	$	-	$	7,012

			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, 2013
Collateral-dependent Impaired Loans
Real estate mortgage – construction and land development	$	334	$	-	$	-	$	334
Real estate mortgage – residential		2,085		-		-		2,085
Real estate mortgage – farmland and other commercial enterprises		3,152		-		-		3,152
Commercial and industrial		88		-		-		88
Total	$	5,659	$	-	$	-	$	5,659
OREO
Construction and land development	$	14,465	$	-	$	-	$	14,465
Residential real estate		1,116		-		-		1,116
Farmland and other commercial enterprises		9,152		-		-		9,152
Total	$	24,733	$	-	$	-	$	24,733

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				Six Months Ended
	June 30,				June 30,
(In thousands)	2014		2013		2014		2013
Impairment charges:
Collateral-dependent impaired loans	$	135	$	839	$	268	$	1,210
OREO		419		1,005		1,170		1,694
Total	$	554	$	1,844	$	1,438	$	2,904

The following table presents quantitative information about unobservable inputs for assets measured on a nonrecurring basis using Level 3 measurements. As previously discussed, the fair value of real estate securing 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 below for 2014.

(In thousands)	Fair Value at June 30, 2014		Valuation Technique	Unobservable Inputs	Range		Average
Collateral-dependent impaired loans	$	1,263	Discounted appraisals	Marketability discount		0% - 30.1%		13.0%
OREO	$	7,012	Discounted appraisals	Marketability discount		0.5% - 31.8%		8.1%

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 June 30, 2014 and December 31, 2013. 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)
June 30, 2014
Assets
Cash and cash equivalents	$	68,987	$	68,987	$	68,987	$	-	$	-
Held to maturity investment securities		3,814		3,963		-		3,963		-
Loans, net		953,056		953,158		-		-		953,158
Accrued interest receivable		5,670		5,670		-		5,670		-
Federal Home Loan Bank and Federal Reserve Bank Stock		9,368	N/A			-		-		-
Liabilities
Deposits		1,382,673		1,384,661		947,958		-		436,703
Federal funds purchased and other short-term borrowings		24,230		24,230		-		24,230		-
Securities sold under agreements to repurchase and other long-term borrowings		127,797		138,251		-		138,251		-
Subordinated notes payable to unconsolidated trusts		48,970		23,794		-		-		23,794
Accrued interest payable		1,065		1,065		-		1,065		-
December 31, 2013
Assets
Cash and cash equivalents	$	68,253	$	68,253	$	68,253	$	-	$	-
Held to maturity investment securities		765		827		-		827		-
Loans, net		979,306		977,846		-		-		977,846
Accrued interest receivable		5,901		5,901		-		5,901		-
Federal Home Loan Bank and Federal Reserve Bank Stock		9,516	N/A			-		-		-
Liabilities
Deposits		1,410,215		1,412,572		938,700		-		473,872
Federal funds purchased and other short-term borrowings		29,123		29,123		-		29,123		-
Securities sold under agreements to repurchase and other long-term borrowings		127,880		139,375		-		139,375		-
Subordinated notes payable to unconsolidated trusts		48,970		26,070		-		-		26,070
Accrued interest payable		1,137		1,137		-		1,137		-