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, 2015

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

7,495,170 shares outstanding at August 6, 2015

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Unaudited Condensed Consolidated Balance Sheets	3
Unaudited Condensed Consolidated Statements of Income	4
Unaudited Condensed Consolidated Statements of Comprehensive Income	5
Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity	6
Unaudited Condensed Consolidated Statements of Cash Flows	7
Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3. Quantitative and Qualitative Disclosures About Market Risk	54
Item 4. Controls and Procedures	54
PART II - OTHER INFORMATION
Item 1. Legal Proceedings	55
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	55
Item 6. Exhibits	55
SIGNATURES	58

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)	2015			2014
Assets
Cash and cash equivalents:
Cash and due from banks	$	22,586		$	26,770
Interest bearing deposits in other banks		42,574			67,152
Federal funds sold and securities purchased under agreements to resell		5,262			6,992
Money market mutual funds		11,200			-
Total cash and cash equivalents		81,622			100,914
Investment securities:
Available for sale, amortized cost of $612,243 (2015) and $618,429 (2014)		618,297			626,388
Held to maturity, fair value of $3,871 (2015) and $3,923 (2014)		3,703			3,728
Total investment securities		622,000			630,116
Loans, net of unearned income		933,305			931,943
Allowance for loan losses		(12,199	)		(13,968	)
Loans, net		921,106			917,975
Premises and equipment, net		34,176			34,933
Company-owned life insurance		29,809			29,363
Intangible assets, net		225			449
Other real estate owned		26,214			31,960
Other assets		35,261			36,896
Total assets	$	1,750,413		$	1,782,606
Liabilities
Deposits:
Noninterest bearing	$	298,665		$	292,788
Interest bearing		1,060,509			1,094,373
Total deposits		1,359,174			1,387,161
Federal funds purchased and other short-term borrowings		27,359			28,590
Securities sold under agreements to repurchase and other long-term borrowings		120,150			119,724
Subordinated notes payable to unconsolidated trusts		48,970			48,970
Dividends payable		-			113
Other liabilities		26,983			25,119
Total liabilities		1,582,636			1,609,677
Shareholders’ Equity
Preferred stock, no par value		-			10,000
1,000,000 shares authorized; none and 10,000 Series A shares issued and outstanding at June 30, 2015 and December 31, 2014
Common stock, par value $.125 per share		937			936
14,608,000 shares authorized; 7,494,535 and 7,489,388 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively
Capital surplus		51,470			51,344
Retained earnings		112,955			105,774
Accumulated other comprehensive income		2,415			4,875
Total shareholders’ equity		167,777			172,929
Total liabilities and shareholders’ equity	$	1,750,413		$	1,782,606

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)	2015			2014			2015			2014
Interest Income
Interest and fees on loans	$	12,371		$	12,676		$	24,087		$	25,318
Interest on investment securities:
Taxable		2,641			2,980			5,436			6,060
Nontaxable		665			637			1,321			1,261
Interest on deposits in other banks		41			37			91			64
Interest on federal funds sold and securities purchased under agreements to resell		3			1			6			2
Total interest income		15,721			16,331			30,941			32,705
Interest Expense
Interest on deposits		737			1,104			1,558			2,307
Interest on federal funds purchased and other short-term borrowings		10			11			20			30
Interest on securities sold under agreements to repurchase and other long-term borrowings		1,187			1,279			2,363			2,543
Interest on subordinated notes payable to unconsolidated trusts		214			210			424			419
Total interest expense		2,148			2,604			4,365			5,299
Net interest income		13,573			13,727			26,576			27,406
Provision for loan losses		(264	)		(1,388	)		(1,809	)		(1,256	)
Net interest income after provision for loan losses		13,837			15,115			28,385			28,662
Noninterest Income
Service charges and fees on deposits		1,907			1,991			3,679			3,907
Allotment processing fees		1,102			1,274			2,292			2,519
Other service charges, commissions, and fees		1,347			1,399			2,614			2,634
Trust income		583			523			1,154			1,068
Investment securities gain (losses), net		45			(84	)		165			(75	)
Gains on sale of mortgage loans, net		173			123			338			220
Income from company-owned life insurance		227			233			468			479
Other		124			532			239			612
Total noninterest income		5,508			5,991			10,949			11,364
Noninterest Expense
Salaries and employee benefits		7,852			7,342			16,172			14,693
Occupancy expenses, net		1,219			1,209			2,446			2,491
Equipment expenses		609			593			1,227			1,187
Data processing and communication expenses		1,074			969			2,129			1,974
Bank franchise tax		607			610			1,212			1,222
Amortization of intangibles		113			101			225			202
Deposit insurance expense		404			461			804			901
Other real estate expenses, net		726			938			771			2,002
Legal expenses		189			228			401			422
Other		1,681			1,872			3,597			3,659
Total noninterest expense		14,474			14,323			28,984			28,753
Income before income taxes		4,871			6,783			10,350			11,273
Income tax expense		1,369			1,959			2,774			3,079
Net income		3,502			4,824			7,576			8,194
Less preferred stock dividends and discount accretion		170			563			395			1,100
Net income available to common shareholders	$	3,332		$	4,261		$	7,181		$	7,094
Per Common Share
Net income - basic and diluted	$	.44		$	.57		$	.96		$	.95
Cash dividends declared	N/A			N/A			N/A			N/A
Weighted Average Common Shares Outstanding
Basic and diluted		7,492			7,482			7,491			7,481

See accompanying notes to unaudited condensed consolidated financial statements.

4

Unaudited Condensed Consolidated Statements of Comprehensive Income

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(In thousands)	2015			2014			2015			2014
Net Income	$	3,502		$	4,824		$	7,576		$	8,194
Other comprehensive income (loss):
Unrealized holding (loss) gain on available for sale securities arising during the period on securities held at end of period, net of tax of $(1,634), $2,678 $(613) and $4,618, respectively		(3,035	)		4,973			(1,138	)		8,577
Reclassification adjustment for prior period unrealized (gain) loss previously reported in other comprehensive income recognized during current period, net of tax of $17, $8, $54 and $(36), respectively		(31	)		(15	)		(101	)		67
Change in unfunded portion of postretirement benefit obligation, net of tax of $8, $13, $(657) and $25, respectively		15			23			(1,221	)		46
Other comprehensive (loss) income		(3,051	)		4,981			(2,460	)		8,690
Comprehensive income	$	451		$	9,805		$	5,116		$	16,884

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, 2015 and 2014	Stock			Shares		Amount		Surplus		Earnings			Income (Loss)			Equity
Balance at January 1, 2015	$	10,000			7,489	$	936	$	51,344	$	105,774		$	4,875		$	172,929
Net income		-			-		-		-		7,576			-			7,576
Other comprehensive income		-			-		-		-		-			(2,460	)		(2,460	)
Cash dividends declared – preferred, $39.50 per share		-			-		-		-		(395	)		-			(395	)
Redemption of preferred stock		(10,000	)		-		-		-		-			-			(10,000	)
Shares issued under director compensation plan		-			2		-		45		-			-			45
Shares issued pursuant to employee stock purchase plan		-			4		1		65		-			-			66
Expense related to employee stock purchase plan		-			-		-		16		-			-			16
Balance at June 30, 2015	$	-			7,495	$	937	$	51,470	$	112,955		$	2,415		$	167,777
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 loss		-			-		-		-		-			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

See accompanying notes to unaudited condensed consolidated financial statements.

6

 Unaudited Condensed Consolidated Statements of Cash Flows

Six months ended June 30, (In thousands)	2015			2014
Cash Flows from Operating Activities
Net income	$	7,576		$	8,194
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		2,010			2,012
Net premium amortization of investment securities:
Available for sale		2,170			1,895
Held to maturity		25			16
Provision for loan losses		(1,809	)		(1,256	)
Deferred income tax expense		88			2
Noncash employee stock purchase plan expense		16			19
Noncash director fee compensation		45			36
Mortgage loans originated for sale		(13,484	)		(12,584	)
Proceeds from sale of mortgage loans		13,511			16,156
Gain on sale of mortgage loans, net		(338	)		(220	)
Loss (gain) on disposal and write downs of premises and equipment, net		15			(5	)
Net loss on sale and write downs of other real estate		557			1,508
Net (gain) loss on sale of available for sale investment securities		(165	)		75
Increase in cash surrender value of company-owned life insurance		(446	)		(460	)
Decrease in accrued interest receivable		215			231
Decrease in other assets		2,498			977
Decrease in accrued interest payable		(47	)		(72	)
Increase in other liabilities		5			2,337
Net cash provided by operating activities		12,442			18,861
Cash Flows from Investing Activities
Proceeds from maturities and calls of available for sale investment securities		65,795			41,485
Proceeds from sale of available for sale investment securities		12,406			12,104
Purchase of investment securities:
Available for sale		(74,020	)		(45,697	)
Held to maturity		-			(3,065	)
Proceeds from sale of restricted stock investments, net		-			148
Loans originated for investment (greater) less than principal collected, net		(1,146	)		18,945
Purchase of premises and equipment		(941	)		(1,350	)
Proceeds from sale of other real estate		5,406			2,803
Proceeds from disposals of premises and equipment		-			5
Net cash provided by investing activities		7,500			25,378
Cash Flows from Financing Activities
Net decrease in deposits		(27,987	)		(27,542	)
Net decrease in federal funds purchased and other short-term borrowings		(1,231	)		(4,893	)
Proceeds from securities sold under agreements to repurchase and other long-term borrowings		504			5
Repayments of securities sold under agreements to repurchase and other long-term borrowings		(78	)		(88	)
Redemption of preferred stock		(10,000	)		(10,000	)
Dividends paid, preferred		(508	)		(1,050	)
Shares issued under employee stock purchase plan		66			63
Net cash used in financing activities		(39,234	)		(43,505	)
Net (decrease) increase in cash and cash equivalents		(19,292	)		734
Cash and cash equivalents at beginning of year		100,914			68,253
Cash and cash equivalents at end of period	$	81,622		$	68,987
Supplemental Disclosures
Cash paid during the period for:
Interest	$	4,412		$	5,371
Income taxes		350			750
Transfers from loans to other real estate		393			6,668
Sale and financing of other real estate		258			1,459
Cash dividends payable, preferred		-			225

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, Inc. (“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. 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 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 two active nonbank subsidiaries, FCB Services, Inc. (“FCB Services”), and FFKT Insurance Services, Inc. (“FFKT Insurance”). 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. 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.

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 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, 2014 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, 2014 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

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,	2015									2014
(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	$	7,001		$	(1,535	)	$	5,466		$	63		$	434	$	497
Other comprehensive (loss) income before reclassifications		(3,035	)		-			(3,035	)		4,973			-		4,973
Amounts reclassified from accumulated other comprehensive income		(31	)		15			(16	)		(15	)		23		8
Net current-period other comprehensive (loss) income		(3,066	)		15			(3,051	)		4,958			23		4,981
Ending balance	$	3,935		$	(1,520	)	$	2,415		$	5,021		$	457	$	5,478

Six months ended June 30,	2015									2014
(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	$	5,174		$	(299	)	$	4,875		$	(3,623	)	$	411	$	(3,212	)
Other comprehensive (loss) income before reclassifications		(1,138	)		(1,251	)		(2,389	)		8,577			-		8,577
Amounts reclassified from accumulated other comprehensive income		(101	)		30			(71	)		67			46		113
Net current-period other comprehensive (loss) income		(1,239	)		(1,221	)		(2,460	)		8,644			46		8,690
Ending balance	$	3,935		$	(1,520	)	$	2,415		$	5,021		$	457	$	5,478

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)	2015			2014			2015			2014
Unrealized gains and losses on available for sale investment securities	$	48		$	23		$	155		$	(103	)	Investment securities gains (losses), net
		(17	)		(8	)		(54	)		36		Income tax expense
	$	31		$	15		$	101		$	(67	)	Net of tax
Amortization related to postretirement benefits
Prior service costs	$	(12	)	$	(52	)	$	(25	)	$	(104	)	Salaries and employee benefits
Actuarial gains (losses)		(11	)		16			(21	)		33		Salaries and employee benefits
		(23	)		(36	)		(46	)		(71	)	Total before tax
		8			13			16			25		Income tax benefit
	$	(15	)	$	(23	)	$	(30	)	$	(46	)	Net of tax
Total reclassifications for the period	$	16		$	(8	)	$	71		$	(113	)	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 the Company’s 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.

11

The general portion of the Company’s 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 the qualitative risk factors summarized below.

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 January 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-01, “Income Statement—Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items.” This ASU amends U.S. GAAP by removing the concept of extraordinary items, including deleting the definition of “extraordinary items” from the FASB Master Glossary. The revised guidance provides that the nature and financial effects of each event or transaction that is unusual in nature or occurs infrequently or both shall be presented as a separate component of income from continuing operations or, alternatively, disclosed in notes to the financial statements.

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The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015, with early adoption permitted. A reporting entity may apply the amendments prospectively or retrospectively. 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 April 2015, the FASB issued ASU No. 2015-03, “Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.” This ASU addresses balance sheet presentation requirements for debt issuance costs and debt discount and premiums. ASU No. 2015-03 requires that debt issuance costs related to a recognized debt liability be presented on the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. This ASU is effective for financial statements issued for fiscal years beginning after December 15, 2015, and for interim periods within those fiscal years. 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 2015, the FASB issued ASU No. 2015-07, “Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent).” This ASU applies to entities that elect to measure the fair value of an investment using the net asset value per share (or its equivalent) practical expedient. The amendments in this ASU remove the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. The amendments also clarify that certain disclosure requirements are limited to investments for which the entity has elected to measure the fair value using the practical expedient, and not all investments eligible to be measured at fair value using the practical expedient. The amendments in ASU 2015-07 are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015, with early application permitted. Entities are required to apply the amendments retrospectively to all periods presented. The Company does not expect there to be a material impact on its consolidated financial position, results of operations, or cash flows upon adoption.

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.

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)	2015		2014		2015		2014
Net income, basic and diluted	$	3,502	$	4,824	$	7,576	$	8,194
Less preferred stock dividends and discount accretion		170		563		395		1,100
Net income available to common shareholders, basic and diluted	$	3,332	$	4,261	$	7,181	$	7,094
Average common shares issued and outstanding, basic and diluted		7,492		7,482		7,491		7,481
Net income per common share, basic and diluted	$	.44	$	.57	$	.96	$	.95

13

Stock options for 18,049 shares of common stock were not included in the determination of diluted net income per common share for each period presented for 2014 because they were antidilutive. All previous options expired during the fourth quarter of 2014.

6. Investment Securities

The following tables summarize the amortized costs and estimated fair value of the securities portfolio at June 30, 2015 and December 31, 2014. The summary is divided into available for sale and held to maturity investment securities.

June 30, 2015 (In thousands)	Amortized Cost		Gross UnrealizedGains		Gross UnrealizedLosses		Estimated Fair Value
Available For Sale
Obligations of U.S. government-sponsored entities	$	131,378	$	411	$	632	$	131,157
Obligations of states and political subdivisions		136,908		2,248		681		138,475
Mortgage-backed securities – residential		323,087		6,531		1,361		328,257
Mortgage-backed securities – commercial		13,106		78		14		13,170
Corporate debt securities		6,881		19		514		6,386
Mutual funds and equity securities		883		2		33		852
Total securities – available for sale	$	612,243	$	9,289	$	3,235	$	618,297
Held To Maturity
Obligations of states and political subdivisions	$	3,703	$	168	$	-	$	3,871

December 31, 2014 (In thousands)	Amortized Cost		Gross UnrealizedGains		Gross UnrealizedLosses		Estimated Fair Value
Available For Sale
Obligations of U.S. government-sponsored entities	$	110,094	$	369	$	1,015	$	109,448
Obligations of states and political subdivisions		133,563		2,600		397		135,766
Mortgage-backed securities – residential		363,729		7,959		1,199		370,489
Mortgage-backed securities – commercial		2,515		7		10		2,512
Corporate debt securities		6,639		26		358		6,307
Mutual funds and equity securities		1,889		2		25		1,866
Total securities – available for sale	$	618,429	$	10,963	$	3,004	$	626,388
Held To Maturity
Obligations of states and political subdivisions	$	3,728	$	195	$	-	$	3,923

The amortized cost and estimated fair value of the debt securities portfolio at June 30, 2015, 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.

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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, 2015 (In thousands)	Cost		Fair Value		Cost		Fair Value
Due in one year or less	$	12,034	$	12,062	$	-	$	-
Due after one year through five years		156,768		157,760		-		-
Due after five years through ten years		92,094		92,396		705		799
Due after ten years		14,270		13,800		2,998		3,072
Mortgage-backed securities		336,194		341,427		-		-
Total	$	611,360	$	617,445	$	3,703	$	3,871

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)	2015		2014			2015		2014
Gross realized gains	$	50	$	19		$	180	$	178
Gross realized losses		5		103			15		253
Net realized gain (loss)	$	45	$	(84	)	$	165	$	(75	)

Investment securities with unrealized losses at June 30, 2015 and December 31, 2014 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, 2015 (In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Obligations of U.S. government-sponsored entities	$	50,661	$	378	$	19,648	$	254	$	70,309	$	632
Obligations of states and political subdivisions		47,962		538		8,103		143		56,065		681
Mortgage-backed securities – residential		93,303		662		23,454		699		116,757		1,361
Mortgage-backed securities – commercial		2,739		14		-		-		2,739		14
Corporate debt securities		287		5		5,379		509		5,666		514
Mutual funds and equity securities		565		20		70		13		635		33
Total	$	195,517	$	1,617	$	56,654	$	1,618	$	252,171	$	3,235

	Less than 12 Months				12 Months or More				Total
December 31, 2014 (In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Obligations of U.S. government-sponsored entities	$	22,696	$	76	$	60,892	$	939	$	83,588	$	1,015
Obligations of states and political subdivisions		20,746		81		21,272		316		42,018		397
Mortgage-backed securities – residential		37,451		82		71,311		1,117		108,762		1,199
Mortgage-backed securities – commercial		-		-		723		10		723		10
Corporate debt securities		76		4		5,525		354		5,601		358
Mutual funds and equity securities		305		11		95		14		400		25
Total	$	81,274	$	254	$	159,818	$	2,750	$	241,092	$	3,004

15

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.

Corporate debt securities in the Company’s investment securities portfolio at June 30, 2015 include single-issuer trust preferred capital securities with an unrealized loss of $509 thousand and a carrying value of $5.4 million. At year-end 2014, these securities had an unrealized loss of $354 thousand. 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 the rating agencies. The issuer of the securities announced in the first quarter of 2015 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, 2015 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, 2015		December 31, 2014
Real Estate:
Real estate mortgage - construction and land development	$	105,911	$	97,045
Real estate mortgage - residential		353,132		361,022
Real estate mortgage - farmland and other commercial enterprises		369,294		375,277
Commercial:
Commercial and industrial		52,313		47,112
States and political subdivisions		21,037		22,369
Lease financing		50		159
Other		19,333		15,547
Consumer:
Secured		7,152		7,963
Unsecured		5,083		5,450
Total loans		933,305		931,944
Less unearned income		-		1
Total loans, net of unearned income	$	933,305	$	931,943

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

(In thousands)	Real Estate			Commercial			Consumer			Total
Three months ended June 30, 2015
Balance, beginning of period	$	11,522		$	866		$	218		$	12,606
Provision for loan losses		(576	)		189			123			(264	)
Recoveries		52			15			26			93
Loans charged off		(192	)		(13	)		(31	)		(236	)
Balance, end of period	$	10,806		$	1,057		$	336		$	12,199
Six months ended June 30, 2015
Balance, beginning of period	$	12,542		$	1,153		$	273		$	13,968
Provision for loan losses		(1,787	)		(101	)		79			(1,809	)
Recoveries		338			31			63			432
Loans charged off		(287	)		(26	)		(79	)		(392	)
Balance, end of period	$	10,806		$	1,057		$	336		$	12,199

(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

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

June 30, 2015 (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	$	11,524	$	5,523	$	3,280	$	8,803	$	525
Real estate mortgage - residential		10,698		3,344		7,240		10,584		1,196
Real estate mortgage - farmland and other commercial enterprises		22,376		5,018		17,218		22,236		904
Commercial
Commercial and industrial		767		323		446		769		270
Consumer
Unsecured		164		-		165		165		164
Total	$	45,529	$	14,208	$	28,349	$	42,557	$	3,059

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December 31, 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	$	13,656	$	6,902	$	3,917	$	10,819	$	744
Real estate mortgage - residential		10,256		3,473		6,649		10,122		1,172
Real estate mortgage - farmland and other commercial enterprises		23,003		5,247		17,649		22,896		1,359
Commercial
Commercial and industrial		93		22		71		93		71
Consumer
Secured		-		-		-		-		-
Unsecured		25		-		25		25		25
Total	$	47,033	$	15,644	$	28,311	$	43,955	$	3,371

Three Months Ended June 30,	2015						2014
(In thousands)	Average		Interest Income Recognized		Cash Basis Interest Recognized		Average		Interest Income Recognized		Cash Basis Interest Recognized
Real Estate
Real estate mortgage - construction and land development	$	10,388	$	135	$	131	$	15,452	$	120	$	118
Real estate mortgage – residential		10,739		134		122		11,059		147		141
Real estate mortgage – farmland and other commercial enterprises		22,426		245		242		26,295		226		214
Commercial
Commercial and industrial		805		5		5		245		3		3
Consumer
Secured		-		-		-		-		-		-
Unsecured		167		2		2		68		-		-
Total	$	44,525	$	521	$	502	$	53,119	$	496	$	476

Six Months Ended June 30,	2015						2014
(In thousands)	Average		Interest Income Recognized		Cash Basis Interest Recognized		Average		Interest Income Recognized		Cash Basis Interest Recognized
Real Estate
Real estate mortgage - construction and land development	$	10,754	$	216	$	211	$	15,537	$	233	$	229
Real estate mortgage – residential		10,597		255		243		11,384		262		250
Real estate mortgage – farmland and other commercial enterprises		23,913		525		519		30,222		480		458
Commercial
Commercial and industrial		621		6		6		247		4		3
Consumer
Secured		-		-		-		9		-		-
Unsecured		96		2		2		69		4		3
Total	$	45,981	$	1,004	$	981	$	57,468	$	983	$	943

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The following tables present the balance of the allowance for loan losses and the recorded investment in loans by portfolio segment based on impairment method as of June 30, 2015 and December 31, 2014.

June 30, 2015 (In thousands)	Real Estate		Commercial		Consumer		Total
Allowance for Loan Losses
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	2,625	$	270	$	164	$	3,059
Collectively evaluated for impairment		8,181		787		172		9,140
Total ending allowance balance	$	10,806	$	1,057	$	336	$	12,199
Loans
Loans individually evaluated for impairment	$	41,623	$	769	$	165	$	42,557
Loans collectively evaluated for impairment		786,714		91,964		12,070		890,748
Total ending loan balance, net of unearned income	$	828,337	$	92,733	$	12,235	$	933,305

December 31, 2014 (In thousands)	Real Estate		Commercial		Consumer		Total
Allowance for Loan Losses
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	3,275	$	71	$	25	$	3,371
Collectively evaluated for impairment		9,267		1,082		248		10,597
Total ending allowance balance	$	12,542	$	1,153	$	273	$	13,968
Loans
Loans individually evaluated for impairment	$	43,837	$	93	$	25	$	43,955
Loans collectively evaluated for impairment		789,507		85,093		13,388		887,988
Total ending loan balance, net of unearned income	$	833,344	$	85,186	$	13,413	$	931,943

The following tables present the recorded investment in nonperforming loans by class of loans as of June 30, 2015 and December 31, 2014.

June 30, 2015 (In thousands)	Nonaccrual		Restructured Loans		Loans Past Due 90 Days or More and Still Accruing
Real Estate:
Real estate mortgage - construction and land development	$	2,404	$	3,679	$	-
Real estate mortgage - residential		3,335		4,385		-
Real estate mortgage - farmland and other commercial enterprises		4,109		15,671		-
Commercial:
Commercial and industrial		52		387		-
Other		9		-		-
Consumer:
Secured		12		-		-
Unsecured		-		150		-
Total	$	9,921	$	24,272	$	-

19

December 31, 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	$	3,744	$	3,742	$	-
Real estate mortgage - residential		3,474		4,674		-
Real estate mortgage - farmland and other commercial enterprises		4,202		16,004		-
Commercial:
Commercial and industrial		81		-		-
Lease financing		7		-		-
Consumer:
Unsecured		-		9		-
Total	$	11,508	$	24,429	$	-

The Company has allocated $2.0 million and $2.2 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, 2015 and December 31, 2014, 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, 2015 and December 31, 2014.

The Company had three credits modified as troubled debt restructurings during 2015. Additionally, troubled debt restructurings increased as a result of the purchase of a previously-participated portion of a loan to a nonaffiliated bank during the first quarter of 2015. This loan was participated prior to it being restructured. The purchase price paid represented a discount of $482 thousand or 15% of the purchased principal amount. The loan is performing under the terms of the restructuring and the borrower’s financial position has steadily improved. Accretion of the discount was recognized over the contractual life of the loan, which ended in June 2015. There is no further accretion to be recognized. The total outstanding balance related to this credit, which was renewed during June 2015, was $11.4 million at June 30, 2015. This represents 46.9% of the Company’s total restructured loans and is the largest such individual credit. This credit was restructured in 2012 following an interest rate concession and extended amortization term.

The following table presents loans by class modified as troubled debt restructurings that occurred during the three and six months ended June 30, 2015. 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, 2015
Commercial:
Commercial and industrial		2	$	388	$	388
Consumer:
Unsecured		1		145		145
Total		3	$	533	$	533
Six Months Ended June 30, 2015
Commercial:
Commercial and industrial		2	$	388	$	388
Consumer:
Secured		1		145		145
Total		3	$	533	$	533

The troubled debt restructurings identified above increased the allowance for loan losses by $356 thousand in the three and six months periods ended June 30, 2015, respectively. There were no charge-offs related to these loans. There were no payment defaults during the first six months of 2015 or 2014 for credits that were restructured during the previous twelve months.

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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, 2015 (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	$	78	$	272	$	350	$	105,561	$	105,911
Real estate mortgage - residential		1,678		1,615		3,293		349,839		353,132
Real estate mortgage - farmland and other commercial enterprises		857		2,843		3,700		365,594		369,294
Commercial:
Commercial and industrial		-		13		13		52,300		52,313
States and political subdivisions		-		-		-		21,037		21,037
Lease financing, net		50		-		50		-		50
Other		5		-		5		19,328		19,333
Consumer:
Secured		34		-		34		7,118		7,152
Unsecured		223		-		223		4,860		5,083
Total	$	2,925	$	4,743	$	7,668	$	925,637	$	933,305

December 31, 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	$	-	$	272	$	272	$	96,773	$	97,045
Real estate mortgage - residential		1,395		1,595		2,990		358,032		361,022
Real estate mortgage - farmland and other commercial enterprises		75		3,484		3,559		371,718		375,277
Commercial:
Commercial and industrial		-		13		13		47,099		47,112
States and political subdivisions		-		-		-		22,369		22,369
Lease financing, net		-		-		-		158		158
Other		40		7		47		15,500		15,547
Consumer:
Secured		58		-		58		7,905		7,963
Unsecured		16		1		17		5,433		5,450
Total	$	1,584	$	5,372	$	6,956	$	924,987	$	931,943

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.

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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, 2015 (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	$	90,470	$	319,315	$	325,928	$	50,851	$	21,037	$	50	$	19,310
Special Mention		4,200		14,337		25,606		981		-		-		-
Substandard		11,241		19,480		17,760		481		-		-		23
Doubtful		-		-		-		-		-		-		-
Total	$	105,911	$	353,132	$	369,294	$	52,313	$	21,037	$	50	$	19,333

	Real Estate						Commercial
December 31, 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	$	81,438	$	326,124	$	327,019	$	45,665	$	22,369	$	158	$	15,526
Special Mention		2,674		16,429		27,855		946		-		-		14
Substandard		12,933		18,469		19,941		501		-		-		7
Doubtful		-		-		462		-		-		-		-
Total	$	97,045	$	361,022	$	375,277	$	47,112	$	22,369	$	158	$	15,547

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, 2015 and December 31, 2014.

	June 30, 2015				December 31, 2014
	Consumer				Consumer
(In thousands)	Secured		Unsecured		Secured		Unsecured
Credit risk profile based on payment activity:
Performing	$	7,140	$	4,933	$	7,963	$	5,441
Nonperforming		12		150		-		9
Total	$	7,152	$	5,083	$	7,963	$	5,450

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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, 2015		December 31, 2014
Construction and land development	$	14,058	$	17,628
Residential real estate		1,252		2,219
Farmland and other commercial enterprises		10,904		12,113
Total	$	26,214	$	31,960

OREO activity for the six months ended June 30, 2015 and 2014 was as follows:

Six months ended June 30, (In thousands)	2015			2014
Beginning balance	$	31,960		$	37,826
Transfers from loans and other increases		475			6,978
Proceeds from sales		(5,664	)		(4,262	)
Gain (loss) on sales, net		9			(94	)
Write downs and other decreases, net		(566	)		(1,414	)
Ending balance	$	26,214		$	39,034

At June 30, 2015, the Company had a total of $2.5 million of loans secured by residential real estate mortgages that were in the process of foreclosure.

9. Securities Sold under Agreements to Repurchase

Securities sold under agreements to repurchase represent transactions where the Company sells certain of its investment securities and agrees to repurchase them at a specific date in the future. Securities sold under agreements to repurchase are accounted for as secured borrowing and reflect the amount of cash received in connection with the transaction.

Securities sold under agreements to repurchase are collateralized by U.S. government agency securities, primarily mortgage-backed securities. The Company may be required to provide additional collateral securing the borrowings in the event of principal pay downs or a decrease in the market value of the pledged securities. The Company mitigates this risk by monitoring the market value and liquidity of the collateral and ensuring that it holds a sufficient level of eligible securities to cover potential increases in collateral requirements.

The following table represents the remaining maturity of repurchase agreements disaggregated by the class of securities pledged.

	Remaining Contractual Maturity of the Agreements
June 30, 2015 (In thousands)	Overnight/ Continuous		Less Than 30 Days		30-89Days		90 Days to One Year			Over One Year to Four Years	Total
U.S. government agency securities	$	25,959	$	1,200	$	-	$	713	$	100,755	$	128,627
Total	$	25,959	$	1,200	$	-	$	713	$	100,755	$	128,627

10. Postretirement Medical Benefits

The Company provides lifetime medical and dental benefits upon retirement for certain employees meeting the eligibility requirements as of December 31, 1989 (“Plan 1”). Additional participants are not eligible to be included in Plan 1 unless they met the requirements on this date. 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 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.

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The following disclosures of the net periodic benefit cost components of Plan 1 and Plan 2 were measured at January 1, 2015 and 2014.

	Three Months Ended					Six Months Ended
	June 30,					June 30,
(In thousands)	2015		2014			2015		2014
Service cost	$	184	$	120		$	369	$	242
Interest cost		163		143			325		285
Recognized prior service cost		12		52			25		104
Recognized net actuarial loss (gain)		11		(16	)		21		(33	)
Net periodic benefit cost	$	370	$	299		$	740	$	598

The Company expects benefit payments of $359 thousand for 2015, of which $70 thousand and $141 thousand have been made during the three and six months ended June 30, 2015, respectively.

11. Regulatory Matters

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

In July 2013, U.S. banking regulators adopted final rules related to standards on bank capital adequacy and liquidity (commonly referred to “Basel III”). The new rules were effective for the Company beginning on January 1, 2015, subject to a phase-in period for certain provisions extending through January 1, 2019. The rules include a new common equity Tier 1 capital ratio, an increase to the minimum Tier 1 capital ratio, an increase to risk-weightings of certain assets, implementation of a new capital conservation buffer in excess of the required minimum (which is set to be phased in beginning in 2016), and changes to how regulatory capital is defined. The Company and each of its bank subsidiaries meet the minimum capital ratios and a fully phased-in capital conservation buffer under the new rules.

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

	June 30, 2015												December 31, 2014
	Common Equity Tier 1 Risk-based Capital1			Tier 1 Risk-based Capital1			Total Risk-based Capital1			Tier 1 Leverage2			Common Equity Tier 1 Risk-based Capital1	Tier 1 Risk-based Capital1			Total Risk-based Capital1			Tier 1 Leverage2
Consolidated		14.54	%		18.71	%		19.79	%		11.91	%	N/A		19.75	%		21.00	%		12.04	%
Farmers Bank		16.58			16.58			17.53			9.36		N/A		17.71			18.70			9.40
United Bank		18.74			18.74			19.99			12.51		N/A		18.00			19.26			11.08
First Citizens		13.36			13.36			13.98			9.32		N/A		13.66			14.30			9.44
Citizens Northern		13.98			13.98			15.23			9.89		N/A		14.46			15.71			10.11

¹Common Equity Tier 1 Risked-based, Tier 1 Risk-based, and Total Risk-based Capital ratios are computed by dividing a bank’s Common Equity Tier 1, 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.

N/A – Not applicable.

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On June 8, 2015, the Company redeemed the final 10,000 shares of its remaining outstanding Series A preferred stock. The shares were redeemed at the stated liquidation value of $1,000 per share, plus accrued dividends of $58 thousand. The Company originally issued 30,000 shares of its Series A preferred stock in 2009. The redemption was the third and final partial redemption of the original shares issued. No additional debt or equity was issued in connection with any of the shares redeemed.

Summary of Regulatory Agreements

The Company has one subsidiary bank, Citizens Northern, which is currently under an agreement with its primary banking regulators. This agreement is summarized below.

Citizens Northern  

The Federal Deposit Insurance Corporation (“FDIC”) and Kentucky Department of Financial Institutions (“KDFI”) entered into a Memorandum of Understanding (“Memorandum”) with Citizens Northern in September 2010.  This Memorandum was terminated and replaced in July 2013. 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 agreement through periodic on-site examinations, regular communications, and quarterly data analysis. The Company believes it is adequately addressing all issues of the regulatory agreement. However, only the regulatory agencies can determine if compliance with the agreement has been met. The Company believes that Citizens Northern is in compliance with the requirements identified in its regulatory agreement as of June 30, 2015.

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.

12. 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.

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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, 2015 and December 31, 2014 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, 2015
Obligations of U.S. government-sponsored entities	$	131,157	$	-	$	131,157	$	-
Obligations of states and political subdivisions		138,475				138,475		-
Mortgage-backed securities – residential		328,257		-		328,257		-
Mortgage-backed securities – commercial		13,170		-		13,170		-
Corporate debt securities		6,386		-		6,386		-
Mutual funds and equity securities		852		852		-		-
Total	$	618,297	$	852	$	617,445	$	-

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			Fair Value Measurements Using
(In thousands) Available For Sale Investment Securities	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2014
Obligations of U.S. government-sponsored entities	$	109,448	$	-	$	109,448	$	-
Obligations of states and political subdivisions		135,766		-		135,766		-
Mortgage-backed securities – residential		370,489		-		370,489		-
Mortgage-backed securities – commercial		2,512		-		2,512		-
Corporate debt securities		6,307		-		6,307		-
Mutual funds and equity securities		1,866		1,866		-		-
Total	$	626,388	$	1,866	$	624,522	$	-

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.

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The following tables represent the carrying amount of assets measured at fair value on a nonrecurring basis and still held by the Company as of the dates indicated. The amounts in the 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, 2015
Collateral-dependent Impaired Loans
Real estate mortgage – residential	$	680	$	-	$	-	$	680
Total	$	680	$	-	$	-	$	680
OREO
Construction and land development	$	807	$	-	$	-	$	807
Residential real estate		256		-		-		256
Farmland and other commercial enterprises		3,980		-		-		3,980
Total	$	5,043	$	-	$	-	$	5,043

			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, 2014
Collateral-dependent Impaired Loans
Real estate mortgage – construction and land development	$	284	$	-	$	-	$	284
Real estate mortgage – residential		946		-		-		946
Real estate mortgage – farmland and other commercial enterprises		340		-		-		340
Total	$	1,570	$	-	$	-	$	1,570
OREO
Construction and land development	$	8,123	$	-	$	-	$	8,123
Residential real estate		863		-		-		863
Farmland and other commercial enterprises		5,459		-		-		5,459
Total	$	14,445	$	-	$	-	$	14,445

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands)	2015		2014		2015		2014
Impairment charges:
Collateral-dependent impaired loans	$	9	$	135	$	31	$	268
OREO		566		419		566		1,170
Total	$	575	$	554	$	597	$	1,438

The following table presents quantitative information about unobservable inputs for assets measured on a nonrecurring basis using Level 3 measurements. As described above, the fair value of real estate securing collateral-dependent impaired loans and OREO are based on current third party appraisals. It is often necessary, however, for the Company to discount the appraisal amounts supporting its impaired loans and OREO. These discounts relate primarily to marketing and other holding costs that are not included in certain appraisals or to update values as a result of market declines of similar properties for which newer appraisals are available. Discounts also result from contracts to sell properties entered into during the period. The range of discounts is presented in the table below for 2015. The upper end of the range identified in the table below related to OREO is the result of a small dollar property written down to the contract sales price. The weighted average column represents a better indicator of the discounts applied to the appraisals.

(In thousands)	Fair Value at June 30, 2015		Valuation Technique	Unobservable Inputs	Range			Average
Collateral-dependent impaired loans	$	680	Discounted appraisals	Marketability discount		0% - 8.0	%		5.9	%
OREO	$	5,043	Discounted appraisals	Marketability discount		2.7% - 68.9	%		10.2	%

Fair Value of Financial Instruments

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

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

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

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

Investment Securities Held to Maturity

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

Loans

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

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Federal Home Loan Bank and Federal Reserve Bank Stock

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

Deposit Liabilities

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

Federal Funds Purchased and Other Short-term Borrowings

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

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

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

Commitments to Extend Credit and Standby Letters of Credit

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

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, 2015 and December 31, 2014. 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, 2015
Assets
Cash and cash equivalents	$	81,622	$	81,622	$	81,622	$	-	$	-
Held to maturity investment securities		3,703		3,871		-		3,871		-
Loans, net		921,106		920,780		-		-		920,780
Accrued interest receivable		5,410		5,410		-		5,410		-
Federal Home Loan Bank and Federal Reserve Bank Stock		9,368	N/A			-		-		-
Liabilities
Deposits		1,359,174		1,360,117		1,004,398		-		355,719
Federal funds purchased and other short-term borrowings		27,359		27,359		-		27,359		-
Securities sold under agreements to repurchase and other long-term borrowings		120,150		128,602		-		128,602		-
Subordinated notes payable to unconsolidated trusts		48,970		31,156		-		-		31,156
Accrued interest payable		897		897		-		897		-
December 31, 2014
Assets
Cash and cash equivalents	$	100,914	$	100,914	$	100,914	$	-	$	-
Held to maturity investment securities		3,728		3,923		-		3,923		-
Loans, net		917,975		918,697		-		-		918,697
Accrued interest receivable		5,625		5,625		-		5,625		-
Federal Home Loan Bank and Federal Reserve Bank Stock		9,368	N/A			-		-		-
Liabilities
Deposits		1,387,161		1,388,614		991,630		-		396,984
Federal funds purchased and other short-term borrowings		28,590		28,590		-		28,590		-
Securities sold under agreements to repurchase and other long-term borrowings		119,724		129,244		-		129,244		-
Subordinated notes payable to unconsolidated trusts		48,970		22,594		-		-		22,594
Accrued interest payable		944		944		-		944		-

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

FORWARD-LOOKING STATEMENTS

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

Various risks and uncertainties may cause actual results to differ materially from those indicated by the Company’s forward-looking statements. In addition to the risks described under Part 1, Item 1A “Risk Factors” in the Company’s most recent annual report on Form 10-K, factors that could cause actual results to differ from the results discussed in the forward-looking statements include, but are not limited to: economic conditions (both generally and more specifically in the markets in which the Company and its subsidiaries operate) and lower interest margins; competition for the Company’s customers from other providers of financial services; deposit outflows or reduced demand for financial services and loan products; government legislation, regulation, and changes in monetary and fiscal policies (which changes from time to time and over which the Company has no control); changes in interest rates; changes in prepayment speeds of loans or investment securities; inflation; material unforeseen changes in the liquidity, results of operations, or financial condition of the Company’s customers; changes in the level of non-performing assets and charge-offs; changes in the number of common shares outstanding; the capability of the Company to successfully enter into a definitive agreement for and close anticipated transactions; unexpected claims or litigation against the Company; 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.

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RESULTS OF OPERATIONS

Second Quarter 2015 Compared to Second Quarter 2014

The Company reported net income of $3.5 million for the quarter ended June 30, 2015, a decrease of $1.3 million or 27.4% compared with net income of $4.8 million for the second quarter of 2014. On a per common share basis, net income was $.44 and $.57 for the current and year-ago quarters, respectively. This represents a decrease of $.13 or 22.8%. On a percentage basis, the decrease in per common share net income was less than the decrease in net income due to a reduction in preferred stock dividends. The decrease in preferred stock dividend is the result of the Company’s preferred share redemptions, which took place in three separate transactions of 10,000 shares each beginning in the second quarter of 2014 and concluding in the second quarter of 2015.

Selected income statement amounts and related data are summarized in the table below.

(In thousands, except per share data)
Three Months Ended June 30,	2015			2014			Increase (Decrease)
Interest income	$	15,721		$	16,331		$	(610	)
Interest expense		2,148			2,604			(456	)
Net interest income		13,573			13,727			(154	)
Provision for loan losses		(264	)		(1,388	)		1,124
Net interest income after provision for loan losses		13,837			15,115			(1,278	)
Noninterest income		5,508			5,991			(483	)
Noninterest expenses		14,474			14,323			151
Income before income taxes		4,871			6,783			(1,912	)
Income tax expense		1,369			1,959			(590	)
Net income		3,502			4,824			(1,322	)
Less preferred stock dividends and discount accretion		170			563			(393	)
Net income available to common shareholders	$	3,332		$	4,261		$	(929	)
Basic and diluted net income per common share	$	.44		$	.57		$	(.13	)
Weighted average common shares outstanding – basic and diluted		7,492			7,482			10
Return on average assets		.79	%		1.07	%	(28) bp
Return on average equity		7.97	%		10.98	%	(301) bp

 bp = basis points.

The decrease in net income is primarily attributed to a lower credit to the provision for loan losses of $1.1 million. Net interest income decreased $154 thousand or 1.1%. Noninterest income and income tax expense decreased $483 thousand or 8.1% and $590 thousand or 30.1%, respectively. Noninterest expense increased $151 thousand or 1.1%. 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, 2015, as measured by the Treasury yield curve, remained at very low levels when compared with historical trends, although yields on longer-term maturities spiked upward in the current quarter. During the current quarter, yields on three-month, six-month, and three-year maturity periods were relatively unchanged. Yields on the ten and thirty-year maturity periods increased 44 and 57 basis points, respectively. At June 30, 2015, the short-term federal funds target interest rate remained between zero and 0.25%, unchanged since December 2008. The Federal Reserve Board (“Federal Reserve”) has indicated that it will be appropriate to raise the federal funds target interest rate when it sees further improvement in the labor market and is reasonably confident that inflation will return to its 2 percent objective over the medium term. At June 30, 2015, the national and Kentucky unemployment rate was 5.3% and 5.1%, respectively. However, labor force participation rates remain near 40-year lows. The national inflation rate at June 30, 2015 was 0.12%.

33

Net interest income was $13.6 million for the current quarter, a decrease of $154 thousand or 1.1% compared to $13.7 million for the prior year second quarter. The decrease in net interest income was driven by lower interest income of $610 thousand or 3.7%, partially offset by a decrease in interest expense of $456 thousand or 17.5%. Interest income on loans and investment securities decreased $305 thousand or 2.4% and $311 thousand or 8.6%, respectively. Interest expense on deposits decreased $367 thousand or 33.2% in the comparison.

The decrease to interest income on loans resulted from a decline in average balances outstanding. The average rate on loans increased in the comparison. The decrease in loan volume has been accelerated by early payoffs of several larger balance credits that were refinanced by competitors with terms below the Company’s underwriting standards. In recent years, the Company has focused on strengthening its credit underwriting standards, which has improved the overall credit quality of the loan portfolio. The average rate earned on loans for the current quarter includes $361 thousand of accretion related to a loan purchased at a discount during the first quarter of 2015. Accretion was recognized over the contractual life of the purchased loan, which ended in June 2015. There is no further accretion to be recognized.

Interest income on investment securities decreased mainly due to lower rates, partially offset by an increase in volume. In periods when quality loan demand is low, available funds are invested in lower yielding investment securities or cash equivalents at then-current market rates, or otherwise used to manage liquidity, such as for deposit outflows or for the repayment of long-term debt. Average investment securities for the quarter increased $26.0 million or 4.2% from a year ago.

The decrease in interest expense on deposits was driven by rate declines and, to a lesser extent, lower average outstanding balances. The decrease in interest expense was primarily attributed to lower interest on time deposits.

Overall declines in interest income on loans and interest paid on deposits are the result of a slow growing economy and 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. 

The net interest margin on a taxable equivalent basis was 3.40% and 3.41% in the current and year-ago quarters, respectively. Net interest spread was unchanged at 3.25%. As discussed above, interest income for the current quarter includes discount accretion related to a loan purchased during the first quarter of 2015. There is no further accretion to be recognized on this loan; therefore, the Company expects its net interest margin to trend downward in the near term according to internal modeling using expectations about future market interest rates, the maturity structure of the Company’s earning assets and liabilities, and other factors. Future results could be significantly different than expectations.

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

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

Three Months Ended June 30,	2015									2014
(In thousands)	Average Balance			Interest			Average Rate			Average Balance			Interest			Average Rate
Earning Assets
Investment securities
Taxable	$	520,681		$	2,641			2.03	%	$	504,924		$	2,980			2.37	%
Nontaxable1		128,543			990			3.09			118,327			947			3.21
Interest bearing deposits in banks, federal funds sold and securities purchased under agreements to resell		69,497			44			.25			60,815			38			.25
Loans1,2,3		931,768			12,467			5.37			978,677			12,772			5.23
Total earning assets		1,650,489		$	16,142			3.92	%		1,662,743		$	16,737			4.04	%
Allowance for loan losses		(12,390	)								(18,434	)
Total earning assets, net of allowance for loan losses		1,638,099									1,644,309
Nonearning Assets
Cash and due from banks		23,057									22,772
Premises and equipment, net		34,380									36,011
Other assets		91,795									98,439
Total assets	$	1,787,331								$	1,801,531
Interest Bearing Liabilities
Deposits
Interest bearing demand	$	339,143		$	49			.06	%	$	322,799		$	47			.06	%
Savings		383,647			119			.12			356,408			153			.17
Time		363,059			569			.63			443,065			904			.82
Federal funds purchased and other short-term borrowings		27,916			10			.14			27,689			11			.16
Securities sold under agreements to  repurchase and other long-term borrowings		167,868			1,401			3.35			176,027			1,489			3.39
Total interest bearing liabilities		1,281,633		$	2,148			0.67	%		1,325,988		$	2,604			.79	%
Noninterest Bearing Liabilities
Demand deposits		302,133									275,230
Other liabilities		27,327									24,105
Total liabilities		1,611,093									1,625,323
Shareholders’ equity		176,238									176,208
Total liabilities and shareholders’ equity	$	1,787,331								$	1,801,531
Net interest income					13,994									14,133
TE basis adjustment					(421	)								(406	)
Net interest income				$	13,573								$	13,727
Net interest spread								3.25	%								3.25	%
Impact of noninterest bearing sources of funds								.15									.16
Net interest margin								3.40	%								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 $371 thousand and $427 thousand in 2015 and 2014, respectively.

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

(In thousands)	Variance			Variance Attributed to
Three Months Ended June 30,	2015/20141			Volume			Rate
Interest Income
Taxable investment securities	$	(339	)	$	552		$	(891	)
Nontaxable investment securities2		43			228			(185	)
Interest bearing deposits in banks, federal funds sold and securities purchased under agreements to resell		6			6			-
Loans2		(305	)		(1,954	)		1,649
Total interest income		(595	)		(1,168	)		573
Interest Expense
Interest bearing demand deposits		2			2			-
Savings deposits		(34	)		66			(100	)
Time deposits		(335	)		(147	)		(188	)
Federal funds purchased and other short-term borrowings		(1	)		-			(1	)
Securities sold under agreements to repurchase and  other long-term borrowings		(88	)		(70	)		(18	)
Total interest expense		(456	)		(149	)		(307	)
Net interest income	$	(139	)	$	(1,019	)	$	880
Percentage change		100.0	%		733.1	%		(633.1	)%

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 continued to improve in the comparable periods, including certain credit quality metrics are at or near recent quarterly bests.

The Company recorded a credit to the provision for loan losses in the amount of $264 thousand and $1.4 million in the current and year ago quarters, respectively. The allowance for loan losses as a percentage of outstanding loans was 1.31% at June 30, 2015 compared to 1.50% and 1.76% at year-end 2014 and June 30, 2014, respectively. The credit to 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 $143 thousand in the current quarter, a decrease of $36 thousand or 20.1% compared to $179 thousand a year earlier.

Nonperforming loans, early stage delinquencies, and watch list loans have each declined when 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. While historical loss rates are expected to continue improving throughout 2015 due to elevated charge-offs falling out of the look-back period, this expected improvement may not necessarily correlate to a lower provision for loan losses. Other qualitative factors, such as changes in loan volume, the overall makeup of the portfolio, economic conditions, and other risk factors applied to historical loss rates may offset to some degree the impact of decreases to the historical loss rates. 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.

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Noninterest Income

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

(Dollars in thousands) Three Months Ended June 30,	2015		2014			Increase (Decrease)			%
Service charges and fees on deposits	$	1,907	$	1,991		$	(84	)		(4.2	)%
Allotment processing fees		1,102		1,274			(172	)		(13.5	)
Other service charges, commissions, and fees		1,347		1,399			(52	)		(3.7	)
Trust income		583		523			60			11.5
Investment securities gains (losses), net		45		(84	)		129			(153.6	)
Gain on sale of mortgage loans, net		173		123			50			40.7
Income from company-owned life insurance		227		233			(6	)		(2.6	)
Other		124		532			(408	)		(76.7	)
Total noninterest income	$	5,508	$	5,991		$	(483	)		(8.1	)%

The decrease in noninterest income is attributed mainly to the Company’s equity interest in three tax credit partnerships. The Company recorded income of $418 thousand related to these partnerships in the year-ago second quarter compared to none in the current quarter. The Company liquidated its interest in one of the partnerships in December 2014 and the carrying value of the remaining two is zero.

Service charges and fees on deposits decreased primarily due to lower overdraft fees of $119 thousand or 10.1% related to volume declines. The decrease in allotment processing fees is a result of lower processing volume stemming from the U.S. Department of Defense policy restrictions that went into effect on January 1, 2015. As previously disclosed by the Company, the new policy restricts active duty service members from entering into certain types of allotment arrangements. These restrictions have resulted in lower processing volumes for the Company. While the Company continues to diversify its allotment customer base and product offerings, the future impact on processing revenue remains uncertain and challenging to predict.

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 increase in gains on the sale of loans is attributed to a $740 thousand or 12.9% increase in mortgage loan sales volume.

The net loss on investment securities in the year-ago 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.

37

Noninterest Expense

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

(Dollars in thousands) Three Months Ended June 30,	2015	2014	Increase (Decrease)	%
Salaries and employee benefits	$7,852	$7,342	$510	6.9%
Occupancy expenses, net	1,219	1,209	10	.8
Equipment expenses	609	593	16	2.7
Data processing and communication expense	1,074	969	105	10.8
Bank franchise tax	607	610	(3)	(.5)
Amortization of intangibles	113	101	12	11.9
Deposit insurance expense	404	461	(57)	(12.4)
Other real estate expenses, net	726	938	(212)	(22.6)
Legal expenses	189	228	(39)	(17.1)
Other	1,681	1,872	(191)	(10.2)
Total noninterest expense	$14,474	$14,323	$151	1.1%

Total noninterest expense was relatively unchanged in the comparison. The more significant components that changed include higher salaries and employee benefits expense and lower expenses related to repossessed real estate. Salaries and related payroll taxes were up $353 thousand or 5.9%. Employee benefits increased $158 thousand or 11.9%, mainly due to claims activity related to the Company’s self-funded health insurance plan and an increase in the actuary-determined postretirement benefit expense. The Company had 510 full time equivalent employees at quarter-end, unchanged from a year earlier. The decrease in repossessed real estate expenses is primarily the result of lower development, maintenance, and operating costs of $151 thousand, and a smaller net loss on sales of $119 thousand. Impairment charges were up $58 thousand or 11.4%.

The increase in data processing and communication expense was led by higher telephone and automated teller expenses. Higher telephone expense reflects vendor rate increases that were effective at the beginning of 2015. Automated teller expenses increased due to higher transaction volume. Amortization of intangibles represents actuary-determined amounts related to core deposits from previous acquisitions, with 2015 being the final year of scheduled amortization. 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 $1.4 million for the current quarter, a decrease of $590 thousand or 30.1% compared to $2.0 million for the same quarter of 2014. The effective income tax rates were 28.1% and 28.9% for the current and year-ago quarters, respectively.

First Six Months of 2015 Compared to First Six Months of 2014

The Company reported net income of $7.6 million for the first six months of 2015, a decrease of $618 thousand or 7.5% compared with net income of $8.2 million for 2014. On a per common share basis, net income for the current six months was $.96, an increase of $.01 or 1.1% compared to $.95 reported a year earlier. Per common share net income was positively impacted by the Company’s redemption of its outstanding preferred shares, which decreased preferred dividends and resulted in an increase in net income available to common shareholders. The preferred share redemptions took place in three separate transactions of 10,000 shares each, beginning in the second quarter of 2014 and concluding in June 2015.

38

Selected income statement amounts and related data are presented in the table below. 

(In thousands, except per share data)
Six Months Ended June 30,	2015			2014			Increase (Decrease)
Interest income	$	30,941		$	32,705		$	(1,764	)
Interest expense		4,365			5,299			(934	)
Net interest income		26,576			27,406			(830	)
Provision for loan losses		(1,809	)		(1,256	)		(553	)
Net interest income after provision for loan losses		28,385			28,662			(277	)
Noninterest income		10,949			11,364			(415	)
Noninterest expenses		28,984			28,753			231
Income before income taxes		10,350			11,273			(923	)
Income tax expense		2,774			3,079			(305	)
Net income		7,576			8,194			(618	)
Less preferred stock dividends and discount accretion		395			1,100			(705	)
Net income available to common shareholders	$	7,181		$	7,094		$	87
Basic and diluted net income per common share	$	.96		$	.95		$	.01
Weighted average common shares outstanding – basic and diluted		7,491			7,481			10
Return on average assets		.85	%		.91	%	(6) bp
Return on average equity		8.68	%		9.39	%	(71) bp

bp = basis points.

The $618 thousand decrease in net income is attributed primarily to lower net interest income of $830 thousand or 3.0%, a decrease in noninterest income of $415 thousand or 3.7%, and an increase in noninterest expense of $231 thousand or 0.8%. These amounts were partially offset by a lower provision for loan losses of $553 thousand or 44.0%. Income tax expense was down $305 thousand or 9.9%. Further information related to the more significant components making up the decrease in net income follows.

Net Interest Income

Net interest income was $26.6 million for the first six months of 2015, a decrease of $830 thousand or 3.0% compared to $27.4 million for the first six months of 2014. The decrease in net interest income resulted from a decline in interest income of $1.8 million or 5.4%, partially offset by a decrease in interest expense of $934 thousand or 17.6%. Interest income on loans and investment securities decreased $1.2 million or 4.9% and $564 thousand or 7.7%, respectively. Interest expense on deposits decreased $749 thousand or 32.5%.

The decrease to interest income on loans resulted primarily from a decline in average balances outstanding, which offset an increase in the average rate in the comparison. The decrease in loan volume has been accelerated by early payoffs of several larger balance credits that were refinanced by competitors with terms below the Company’s underwriting standards. In recent years, the Company has focused on strengthening its credit underwriting standards, which has improved the overall credit quality of the loan portfolio. The average rate earned on loans for the current six months was boosted $482 thousand from accretion related to a loan purchased at a discount during the first quarter of 2015. Accretion was recognized over the contractual life of the purchased loan, which ended in June 2015. There is no further accretion to be recognized.

Interest income on investment securities decreased mainly due to lower rates, partially offset by an increase in volume. In periods when quality loan demand is low, available funds are invested in lower yielding investment securities or cash equivalents at then-current market rates, or otherwise used to manage liquidity, such as for deposit outflows or for the repayment of long-term debt. Average investment securities increased $23.5 million or 3.8% from the year-ago comparable period.

The decrease in interest expense on deposits was driven primarily by rate declines and, to a lesser extent, lower average outstanding balances. The decrease in interest expense was primarily attributed to lower interest on time deposits.

39

Overall declines in interest income on loans and interest paid on deposits are the result of a slow growing economy and 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.

The net interest margin on a taxable equivalent basis was 3.33% and 3.41% for the first six months of 2015 and 2014, respectively. Net interest spread was 3.18% and 3.25% in the comparison. As discussed above, interest income for the current six months includes discount accretion related to a loan purchased during the first quarter of 2015. There is no further accretion to be recognized on this loan; therefore, the Company expects its net interest margin to trend downward or 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.

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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,	2015									2014
(In thousands)	Average Balance			Interest			Average Rate			Average Balance			Interest			Average Rate
Earning Assets
Investment securities
Taxable	$	519,164		$	5,436			2.11	%	$	505,851		$	6,060			2.42	%
Nontaxable1		127,293			1,967			3.12			117,057			1,873			3.23
Interest bearing deposits in banks, federal funds sold and securities purchased under agreements to resell		84,831			97			.23			58,453			66			.23
Loans1,2,3		927,617			24,283			5.28			986,321			25,499			5.21
Total earning assets		1,658,905		$	31,783			3.86	%		1,667,682		$	33,498			4.05	%
Allowance for loan losses		(13,090	)								(19,016	)
Total earning assets, net of allowance for loan losses		1,645,815									1,648,666
Nonearning Assets
Cash and due from banks		23,349									23,035
Premises and equipment, net		34,545									36,092
Other assets		94,675									99,260
Total assets	$	1,798,384								$	1,807,053
Interest Bearing Liabilities
Deposits
Interest bearing demand	$	343,079		$	99			.06	%	$	322,884		$	97			.06	%
Savings		379,853			235			.12			352,947			311			.18
Time		374,538			1,224			.66			452,848			1,899			.85
Federal funds purchased and other short-term borrowings		28,393			20			.14			30,721			30			.20
Securities sold under agreements to  repurchase and other long-term borrowings		167,887			2,787			3.35			176,049			2,962			3.39
Total interest bearing liabilities		1,293,750		$	4,365			.68	%		1,335,449		$	5,299			.80	%
Noninterest Bearing Liabilities
Demand deposits		301,631									271,084
Other liabilities		26,897									24,472
Total liabilities		1,622,278									1,631,005
Shareholders’ equity		176,106									176,048
Total liabilities and shareholders’ equity	$	1,798,384								$	1,807,053
Net interest income					27,418									28,199
TE basis adjustment					(842	)								(793	)
Net interest income				$	26,576								$	27,406
Net interest spread								3.18	%								3.25	%
Impact of noninterest bearing sources of funds								.15									.16
Net interest margin								3.33	%								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 $640 thousand and $666 thousand in 2015 and 2014, respectively.

41

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

(In thousands)	Variance			Variance Attributed to
Six Months Ended June 30,	2015/20141			Volume			Rate
Interest Income
Taxable investment securities	$	(624	)	$	428		$	(1,052	)
Nontaxable investment securities2		94			253			(159	)
Interest bearing deposits in banks, federal funds sold and securities purchased under agreements to resell		31			31			-
Loans2		(1,216	)		(2,118	)		902
Total interest income		(1,715	)		(1,406	)		(309	)
Interest Expense
Interest bearing demand deposits		2			2			-
Savings deposits		(76	)		64			(140	)
Time deposits		(675	)		(295	)		(380	)
Federal funds purchased and other short-term borrowings		(10	)		(2	)		(8	)
Securities sold under agreements to repurchase and  other long-term borrowings		(175	)		(140	)		(35	)
Total interest expense		(934	)		(371	)		(563	)
Net interest income	$	(781	)	$	(1,035	)	$	254
Percentage change		100.0	%		132.5	%		(32.5	)%

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 $1.8 million and $1.3 million for the first six months of 2015 and 2014, respectively. The allowance for loan losses as a percentage of outstanding loans was 1.31% at June 30, 2015 compared to 1.50% and 1.76% at year-end 2014 and June 30, 2014, respectively. The decrease in the provision for loan losses is attributed to continuing improvement in the credit quality of the loan portfolio and an overall decrease in outstanding loans. The Company had net loan recoveries of $40 thousand in the current period compared to net charge-offs of $2.2 million a year earlier.

Nonperforming loans, early stage delinquencies, and watch list loans have each declined compared to 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. While historical loss rates are expected to continue improving throughout 2015 due to elevated charge-offs falling out of the look-back period, this expected improvement may not necessarily correlate to a lower provision for loan losses. Other qualitative factors, such as changes in loan volume, the overall makeup of the portfolio, economic conditions, and other risk factors applied to historical loss rates may offset to some degree the impact of decreases to the historical loss rates. 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.

42

Noninterest Income

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

(Dollars in thousands) Six Months Ended June 30,	2015		2014			Increase (Decrease)			%
Service charges and fees on deposits	$	3,679	$	3,907		$	(228	)		(5.8	)%
Allotment processing fees		2,292		2,519			(227	)		(9.0	)
Other service charges, commissions, and fees		2,614		2,634			(20	)		(.8	)
Trust income		1,154		1,068			86			8.1
Investment securities gains (losses), net		165		(75	)		240		N/M
Gain on sale of mortgage loans, net		338		220			118			53.6
Income from company-owned life insurance		468		479			(11	)		(2.3	)
Other		239		612			(373	)		(60.9	)
Total noninterest income	$	10,949	$	11,364		$	(415	)		(3.7	)%

N/M – Not meaningful.

The decrease in noninterest income was driven mainly the Company’s equity interest in its three tax credit partnerships. The Company recorded income of $358 thousand related to these partnerships in the year-ago period compared with none for the current period. The Company liquidated its interest in one of the partnerships in December 2014 and the carrying value of the remaining two is zero.

Service charges and fees on deposits decreased primarily due to lower overdraft fees of $271 thousand or 11.9% as a result of volume declines. The decrease in allotment processing fees is a result of lower processing volume related to the U.S. Department of Defense policy restrictions that went into effect on January 1, 2015. As previously disclosed by the Company, the new policy restricts active duty service members from entering into certain types of allotment arrangements. These restrictions have resulted in lower processing volumes. While the Company continues to diversify its allotment customer base and product offerings, the future impact on processing revenue remains uncertain and challenging to predict.

The increase in trust income is primarily due to higher market values of managed assets, which is a component of the fee structure arrangement. The Company recorded a net gain on the sale of mortgage loans of $338 thousand, up $118 thousand or 53.6%. The volume of mortgage loans sold decreased $2.8 million in the comparison; however, the net gain for the prior year includes a nonrecurring loss of $92 thousand, made up of a $46 thousand loss related to a group of loans reclassified from held for sale to held for investment and a group of loans sold for a loss of $46 thousand.

The net loss on investment securities in the prior year includes $95 thousand attributed to a municipal bond where the issuer participated in the Build America Bond 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.

43

Noninterest Expense

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

(Dollars in thousands) Six Months Ended June 30,	2015		2014		Increase (Decrease)			%
Salaries and employee benefits	$	16,172	$	14,693	$	1,479			10.1	%
Occupancy expenses, net		2,446		2,491		(45	)		(1.8	)
Equipment expenses		1,227		1,187		40			3.4
Data processing and communication expense		2,129		1,974		155			7.9
Bank franchise tax		1,212		1,222		(10	)		(.8	)
Amortization of intangibles		225		202		23			11.4
Deposit insurance expense		804		901		(97	)		(10.8	)
Other real estate expenses, net		771		2,002		(1,231	)		(61.5	)
Legal expenses		401		422		(21	)		(5.0	)
Other		3,597		3,659		(62	)		(1.7	)
Total noninterest expense	$	28,984	$	28,753	$	231			.8	%

Total noninterest expense was relatively unchanged in the comparison. The more significant components that changed include higher salaries and employee benefits expense and lower expenses related to repossessed real estate. Salaries and related payroll taxes increased $724 thousand or 6.0%. Employee benefits increased $758 thousand or 29.8%, mainly due to claims activity related to the Company’s self-funded health insurance plan and, to a lesser extent, an increase in the actuary-determined postretirement benefit expense. The Company had 510 full time equivalent employees at the end of the period, unchanged from a year earlier.

The decrease in repossessed real estate expenses is primarily the result of lower impairment charges of $848 thousand or 60.0% and lower development, maintenance, and operating costs of $280 thousand. The prior year includes a net loss on the sale of properties of $94 thousand compared with a net gain of $9 thousand for the current period.

The increase in data processing and communication expense is primarily due to higher telephone and automated teller expenses. The increase in telephone expense is attributed to vendor rate increases that were effective at the beginning of 2015. Automated teller expenses increased due to higher transaction volume. Amortization of intangibles represents actuary-determined amounts related to core deposits from previous acquisitions, with 2015 being the final year of scheduled amortization. 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 $2.8 million for the current six months, a decrease of $305 thousand or 9.9% compared to $3.1 million for the prior year. The effective income tax rates were 26.8% and 27.3% for the current and year-ago periods, respectively. The decrease in the effective income tax rate is mainly attributed to lower pretax income, made up by a higher mix of tax-exempt versus taxable sources of revenue.

44

 FINANCIAL CONDITION

Total assets were $1.8 billion at June 30, 2015, a decrease of $32.2 million or 1.8% from year-end 2014. Cash and cash equivalents decreased $19.3 million or 19.1%. Other real estate owned (“OREO”) and investment securities decreased $5.7 million or 18.0% and $8.1 million or 1.3%, respectively. Loans edged up $1.4 million or 0.1%.

The decrease in cash and cash equivalents and investment securities from year-end is a result of the Company’s overall net funding position, which includes a decline in deposits of $28.0 million or 2.0%. While loans outstanding increased in the comparison, generating high quality loan demand remains a challenge. OREO continued to trend downward primarily due to property sales, which outpaced new additions.

Total liabilities were $1.6 billion at June 30, 2015, a decrease of $27.0 million or 1.7% compared to year-end 2014. The decrease in total liabilities is mainly attributed to the reduction in total deposits. Interest bearing deposits are down $33.9 million or 3.1%, partially offset by an increase in noninterest bearing deposits of $5.9 million or 2.0%. The decrease in interest bearing deposits was driven by lower time deposits of $40.8 million or 10.3%.

Shareholders’ equity was $168 million at June 30, 2015, a decrease of $5.2 million or 3.0% compared to $173 million at year-end 2014. The decrease in shareholders’ equity was driven by the redemption of the remaining portion of the Company’s preferred stock in the amount of $10.0 million during the second quarter. Net income increased shareholders’ equity $7.6 million, which was partially offset by lower other comprehensive income of $2.4 million. The decrease in other comprehensive income was made up of a $1.2 million decline in the after-tax unrealized gain related to the available for sale investment securities portfolio and a $1.2 million decrease in the after-tax amount related to the Company’s liability for postretirement medical benefits plan.

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

(Dollars in thousands, except per share amounts)	June 30, 2015		December 31, 2014		Increase (Decrease)			%
Cash and cash equivalents	$	81,622	$	100,914	$	(19,292	)		(19.1	)%
Investment securities		622,000		630,116		(8,116	)		(1.3	)
Loans, net of allowance of $12,199 and $13,968		921,106		917,975		3,131			.3
Other real estate owned		26,214		31,960		(5,746	)		(18.0	)
Other assets		99,471		101,641		(2,170	)		(2.1	)
Total assets	$	1,750,413	$	1,782,606	$	(32,193	)		(1.8	)%
Deposits	$	1,359,174	$	1,387,161	$	(27,987	)		(2.0	)%
Federal funds purchased and other short-term borrowings		27,359		28,590		(1,231	)		(4.3	)
Other borrowings		169,120		168,694		426			.3
Other liabilities		26,983		25,232		1,751			6.9
Total liabilities		1,582,636		1,609,677		(27,041	)		(1.7	)
Preferred stock		-		10,000		(10,000	)		(100.0	)
Common stock		937		936		1			.1
Capital surplus		51,470		51,344		126			.2
Retained earnings		112,955		105,774		7,181			6.8
Accumulated other comprehensive income		2,415		4,875		(2,460	)		(50.5	)
Total shareholders’ equity		167,777		172,929		(5,152	)		(3.0	)
Total liabilities and shareholders’ equity	$	1,750,413	$	1,782,606	$	(32,193	)		(1.8	)%
End of period tangible book value per common share1	$	22.36	$	21.69	$	.67			3.1	%
End of period per common share closing price		28.43		23.29		5.14			22.1

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

45

Temporary Investments

Temporary investments consist of interest bearing deposits in other banks, federal funds sold and securities purchased under agreements to resell, and money market mutual funds. 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, 2015, temporary investments were $59.0 million, a decrease of $15.1 million or 20.4% from year-end 2014.

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. Principal payment received on mortgage-backed securities and proceeds 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 $622 million at June 30, 2015, a decrease of $8.1 million or 1.3% compared to $630 million at year-end 2014.

The decrease in investment securities was driven by net maturities, calls, and sales of $78.2 million in the aggregate, which outpaced purchases totaling $74.0 million. Net premium amortization of $2.2 million and a decrease in the market value adjustment related to the available for sale portfolio of $1.9 million also made up part of the decrease. The decrease in the market value adjustment of the available for sale securities portfolio is attributed to higher bond prices related to longer term maturity periods. Yields for the ten and 30-year Treasury securities increased 18 basis points and 35 basis points, respectively, since year-end 2014. Generally, as market interest rates increase, the value of fixed rate investments decrease.

Investment securities include single-issuer trust preferred capital securities of a U.S. based global financial services firm. The carrying value of this investment at June 30, 2015 was $5.4 million, which includes an unrealized loss of $509 thousand. At year-end 2014, these securities had an unrealized loss of $354 thousand.

The Company’s investment in the single-issuer trust preferred capital securities continue to perform according to contractual terms and continue to be rated as investment grade by major rating agencies. The issuer of the securities announced in the first quarter of 2015 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 were $933 million at June 30, 2015, an increase of $1.4 million or 0.1% compared to year-end 2014. The increase in loans resulted from a $5.9 million or 0.6% increase during the second quarter, driven by several previously approved larger construction loans that have begun to be drawn upon. High quality loan demand remains soft, 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 increase in loans occurred despite early payoffs of several larger balance credits. The Company has experienced early payoffs on several larger credits which were refinanced by competitors with terms below the Company’s underwriting standards. Loan payments include $2.7 million related to nonaccrual loans during 2015.

46

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

	June 30, 2015					December 31, 2014
(Dollars in thousands)	Amount		%			Amount		%
Real estate mortgage - construction and land development	$	105,911		11.3	%	$	97,045		10.4	%
Real estate mortgage - residential		353,132		37.8			361,022		38.7
Real estate mortgage - farmland and other commercial enterprises		369,294		39.6			375,277		40.3
Commercial, financial, and agriculture		92,683		9.9			85,028		9.1
Installment		12,235		1.3			13,413		1.5
Lease financing		50		-			158		-
Total	$	933,305		100.0	%	$	931,943		100.0	%

On an average basis, loans represented 55.9% of earning assets for the current six month period, a decrease of 239 basis points compared to 58.3% for the year 2014. 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.

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 qualitative 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 $12.2 million or 1.31% of outstanding loans at June 30, 2015. This compares to $14.0 million or 1.50% of net loans outstanding at year-end 2014. The decrease in the allowance as a percentage of net loans outstanding from the prior year-end is resulted primarily from a credit to the provision for loan losses of $1.8 million for the current six-month period. As a percentage of nonperforming loans, the allowance for loan losses was 35.7% at June 30, 2015 compared to 38.9% at year-end 2014. The relatively low amount of the allowance for loan losses as a percentage of nonperforming loans is due mainly to the makeup of nonperforming loans.

Nonperforming loans include $24.3 million of accruing restructured loans, which represents 71% of total nonperforming loans at June 30, 2015. At year-end 2014, this amount was $24.4 million or 68%. The allowance attributed to credits that are restructured with lower interest rates generally represents the difference in the present value of future cash flows calculated at the loan’s original effective interest rate and the new lower rate. This typically results in a reserve for loan losses that is less severe than for other loans that are collateral dependent. The allowance specifically allocated to impaired loans, which includes restructured loans, was $3.1 million or 7.2% and $3.4 million or 7.7% of such loans at June 30, 2015 and year-end, respectively. As a percentage of nonaccrual loans and loans past due 90 days or more and still accruing, the allowance for loan losses was 123% and 121% at the current quarter-end and year-end 2014, respectively.

47

The overall improvement in the credit quality of the loan portfolio experienced during 2014 continued during the first six months of 2015. 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, 2015		December 31, 2014		June 30, 2014		Three-year High1		Three-year Low1
Nonperforming loans	$	34,193	$	35,937	$	43,551	$	69,627	$	34,193
Nonaccrual loans		9,921		11,508		18,095		43,150		9,921
Loans past due 30-89 days and still accruing		1,312		1,352		3,651		7,831		1,312
Loans graded substandard or below		48,985		52,313		68,448		113,216		48,985
Impaired loans		42,557		43,955		49,623		79,168		42,557
Loans, net of unearned income		933,305		931,943		970,179		1,018,311		927,389

¹Based on quarter-end balances over the previous three years.

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 $34.2 million at June 30, 2015, a decrease of $1.7 million or 4.9% compared to $35.9 million at year-end 2014. Nonaccrual loans and accruing restructured loans decreased $1.6 million or 13.8% and $157 thousand or 0.6%, respectively. Accruing restructured loans make up $24.3 million or 71% of the Company’s nonperforming loans at June 30, 2015 compared with $9.9 million or 29% related to nonaccrual loans. Nonaccrual loans have decreased to the lowest level since the third quarter of 2007.

48

Nonperforming loans, presented by class, were as follows for the periods indicated.

Nonperforming Loans

(In thousands)	June 30, 2015			December 31, 2014
Nonaccrual Loans
Real Estate:
Real estate mortgage - construction and land development	$	2,404		$	3,744
Real estate mortgage - residential		3,335			3,474
Real estate mortgage - farmland and other commercial enterprises		4,109			4,202
Commercial:
Commercial and industrial		52			81
Other		9			7
Consumer:
Secured		12			-
Unsecured		-			-
Total nonaccrual loans	$	9,921		$	11,508
Restructured Loans
Real Estate:
Real estate mortgage - construction and land development	$	3,679		$	3,742
Real estate mortgage - residential		4,385			4,674
Real estate mortgage - farmland and other commercial enterprises		15,671			16,004
Commercial:
Commercial and industrial		387			-
Consumer:
Unsecured		150			9
Total restructured loans	$	24,272		$	24,429
Total nonperforming loans	$	34,193		$	35,937
Ratio of total nonperforming loans to total loans (net of unearned income)		3.7	%		3.9	%

The most significant components of nonperforming loans include nonaccrual and accruing restructured loans. Activity during 2015 related to these two components was as follows:

(In thousands)	Nonaccrual Loans			Restructured Loans
Balance at December 31, 2014	$	11,508		$	24,429
Additions		1,810			3,270
Principal paydowns		(2,741	)		(3,427	)
Transfers to performing status		(36	)		-
Transfers to other real estate owned/other foreclosed assets		(392	)		-
Charge-offs		(228	)		-
Balance at June 30, 2015	$	9,921		$	24,272

49

The Company’s comprehensive risk-grading and loan review program includes a review of loans to assess risk and assign a grade to those loans, a review of delinquencies, and an assessment of loans for needed charge-offs or placement on nonaccrual status. The Company had loans in the amount of $60.5 million and $64.7 million at June 30, 2015 and year-end 2014, 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 lingering 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, 2015, the five largest potential problem credits were $13.2 million in the aggregate compared to $13.9 million at year-end 2014.

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

OREO includes real estate properties acquired by the Company through, or in lieu of, actual foreclosure. At June 30, 2015, OREO was $26.2 million, a decrease of $5.7 million or 18.0% compared to $32.0 million at year-end 2014. The decrease was driven by sales activity, including two larger-balance residential real estate development properties that sold for $2.9 million, one larger-balance residential real estate property that sold for $525 thousand, and one larger-balance commercial real estate property sold for $499 thousand. OREO has declined $26.3 million or 50.1% from its peak of $52.6 million, which occurred at year-end 2012. A summary of OREO activity for 2015 follows.

(In thousands)	Amount
Balance at December 31, 2014	$	31,960
Transfers from loans		475
Proceeds from sales		(5,664	)
Net gain on sales		9
Write-downs and other decreases, net		(566	)
Balance at June 30, 2015	$	26,214

50

Deposits

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

	End of Period										Average
(In thousands)	June 30, 2015		December 31, 2014		Increase (Decrease)			%			Six Months June 30, 2015		Twelve Months December 31, 2014		Increase (Decrease)			%
Noninterest Bearing	$	298,665	$	292,788	$	5,877			2.0	%	$	301,631	$	281,025	$	20,606			7.3	%
Interest Bearing
Demand		323,523		335,657		(12,134	)		(3.6	)		343,079		320,947		22,132			6.9
Savings		382,210		363,185		19,025			5.2			379,853		357,156		22,697			6.4
Time		354,776		395,531		(40,755	)		(10.3	)		374,538		433,756		(59,218	)		(13.7	)
Total interest bearing		1,060,509		1,094,373		(33,864	)		(3.1	)		1,097,470		1,111,859		(14,389	)		(1.3	)
Total Deposits	$	1,359,174	$	1,387,161	$	(27,987	)		(2.0	)%	$	1,399,101	$	1,392,884	$	6,217			.4	%

The decrease in total end of period deposits was driven by lower time deposits and is primarily attributed to the Company’s overall high liquidity position and strategy to lower overall funding costs, mainly by allowing higher-rate certificates of deposit to roll off or to reprice at lower interest rates. Many of those balances have been rolled into either demand or savings 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 $196 million at June 30, 2015, a decrease of $805 thousand or 0.4% from year-end 2014. Short-term borrowings were $27.4 million at quarter-end. This represents a decrease of $1.2 million or 4.3%, which is attributed to a decline in repurchase agreements with commercial depositors in the normal course of business. Short-term borrowings primarily represent funds that have been swept out of the deposit accounts of certain qualifying commercial customers into repurchase agreements and accounted for as secured borrowings by the Company. Long-term borrowings were relatively unchanged at $169 million.

LIQUIDITY

The primary source of funds for the Parent Company is the receipt of dividends from its subsidiary banks, balances of cash and cash equivalents maintained, and borrowings from nonaffiliated sources. 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 payments for general operating expenses.

Payment of dividends to the Parent Company by its subsidiary banks is subject to certain regulatory restrictions as set forth in national and state banking laws and regulations. Furthermore, Citizens Bank of Northern Kentucky, Inc. (“Citizens Northern”) must obtain regulatory approval to declare or pay dividends to the Parent Company in connection with a prior regulatory agreement. Capital ratios at each of the Company’s four subsidiary banks exceed regulatory established “well-capitalized” status at June 30, 2015 under the prompt corrective action regulatory framework; however, Citizens Northern is required to maintain capital ratios at a higher level as outlined in its regulatory agreement. The capital ratios at Citizens Northern exceeded the required higher amounts at June 30, 2015.

The Parent Company had cash and cash equivalents of $30.2 million and $32.1 million at June 30, 2015 and year-end 2014, respectively. Significant cash receipts by the Parent Company for 2015 include dividend payments from its bank subsidiaries of $7.4 million, return of capital amounts from nonbank subsidiaries of $1.4 million, and management fees from subsidiaries of $1.2 million. Significant cash payments by the Parent Company in 2015 include $10.0 million to redeem the final portion of its outstanding preferred stock, $1.6 million for salaries, payroll taxes, and employee benefits, $508 thousand for the payment of dividends on preferred stock, and $421 thousand for the payment of interest expense on subordinated notes payable.

51

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, investment securities, and cash flow generated by the repayment of principal and interest on loans and investment securities. For liabilities, sources of funds primarily include the subsidiary banks' core deposits, Federal Home Loan Bank (“FHLB”) and other borrowings, and federal funds purchased and securities sold under agreements to repurchase. While maturities and scheduled amortization of loans and investment securities are generally a predictable source of funds, deposit outflows and mortgage prepayments are influenced significantly by general interest rates, economic conditions, and competition in our local markets.

As of June 30, 2015, the Company had $235 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 was $224 million at year-end 2014.

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 Committees, at both the Parent Company and bank subsidiary level, meet regularly to monitor the composition of the balance sheet to ensure comprehensive management of interest rate risk and liquidity.

Liquid assets consist of cash and cash equivalents and available for sale investment securities. At June 30, 2015, consolidated liquid assets were $700 million, a decrease of $27.4 million or 3.8% compared to $727 million at year-end 2014. Although liquid assets decreased in the comparison, the Company’s liquidity position remains elevated mainly as a result of the Company’s overall net funding position and weak, high-quality 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 $12.4 million and $18.9 million for the first six months of 2015 and 2014, respectively. This represents a decrease of $6.4 million or 34.0%, led by a decrease of $3.7 million related to net mortgage loans originated for sale activity. Net cash flow provided by investing activities was $7.5 million and $25.4 million for 2015 and 2014, respectively. The $17.9 million decrease was primarily driven by loan activity. The Company had net cash outflow representing overall principal advances in the current period of $1.1 million compared with net principal collections a year earlier in the amount of $18.9 million. Proceeds from the sale of OREO increased $2.6 million in the comparison. Net cash inflows related to investment securities were $4.2 million for 2015, down $794 thousand compared to a year earlier.

Net cash used in financing activities was $39.2 million for the first six months of 2015, a decrease of $4.3 million compared with $43.5 million a year earlier. The decrease was driven primarily by short-term borrowing activity. For 2015, net repayments on short-term borrowings were $1.2 million compared with net repayments of $4.9 million for 2014.

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.

52

CAPITAL RESOURCES

Shareholders’ equity was $168 million at June 30, 2015, a decrease of $5.2 million or 3.0% compared to $173 million at year-end 2014. The decrease in shareholders’ equity was driven by the redemption of the remaining portion of the Company’s preferred stock in the amount of $10.0 million during the second quarter. Net income increased shareholders’ equity by $7.6 million, partially offset by $2.5 million related to other comprehensive income. Other comprehensive income includes a decrease of $1.2 million related to the after-tax amount of the unrealized gain on available for sale investment securities and a decrease of $1.2 million attributed to the after-tax amount related to the Company’s liability for postretirement medical benefits plan. The decrease in the unrealized gain on available for sale investment securities correlates to the increase in long term market interest rates at the end of the period compared with year-end 2014. As market interest rates increase, the value of fixed rate investments generally decreases. The decrease related to postretirement medical benefits reflects changes in actuarial assumptions attributed to plan valuation.

On January 9, 2009, the Company issued 30,000 shares of Series A, no par value cumulative perpetual preferred stock. The Company redeemed 20,000 of the preferred shares during 2014. On June 8, 2015, the Company redeemed the final 10,000 shares at the stated liquidation value of $1,000 per share, plus accrued dividends of $58 thousand. There was no additional debt or equity issued by the Company in connection with any of the shares redeemed.

At June 30, 2015, the Company’s tangible capital ratio was 9.57%, a decrease of 11 basis points compared to 9.68% at year-end 2014. The decrease in the tangible capital ratio was driven by the $10.0 million decrease in preferred stock that was redeemed in the second quarter. The tangible capital ratio represents tangible equity as a percentage of tangible assets, which excludes intangible assets. Tangible common equity to tangible assets, which further excludes outstanding preferred stock, was 9.57% and 9.12% at June 30, 2015 and year-end 2014, respectively. This represents an increase of 45 basis points in the comparison. The increase in the tangible common equity ratio is the result of a combination of both an increase in tangible common equity and a reduction in tangible assets in the comparison.

In July 2013, U.S. banking regulators adopted final rules related to standards on bank capital adequacy and liquidity (commonly referred to as “Basel III”). The new rules were effective for the Company beginning on January 1, 2015, subject to a phase-in period for certain provisions extending through January 1, 2019. The rules include a new common equity Tier 1 capital ratio, an increase to the minimum Tier 1 capital ratio, an increase to risk-weightings of certain assets, implementation of a new capital conservation buffer in excess of the required minimum (which is set to be phased in beginning in 2016), and changes to how regulatory capital is defined. The Company and each of its bank subsidiaries meet the minimum capital ratios and a fully phased-in capital conservation buffer under the new rules.

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 capital ratios of the Company and its subsidiary banks are presented in the following table for the dates indicated.

	June 30, 2015												December 31, 2014
	Common Equity Tier 1 Risk-based Capital1			Tier 1 Risk-based Capital1			Total Risk-based Capital1			Tier 1 Leverage2			Common Equity Tier 1 Risk-based Capital1	Tier 1 Risk-based Capital1			Total Risk-based Capital1			Tier 1 Leverage2
Consolidated		14.54	%		18.71	%		19.79	%		11.91	%	N/A		19.75	%		21.00	%		12.04	%
Farmers Bank & Capital Trust Company		16.58			16.58			17.53			9.36		N/A		17.71			18.70			9.40
United Bank & Trust Company		18.74			18.74			19.99			12.51		N/A		18.00			19.26			11.08
First Citizens Bank, Inc.		13.36			13.36			13.98			9.32		N/A		13.66			14.30			9.44
Citizens Northern3		13.98			13.98			15.23			9.89		N/A		14.46			15.71			10.11
Regulatory minimum		4.50			6.00			8.00			4.00		N/A		4.00			8.00			4.00
Well-capitalized status		6.50			8.00			10.00			5.00		N/A		6.00			10.00			5.00

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

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

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

N/A – Not applicable.

53

Regulatory Agreements

Citizens Northern is party to a supervisory agreement with its primary banking regulator. This agreement is summarized in Note 11 to the unaudited condensed consolidated financial statements of this Form 10-Q. The agreement is discussed in significantly greater detail in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 under the caption “Capital Resources” in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

There have been no changes to the regulatory agreement at Citizens Northern in 2015. The Company believes it is adequately addressing all issues of the regulatory agreement to which it is subject and is in compliance with the agreement. However, only the 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 regulatory agreement 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 agreement.

The agreement originally entered into during 2009 between the United Bank & Trust Company and its primarily regulators was terminated during the first quarter 2015 as a result of continued satisfactory compliance.

The Parent Company maintains cash available to fund a certain amount of additional injections of capital to its bank subsidiaries if necessary. 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.

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, 2015, 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 0.2% and 0.6%, respectively for the year ending December 31, 2015 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 0.3% and 0.8%, 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, 2015 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.

54

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

As of June 30, 2015, 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

During 2014, the Company changed the form of payment to its directors for board meeting 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 into 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. Attendance for committee meetings 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.

The Company issued 1,115 shares and 1,885 shares of common stock to its non-employee directors under this plan in the three and six months ended June 30, 2015, respectively, as compensation for director fees of $27 thousand and $46 thousand for those respective periods. 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 shares of common stock repurchased by the Company during the quarter ended June 30, 2015. There are 84,971 shares that may still be purchased under the various authorizations, although no shares have been purchased since 2008.

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.

55

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)).
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	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)).
10.3	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)).
10.4	Amendment No. 2 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 8, 2014).
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)).
10.6	Employment agreement dated October 28, 2014 between Farmers Capital Bank Corporation and Mark A. Hampton (incorporated by reference to Exhibit 10.1 to Form 8-K filed October 28, 2014 (File No. 000-14412)).

56

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.

57

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, 2015	/s/ Lloyd C. Hillard, Jr.
		Lloyd C. Hillard, Jr.
		President and CEO
		(Principal Executive Officer)
Date:	August 7, 2015	/s/ Mark A. Hampton
		Mark A. Hampton
		Executive Vice President, CFO, and Secretary
		(Principal Financial and Accounting Officer)

58

EX-31.1

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, 2015	/s/ Lloyd C. Hillard, Jr.
		Lloyd C. Hillard, Jr.
		President and CEO

EX-31.2

Exhibit 31.2

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

I, Mark A. Hampton, 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, 2015	/s/ Mark A. Hampton
		Mark A. Hampton
		Executive Vice President, CFO, and Secretary

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, 2015 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, 2015	/s/ Lloyd C. Hillard, Jr.
		Lloyd C. Hillard, Jr.
		President and CEO
Date:	August 7, 2015	/s/ Mark A. Hampton
		Mark A. Hampton
		Executive Vice President, CFO, and Secretary

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.

XML

Note 6 - Investment Securities (Details) - Gross Realized Gains and Losses on the Sale of Available for Sale Investment Securities - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Gross Realized Gains and Losses on the Sale of Available for Sale Investment Securities [Abstract]
Gross realized gains	$ 50	$ 19	$ 180	$ 178
Gross realized losses	5	103	15	253
Net realized gain (loss)	$ 45	$ (84)	$ 165	$ (75)

XML

Note 8 - Other Real Estate Owned (Details) - OREO Activity - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
OREO Activity [Abstract]
Beginning balance	$ 31,960	$ 37,826
Transfers from loans and other increases	475	6,978
Proceeds from sales	(5,664)	(4,262)
Gain (loss) on sales, net	9	(94)
Write downs and other decreases, net	(566)	(1,414)
Ending balance	$ 26,214	$ 39,034

XML

Note 7 - Loans and Allowance for Loan Losses (Details) - Troubled Debt Restructurings $ in Thousands	3 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2015 USD ($)	Jun. 30, 2015 USD ($)	Dec. 31, 2014
Commercial:
Number of Loans	3	3	0
Pre-Modification Outstanding Recorded Investment	$ 533	$ 533
Post-Modification Outstanding Recorded Investment	$ 533	$ 533
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Commercial:
Number of Loans	2	2
Pre-Modification Outstanding Recorded Investment	$ 388	$ 388
Post-Modification Outstanding Recorded Investment	$ 388	$ 388
Consumer Portfolio Segment [Member] | Consumer Unsecured [Member]
Commercial:
Number of Loans	1	1
Pre-Modification Outstanding Recorded Investment	$ 145	$ 145
Post-Modification Outstanding Recorded Investment	$ 145	$ 145

XML

Note 9 - Securities Sold under Agreements to Repurchase (Details) - Maturity of Repurchase Agreements $ in Thousands	Jun. 30, 2015 USD ($)
Note 9 - Securities Sold under Agreements to Repurchase (Details) - Maturity of Repurchase Agreements [Line Items]
Remaining contractual maturity of the agreements	$ 128,627
US Government Agencies Debt Securities [Member]
Note 9 - Securities Sold under Agreements to Repurchase (Details) - Maturity of Repurchase Agreements [Line Items]
Remaining contractual maturity of the agreements	128,627
Maturity Overnight [Member]
Note 9 - Securities Sold under Agreements to Repurchase (Details) - Maturity of Repurchase Agreements [Line Items]
Remaining contractual maturity of the agreements	25,959
Maturity Overnight [Member] | US Government Agencies Debt Securities [Member]
Note 9 - Securities Sold under Agreements to Repurchase (Details) - Maturity of Repurchase Agreements [Line Items]
Remaining contractual maturity of the agreements	25,959
Maturity Less than 30 Days [Member]
Note 9 - Securities Sold under Agreements to Repurchase (Details) - Maturity of Repurchase Agreements [Line Items]
Remaining contractual maturity of the agreements	1,200
Maturity Less than 30 Days [Member] | US Government Agencies Debt Securities [Member]
Note 9 - Securities Sold under Agreements to Repurchase (Details) - Maturity of Repurchase Agreements [Line Items]
Remaining contractual maturity of the agreements	1,200
Maturity 30 to 90 Days [Member]
Note 9 - Securities Sold under Agreements to Repurchase (Details) - Maturity of Repurchase Agreements [Line Items]
Remaining contractual maturity of the agreements	0
Maturity 30 to 90 Days [Member] | US Government Agencies Debt Securities [Member]
Note 9 - Securities Sold under Agreements to Repurchase (Details) - Maturity of Repurchase Agreements [Line Items]
Remaining contractual maturity of the agreements	0
Maturity Greater than 90 Days [Member]
Note 9 - Securities Sold under Agreements to Repurchase (Details) - Maturity of Repurchase Agreements [Line Items]
Remaining contractual maturity of the agreements	713
Maturity Greater than 90 Days [Member] | US Government Agencies Debt Securities [Member]
Note 9 - Securities Sold under Agreements to Repurchase (Details) - Maturity of Repurchase Agreements [Line Items]
Remaining contractual maturity of the agreements	713
Maturity Over One Year to Four Years [Member]
Note 9 - Securities Sold under Agreements to Repurchase (Details) - Maturity of Repurchase Agreements [Line Items]
Remaining contractual maturity of the agreements	100,755
Maturity Over One Year to Four Years [Member] | US Government Agencies Debt Securities [Member]
Note 9 - Securities Sold under Agreements to Repurchase (Details) - Maturity of Repurchase Agreements [Line Items]
Remaining contractual maturity of the agreements	$ 100,755

XML

Note 7 - Loans and Allowance for Loan Losses (Details) - Allowance for Loan Losses and the Recorded Investment in Loans by Impairment Method - USD ($) $ in Thousands	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2013
Ending allowance balance attributable to loans:
Allowance for loan losses individually evaluated for impairment	$ 3,059		$ 3,371
Allowance for loan losses collectively evaluated for impairment	9,140		10,597
Total ending allowance balance	12,199	$ 12,606	13,968	$ 17,123	$ 18,690	$ 20,577
Loans
Loans individually evaluated for impairment	42,557		43,955
Loans collectively evaluated for impairment	890,748		887,988
Total loans, net of unearned income	933,305		931,943
Real Estate Portfolio Segment [Member]
Ending allowance balance attributable to loans:
Allowance for loan losses individually evaluated for impairment	2,625		3,275
Allowance for loan losses collectively evaluated for impairment	8,181		9,267
Total ending allowance balance	10,806	11,522	12,542	15,448	17,114	18,716
Loans
Loans individually evaluated for impairment	41,623		43,837
Loans collectively evaluated for impairment	786,714		789,507
Total loans, net of unearned income	828,337		833,344
Commercial Portfolio Segment [Member]
Ending allowance balance attributable to loans:
Allowance for loan losses individually evaluated for impairment	270		71
Allowance for loan losses collectively evaluated for impairment	787		1,082
Total ending allowance balance	1,057	866	1,153	1,338	1,201	1,409
Loans
Loans individually evaluated for impairment	769		93
Loans collectively evaluated for impairment	91,964		85,093
Total loans, net of unearned income	92,733		85,186
Consumer Portfolio Segment [Member]
Ending allowance balance attributable to loans:
Allowance for loan losses individually evaluated for impairment	164		25
Allowance for loan losses collectively evaluated for impairment	172		248
Total ending allowance balance	336	$ 218	273	$ 337	$ 375	$ 452
Loans
Loans individually evaluated for impairment	165		25
Loans collectively evaluated for impairment	12,070		13,388
Total loans, net of unearned income	$ 12,235		$ 13,413

XML

Note 3 - Accumulated Other Comprehensive Income (Details) - Amounts Reclassified out of Accumulated Other Comprehensive Income by Component - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Income tax expense	$ (1,369)	$ (1,959)	$ (2,774)	$ (3,079)
Net of tax	3,332	4,261	7,181	7,094
	4,871	6,783	10,350	11,273
Reclassification out of Accumulated Other Comprehensive Income [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net of tax	16	(8)	71	(113)
Reclassification out of Accumulated Other Comprehensive Income [Member] | Accumulated Net Investment Gain (Loss) Attributable to Parent [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Unrealized gains and losses on available for sale investment securities	48	23	155	(103)
Income tax expense	(17)	(8)	(54)	36
Net of tax	31	15	101	(67)
Reclassification out of Accumulated Other Comprehensive Income [Member] | Accumulated Defined Benefit Plans Adjustment Attributable to Parent [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Income tax expense	8	13	16	25
Net of tax	(15)	(23)	(30)	(46)
Prior service costs	(12)	(52)	(25)	(104)
Actuarial gains (losses)	(11)	16	(21)	33
	$ (23)	$ (36)	$ (46)	$ (71)

XML

Note 10 - Postretirement Medical Benefits (Details) - Net Periodic Benefit Cost - Postretirement Medical Benefits [Member] - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Note 10 - Postretirement Medical Benefits (Details) - Net Periodic Benefit Cost [Line Items]
Service cost	$ 184	$ 120	$ 369	$ 242
Interest cost	163	143	325	285
Recognized prior service cost	12	52	25	104
Recognized net actuarial loss (gain)	11	(16)	21	(33)
Net periodic benefit cost	$ 370	$ 299	$ 740	$ 598

XML

Note 6 - Investment Securities (Tables)

6 Months Ended

Jun. 30, 2015

Investments, Debt and Equity Securities [Abstract]

Schedule of AFS and HTM Reconciliation [Table Text Block]

June 30, 2015 (In thousands)	Amortized Cost		Gross UnrealizedGains		Gross UnrealizedLosses		Estimated Fair Value
Available For Sale
Obligations of U.S. government-sponsored entities	$	131,378	$	411	$	632	$	131,157
Obligations of states and political subdivisions		136,908		2,248		681		138,475
Mortgage-backed securities – residential		323,087		6,531		1,361		328,257
Mortgage-backed securities – commercial		13,106		78		14		13,170
Corporate debt securities		6,881		19		514		6,386
Mutual funds and equity securities		883		2		33		852
Total securities – available for sale	$	612,243	$	9,289	$	3,235	$	618,297
Held To Maturity
Obligations of states and political subdivisions	$	3,703	$	168	$	-	$	3,871

December 31, 2014 (In thousands)	Amortized Cost		Gross UnrealizedGains		Gross UnrealizedLosses		Estimated Fair Value
Available For Sale
Obligations of U.S. government-sponsored entities	$	110,094	$	369	$	1,015	$	109,448
Obligations of states and political subdivisions		133,563		2,600		397		135,766
Mortgage-backed securities – residential		363,729		7,959		1,199		370,489
Mortgage-backed securities – commercial		2,515		7		10		2,512
Corporate debt securities		6,639		26		358		6,307
Mutual funds and equity securities		1,889		2		25		1,866
Total securities – available for sale	$	618,429	$	10,963	$	3,004	$	626,388
Held To Maturity
Obligations of states and political subdivisions	$	3,728	$	195	$	-	$	3,923

Investments Classified by Contractual Maturity Date [Table Text Block]

	Available For Sale				Held To Maturity
	Amortized		Estimated		Amortized		Estimated
June 30, 2015 (In thousands)	Cost		Fair Value		Cost		Fair Value
Due in one year or less	$	12,034	$	12,062	$	-	$	-
Due after one year through five years		156,768		157,760		-		-
Due after five years through ten years		92,094		92,396		705		799
Due after ten years		14,270		13,800		2,998		3,072
Mortgage-backed securities		336,194		341,427		-		-
Total	$	611,360	$	617,445	$	3,703	$	3,871

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

	Three Months Ended					Six Months Ended
	June 30,					June 30,
(In thousands)	2015		2014			2015		2014
Gross realized gains	$	50	$	19		$	180	$	178
Gross realized losses		5		103			15		253
Net realized gain (loss)	$	45	$	(84	)	$	165	$	(75	)

Schedule of Unrealized Loss on Investments [Table Text Block]

	Less than 12 Months				12 Months or More				Total
June 30, 2015 (In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Obligations of U.S. government-sponsored entities	$	50,661	$	378	$	19,648	$	254	$	70,309	$	632
Obligations of states and political subdivisions		47,962		538		8,103		143		56,065		681
Mortgage-backed securities – residential		93,303		662		23,454		699		116,757		1,361
Mortgage-backed securities – commercial		2,739		14		-		-		2,739		14
Corporate debt securities		287		5		5,379		509		5,666		514
Mutual funds and equity securities		565		20		70		13		635		33
Total	$	195,517	$	1,617	$	56,654	$	1,618	$	252,171	$	3,235

	Less than 12 Months				12 Months or More				Total
December 31, 2014 (In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Obligations of U.S. government-sponsored entities	$	22,696	$	76	$	60,892	$	939	$	83,588	$	1,015
Obligations of states and political subdivisions		20,746		81		21,272		316		42,018		397
Mortgage-backed securities – residential		37,451		82		71,311		1,117		108,762		1,199
Mortgage-backed securities – commercial		-		-		723		10		723		10
Corporate debt securities		76		4		5,525		354		5,601		358
Mutual funds and equity securities		305		11		95		14		400		25
Total	$	81,274	$	254	$	159,818	$	2,750	$	241,092	$	3,004

XML

Note 7 - Loans and Allowance for Loan Losses (Details) - Risk Category of Loans by Class - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Credit risk profile by internally assigned rating grades:
Loans	$ 933,305	$ 931,943
Real Estate Portfolio Segment [Member]
Credit risk profile by internally assigned rating grades:
Loans	828,337	833,344
Real Estate Portfolio Segment [Member] | Real Estate Construction and Land Development [Member]
Credit risk profile by internally assigned rating grades:
Loans	105,911	97,045
Real Estate Portfolio Segment [Member] | Real Estate Construction and Land Development [Member] | Pass [Member]
Credit risk profile by internally assigned rating grades:
Loans	90,470	81,438
Real Estate Portfolio Segment [Member] | Real Estate Construction and Land Development [Member] | Special Mention [Member]
Credit risk profile by internally assigned rating grades:
Loans	4,200	2,674
Real Estate Portfolio Segment [Member] | Real Estate Construction and Land Development [Member] | Substandard [Member]
Credit risk profile by internally assigned rating grades:
Loans	11,241	12,933
Real Estate Portfolio Segment [Member] | Real Estate Construction and Land Development [Member] | Doubtful [Member]
Credit risk profile by internally assigned rating grades:
Loans	0	0
Real Estate Portfolio Segment [Member] | Real Estate Mortgage Residential [Member]
Credit risk profile by internally assigned rating grades:
Loans	353,132	361,022
Real Estate Portfolio Segment [Member] | Real Estate Mortgage Residential [Member] | Pass [Member]
Credit risk profile by internally assigned rating grades:
Loans	319,315	326,124
Real Estate Portfolio Segment [Member] | Real Estate Mortgage Residential [Member] | Special Mention [Member]
Credit risk profile by internally assigned rating grades:
Loans	14,337	16,429
Real Estate Portfolio Segment [Member] | Real Estate Mortgage Residential [Member] | Substandard [Member]
Credit risk profile by internally assigned rating grades:
Loans	19,480	18,469
Real Estate Portfolio Segment [Member] | Real Estate Mortgage Residential [Member] | Doubtful [Member]
Credit risk profile by internally assigned rating grades:
Loans	0	0
Real Estate Portfolio Segment [Member] | Real Estate Mortgage Farmland and Other Commercial Enterprises [Member]
Credit risk profile by internally assigned rating grades:
Loans	369,294	375,277
Real Estate Portfolio Segment [Member] | Real Estate Mortgage Farmland and Other Commercial Enterprises [Member] | Pass [Member]
Credit risk profile by internally assigned rating grades:
Loans	325,928	327,019
Real Estate Portfolio Segment [Member] | Real Estate Mortgage Farmland and Other Commercial Enterprises [Member] | Special Mention [Member]
Credit risk profile by internally assigned rating grades:
Loans	25,606	27,855
Real Estate Portfolio Segment [Member] | Real Estate Mortgage Farmland and Other Commercial Enterprises [Member] | Substandard [Member]
Credit risk profile by internally assigned rating grades:
Loans	17,760	19,941
Real Estate Portfolio Segment [Member] | Real Estate Mortgage Farmland and Other Commercial Enterprises [Member] | Doubtful [Member]
Credit risk profile by internally assigned rating grades:
Loans	0	462
Commercial Portfolio Segment [Member]
Credit risk profile by internally assigned rating grades:
Loans	92,733	85,186
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Credit risk profile by internally assigned rating grades:
Loans	52,313	47,112
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member] | Pass [Member]
Credit risk profile by internally assigned rating grades:
Loans	50,851	45,665
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member] | Special Mention [Member]
Credit risk profile by internally assigned rating grades:
Loans	981	946
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member] | Substandard [Member]
Credit risk profile by internally assigned rating grades:
Loans	481	501
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member] | Doubtful [Member]
Credit risk profile by internally assigned rating grades:
Loans	0	0
Commercial Portfolio Segment [Member] | States and Political Subdivisions [Member]
Credit risk profile by internally assigned rating grades:
Loans	21,037	22,369
Commercial Portfolio Segment [Member] | States and Political Subdivisions [Member] | Pass [Member]
Credit risk profile by internally assigned rating grades:
Loans	21,037	22,369
Commercial Portfolio Segment [Member] | States and Political Subdivisions [Member] | Special Mention [Member]
Credit risk profile by internally assigned rating grades:
Loans	0	0
Commercial Portfolio Segment [Member] | States and Political Subdivisions [Member] | Substandard [Member]
Credit risk profile by internally assigned rating grades:
Loans	0	0
Commercial Portfolio Segment [Member] | States and Political Subdivisions [Member] | Doubtful [Member]
Credit risk profile by internally assigned rating grades:
Loans	0	0
Commercial Portfolio Segment [Member] | Lease Financing [Member]
Credit risk profile by internally assigned rating grades:
Loans	50	158
Commercial Portfolio Segment [Member] | Lease Financing [Member] | Pass [Member]
Credit risk profile by internally assigned rating grades:
Loans	50	158
Commercial Portfolio Segment [Member] | Lease Financing [Member] | Special Mention [Member]
Credit risk profile by internally assigned rating grades:
Loans	0	0
Commercial Portfolio Segment [Member] | Lease Financing [Member] | Substandard [Member]
Credit risk profile by internally assigned rating grades:
Loans	0	0
Commercial Portfolio Segment [Member] | Lease Financing [Member] | Doubtful [Member]
Credit risk profile by internally assigned rating grades:
Loans	0	0
Commercial Portfolio Segment [Member] | Commercial Other [Member]
Credit risk profile by internally assigned rating grades:
Loans	19,333	15,547
Commercial Portfolio Segment [Member] | Commercial Other [Member] | Pass [Member]
Credit risk profile by internally assigned rating grades:
Loans	19,310	15,526
Commercial Portfolio Segment [Member] | Commercial Other [Member] | Special Mention [Member]
Credit risk profile by internally assigned rating grades:
Loans	0	14
Commercial Portfolio Segment [Member] | Commercial Other [Member] | Substandard [Member]
Credit risk profile by internally assigned rating grades:
Loans	23	7
Commercial Portfolio Segment [Member] | Commercial Other [Member] | Doubtful [Member]
Credit risk profile by internally assigned rating grades:
Loans	$ 0	$ 0

XML

Note 7 - Loans and Allowance for Loan Losses (Details) - Major Classifications of Loans - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Real Estate:
Real estate mortgage - construction and land development	$ 105,911	$ 97,045
Real estate mortgage - residential	353,132	361,022
Real estate mortgage - farmland and other commercial enterprises	369,294	375,277
Commercial:
Commercial and industrial	52,313	47,112
States and political subdivisions	21,037	22,369
Lease financing	50	159
Other	19,333	15,547
Consumer:
Secured	7,152	7,963
Unsecured	5,083	5,450
Total loans	933,305	931,944
Less unearned income		1
Total loans, net of unearned income	$ 933,305	$ 931,943

XML

Note 6 - Investment Securities (Details) - The Amortized Costs and Estimated Fair Value of the Securities Portfolio - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Available For Sale
Available for Sale Investment Securities - Amortized Cost	$ 612,243	$ 618,429
Available for Sale Investment Securities - Gross Unrealized Gains	9,289	10,963
Available for Sale Investment Securities - Gross Unrealized Losses	3,235	3,004
Available for Sale Investment Securities	618,297	626,388
Held To Maturity
Held to Maturity Securities - Amortized Cost	3,703	3,728
Held to Maturity Securities - Estimated Fair Value	3,871	3,923
US Government-sponsored Enterprises Debt Securities [Member]
Available For Sale
Available for Sale Investment Securities - Amortized Cost	131,378	110,094
Available for Sale Investment Securities - Gross Unrealized Gains	411	369
Available for Sale Investment Securities - Gross Unrealized Losses	632	1,015
Available for Sale Investment Securities	131,157	109,448
US States and Political Subdivisions Debt Securities [Member]
Available For Sale
Available for Sale Investment Securities - Amortized Cost	136,908	133,563
Available for Sale Investment Securities - Gross Unrealized Gains	2,248	2,600
Available for Sale Investment Securities - Gross Unrealized Losses	681	397
Available for Sale Investment Securities	138,475	135,766
Held To Maturity
Held to Maturity Securities - Amortized Cost	3,703	3,728
Held to Maturity Securities - Gross Unrealized Gains	168	195
Held to Maturity Securities - Gross Unrealized Losses	0	0
Held to Maturity Securities - Estimated Fair Value	3,871	3,923
Residential Mortgage Backed Securities [Member]
Available For Sale
Available for Sale Investment Securities - Amortized Cost	323,087	363,729
Available for Sale Investment Securities - Gross Unrealized Gains	6,531	7,959
Available for Sale Investment Securities - Gross Unrealized Losses	1,361	1,199
Available for Sale Investment Securities	328,257	370,489
Commercial Mortgage Backed Securities [Member]
Available For Sale
Available for Sale Investment Securities - Amortized Cost	13,106	2,515
Available for Sale Investment Securities - Gross Unrealized Gains	78	7
Available for Sale Investment Securities - Gross Unrealized Losses	14	10
Available for Sale Investment Securities	13,170	2,512
Corporate Debt Securities [Member]
Available For Sale
Available for Sale Investment Securities - Amortized Cost	6,881	6,639
Available for Sale Investment Securities - Gross Unrealized Gains	19	26
Available for Sale Investment Securities - Gross Unrealized Losses	514	358
Available for Sale Investment Securities	6,386	6,307
Mutual Funds and Equity Securities [Member]
Available For Sale
Available for Sale Investment Securities - Amortized Cost	883	1,889
Available for Sale Investment Securities - Gross Unrealized Gains	2	2
Available for Sale Investment Securities - Gross Unrealized Losses	33	25
Available for Sale Investment Securities	$ 852	$ 1,866

XML

Note 8 - Other Real Estate Owned (Details) $ in Millions	Jun. 30, 2015 USD ($)
Disclosure Text Block [Abstract]
Mortgage Loans in Process of Foreclosure, Amount	$ 2.5

XML

Note 12 - Fair Value Measurements (Details) - Available for Sale Investment Securities Measured at Fair Value on a Recurring Basis - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Note 12 - Fair Value Measurements (Details) - Available for Sale Investment Securities Measured at Fair Value on a Recurring Basis [Line Items]
Available for Sale Investment Securities	$ 618,297	$ 626,388
US Government-sponsored Enterprises Debt Securities [Member]
Note 12 - Fair Value Measurements (Details) - Available for Sale Investment Securities Measured at Fair Value on a Recurring Basis [Line Items]
Available for Sale Investment Securities	131,157	109,448
US States and Political Subdivisions Debt Securities [Member]
Note 12 - Fair Value Measurements (Details) - Available for Sale Investment Securities Measured at Fair Value on a Recurring Basis [Line Items]
Available for Sale Investment Securities	138,475	135,766
Residential Mortgage Backed Securities [Member]
Note 12 - Fair Value Measurements (Details) - Available for Sale Investment Securities Measured at Fair Value on a Recurring Basis [Line Items]
Available for Sale Investment Securities	328,257	370,489
Commercial Mortgage Backed Securities [Member]
Note 12 - Fair Value Measurements (Details) - Available for Sale Investment Securities Measured at Fair Value on a Recurring Basis [Line Items]
Available for Sale Investment Securities	13,170	2,512
Corporate Debt Securities [Member]
Note 12 - Fair Value Measurements (Details) - Available for Sale Investment Securities Measured at Fair Value on a Recurring Basis [Line Items]
Available for Sale Investment Securities	6,386	6,307
Mutual Funds and Equity Securities [Member]
Note 12 - Fair Value Measurements (Details) - Available for Sale Investment Securities Measured at Fair Value on a Recurring Basis [Line Items]
Available for Sale Investment Securities	852	1,866
Fair Value, Inputs, Level 1 [Member]
Note 12 - Fair Value Measurements (Details) - Available for Sale Investment Securities Measured at Fair Value on a Recurring Basis [Line Items]
Available for Sale Investment Securities	852	1,866
Fair Value, Inputs, Level 1 [Member] | US Government-sponsored Enterprises Debt Securities [Member]
Note 12 - 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
Fair Value, Inputs, Level 1 [Member] | US States and Political Subdivisions Debt Securities [Member]
Note 12 - 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
Fair Value, Inputs, Level 1 [Member] | Residential Mortgage Backed Securities [Member]
Note 12 - 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
Fair Value, Inputs, Level 1 [Member] | Commercial Mortgage Backed Securities [Member]
Note 12 - 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
Fair Value, Inputs, Level 1 [Member] | Corporate Debt Securities [Member]
Note 12 - 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
Fair Value, Inputs, Level 1 [Member] | Mutual Funds and Equity Securities [Member]
Note 12 - Fair Value Measurements (Details) - Available for Sale Investment Securities Measured at Fair Value on a Recurring Basis [Line Items]
Available for Sale Investment Securities	852	1,866
Fair Value, Inputs, Level 2 [Member]
Note 12 - Fair Value Measurements (Details) - Available for Sale Investment Securities Measured at Fair Value on a Recurring Basis [Line Items]
Available for Sale Investment Securities	617,445	624,522
Fair Value, Inputs, Level 2 [Member] | US Government-sponsored Enterprises Debt Securities [Member]
Note 12 - Fair Value Measurements (Details) - Available for Sale Investment Securities Measured at Fair Value on a Recurring Basis [Line Items]
Available for Sale Investment Securities	131,157	109,448
Fair Value, Inputs, Level 2 [Member] | US States and Political Subdivisions Debt Securities [Member]
Note 12 - Fair Value Measurements (Details) - Available for Sale Investment Securities Measured at Fair Value on a Recurring Basis [Line Items]
Available for Sale Investment Securities	138,475	135,766
Fair Value, Inputs, Level 2 [Member] | Residential Mortgage Backed Securities [Member]
Note 12 - Fair Value Measurements (Details) - Available for Sale Investment Securities Measured at Fair Value on a Recurring Basis [Line Items]
Available for Sale Investment Securities	328,257	370,489
Fair Value, Inputs, Level 2 [Member] | Commercial Mortgage Backed Securities [Member]
Note 12 - Fair Value Measurements (Details) - Available for Sale Investment Securities Measured at Fair Value on a Recurring Basis [Line Items]
Available for Sale Investment Securities	13,170	2,512
Fair Value, Inputs, Level 2 [Member] | Corporate Debt Securities [Member]
Note 12 - Fair Value Measurements (Details) - Available for Sale Investment Securities Measured at Fair Value on a Recurring Basis [Line Items]
Available for Sale Investment Securities	6,386	6,307
Fair Value, Inputs, Level 2 [Member] | Mutual Funds and Equity Securities [Member]
Note 12 - 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
Fair Value, Inputs, Level 3 [Member]
Note 12 - 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
Fair Value, Inputs, Level 3 [Member] | US Government-sponsored Enterprises Debt Securities [Member]
Note 12 - 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
Fair Value, Inputs, Level 3 [Member] | US States and Political Subdivisions Debt Securities [Member]
Note 12 - 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
Fair Value, Inputs, Level 3 [Member] | Residential Mortgage Backed Securities [Member]
Note 12 - 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
Fair Value, Inputs, Level 3 [Member] | Commercial Mortgage Backed Securities [Member]
Note 12 - 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
Fair Value, Inputs, Level 3 [Member] | Corporate Debt Securities [Member]
Note 12 - 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
Fair Value, Inputs, Level 3 [Member] | Mutual Funds and Equity Securities [Member]
Note 12 - 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 (Details) - Recorded Investment in Nonperforming Loans by Class of Loans - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Real Estate:
Nonaccrual	$ 9,921	$ 11,508
Restructured Loans	24,272	24,429
Loans Past Due 90 Days or More and Still Accruing	0	0
Real Estate Portfolio Segment [Member] | Real Estate Construction and Land Development [Member]
Real Estate:
Nonaccrual	2,404	3,744
Restructured Loans	3,679	3,742
Loans Past Due 90 Days or More and Still Accruing	0	0
Real Estate Portfolio Segment [Member] | Real Estate Mortgage Residential [Member]
Real Estate:
Nonaccrual	3,335	3,474
Restructured Loans	4,385	4,674
Loans Past Due 90 Days or More and Still Accruing	0	0
Real Estate Portfolio Segment [Member] | Real Estate Mortgage Farmland and Other Commercial Enterprises [Member]
Real Estate:
Nonaccrual	4,109	4,202
Restructured Loans	15,671	16,004
Loans Past Due 90 Days or More and Still Accruing	0	0
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Real Estate:
Nonaccrual	52	81
Restructured Loans	387	0
Loans Past Due 90 Days or More and Still Accruing	0	0
Commercial Portfolio Segment [Member] | Commercial Other [Member]
Real Estate:
Nonaccrual	9
Restructured Loans	0
Loans Past Due 90 Days or More and Still Accruing	0
Commercial Portfolio Segment [Member] | Lease Financing [Member]
Real Estate:
Nonaccrual		7
Restructured Loans		0
Loans Past Due 90 Days or More and Still Accruing		0
Consumer Portfolio Segment [Member] | Consumer Secured [Member]
Real Estate:
Nonaccrual	12
Restructured Loans	0
Loans Past Due 90 Days or More and Still Accruing	0
Consumer Portfolio Segment [Member] | Consumer Unsecured [Member]
Real Estate:
Nonaccrual	0	0
Restructured Loans	150	9
Loans Past Due 90 Days or More and Still Accruing	$ 0	$ 0

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Unaudited Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Cash Flows from Operating Activities
Net income	$ 7,576	$ 8,194
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	2,010	2,012
Net premium amortization of investment securities:
Provision for loan losses	(1,809)	(1,256)
Deferred income tax expense	88	2
Mortgage loans originated for sale	(13,484)	(12,584)
Proceeds from sale of mortgage loans	13,511	16,156
Gain on sale of mortgage loans, net	(338)	(220)
Loss (gain) on disposal and write downs of premises and equipment, net	15	(5)
Net loss on sale and write downs of other real estate	557	1,508
Net (gain) loss on sale of available for sale investment securities	(165)	75
Increase in cash surrender value of company-owned life insurance	(446)	(460)
Decrease in accrued interest receivable	215	231
Decrease in other assets	2,498	977
Decrease in accrued interest payable	(47)	(72)
Increase in other liabilities	5	2,337
Net cash provided by operating activities	12,442	18,861
Cash Flows from Investing Activities
Proceeds from maturities and calls of available for sale investment securities	65,795	41,485
Proceeds from sale of available for sale investment securities	12,406	12,104
Purchase of investment securities:
Available for sale	(74,020)	(45,697)
Held to maturity	0	(3,065)
Proceeds from sale of restricted stock investments, net	0	148
Loans originated for investment (greater) less than principal collected, net	(1,146)	18,945
Purchase of premises and equipment	(941)	(1,350)
Proceeds from sale of other real estate	5,406	2,803
Proceeds from disposals of premises and equipment	0	5
Net cash provided by investing activities	7,500	25,378
Cash Flows from Financing Activities
Net decrease in deposits	(27,987)	(27,542)
Net decrease in federal funds purchased and other short-term borrowings	(1,231)	(4,893)
Proceeds from securities sold under agreements to repurchase and other long-term borrowings	504	5
Repayments of securities sold under agreements to repurchase and other long-term borrowings	(78)	(88)
Redemption of preferred stock	(10,000)	(10,000)
Dividends paid, preferred	(508)	(1,050)
Shares issued under employee stock purchase plan	66	63
Net cash used in financing activities	(39,234)	(43,505)
Net (decrease) increase in cash and cash equivalents	(19,292)	734
Cash and cash equivalents at beginning of year	100,914	68,253
Cash and cash equivalents at end of period	81,622	68,987
Cash paid during the period for:
Interest	4,412	5,371
Income taxes	350	750
Transfers from loans to other real estate	393	6,668
Sale and financing of other real estate	258	1,459
Cash dividends payable, preferred	0	225
Employee Stock Purchase Plan Expense [Member]
Net premium amortization of investment securities:
Noncash compensation expense	16	19
Director Fee Compensation [Member]
Net premium amortization of investment securities:
Noncash compensation expense	45	36
Available-for-sale Securities [Member]
Net premium amortization of investment securities:
Net premuim amortization of investment securities	2,170	1,895
Held-to-maturity Securities [Member]
Net premium amortization of investment securities:
Net premuim amortization of investment securities	$ 25	$ 16

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Note 12 - Fair Value Measurements (Details) - Assets Measured at Fair Value on a Nonrecurring Basis - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Impaired Loans [Member]
Collateral-dependent Impaired Loans
Assets fair value, nonrecurring	$ 680	$ 1,570
OREO [Member]
Collateral-dependent Impaired Loans
Assets fair value, nonrecurring	5,043	14,445
Real Estate Portfolio Segment [Member] | Real Estate Mortgage Residential [Member] | Impaired Loans [Member]
Collateral-dependent Impaired Loans
Assets fair value, nonrecurring	680	946
Real Estate Portfolio Segment [Member] | Real Estate Mortgage Residential [Member] | OREO [Member]
Collateral-dependent Impaired Loans
Assets fair value, nonrecurring	256	863
Real Estate Portfolio Segment [Member] | Real Estate Construction and Land Development [Member] | Impaired Loans [Member]
Collateral-dependent Impaired Loans
Assets fair value, nonrecurring		284
Real Estate Portfolio Segment [Member] | Real Estate Construction and Land Development [Member] | OREO [Member]
Collateral-dependent Impaired Loans
Assets fair value, nonrecurring	807	8,123
Real Estate Portfolio Segment [Member] | Real Estate Mortgage Farmland and Other Commercial Enterprises [Member] | Impaired Loans [Member]
Collateral-dependent Impaired Loans
Assets fair value, nonrecurring		340
Real Estate Portfolio Segment [Member] | Real Estate Mortgage Farmland and Other Commercial Enterprises [Member] | OREO [Member]
Collateral-dependent Impaired Loans
Assets fair value, nonrecurring	3,980	5,459
Fair Value, Inputs, Level 1 [Member] | Impaired Loans [Member]
Collateral-dependent Impaired Loans
Assets fair value, nonrecurring	0	0
Fair Value, Inputs, Level 1 [Member] | OREO [Member]
Collateral-dependent Impaired Loans
Assets fair value, nonrecurring	0	0
Fair Value, Inputs, Level 1 [Member] | Real Estate Portfolio Segment [Member] | Real Estate Mortgage Residential [Member] | Impaired Loans [Member]
Collateral-dependent Impaired Loans
Assets fair value, nonrecurring	0	0
Fair Value, Inputs, Level 1 [Member] | Real Estate Portfolio Segment [Member] | Real Estate Mortgage Residential [Member] | OREO [Member]
Collateral-dependent Impaired Loans
Assets fair value, nonrecurring	0	0
Fair Value, Inputs, Level 1 [Member] | Real Estate Portfolio Segment [Member] | Real Estate Construction and Land Development [Member] | Impaired Loans [Member]
Collateral-dependent Impaired Loans
Assets fair value, nonrecurring		0
Fair Value, Inputs, Level 1 [Member] | Real Estate Portfolio Segment [Member] | Real Estate Construction and Land Development [Member] | OREO [Member]
Collateral-dependent Impaired Loans
Assets fair value, nonrecurring	0	0
Fair Value, Inputs, Level 1 [Member] | Real Estate Portfolio Segment [Member] | Real Estate Mortgage Farmland and Other Commercial Enterprises [Member] | Impaired Loans [Member]
Collateral-dependent Impaired Loans
Assets fair value, nonrecurring		0
Fair Value, Inputs, Level 1 [Member] | Real Estate Portfolio Segment [Member] | Real Estate Mortgage Farmland and Other Commercial Enterprises [Member] | OREO [Member]
Collateral-dependent Impaired Loans
Assets fair value, nonrecurring	0	0
Fair Value, Inputs, Level 2 [Member] | Impaired Loans [Member]
Collateral-dependent Impaired Loans
Assets fair value, nonrecurring	0	0
Fair Value, Inputs, Level 2 [Member] | OREO [Member]
Collateral-dependent Impaired Loans
Assets fair value, nonrecurring	0	0
Fair Value, Inputs, Level 2 [Member] | Real Estate Portfolio Segment [Member] | Real Estate Mortgage Residential [Member] | Impaired Loans [Member]
Collateral-dependent Impaired Loans
Assets fair value, nonrecurring	0	0
Fair Value, Inputs, Level 2 [Member] | Real Estate Portfolio Segment [Member] | Real Estate Mortgage Residential [Member] | OREO [Member]
Collateral-dependent Impaired Loans
Assets fair value, nonrecurring	0	0
Fair Value, Inputs, Level 2 [Member] | Real Estate Portfolio Segment [Member] | Real Estate Construction and Land Development [Member] | Impaired Loans [Member]
Collateral-dependent Impaired Loans
Assets fair value, nonrecurring		0
Fair Value, Inputs, Level 2 [Member] | Real Estate Portfolio Segment [Member] | Real Estate Construction and Land Development [Member] | OREO [Member]
Collateral-dependent Impaired Loans
Assets fair value, nonrecurring	0	0
Fair Value, Inputs, Level 2 [Member] | Real Estate Portfolio Segment [Member] | Real Estate Mortgage Farmland and Other Commercial Enterprises [Member] | Impaired Loans [Member]
Collateral-dependent Impaired Loans
Assets fair value, nonrecurring		0
Fair Value, Inputs, Level 2 [Member] | Real Estate Portfolio Segment [Member] | Real Estate Mortgage Farmland and Other Commercial Enterprises [Member] | OREO [Member]
Collateral-dependent Impaired Loans
Assets fair value, nonrecurring	0	0
Fair Value, Inputs, Level 3 [Member] | Impaired Loans [Member]
Collateral-dependent Impaired Loans
Assets fair value, nonrecurring	680	1,570
Fair Value, Inputs, Level 3 [Member] | OREO [Member]
Collateral-dependent Impaired Loans
Assets fair value, nonrecurring	5,043	14,445
Fair Value, Inputs, Level 3 [Member] | Real Estate Portfolio Segment [Member] | Real Estate Mortgage Residential [Member] | Impaired Loans [Member]
Collateral-dependent Impaired Loans
Assets fair value, nonrecurring	680	946
Fair Value, Inputs, Level 3 [Member] | Real Estate Portfolio Segment [Member] | Real Estate Mortgage Residential [Member] | OREO [Member]
Collateral-dependent Impaired Loans
Assets fair value, nonrecurring	256	863
Fair Value, Inputs, Level 3 [Member] | Real Estate Portfolio Segment [Member] | Real Estate Construction and Land Development [Member] | Impaired Loans [Member]
Collateral-dependent Impaired Loans
Assets fair value, nonrecurring		284
Fair Value, Inputs, Level 3 [Member] | Real Estate Portfolio Segment [Member] | Real Estate Construction and Land Development [Member] | OREO [Member]
Collateral-dependent Impaired Loans
Assets fair value, nonrecurring	807	8,123
Fair Value, Inputs, Level 3 [Member] | Real Estate Portfolio Segment [Member] | Real Estate Mortgage Farmland and Other Commercial Enterprises [Member] | Impaired Loans [Member]
Collateral-dependent Impaired Loans
Assets fair value, nonrecurring		340
Fair Value, Inputs, Level 3 [Member] | Real Estate Portfolio Segment [Member] | Real Estate Mortgage Farmland and Other Commercial Enterprises [Member] | OREO [Member]
Collateral-dependent Impaired Loans
Assets fair value, nonrecurring	$ 3,980	$ 5,459

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Note 7 - Loans and Allowance for Loan Losses (Details) - Activity in the Allowance for Loan Losses - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance, beginning of period	$ 12,606	$ 18,690	$ 13,968	$ 20,577
Provision for loan losses	(264)	(1,388)	(1,809)	(1,256)
Recoveries	93	246	432	476
Loans charged off	(236)	(425)	(392)	(2,674)
Balance, end of period	12,199	17,123	12,199	17,123
Real Estate Portfolio Segment [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance, beginning of period	11,522	17,114	12,542	18,716
Provision for loan losses	(576)	(1,603)	(1,787)	(2,359)
Recoveries	52	189	338	357
Loans charged off	(192)	(252)	(287)	(1,266)
Balance, end of period	10,806	15,448	10,806	15,448
Commercial Portfolio Segment [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance, beginning of period	866	1,201	1,153	1,409
Provision for loan losses	189	205	(101)	1,130
Recoveries	15	18	31	45
Loans charged off	(13)	(86)	(26)	(1,246)
Balance, end of period	1,057	1,338	1,057	1,338
Consumer Portfolio Segment [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance, beginning of period	218	375	273	452
Provision for loan losses	123	10	79	(27)
Recoveries	26	39	63	74
Loans charged off	(31)	(87)	(79)	(162)
Balance, end of period	$ 336	$ 337	$ 336	$ 337

XML

Note 10 - Postretirement Medical Benefits (Tables)

6 Months Ended

Jun. 30, 2015

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)	2015		2014			2015		2014
Service cost	$	184	$	120		$	369	$	242
Interest cost		163		143			325		285
Recognized prior service cost		12		52			25		104
Recognized net actuarial loss (gain)		11		(16	)		21		(33	)
Net periodic benefit cost	$	370	$	299		$	740	$	598

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Note 9 - Securities Sold under Agreements to Repurchase (Tables)

6 Months Ended

Jun. 30, 2015

Disclosure Text Block [Abstract]

Schedule of Repurchase Agreements [Table Text Block]

	Remaining Contractual Maturity of the Agreements
June 30, 2015 (In thousands)	Overnight/ Continuous		Less Than 30 Days		30-89Days		90 Days to One Year			Over One Year to Four Years	Total
U.S. government agency securities	$	25,959	$	1,200	$	-	$	713	$	100,755	$	128,627
Total	$	25,959	$	1,200	$	-	$	713	$	100,755	$	128,627

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Note 10 - Postretirement Medical Benefits (Details) - Jun. 30, 2015 - USD ($) $ in Thousands	Total	Total
Note 10 - Postretirement Medical Benefits (Details) [Line Items]
Defined Benefit Plans, Estimated Future Employer Contributions in Current Fiscal Year		$ 359
Other Postretirement Benefits Payments	$ 70	$ 141
Plan 2 [Member]
Note 10 - Postretirement Medical Benefits (Details) [Line Items]
Employee Service Requirement		20 years
Employee Age Requirement		55 years
Contributions Plan 2	50.00%	50.00%
Plan 1 [Member]
Note 10 - Postretirement Medical Benefits (Details) [Line Items]
Company Contributions Plan 1	100.00%	100.00%

XML

Note 7 - Loans and Allowance for Loan Losses (Details) - Individually Impaired Loans by Class of Loans - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Real Estate
Impaired loans, unpaid principal balance	$ 45,529	$ 47,033
Impaired loans, recorded investment with no allowance	14,208	15,644
Impaired loans, recorded investment with allowance	28,349	28,311
Impaired loans, total recorded investment	42,557	43,955
Impaired loans, allowance for loan losses allocated	3,059	3,371
Real Estate Portfolio Segment [Member] | Real Estate Construction and Land Development [Member]
Real Estate
Impaired loans, unpaid principal balance	11,524	13,656
Impaired loans, recorded investment with no allowance	5,523	6,902
Impaired loans, recorded investment with allowance	3,280	3,917
Impaired loans, total recorded investment	8,803	10,819
Impaired loans, allowance for loan losses allocated	525	744
Real Estate Portfolio Segment [Member] | Real Estate Mortgage Residential [Member]
Real Estate
Impaired loans, unpaid principal balance	10,698	10,256
Impaired loans, recorded investment with no allowance	3,344	3,473
Impaired loans, recorded investment with allowance	7,240	6,649
Impaired loans, total recorded investment	10,584	10,122
Impaired loans, allowance for loan losses allocated	1,196	1,172
Real Estate Portfolio Segment [Member] | Real Estate Mortgage Farmland and Other Commercial Enterprises [Member]
Real Estate
Impaired loans, unpaid principal balance	22,376	23,003
Impaired loans, recorded investment with no allowance	5,018	5,247
Impaired loans, recorded investment with allowance	17,218	17,649
Impaired loans, total recorded investment	22,236	22,896
Impaired loans, allowance for loan losses allocated	904	1,359
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Real Estate
Impaired loans, unpaid principal balance	767	93
Impaired loans, recorded investment with no allowance	323	22
Impaired loans, recorded investment with allowance	446	71
Impaired loans, total recorded investment	769	93
Impaired loans, allowance for loan losses allocated	270	71
Consumer Portfolio Segment [Member] | Consumer Unsecured [Member]
Real Estate
Impaired loans, unpaid principal balance	164	25
Impaired loans, recorded investment with no allowance	0	0
Impaired loans, recorded investment with allowance	165	25
Impaired loans, total recorded investment	165	25
Impaired loans, allowance for loan losses allocated	$ 164	25
Consumer Portfolio Segment [Member] | Consumer Secured [Member]
Real Estate
Impaired loans, unpaid principal balance		0
Impaired loans, recorded investment with no allowance		0
Impaired loans, recorded investment with allowance		0
Impaired loans, total recorded investment		0
Impaired loans, allowance for loan losses allocated		$ 0

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Note 11 - Regulatory Matters (Tables)

6 Months Ended

Jun. 30, 2015

Disclosure Text Block [Abstract]

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

	June 30, 2015												December 31, 2014
	Common Equity Tier 1 Risk-based Capital1			Tier 1 Risk-based Capital1			Total Risk-based Capital1			Tier 1 Leverage2			Common Equity Tier 1 Risk-based Capital1	Tier 1 Risk-based Capital1			Total Risk-based Capital1			Tier 1 Leverage2
Consolidated		14.54	%		18.71	%		19.79	%		11.91	%	N/A		19.75	%		21.00	%		12.04	%
Farmers Bank		16.58			16.58			17.53			9.36		N/A		17.71			18.70			9.40
United Bank		18.74			18.74			19.99			12.51		N/A		18.00			19.26			11.08
First Citizens		13.36			13.36			13.98			9.32		N/A		13.66			14.30			9.44
Citizens Northern		13.98			13.98			15.23			9.89		N/A		14.46			15.71			10.11

XML

Note 12 - Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2015

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, 2015
Obligations of U.S. government-sponsored entities	$	131,157	$	-	$	131,157	$	-
Obligations of states and political subdivisions		138,475				138,475		-
Mortgage-backed securities – residential		328,257		-		328,257		-
Mortgage-backed securities – commercial		13,170		-		13,170		-
Corporate debt securities		6,386		-		6,386		-
Mutual funds and equity securities		852		852		-		-
Total	$	618,297	$	852	$	617,445	$	-

			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, 2014
Obligations of U.S. government-sponsored entities	$	109,448	$	-	$	109,448	$	-
Obligations of states and political subdivisions		135,766		-		135,766		-
Mortgage-backed securities – residential		370,489		-		370,489		-
Mortgage-backed securities – commercial		2,512		-		2,512		-
Corporate debt securities		6,307		-		6,307		-
Mutual funds and equity securities		1,866		1,866		-		-
Total	$	626,388	$	1,866	$	624,522	$	-

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, 2015
Collateral-dependent Impaired Loans
Real estate mortgage – residential	$	680	$	-	$	-	$	680
Total	$	680	$	-	$	-	$	680
OREO
Construction and land development	$	807	$	-	$	-	$	807
Residential real estate		256		-		-		256
Farmland and other commercial enterprises		3,980		-		-		3,980
Total	$	5,043	$	-	$	-	$	5,043

			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, 2014
Collateral-dependent Impaired Loans
Real estate mortgage – construction and land development	$	284	$	-	$	-	$	284
Real estate mortgage – residential		946		-		-		946
Real estate mortgage – farmland and other commercial enterprises		340		-		-		340
Total	$	1,570	$	-	$	-	$	1,570
OREO
Construction and land development	$	8,123	$	-	$	-	$	8,123
Residential real estate		863		-		-		863
Farmland and other commercial enterprises		5,459		-		-		5,459
Total	$	14,445	$	-	$	-	$	14,445

Asset Impairment Charges on Assets Nonrecurring [Table Text Block]

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands)	2015		2014		2015		2014
Impairment charges:
Collateral-dependent impaired loans	$	9	$	135	$	31	$	268
OREO		566		419		566		1,170
Total	$	575	$	554	$	597	$	1,438

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

(In thousands)	Fair Value at June 30, 2015		Valuation Technique	Unobservable Inputs	Range			Average
Collateral-dependent impaired loans	$	680	Discounted appraisals	Marketability discount		0% - 8.0	%		5.9	%
OREO	$	5,043	Discounted appraisals	Marketability discount		2.7% - 68.9	%		10.2	%

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, 2015
Assets
Cash and cash equivalents	$	81,622	$	81,622	$	81,622	$	-	$	-
Held to maturity investment securities		3,703		3,871		-		3,871		-
Loans, net		921,106		920,780		-		-		920,780
Accrued interest receivable		5,410		5,410		-		5,410		-
Federal Home Loan Bank and Federal Reserve Bank Stock		9,368	N/A			-		-		-
Liabilities
Deposits		1,359,174		1,360,117		1,004,398		-		355,719
Federal funds purchased and other short-term borrowings		27,359		27,359		-		27,359		-
Securities sold under agreements to repurchase and other long-term borrowings		120,150		128,602		-		128,602		-
Subordinated notes payable to unconsolidated trusts		48,970		31,156		-		-		31,156
Accrued interest payable		897		897		-		897		-
December 31, 2014
Assets
Cash and cash equivalents	$	100,914	$	100,914	$	100,914	$	-	$	-
Held to maturity investment securities		3,728		3,923		-		3,923		-
Loans, net		917,975		918,697		-		-		918,697
Accrued interest receivable		5,625		5,625		-		5,625		-
Federal Home Loan Bank and Federal Reserve Bank Stock		9,368	N/A			-		-		-
Liabilities
Deposits		1,387,161		1,388,614		991,630		-		396,984
Federal funds purchased and other short-term borrowings		28,590		28,590		-		28,590		-
Securities sold under agreements to repurchase and other long-term borrowings		119,724		129,244		-		129,244		-
Subordinated notes payable to unconsolidated trusts		48,970		22,594		-		-		22,594
Accrued interest payable		944		944		-		944		-

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Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity (Parentheticals) - $ / shares	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Preferred dividends	$ 39.50	$ 40.00

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Note 3 - Accumulated Other Comprehensive Income (Details) - Changes in Accumulated Other Comprehensive Income by Component - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	$ 5,466	$ 497	$ 4,875	$ (3,212)
Other comprehensive (loss) income before reclassifications	(3,035)	4,973	(2,389)	8,577
Amounts reclassified from accumulated other comprehensive income	(16)	8	(71)	113
Net current-period other comprehensive (loss) income	(3,051)	4,981	(2,460)	8,690
Ending balance	2,415	5,478	2,415	5,478
Accumulated Net Investment Gain (Loss) Attributable to Parent [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	7,001	63	5,174	(3,623)
Other comprehensive (loss) income before reclassifications	(3,035)	4,973	(1,138)	8,577
Amounts reclassified from accumulated other comprehensive income	(31)	(15)	(101)	67
Net current-period other comprehensive (loss) income	(3,066)	4,958	(1,239)	8,644
Ending balance	3,935	5,021	3,935	5,021
Accumulated Defined Benefit Plans Adjustment Attributable to Parent [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	(1,535)	434	(299)	411
Other comprehensive (loss) income before reclassifications			(1,251)
Amounts reclassified from accumulated other comprehensive income	15	23	30	46
Net current-period other comprehensive (loss) income	15	23	(1,221)	46
Ending balance	$ (1,520)	$ 457	$ (1,520)	$ 457

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Note 6 - Investment Securities (Details) - Investment Securities with Unrealized Losses Not Recognized in Income - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Note 6 - Investment Securities (Details) - Investment Securities with Unrealized Losses Not Recognized in Income [Line Items]
Less than 12 Months, Fair Value	$ 195,517	$ 81,274
Less than 12 Months, Unrealized Losses	1,617	254
12 Months or More, Fair Value	56,654	159,818
12 Months or More, Unrealized Losses	1,618	2,750
Total, Fair Value	252,171	241,092
Total, Unrealized Losses	3,235	3,004
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	50,661	22,696
Less than 12 Months, Unrealized Losses	378	76
12 Months or More, Fair Value	19,648	60,892
12 Months or More, Unrealized Losses	254	939
Total, Fair Value	70,309	83,588
Total, Unrealized Losses	632	1,015
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	47,962	20,746
Less than 12 Months, Unrealized Losses	538	81
12 Months or More, Fair Value	8,103	21,272
12 Months or More, Unrealized Losses	143	316
Total, Fair Value	56,065	42,018
Total, Unrealized Losses	681	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	93,303	37,451
Less than 12 Months, Unrealized Losses	662	82
12 Months or More, Fair Value	23,454	71,311
12 Months or More, Unrealized Losses	699	1,117
Total, Fair Value	116,757	108,762
Total, Unrealized Losses	1,361	1,199
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	2,739	0
Less than 12 Months, Unrealized Losses	14	0
12 Months or More, Fair Value	0	723
12 Months or More, Unrealized Losses	0	10
Total, Fair Value	2,739	723
Total, Unrealized Losses	14	10
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	287	76
Less than 12 Months, Unrealized Losses	5	4
12 Months or More, Fair Value	5,379	5,525
12 Months or More, Unrealized Losses	509	354
Total, Fair Value	5,666	5,601
Total, Unrealized Losses	514	358
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	565	305
Less than 12 Months, Unrealized Losses	20	11
12 Months or More, Fair Value	70	95
12 Months or More, Unrealized Losses	13	14
Total, Fair Value	635	400
Total, Unrealized Losses	$ 33	$ 25

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Note 8 - Other Real Estate Owned (Details) - Other Real Estate Owned - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014	Jun. 30, 2014	Dec. 31, 2013
Note 8 - Other Real Estate Owned (Details) - Other Real Estate Owned [Line Items]
Other Real Estate Owned	$ 26,214	$ 31,960	$ 39,034	$ 37,826
Construction and Land Development OREO [Member]
Note 8 - Other Real Estate Owned (Details) - Other Real Estate Owned [Line Items]
Other Real Estate Owned	14,058	17,628
Residential Real Estate OREO [Member]
Note 8 - Other Real Estate Owned (Details) - Other Real Estate Owned [Line Items]
Other Real Estate Owned	1,252	2,219
Farmland and Other Commercial Enterprises OREO [Member]
Note 8 - Other Real Estate Owned (Details) - Other Real Estate Owned [Line Items]
Other Real Estate Owned	10,904	12,113
OREO [Member]
Note 8 - Other Real Estate Owned (Details) - Other Real Estate Owned [Line Items]
Other Real Estate Owned	$ 26,214	$ 31,960

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Unaudited Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Cash and cash equivalents:
Cash and due from banks	$ 22,586	$ 26,770
Interest bearing deposits in other banks	42,574	67,152
Federal funds sold and securities purchased under agreements to resell	5,262	6,992
Money market mutual funds	11,200	0
Total cash and cash equivalents	81,622	100,914
Investment securities:
Available for sale, amortized cost of $612,243 (2015) and $618,429 (2014)	618,297	626,388
Held to maturity, fair value of $3,871 (2015) and $3,923 (2014)	3,703	3,728
Total investment securities	622,000	630,116
Loans, net of unearned income	933,305	931,943
Allowance for loan losses	(12,199)	(13,968)
Loans, net	921,106	917,975
Premises and equipment, net	34,176	34,933
Company-owned life insurance	29,809	29,363
Intangible assets, net	225	449
Other real estate owned	26,214	31,960
Other assets	35,261	36,896
Total assets	1,750,413	1,782,606
Deposits:
Noninterest bearing	298,665	292,788
Interest bearing	1,060,509	1,094,373
Total deposits	1,359,174	1,387,161
Federal funds purchased and other short-term borrowings	27,359	28,590
Securities sold under agreements to repurchase and other long-term borrowings	120,150	119,724
Subordinated notes payable to unconsolidated trusts	48,970	48,970
Dividends payable	0	113
Other liabilities	26,983	25,119
Total liabilities	1,582,636	1,609,677
1,000,000 shares authorized; none and 10,000 Series A shares issued and outstanding at June 30, 2015 and December 31, 2014
Common stock, par value $.125 per share	937	936
14,608,000 shares authorized; 7,494,535 and 7,489,388 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively
Capital surplus	51,470	51,344
Retained earnings	112,955	105,774
Accumulated other comprehensive income	2,415	4,875
Total shareholders’ equity	167,777	172,929
Total liabilities and shareholders’ equity	$ 1,750,413	1,782,606
Series A Preferred Stock [Member]
Shareholders’ Equity
Preferred stock, no par value		$ 10,000

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Note 7 - Loans and Allowance for Loan Losses (Details) - Individually Impaired Loans By Class of Loans, Continued - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Real Estate
Impaired loans, average	$ 44,525	$ 53,119	$ 45,981	$ 57,468
Impaired loans, interest income recognized	521	496	1,004	983
Impaired loans, cash basis interest recognized	502	476	981	943
Real Estate Portfolio Segment [Member] | Real Estate Construction and Land Development [Member]
Real Estate
Impaired loans, average	10,388	15,452	10,754	15,537
Impaired loans, interest income recognized	135	120	216	233
Impaired loans, cash basis interest recognized	131	118	211	229
Real Estate Portfolio Segment [Member] | Real Estate Mortgage Residential [Member]
Real Estate
Impaired loans, average	10,739	11,059	10,597	11,384
Impaired loans, interest income recognized	134	147	255	262
Impaired loans, cash basis interest recognized	122	141	243	250
Real Estate Portfolio Segment [Member] | Real Estate Mortgage Farmland and Other Commercial Enterprises [Member]
Real Estate
Impaired loans, average	22,426	26,295	23,913	30,222
Impaired loans, interest income recognized	245	226	525	480
Impaired loans, cash basis interest recognized	242	214	519	458
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Real Estate
Impaired loans, average	805	245	621	247
Impaired loans, interest income recognized	5	3	6	4
Impaired loans, cash basis interest recognized	5	3	6	3
Consumer Portfolio Segment [Member] | Consumer Secured [Member]
Real Estate
Impaired loans, average	0	0	0	9
Impaired loans, interest income recognized	0	0	0	0
Impaired loans, cash basis interest recognized	0	0	0	0
Consumer Portfolio Segment [Member] | Consumer Unsecured [Member]
Real Estate
Impaired loans, average	167	68	96	69
Impaired loans, interest income recognized	2	0	2	4
Impaired loans, cash basis interest recognized	$ 2	$ 0	$ 2	$ 3

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Unaudited Condensed Consolidated Statements of Comprehensive Income (Parentheticals) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Unrealized holding gain (loss) on available for sale securities arising during the period on securities held at end of period, tax	$ (1,634)	$ 2,678	$ (613)	$ 4,618
Reclassification adjustment for prior period unrealized (gain) loss previously reported in other comprehensive income recognized during current period, tax	17	8	54	(36)
Change in unfunded portion of postretirement benefit obligation, tax	$ 8	$ 13	$ (657)	$ 25

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Note 11 - Regulatory Matters (Details) - Regulatory Ratios of the Consolidated Company and Its Subsidiary Banks		Jun. 30, 2015	Dec. 31, 2014
Consolidated [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Common Equity Tier 1 Risk-based Capital	[1]	14.54%
Tier 1 Risk-based Capital	[1]	18.71%	19.75%
Total Risk-based Capital	[1]	19.79%	21.00%
Tier 1 Leverage	[2]	11.91%	12.04%
Farmers Bank [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Common Equity Tier 1 Risk-based Capital	[1]	16.58%
Tier 1 Risk-based Capital	[1]	16.58%	17.71%
Total Risk-based Capital	[1]	17.53%	18.70%
Tier 1 Leverage	[2]	9.36%	9.40%
United Bank [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Common Equity Tier 1 Risk-based Capital	[1]	18.74%
Tier 1 Risk-based Capital	[1]	18.74%	18.00%
Total Risk-based Capital	[1]	19.99%	19.26%
Tier 1 Leverage	[2]	12.51%	11.08%
First Citizens Bank [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Common Equity Tier 1 Risk-based Capital	[1]	13.36%
Tier 1 Risk-based Capital	[1]	13.36%	13.66%
Total Risk-based Capital	[1]	13.98%	14.30%
Tier 1 Leverage	[2]	9.32%	9.44%
Citizens Northern [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Common Equity Tier 1 Risk-based Capital	[1]	13.98%
Tier 1 Risk-based Capital	[1]	13.98%	14.46%
Total Risk-based Capital	[1]	15.23%	15.71%
Tier 1 Leverage	[2]	9.89%	10.11%

[1] Common Equity Tier 1 Risked-based, Tier 1 Risk-based, and Total Risk-based Capital ratios are computed by dividing a bank's Common Equity Tier 1, 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 5 - Net Income Per Common Share (Details) - Net Income Per Common Share Computations - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Net Income Per Common Share Computations [Abstract]
Net income, basic and diluted	$ 3,502	$ 4,824	$ 7,576	$ 8,194
Less preferred stock dividends and discount accretion	170	563	395	1,100
Net income available to common shareholders, basic and diluted	$ 3,332	$ 4,261	$ 7,181	$ 7,094
Average common shares issued and outstanding, basic and diluted (in Shares)	7,492	7,482	7,491	7,481
Net income per common share, basic and diluted (in Dollars per share)	$ 0.44	$ 0.57	$ 0.96	$ 0.95

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Note 12 - Fair Value Measurements (Details) - The Carrying Amounts and Estimated Fair Values of Financial Instruments - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014	Jun. 30, 2014	Dec. 31, 2013
Assets
Cash and cash equivalents, carrying amount	$ 81,622	$ 100,914	$ 68,987	$ 68,253
Held to maturity investment securities, carrying amount	3,703	3,728
Held to maturity investment securities, fair value	3,871	3,923
Loans, net, carrying amount	921,106	917,975
Liabilities
Deposits, carrying amount	1,359,174	1,387,161
Federal funds purchased and other short-term borrowings, carrying amount	27,359	28,590
Securities sold under agreements to repurchase and other long-term borrowings, carrying amount	120,150	119,724
Subordinated notes payable to unconsolidated trusts	48,970	48,970
Reported Value Measurement [Member]
Assets
Cash and cash equivalents, carrying amount	81,622	100,914
Held to maturity investment securities, carrying amount	3,703	3,728
Loans, net, carrying amount	921,106	917,975
Accrued interest receivable, carrying amount	5,410	5,625
Federal Home Loan Bank and Federal Reserve Bank Stock, carrying amount	9,368	9,368
Liabilities
Deposits, carrying amount	1,359,174	1,387,161
Federal funds purchased and other short-term borrowings, carrying amount	27,359	28,590
Securities sold under agreements to repurchase and other long-term borrowings, carrying amount	120,150	119,724
Subordinated notes payable to unconsolidated trusts	48,970	48,970
Accrued interest payable, carrying amount	897	944
Estimate of Fair Value Measurement [Member]
Assets
Cash and cash equivalents, fair value	81,622	100,914
Held to maturity investment securities, fair value	3,871	3,923
Loans, net, fair value	920,780	918,697
Accrued interest receivable, fair value	5,410	5,625
Federal Home Loan Bank and Federal Reserve Bank Stock, fair value	0	0
Liabilities
Deposits, fair value	1,360,117	1,388,614
Federal funds purchased and other short-term borrowings, fair value	27,359	28,590
Securities sold under agreements to repurchase and other long-term borrowings, fair value	128,602	129,244
Subordinated notes payable to unconsolidated trusts, fair value	31,156	22,594
Accrued interest payable, fair value	897	944
Fair Value, Inputs, Level 1 [Member]
Assets
Cash and cash equivalents, fair value	81,622	100,914
Held to maturity investment securities, fair value	0	0
Loans, net, fair value	0	0
Accrued interest receivable, fair value	0	0
Federal Home Loan Bank and Federal Reserve Bank Stock, fair value	0	0
Liabilities
Deposits, fair value	1,004,398	991,630
Federal funds purchased and other short-term borrowings, fair value	0	0
Securities sold under agreements to repurchase and other long-term borrowings, fair value	0	0
Subordinated notes payable to unconsolidated trusts, fair value	0	0
Accrued interest payable, fair value	0	0
Fair Value, Inputs, Level 2 [Member]
Assets
Cash and cash equivalents, fair value	0	0
Held to maturity investment securities, fair value	3,871	3,923
Loans, net, fair value	0	0
Accrued interest receivable, fair value	5,410	5,625
Federal Home Loan Bank and Federal Reserve Bank Stock, fair value	0	0
Liabilities
Deposits, fair value	0	0
Federal funds purchased and other short-term borrowings, fair value	27,359	28,590
Securities sold under agreements to repurchase and other long-term borrowings, fair value	128,602	129,244
Subordinated notes payable to unconsolidated trusts, fair value	0	0
Accrued interest payable, fair value	897	944
Fair Value, Inputs, Level 3 [Member]
Assets
Cash and cash equivalents, fair value	0	0
Held to maturity investment securities, fair value	0	0
Loans, net, fair value	920,780	918,697
Accrued interest receivable, fair value	0	0
Federal Home Loan Bank and Federal Reserve Bank Stock, fair value	0	0
Liabilities
Deposits, fair value	355,719	396,984
Federal funds purchased and other short-term borrowings, fair value	0	0
Securities sold under agreements to repurchase and other long-term borrowings, fair value	0	0
Subordinated notes payable to unconsolidated trusts, fair value	31,156	22,594
Accrued interest payable, fair value	$ 0	$ 0

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Accounting Policies, by Policy (Policies)

6 Months Ended

Jun. 30, 2015

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 the Company’s 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 general portion of the Company’s 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 the qualitative risk factors summarized below.

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 Accounting Standards

In January 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-01, “Income Statement—Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items.” This ASU amends U.S. GAAP by removing the concept of extraordinary items, including deleting the definition of “extraordinary items” from the FASB Master Glossary. The revised guidance provides that the nature and financial effects of each event or transaction that is unusual in nature or occurs infrequently or both shall be presented as a separate component of income from continuing operations or, alternatively, disclosed in notes to the financial statements.

The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015, with early adoption permitted. A reporting entity may apply the amendments prospectively or retrospectively. 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 April 2015, the FASB issued ASU No. 2015-03, “Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.” This ASU addresses balance sheet presentation requirements for debt issuance costs and debt discount and premiums. ASU No. 2015-03 requires that debt issuance costs related to a recognized debt liability be presented on the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. This ASU is effective for financial statements issued for fiscal years beginning after December 15, 2015, and for interim periods within those fiscal years. 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 2015, the FASB issued ASU No. 2015-07, “Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent).” This ASU applies to entities that elect to measure the fair value of an investment using the net asset value per share (or its equivalent) practical expedient. The amendments in this ASU remove the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. The amendments also clarify that certain disclosure requirements are limited to investments for which the entity has elected to measure the fair value using the practical expedient, and not all investments eligible to be measured at fair value using the practical expedient. The amendments in ASU 2015-07 are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015, with early application permitted. Entities are required to apply the amendments retrospectively to all periods presented. The Company does not expect there to be a material impact on its consolidated financial position, results of operations, or cash flows upon adoption.

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 6 - Investment Securities (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Note 6 - Investment Securities (Details) [Line Items]
Available-for-sale Securities, Accumulated Gross Unrealized Loss, before Tax	$ 3,235	$ 3,004
Available-for-sale Securities	618,297	626,388
Single Issuer Corporate Debt Security [Member]
Note 6 - Investment Securities (Details) [Line Items]
Available-for-sale Securities, Accumulated Gross Unrealized Loss, before Tax	509	$ 354
Available-for-sale Securities	$ 5,400

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Note 5 - Net Income Per Common Share (Tables)

6 Months Ended

Jun. 30, 2015

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)	2015		2014		2015		2014
Net income, basic and diluted	$	3,502	$	4,824	$	7,576	$	8,194
Less preferred stock dividends and discount accretion		170		563		395		1,100
Net income available to common shareholders, basic and diluted	$	3,332	$	4,261	$	7,181	$	7,094
Average common shares issued and outstanding, basic and diluted		7,492		7,482		7,491		7,481
Net income per common share, basic and diluted	$	.44	$	.57	$	.96	$	.95

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Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity - USD ($) shares in Thousands, $ in Thousands	Preferred Stock [Member]	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	AOCI Attributable to Parent [Member]	Total
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
Balance at Dec. 31, 2014	10,000	$ 936	51,344	105,774	4,875	172,929
Balance (in Shares) at Dec. 31, 2014		7,489
Net income				7,576		7,576
Other comprehensive income (loss)					(2,460)	(2,460)
Cash dividends declared-preferred				(395)		(395)
Redemption of preferred stock	$ (10,000)					(10,000)
Shares issued under director compensation plan			45			45
Shares issued under director compensation plan (in Shares)		2
Shares issued pursuant to employee stock purchase plan		$ 1	65			66
Shares issued pursuant to employee stock purchase plan (in Shares)		4
Expense related to employee stock purchase plan			16			16
Balance at Jun. 30, 2015		$ 937	$ 51,470	$ 112,955	$ 2,415	$ 167,777
Balance (in Shares) at Jun. 30, 2015		7,495

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Unaudited Condensed Consolidated Balance Sheets (Parentheticals) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Available for sale, amortized cost (in Dollars)	$ 612,243	$ 618,429
Held to maturity, fair value (in Dollars)	$ 3,871	$ 3,923
Preferred stock, shares outstanding (in Dollars per share)	$ 0	$ 10,000
Common stock, par value (in Dollars per share)	$ 0.125	$ 0.125
Common stock, shares authorized	14,608,000	14,608,000
Common stock, shares issued	7,494,535	7,489,388
Common stock, shares outstanding	7,494,535	7,489,388
Series A Preferred Stock [Member]
Preferred stock, par value	0	0
Preferred stock, shares authorized	1,000,000	1,000,000
Preferred stock, shares issued	0	10,000

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Note 8 - Other Real Estate Owned

6 Months Ended

Jun. 30, 2015

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, 2015		December 31, 2014
Construction and land development	$	14,058	$	17,628
Residential real estate		1,252		2,219
Farmland and other commercial enterprises		10,904		12,113
Total	$	26,214	$	31,960

OREO activity for the six months ended June 30, 2015 and 2014 was as follows:

Six months ended June 30, (In thousands)	2015			2014
Beginning balance	$	31,960		$	37,826
Transfers from loans and other increases		475			6,978
Proceeds from sales		(5,664	)		(4,262	)
Gain (loss) on sales, net		9			(94	)
Write downs and other decreases, net		(566	)		(1,414	)
Ending balance	$	26,214		$	39,034

At June 30, 2015, the Company had a total of $2.5 million of loans secured by residential real estate mortgages that were in the process of foreclosure.

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Document And Entity Information - shares	6 Months Ended
	Jun. 30, 2015	Aug. 06, 2015
Document and Entity Information [Abstract]
Entity Registrant Name	FARMERS CAPITAL BANK CORP
Trading Symbol	FFKT
Document Type	10-Q
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		7,495,170
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, 2015
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q2

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Note 9 - Securities Sold under Agreements to Repurchase

6 Months Ended

Jun. 30, 2015

Disclosure Text Block [Abstract]

Long-term Debt [Text Block]

9. Securities Sold under Agreements to Repurchase

Securities sold under agreements to repurchase represent transactions where the Company sells certain of its investment securities and agrees to repurchase them at a specific date in the future. Securities sold under agreements to repurchase are accounted for as secured borrowing and reflect the amount of cash received in connection with the transaction.

Securities sold under agreements to repurchase are collateralized by U.S. government agency securities, primarily mortgage-backed securities. The Company may be required to provide additional collateral securing the borrowings in the event of principal pay downs or a decrease in the market value of the pledged securities. The Company mitigates this risk by monitoring the market value and liquidity of the collateral and ensuring that it holds a sufficient level of eligible securities to cover potential increases in collateral requirements.

The following table represents the remaining maturity of repurchase agreements disaggregated by the class of securities pledged.

	Remaining Contractual Maturity of the Agreements
June 30, 2015 (In thousands)	Overnight/ Continuous		Less Than 30 Days		30-89Days		90 Days to One Year			Over One Year to Four Years	Total
U.S. government agency securities	$	25,959	$	1,200	$	-	$	713	$	100,755	$	128,627
Total	$	25,959	$	1,200	$	-	$	713	$	100,755	$	128,627

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Unaudited Condensed Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Interest Income
Interest and fees on loans	$ 12,371	$ 12,676	$ 24,087	$ 25,318
Interest on investment securities:
Taxable	2,641	2,980	5,436	6,060
Nontaxable	665	637	1,321	1,261
Interest on deposits in other banks	41	37	91	64
Interest on federal funds sold and securities purchased under agreements to resell	3	1	6	2
Total interest income	15,721	16,331	30,941	32,705
Interest Expense
Interest on deposits	737	1,104	1,558	2,307
Interest on federal funds purchased and other short-term borrowings	10	11	20	30
Interest on securities sold under agreements to repurchase and other long-term borrowings	1,187	1,279	2,363	2,543
Interest on subordinated notes payable to unconsolidated trusts	214	210	424	419
Total interest expense	2,148	2,604	4,365	5,299
Net interest income	13,573	13,727	26,576	27,406
Provision for loan losses	(264)	(1,388)	(1,809)	(1,256)
Net interest income after provision for loan losses	13,837	15,115	28,385	28,662
Noninterest Income
Service charges and fees on deposits	1,907	1,991	3,679	3,907
Allotment processing fees	1,102	1,274	2,292	2,519
Other service charges, commissions, and fees	1,347	1,399	2,614	2,634
Trust income	583	523	1,154	1,068
Investment securities gain (losses), net	45	(84)	165	(75)
Gains on sale of mortgage loans, net	173	123	338	220
Income from company-owned life insurance	227	233	468	479
Other	124	532	239	612
Total noninterest income	5,508	5,991	10,949	11,364
Noninterest Expense
Salaries and employee benefits	7,852	7,342	16,172	14,693
Occupancy expenses, net	1,219	1,209	2,446	2,491
Equipment expenses	609	593	1,227	1,187
Data processing and communication expenses	1,074	969	2,129	1,974
Bank franchise tax	607	610	1,212	1,222
Amortization of intangibles	113	101	225	202
Deposit insurance expense	404	461	804	901
Other real estate expenses, net	726	938	771	2,002
Legal expenses	189	228	401	422
Other	1,681	1,872	3,597	3,659
Total noninterest expense	14,474	14,323	28,984	28,753
Income before income taxes	4,871	6,783	10,350	11,273
Income tax expense	1,369	1,959	2,774	3,079
Net income	3,502	4,824	7,576	8,194
Less preferred stock dividends and discount accretion	170	563	395	1,100
Net income available to common shareholders	$ 3,332	$ 4,261	$ 7,181	$ 7,094
Per Common Share
Net income - basic and diluted (in Dollars per share)	$ 0.44	$ 0.57	$ 0.96	$ 0.95
Cash dividends declared (in Dollars per share)	$ 0	$ 0	$ 0	$ 0
Weighted Average Common Shares Outstanding
Basic and diluted (in Shares)	7,492	7,482	7,491	7,481

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Note 3 - Accumulated Other Comprehensive Income

6 Months Ended

Jun. 30, 2015

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,	2015									2014
(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	$	7,001		$	(1,535	)	$	5,466		$	63		$	434	$	497
Other comprehensive (loss) income before reclassifications		(3,035	)		-			(3,035	)		4,973			-		4,973
Amounts reclassified from accumulated other comprehensive income		(31	)		15			(16	)		(15	)		23		8
Net current-period other comprehensive (loss) income		(3,066	)		15			(3,051	)		4,958			23		4,981
Ending balance	$	3,935		$	(1,520	)	$	2,415		$	5,021		$	457	$	5,478

Six months ended June 30,	2015									2014
(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	$	5,174		$	(299	)	$	4,875		$	(3,623	)	$	411	$	(3,212	)
Other comprehensive (loss) income before reclassifications		(1,138	)		(1,251	)		(2,389	)		8,577			-		8,577
Amounts reclassified from accumulated other comprehensive income		(101	)		30			(71	)		67			46		113
Net current-period other comprehensive (loss) income		(1,239	)		(1,221	)		(2,460	)		8,644			46		8,690
Ending balance	$	3,935		$	(1,520	)	$	2,415		$	5,021		$	457	$	5,478

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)	2015			2014			2015			2014
Unrealized gains and losses on available for sale investment securities	$	48		$	23		$	155		$	(103	)	Investment securities gains (losses), net
		(17	)		(8	)		(54	)		36		Income tax expense
	$	31		$	15		$	101		$	(67	)	Net of tax
Amortization related to postretirement benefits
Prior service costs	$	(12	)	$	(52	)	$	(25	)	$	(104	)	Salaries and employee benefits
Actuarial gains (losses)		(11	)		16			(21	)		33		Salaries and employee benefits
		(23	)		(36	)		(46	)		(71	)	Total before tax
		8			13			16			25		Income tax benefit
	$	(15	)	$	(23	)	$	(30	)	$	(46	)	Net of tax
Total reclassifications for the period	$	16		$	(8	)	$	71		$	(113	)	Net of tax

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Note 2 - Reclassifications

6 Months Ended

Jun. 30, 2015

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 3 - Accumulated Other Comprehensive Income (Tables)

6 Months Ended

Jun. 30, 2015

Disclosure Text Block [Abstract]

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

Three months ended June 30,	2015									2014
(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	$	7,001		$	(1,535	)	$	5,466		$	63		$	434	$	497
Other comprehensive (loss) income before reclassifications		(3,035	)		-			(3,035	)		4,973			-		4,973
Amounts reclassified from accumulated other comprehensive income		(31	)		15			(16	)		(15	)		23		8
Net current-period other comprehensive (loss) income		(3,066	)		15			(3,051	)		4,958			23		4,981
Ending balance	$	3,935		$	(1,520	)	$	2,415		$	5,021		$	457	$	5,478

Six months ended June 30,	2015									2014
(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	$	5,174		$	(299	)	$	4,875		$	(3,623	)	$	411	$	(3,212	)
Other comprehensive (loss) income before reclassifications		(1,138	)		(1,251	)		(2,389	)		8,577			-		8,577
Amounts reclassified from accumulated other comprehensive income		(101	)		30			(71	)		67			46		113
Net current-period other comprehensive (loss) income		(1,239	)		(1,221	)		(2,460	)		8,644			46		8,690
Ending balance	$	3,935		$	(1,520	)	$	2,415		$	5,021		$	457	$	5,478

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)	2015			2014			2015			2014
Unrealized gains and losses on available for sale investment securities	$	48		$	23		$	155		$	(103	)	Investment securities gains (losses), net
		(17	)		(8	)		(54	)		36		Income tax expense
	$	31		$	15		$	101		$	(67	)	Net of tax
Amortization related to postretirement benefits
Prior service costs	$	(12	)	$	(52	)	$	(25	)	$	(104	)	Salaries and employee benefits
Actuarial gains (losses)		(11	)		16			(21	)		33		Salaries and employee benefits
		(23	)		(36	)		(46	)		(71	)	Total before tax
		8			13			16			25		Income tax benefit
	$	(15	)	$	(23	)	$	(30	)	$	(46	)	Net of tax
Total reclassifications for the period	$	16		$	(8	)	$	71		$	(113	)	Net of tax

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Note 10 - Postretirement Medical Benefits

6 Months Ended

Jun. 30, 2015

Compensation and Retirement Disclosure [Abstract]

Pension and Other Postretirement Benefits Disclosure [Text Block]

10. Postretirement Medical Benefits

The Company provides lifetime medical and dental benefits upon retirement for certain employees meeting the eligibility requirements as of December 31, 1989 (“Plan 1”). Additional participants are not eligible to be included in Plan 1 unless they met the requirements on this date. 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 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, 2015 and 2014.

	Three Months Ended					Six Months Ended
	June 30,					June 30,
(In thousands)	2015		2014			2015		2014
Service cost	$	184	$	120		$	369	$	242
Interest cost		163		143			325		285
Recognized prior service cost		12		52			25		104
Recognized net actuarial loss (gain)		11		(16	)		21		(33	)
Net periodic benefit cost	$	370	$	299		$	740	$	598

The Company expects benefit payments of $359 thousand for 2015, of which $70 thousand and $141 thousand have been made during the three and six months ended June 30, 2015, respectively.

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Note 6 - Investment Securities

6 Months Ended

Jun. 30, 2015

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, 2015 and December 31, 2014. The summary is divided into available for sale and held to maturity investment securities.

June 30, 2015 (In thousands)	Amortized Cost		Gross UnrealizedGains		Gross UnrealizedLosses		Estimated Fair Value
Available For Sale
Obligations of U.S. government-sponsored entities	$	131,378	$	411	$	632	$	131,157
Obligations of states and political subdivisions		136,908		2,248		681		138,475
Mortgage-backed securities – residential		323,087		6,531		1,361		328,257
Mortgage-backed securities – commercial		13,106		78		14		13,170
Corporate debt securities		6,881		19		514		6,386
Mutual funds and equity securities		883		2		33		852
Total securities – available for sale	$	612,243	$	9,289	$	3,235	$	618,297
Held To Maturity
Obligations of states and political subdivisions	$	3,703	$	168	$	-	$	3,871

December 31, 2014 (In thousands)	Amortized Cost		Gross UnrealizedGains		Gross UnrealizedLosses		Estimated Fair Value
Available For Sale
Obligations of U.S. government-sponsored entities	$	110,094	$	369	$	1,015	$	109,448
Obligations of states and political subdivisions		133,563		2,600		397		135,766
Mortgage-backed securities – residential		363,729		7,959		1,199		370,489
Mortgage-backed securities – commercial		2,515		7		10		2,512
Corporate debt securities		6,639		26		358		6,307
Mutual funds and equity securities		1,889		2		25		1,866
Total securities – available for sale	$	618,429	$	10,963	$	3,004	$	626,388
Held To Maturity
Obligations of states and political subdivisions	$	3,728	$	195	$	-	$	3,923

The amortized cost and estimated fair value of the debt securities portfolio at June 30, 2015, 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, 2015 (In thousands)	Cost		Fair Value		Cost		Fair Value
Due in one year or less	$	12,034	$	12,062	$	-	$	-
Due after one year through five years		156,768		157,760		-		-
Due after five years through ten years		92,094		92,396		705		799
Due after ten years		14,270		13,800		2,998		3,072
Mortgage-backed securities		336,194		341,427		-		-
Total	$	611,360	$	617,445	$	3,703	$	3,871

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)	2015		2014			2015		2014
Gross realized gains	$	50	$	19		$	180	$	178
Gross realized losses		5		103			15		253
Net realized gain (loss)	$	45	$	(84	)	$	165	$	(75	)

Investment securities with unrealized losses at June 30, 2015 and December 31, 2014 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, 2015 (In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Obligations of U.S. government-sponsored entities	$	50,661	$	378	$	19,648	$	254	$	70,309	$	632
Obligations of states and political subdivisions		47,962		538		8,103		143		56,065		681
Mortgage-backed securities – residential		93,303		662		23,454		699		116,757		1,361
Mortgage-backed securities – commercial		2,739		14		-		-		2,739		14
Corporate debt securities		287		5		5,379		509		5,666		514
Mutual funds and equity securities		565		20		70		13		635		33
Total	$	195,517	$	1,617	$	56,654	$	1,618	$	252,171	$	3,235

	Less than 12 Months				12 Months or More				Total
December 31, 2014 (In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Obligations of U.S. government-sponsored entities	$	22,696	$	76	$	60,892	$	939	$	83,588	$	1,015
Obligations of states and political subdivisions		20,746		81		21,272		316		42,018		397
Mortgage-backed securities – residential		37,451		82		71,311		1,117		108,762		1,199
Mortgage-backed securities – commercial		-		-		723		10		723		10
Corporate debt securities		76		4		5,525		354		5,601		358
Mutual funds and equity securities		305		11		95		14		400		25
Total	$	81,274	$	254	$	159,818	$	2,750	$	241,092	$	3,004

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.

Corporate debt securities in the Company’s investment securities portfolio at June 30, 2015 include single-issuer trust preferred capital securities with an unrealized loss of $509 thousand and a carrying value of $5.4 million. At year-end 2014, these securities had an unrealized loss of $354 thousand. 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 the rating agencies. The issuer of the securities announced in the first quarter of 2015 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, 2015 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 12 - Fair Value Measurements (Details) - USD ($)	Jun. 30, 2015	Dec. 31, 2014
Note 12 - Fair Value Measurements (Details) [Line Items]
Loans and Leases Receivable, Deferred Income		$ 1,000
Commitments to Extend Credit [Member]
Note 12 - 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 12 - 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 4 - Accounting Policy

6 Months Ended

Jun. 30, 2015

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 the Company’s 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 general portion of the Company’s 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 the qualitative risk factors summarized below.

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 January 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-01, “Income Statement—Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items.” This ASU amends U.S. GAAP by removing the concept of extraordinary items, including deleting the definition of “extraordinary items” from the FASB Master Glossary. The revised guidance provides that the nature and financial effects of each event or transaction that is unusual in nature or occurs infrequently or both shall be presented as a separate component of income from continuing operations or, alternatively, disclosed in notes to the financial statements.

The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015, with early adoption permitted. A reporting entity may apply the amendments prospectively or retrospectively. 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 April 2015, the FASB issued ASU No. 2015-03, “Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.” This ASU addresses balance sheet presentation requirements for debt issuance costs and debt discount and premiums. ASU No. 2015-03 requires that debt issuance costs related to a recognized debt liability be presented on the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. This ASU is effective for financial statements issued for fiscal years beginning after December 15, 2015, and for interim periods within those fiscal years. 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 2015, the FASB issued ASU No. 2015-07, “Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent).” This ASU applies to entities that elect to measure the fair value of an investment using the net asset value per share (or its equivalent) practical expedient. The amendments in this ASU remove the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. The amendments also clarify that certain disclosure requirements are limited to investments for which the entity has elected to measure the fair value using the practical expedient, and not all investments eligible to be measured at fair value using the practical expedient. The amendments in ASU 2015-07 are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015, with early application permitted. Entities are required to apply the amendments retrospectively to all periods presented. The Company does not expect there to be a material impact on its consolidated financial position, results of operations, or cash flows upon adoption.

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, 2015

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)	2015		2014		2015		2014
Net income, basic and diluted	$	3,502	$	4,824	$	7,576	$	8,194
Less preferred stock dividends and discount accretion		170		563		395		1,100
Net income available to common shareholders, basic and diluted	$	3,332	$	4,261	$	7,181	$	7,094
Average common shares issued and outstanding, basic and diluted		7,492		7,482		7,491		7,481
Net income per common share, basic and diluted	$	.44	$	.57	$	.96	$	.95

Stock options for 18,049 shares of common stock were not included in the determination of diluted net income per common share for each period presented for 2014 because they were antidilutive. All previous options expired during the fourth quarter of 2014.

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Note 7 - Loans and Allowance for Loan Losses

6 Months Ended

Jun. 30, 2015

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, 2015		December 31, 2014
Real Estate:
Real estate mortgage - construction and land development	$	105,911	$	97,045
Real estate mortgage - residential		353,132		361,022
Real estate mortgage - farmland and other commercial enterprises		369,294		375,277
Commercial:
Commercial and industrial		52,313		47,112
States and political subdivisions		21,037		22,369
Lease financing		50		159
Other		19,333		15,547
Consumer:
Secured		7,152		7,963
Unsecured		5,083		5,450
Total loans		933,305		931,944
Less unearned income		-		1
Total loans, net of unearned income	$	933,305	$	931,943

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, 2015
Balance, beginning of period	$	11,522		$	866		$	218		$	12,606
Provision for loan losses		(576	)		189			123			(264	)
Recoveries		52			15			26			93
Loans charged off		(192	)		(13	)		(31	)		(236	)
Balance, end of period	$	10,806		$	1,057		$	336		$	12,199
Six months ended June 30, 2015
Balance, beginning of period	$	12,542		$	1,153		$	273		$	13,968
Provision for loan losses		(1,787	)		(101	)		79			(1,809	)
Recoveries		338			31			63			432
Loans charged off		(287	)		(26	)		(79	)		(392	)
Balance, end of period	$	10,806		$	1,057		$	336		$	12,199

(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

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

June 30, 2015 (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	$	11,524	$	5,523	$	3,280	$	8,803	$	525
Real estate mortgage - residential		10,698		3,344		7,240		10,584		1,196
Real estate mortgage - farmland and other commercial enterprises		22,376		5,018		17,218		22,236		904
Commercial
Commercial and industrial		767		323		446		769		270
Consumer
Unsecured		164		-		165		165		164
Total	$	45,529	$	14,208	$	28,349	$	42,557	$	3,059

December 31, 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	$	13,656	$	6,902	$	3,917	$	10,819	$	744
Real estate mortgage - residential		10,256		3,473		6,649		10,122		1,172
Real estate mortgage - farmland and other commercial enterprises		23,003		5,247		17,649		22,896		1,359
Commercial
Commercial and industrial		93		22		71		93		71
Consumer
Secured		-		-		-		-		-
Unsecured		25		-		25		25		25
Total	$	47,033	$	15,644	$	28,311	$	43,955	$	3,371

Three Months Ended June 30,	2015						2014
(In thousands)	Average		Interest Income Recognized		Cash Basis Interest Recognized		Average		Interest Income Recognized		Cash Basis Interest Recognized
Real Estate
Real estate mortgage - construction and land development	$	10,388	$	135	$	131	$	15,452	$	120	$	118
Real estate mortgage – residential		10,739		134		122		11,059		147		141
Real estate mortgage – farmland and other commercial enterprises		22,426		245		242		26,295		226		214
Commercial
Commercial and industrial		805		5		5		245		3		3
Consumer
Secured		-		-		-		-		-		-
Unsecured		167		2		2		68		-		-
Total	$	44,525	$	521	$	502	$	53,119	$	496	$	476

Six Months Ended June 30,	2015						2014
(In thousands)	Average		Interest Income Recognized		Cash Basis Interest Recognized		Average		Interest Income Recognized		Cash Basis Interest Recognized
Real Estate
Real estate mortgage - construction and land development	$	10,754	$	216	$	211	$	15,537	$	233	$	229
Real estate mortgage – residential		10,597		255		243		11,384		262		250
Real estate mortgage – farmland and other commercial enterprises		23,913		525		519		30,222		480		458
Commercial
Commercial and industrial		621		6		6		247		4		3
Consumer
Secured		-		-		-		9		-		-
Unsecured		96		2		2		69		4		3
Total	$	45,981	$	1,004	$	981	$	57,468	$	983	$	943

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, 2015 and December 31, 2014.

June 30, 2015 (In thousands)	Real Estate		Commercial		Consumer		Total
Allowance for Loan Losses
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	2,625	$	270	$	164	$	3,059
Collectively evaluated for impairment		8,181		787		172		9,140
Total ending allowance balance	$	10,806	$	1,057	$	336	$	12,199
Loans
Loans individually evaluated for impairment	$	41,623	$	769	$	165	$	42,557
Loans collectively evaluated for impairment		786,714		91,964		12,070		890,748
Total ending loan balance, net of unearned income	$	828,337	$	92,733	$	12,235	$	933,305

December 31, 2014 (In thousands)	Real Estate		Commercial		Consumer		Total
Allowance for Loan Losses
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	3,275	$	71	$	25	$	3,371
Collectively evaluated for impairment		9,267		1,082		248		10,597
Total ending allowance balance	$	12,542	$	1,153	$	273	$	13,968
Loans
Loans individually evaluated for impairment	$	43,837	$	93	$	25	$	43,955
Loans collectively evaluated for impairment		789,507		85,093		13,388		887,988
Total ending loan balance, net of unearned income	$	833,344	$	85,186	$	13,413	$	931,943

The following tables present the recorded investment in nonperforming loans by class of loans as of June 30, 2015 and December 31, 2014.

June 30, 2015 (In thousands)	Nonaccrual		Restructured Loans		Loans Past Due 90 Days or More and Still Accruing
Real Estate:
Real estate mortgage - construction and land development	$	2,404	$	3,679	$	-
Real estate mortgage - residential		3,335		4,385		-
Real estate mortgage - farmland and other commercial enterprises		4,109		15,671		-
Commercial:
Commercial and industrial		52		387		-
Other		9		-		-
Consumer:
Secured		12		-		-
Unsecured		-		150		-
Total	$	9,921	$	24,272	$	-

December 31, 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	$	3,744	$	3,742	$	-
Real estate mortgage - residential		3,474		4,674		-
Real estate mortgage - farmland and other commercial enterprises		4,202		16,004		-
Commercial:
Commercial and industrial		81		-		-
Lease financing		7		-		-
Consumer:
Unsecured		-		9		-
Total	$	11,508	$	24,429	$	-

The Company has allocated $2.0 million and $2.2 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, 2015 and December 31, 2014, 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, 2015 and December 31, 2014.

The Company had three credits modified as troubled debt restructurings during 2015. Additionally, troubled debt restructurings increased as a result of the purchase of a previously-participated portion of a loan to a nonaffiliated bank during the first quarter of 2015. This loan was participated prior to it being restructured. The purchase price paid represented a discount of $482 thousand or 15% of the purchased principal amount. The loan is performing under the terms of the restructuring and the borrower’s financial position has steadily improved. Accretion of the discount was recognized over the contractual life of the loan, which ended in June 2015. There is no further accretion to be recognized. The total outstanding balance related to this credit, which was renewed during June 2015, was $11.4 million at June 30, 2015. This represents 46.9% of the Company’s total restructured loans and is the largest such individual credit. This credit was restructured in 2012 following an interest rate concession and extended amortization term.

The following table presents loans by class modified as troubled debt restructurings that occurred during the three and six months ended June 30, 2015. 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, 2015
Commercial:
Commercial and industrial		2	$	388	$	388
Consumer:
Unsecured		1		145		145
Total		3	$	533	$	533
Six Months Ended June 30, 2015
Commercial:
Commercial and industrial		2	$	388	$	388
Consumer:
Secured		1		145		145
Total		3	$	533	$	533

The troubled debt restructurings identified above increased the allowance for loan losses by $356 thousand in the three and six months periods ended June 30, 2015, respectively. There were no charge-offs related to these loans. There were no payment defaults during the first six months of 2015 or 2014 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, 2015 (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	$	78	$	272	$	350	$	105,561	$	105,911
Real estate mortgage - residential		1,678		1,615		3,293		349,839		353,132
Real estate mortgage - farmland and other commercial enterprises		857		2,843		3,700		365,594		369,294
Commercial:
Commercial and industrial		-		13		13		52,300		52,313
States and political subdivisions		-		-		-		21,037		21,037
Lease financing, net		50		-		50		-		50
Other		5		-		5		19,328		19,333
Consumer:
Secured		34		-		34		7,118		7,152
Unsecured		223		-		223		4,860		5,083
Total	$	2,925	$	4,743	$	7,668	$	925,637	$	933,305

December 31, 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	$	-	$	272	$	272	$	96,773	$	97,045
Real estate mortgage - residential		1,395		1,595		2,990		358,032		361,022
Real estate mortgage - farmland and other commercial enterprises		75		3,484		3,559		371,718		375,277
Commercial:
Commercial and industrial		-		13		13		47,099		47,112
States and political subdivisions		-		-		-		22,369		22,369
Lease financing, net		-		-		-		158		158
Other		40		7		47		15,500		15,547
Consumer:
Secured		58		-		58		7,905		7,963
Unsecured		16		1		17		5,433		5,450
Total	$	1,584	$	5,372	$	6,956	$	924,987	$	931,943

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, 2015 (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	$	90,470	$	319,315	$	325,928	$	50,851	$	21,037	$	50	$	19,310
Special Mention		4,200		14,337		25,606		981		-		-		-
Substandard		11,241		19,480		17,760		481		-		-		23
Doubtful		-		-		-		-		-		-		-
Total	$	105,911	$	353,132	$	369,294	$	52,313	$	21,037	$	50	$	19,333

	Real Estate						Commercial
December 31, 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	$	81,438	$	326,124	$	327,019	$	45,665	$	22,369	$	158	$	15,526
Special Mention		2,674		16,429		27,855		946		-		-		14
Substandard		12,933		18,469		19,941		501		-		-		7
Doubtful		-		-		462		-		-		-		-
Total	$	97,045	$	361,022	$	375,277	$	47,112	$	22,369	$	158	$	15,547

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, 2015 and December 31, 2014.

	June 30, 2015				December 31, 2014
	Consumer				Consumer
(In thousands)	Secured		Unsecured		Secured		Unsecured
Credit risk profile based on payment activity:
Performing	$	7,140	$	4,933	$	7,963	$	5,441
Nonperforming		12		150		-		9
Total	$	7,152	$	5,083	$	7,963	$	5,450

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Note 12 - Fair Value Measurements (Details) - Quantitative Information about Unobservable Inputs for Assets Measured on a Nonrecurring Basis Using Level 3 Measurements - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
Impaired Loans [Member]
Note 12 - 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)	$ 680	$ 1,570
Fair Value, Inputs, Level 3 [Member] | Impaired Loans [Member]
Note 12 - 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)	$ 680	$ 1,570
Valuation technique	Discounted appraisals
Unobservable inputs	Marketability discount
Fair Value, Inputs, Level 3 [Member] | OREO [Member]
Note 12 - 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)	$ 5,043
Valuation technique	Discounted appraisals
Unobservable inputs	Marketability discount
Minimum [Member] | Fair Value, Inputs, Level 3 [Member] | Impaired Loans [Member]
Note 12 - Fair Value Measurements (Details) - Quantitative Information about Unobservable Inputs for Assets Measured on a Nonrecurring Basis Using Level 3 Measurements [Line Items]
Marketability discount	0.00%
Minimum [Member] | Fair Value, Inputs, Level 3 [Member] | OREO [Member]
Note 12 - Fair Value Measurements (Details) - Quantitative Information about Unobservable Inputs for Assets Measured on a Nonrecurring Basis Using Level 3 Measurements [Line Items]
Marketability discount	2.70%
Maximum [Member] | Fair Value, Inputs, Level 3 [Member] | Impaired Loans [Member]
Note 12 - Fair Value Measurements (Details) - Quantitative Information about Unobservable Inputs for Assets Measured on a Nonrecurring Basis Using Level 3 Measurements [Line Items]
Marketability discount	8.00%
Maximum [Member] | Fair Value, Inputs, Level 3 [Member] | OREO [Member]
Note 12 - Fair Value Measurements (Details) - Quantitative Information about Unobservable Inputs for Assets Measured on a Nonrecurring Basis Using Level 3 Measurements [Line Items]
Marketability discount	68.90%
Weighted Average [Member] | Fair Value, Inputs, Level 3 [Member] | Impaired Loans [Member]
Note 12 - Fair Value Measurements (Details) - Quantitative Information about Unobservable Inputs for Assets Measured on a Nonrecurring Basis Using Level 3 Measurements [Line Items]
Marketability discount	5.90%
Weighted Average [Member] | Fair Value, Inputs, Level 3 [Member] | OREO [Member]
Note 12 - Fair Value Measurements (Details) - Quantitative Information about Unobservable Inputs for Assets Measured on a Nonrecurring Basis Using Level 3 Measurements [Line Items]
Marketability discount	10.20%

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Note 12 - Fair Value Measurements (Details) - Impairment Charges on Assets Measured at Fair Value on a Nonrecurring Basis - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Impairment charges:
Impairment charges	$ 575	$ 554	$ 597	$ 1,438
Impaired Loans [Member]
Impairment charges:
Impairment charges	9	135	31	268
OREO [Member]
Impairment charges:
Impairment charges	$ 566	$ 419	$ 566	$ 1,170

XML

Note 5 - Net Income Per Common Share (Details) - Jun. 30, 2014 - shares	Total	Total
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	18,049

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Note 7 - Loans and Allowance for Loan Losses (Details) - Risk Category of Loans by Class-Consumer - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Credit risk profile based on payment activity:
Loans	$ 933,305	$ 931,943
Consumer Portfolio Segment [Member]
Credit risk profile based on payment activity:
Loans	12,235	13,413
Consumer Portfolio Segment [Member] | Consumer Secured [Member]
Credit risk profile based on payment activity:
Loans	7,152	7,963
Consumer Portfolio Segment [Member] | Consumer Unsecured [Member]
Credit risk profile based on payment activity:
Loans	5,083	5,450
Consumer Portfolio Segment [Member] | Performing Financial Instruments [Member] | Consumer Secured [Member]
Credit risk profile based on payment activity:
Loans	7,140	7,963
Consumer Portfolio Segment [Member] | Performing Financial Instruments [Member] | Consumer Unsecured [Member]
Credit risk profile based on payment activity:
Loans	4,933	5,441
Consumer Portfolio Segment [Member] | Nonperforming Financial Instruments [Member] | Consumer Secured [Member]
Credit risk profile based on payment activity:
Loans	12	0
Consumer Portfolio Segment [Member] | Nonperforming Financial Instruments [Member] | Consumer Unsecured [Member]
Credit risk profile based on payment activity:
Loans	$ 150	$ 9

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Note 12 - Fair Value Measurements

6 Months Ended

Jun. 30, 2015

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

12. 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, 2015 and December 31, 2014 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, 2015
Obligations of U.S. government-sponsored entities	$	131,157	$	-	$	131,157	$	-
Obligations of states and political subdivisions		138,475				138,475		-
Mortgage-backed securities – residential		328,257		-		328,257		-
Mortgage-backed securities – commercial		13,170		-		13,170		-
Corporate debt securities		6,386		-		6,386		-
Mutual funds and equity securities		852		852		-		-
Total	$	618,297	$	852	$	617,445	$	-

			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, 2014
Obligations of U.S. government-sponsored entities	$	109,448	$	-	$	109,448	$	-
Obligations of states and political subdivisions		135,766		-		135,766		-
Mortgage-backed securities – residential		370,489		-		370,489		-
Mortgage-backed securities – commercial		2,512		-		2,512		-
Corporate debt securities		6,307		-		6,307		-
Mutual funds and equity securities		1,866		1,866		-		-
Total	$	626,388	$	1,866	$	624,522	$	-

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 tables represent the carrying amount of assets measured at fair value on a nonrecurring basis and still held by the Company as of the dates indicated. The amounts in the 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, 2015
Collateral-dependent Impaired Loans
Real estate mortgage – residential	$	680	$	-	$	-	$	680
Total	$	680	$	-	$	-	$	680
OREO
Construction and land development	$	807	$	-	$	-	$	807
Residential real estate		256		-		-		256
Farmland and other commercial enterprises		3,980		-		-		3,980
Total	$	5,043	$	-	$	-	$	5,043

			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, 2014
Collateral-dependent Impaired Loans
Real estate mortgage – construction and land development	$	284	$	-	$	-	$	284
Real estate mortgage – residential		946		-		-		946
Real estate mortgage – farmland and other commercial enterprises		340		-		-		340
Total	$	1,570	$	-	$	-	$	1,570
OREO
Construction and land development	$	8,123	$	-	$	-	$	8,123
Residential real estate		863		-		-		863
Farmland and other commercial enterprises		5,459		-		-		5,459
Total	$	14,445	$	-	$	-	$	14,445

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)	2015		2014		2015		2014
Impairment charges:
Collateral-dependent impaired loans	$	9	$	135	$	31	$	268
OREO		566		419		566		1,170
Total	$	575	$	554	$	597	$	1,438

The following table presents quantitative information about unobservable inputs for assets measured on a nonrecurring basis using Level 3 measurements. As described above, the fair value of real estate securing collateral-dependent impaired loans and OREO are based on current third party appraisals. It is often necessary, however, for the Company to discount the appraisal amounts supporting its impaired loans and OREO. These discounts relate primarily to marketing and other holding costs that are not included in certain appraisals or to update values as a result of market declines of similar properties for which newer appraisals are available. Discounts also result from contracts to sell properties entered into during the period. The range of discounts is presented in the table below for 2015. The upper end of the range identified in the table below related to OREO is the result of a small dollar property written down to the contract sales price. The weighted average column represents a better indicator of the discounts applied to the appraisals.

(In thousands)	Fair Value at June 30, 2015		Valuation Technique	Unobservable Inputs	Range			Average
Collateral-dependent impaired loans	$	680	Discounted appraisals	Marketability discount		0% - 8.0	%		5.9	%
OREO	$	5,043	Discounted appraisals	Marketability discount		2.7% - 68.9	%		10.2	%

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, 2015 and December 31, 2014. 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, 2015
Assets
Cash and cash equivalents	$	81,622	$	81,622	$	81,622	$	-	$	-
Held to maturity investment securities		3,703		3,871		-		3,871		-
Loans, net		921,106		920,780		-		-		920,780
Accrued interest receivable		5,410		5,410		-		5,410		-
Federal Home Loan Bank and Federal Reserve Bank Stock		9,368	N/A			-		-		-
Liabilities
Deposits		1,359,174		1,360,117		1,004,398		-		355,719
Federal funds purchased and other short-term borrowings		27,359		27,359		-		27,359		-
Securities sold under agreements to repurchase and other long-term borrowings		120,150		128,602		-		128,602		-
Subordinated notes payable to unconsolidated trusts		48,970		31,156		-		-		31,156
Accrued interest payable		897		897		-		897		-
December 31, 2014
Assets
Cash and cash equivalents	$	100,914	$	100,914	$	100,914	$	-	$	-
Held to maturity investment securities		3,728		3,923		-		3,923		-
Loans, net		917,975		918,697		-		-		918,697
Accrued interest receivable		5,625		5,625		-		5,625		-
Federal Home Loan Bank and Federal Reserve Bank Stock		9,368	N/A			-		-		-
Liabilities
Deposits		1,387,161		1,388,614		991,630		-		396,984
Federal funds purchased and other short-term borrowings		28,590		28,590		-		28,590		-
Securities sold under agreements to repurchase and other long-term borrowings		119,724		129,244		-		129,244		-
Subordinated notes payable to unconsolidated trusts		48,970		22,594		-		-		22,594
Accrued interest payable		944		944		-		944		-

XML

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

6 Months Ended

Jun. 30, 2015

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, 2015		December 31, 2014
Real Estate:
Real estate mortgage - construction and land development	$	105,911	$	97,045
Real estate mortgage - residential		353,132		361,022
Real estate mortgage - farmland and other commercial enterprises		369,294		375,277
Commercial:
Commercial and industrial		52,313		47,112
States and political subdivisions		21,037		22,369
Lease financing		50		159
Other		19,333		15,547
Consumer:
Secured		7,152		7,963
Unsecured		5,083		5,450
Total loans		933,305		931,944
Less unearned income		-		1
Total loans, net of unearned income	$	933,305	$	931,943

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

(In thousands)	Real Estate			Commercial			Consumer			Total
Three months ended June 30, 2015
Balance, beginning of period	$	11,522		$	866		$	218		$	12,606
Provision for loan losses		(576	)		189			123			(264	)
Recoveries		52			15			26			93
Loans charged off		(192	)		(13	)		(31	)		(236	)
Balance, end of period	$	10,806		$	1,057		$	336		$	12,199
Six months ended June 30, 2015
Balance, beginning of period	$	12,542		$	1,153		$	273		$	13,968
Provision for loan losses		(1,787	)		(101	)		79			(1,809	)
Recoveries		338			31			63			432
Loans charged off		(287	)		(26	)		(79	)		(392	)
Balance, end of period	$	10,806		$	1,057		$	336		$	12,199

(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

Impaired Financing Receivables [Table Text Block]

June 30, 2015 (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	$	11,524	$	5,523	$	3,280	$	8,803	$	525
Real estate mortgage - residential		10,698		3,344		7,240		10,584		1,196
Real estate mortgage - farmland and other commercial enterprises		22,376		5,018		17,218		22,236		904
Commercial
Commercial and industrial		767		323		446		769		270
Consumer
Unsecured		164		-		165		165		164
Total	$	45,529	$	14,208	$	28,349	$	42,557	$	3,059

December 31, 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	$	13,656	$	6,902	$	3,917	$	10,819	$	744
Real estate mortgage - residential		10,256		3,473		6,649		10,122		1,172
Real estate mortgage - farmland and other commercial enterprises		23,003		5,247		17,649		22,896		1,359
Commercial
Commercial and industrial		93		22		71		93		71
Consumer
Secured		-		-		-		-		-
Unsecured		25		-		25		25		25
Total	$	47,033	$	15,644	$	28,311	$	43,955	$	3,371

Loans and ALL Disaggregated Impairment Method [Table Text Block]

June 30, 2015 (In thousands)	Real Estate		Commercial		Consumer		Total
Allowance for Loan Losses
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	2,625	$	270	$	164	$	3,059
Collectively evaluated for impairment		8,181		787		172		9,140
Total ending allowance balance	$	10,806	$	1,057	$	336	$	12,199
Loans
Loans individually evaluated for impairment	$	41,623	$	769	$	165	$	42,557
Loans collectively evaluated for impairment		786,714		91,964		12,070		890,748
Total ending loan balance, net of unearned income	$	828,337	$	92,733	$	12,235	$	933,305

December 31, 2014 (In thousands)	Real Estate		Commercial		Consumer		Total
Allowance for Loan Losses
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	3,275	$	71	$	25	$	3,371
Collectively evaluated for impairment		9,267		1,082		248		10,597
Total ending allowance balance	$	12,542	$	1,153	$	273	$	13,968
Loans
Loans individually evaluated for impairment	$	43,837	$	93	$	25	$	43,955
Loans collectively evaluated for impairment		789,507		85,093		13,388		887,988
Total ending loan balance, net of unearned income	$	833,344	$	85,186	$	13,413	$	931,943

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

June 30, 2015 (In thousands)	Nonaccrual		Restructured Loans		Loans Past Due 90 Days or More and Still Accruing
Real Estate:
Real estate mortgage - construction and land development	$	2,404	$	3,679	$	-
Real estate mortgage - residential		3,335		4,385		-
Real estate mortgage - farmland and other commercial enterprises		4,109		15,671		-
Commercial:
Commercial and industrial		52		387		-
Other		9		-		-
Consumer:
Secured		12		-		-
Unsecured		-		150		-
Total	$	9,921	$	24,272	$	-

December 31, 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	$	3,744	$	3,742	$	-
Real estate mortgage - residential		3,474		4,674		-
Real estate mortgage - farmland and other commercial enterprises		4,202		16,004		-
Commercial:
Commercial and industrial		81		-		-
Lease financing		7		-		-
Consumer:
Unsecured		-		9		-
Total	$	11,508	$	24,429	$	-

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, 2015
Commercial:
Commercial and industrial		2	$	388	$	388
Consumer:
Unsecured		1		145		145
Total		3	$	533	$	533
Six Months Ended June 30, 2015
Commercial:
Commercial and industrial		2	$	388	$	388
Consumer:
Secured		1		145		145
Total		3	$	533	$	533

Past Due Financing Receivables [Table Text Block]

June 30, 2015 (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	$	78	$	272	$	350	$	105,561	$	105,911
Real estate mortgage - residential		1,678		1,615		3,293		349,839		353,132
Real estate mortgage - farmland and other commercial enterprises		857		2,843		3,700		365,594		369,294
Commercial:
Commercial and industrial		-		13		13		52,300		52,313
States and political subdivisions		-		-		-		21,037		21,037
Lease financing, net		50		-		50		-		50
Other		5		-		5		19,328		19,333
Consumer:
Secured		34		-		34		7,118		7,152
Unsecured		223		-		223		4,860		5,083
Total	$	2,925	$	4,743	$	7,668	$	925,637	$	933,305

December 31, 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	$	-	$	272	$	272	$	96,773	$	97,045
Real estate mortgage - residential		1,395		1,595		2,990		358,032		361,022
Real estate mortgage - farmland and other commercial enterprises		75		3,484		3,559		371,718		375,277
Commercial:
Commercial and industrial		-		13		13		47,099		47,112
States and political subdivisions		-		-		-		22,369		22,369
Lease financing, net		-		-		-		158		158
Other		40		7		47		15,500		15,547
Consumer:
Secured		58		-		58		7,905		7,963
Unsecured		16		1		17		5,433		5,450
Total	$	1,584	$	5,372	$	6,956	$	924,987	$	931,943

Financing Receivable Credit Quality Indicators [Table Text Block]

	Real Estate						Commercial
June 30, 2015 (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	$	90,470	$	319,315	$	325,928	$	50,851	$	21,037	$	50	$	19,310
Special Mention		4,200		14,337		25,606		981		-		-		-
Substandard		11,241		19,480		17,760		481		-		-		23
Doubtful		-		-		-		-		-		-		-
Total	$	105,911	$	353,132	$	369,294	$	52,313	$	21,037	$	50	$	19,333

	Real Estate						Commercial
December 31, 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	$	81,438	$	326,124	$	327,019	$	45,665	$	22,369	$	158	$	15,526
Special Mention		2,674		16,429		27,855		946		-		-		14
Substandard		12,933		18,469		19,941		501		-		-		7
Doubtful		-		-		462		-		-		-		-
Total	$	97,045	$	361,022	$	375,277	$	47,112	$	22,369	$	158	$	15,547

Credit Quality Consumer Loans [Table Text Block]

	June 30, 2015				December 31, 2014
	Consumer				Consumer
(In thousands)	Secured		Unsecured		Secured		Unsecured
Credit risk profile based on payment activity:
Performing	$	7,140	$	4,933	$	7,963	$	5,441
Nonperforming		12		150		-		9
Total	$	7,152	$	5,083	$	7,963	$	5,450

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,	2015						2014
(In thousands)	Average		Interest Income Recognized		Cash Basis Interest Recognized		Average		Interest Income Recognized		Cash Basis Interest Recognized
Real Estate
Real estate mortgage - construction and land development	$	10,388	$	135	$	131	$	15,452	$	120	$	118
Real estate mortgage – residential		10,739		134		122		11,059		147		141
Real estate mortgage – farmland and other commercial enterprises		22,426		245		242		26,295		226		214
Commercial
Commercial and industrial		805		5		5		245		3		3
Consumer
Secured		-		-		-		-		-		-
Unsecured		167		2		2		68		-		-
Total	$	44,525	$	521	$	502	$	53,119	$	496	$	476

Six Months Ended June 30,	2015						2014
(In thousands)	Average		Interest Income Recognized		Cash Basis Interest Recognized		Average		Interest Income Recognized		Cash Basis Interest Recognized
Real Estate
Real estate mortgage - construction and land development	$	10,754	$	216	$	211	$	15,537	$	233	$	229
Real estate mortgage – residential		10,597		255		243		11,384		262		250
Real estate mortgage – farmland and other commercial enterprises		23,913		525		519		30,222		480		458
Commercial
Commercial and industrial		621		6		6		247		4		3
Consumer
Secured		-		-		-		9		-		-
Unsecured		96		2		2		69		4		3
Total	$	45,981	$	1,004	$	981	$	57,468	$	983	$	943

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Note 7 - Loans and Allowance for Loan Losses (Details) - Aging Analysis of Loans - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Real Estate:
Loans, past due	$ 7,668	$ 6,956
Loans, current	925,637	924,987
Loans, total	933,305	931,943
Financing Receivables, 30 to 89 Days Past Due [Member]
Real Estate:
Loans, past due	2,925	1,584
Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Real Estate:
Loans, past due	4,743	5,372
Real Estate Portfolio Segment [Member]
Real Estate:
Loans, total	828,337	833,344
Real Estate Portfolio Segment [Member] | Real Estate Construction and Land Development [Member]
Real Estate:
Loans, past due	350	272
Loans, current	105,561	96,773
Loans, total	105,911	97,045
Real Estate Portfolio Segment [Member] | Real Estate Construction and Land Development [Member] | Financing Receivables, 30 to 89 Days Past Due [Member]
Real Estate:
Loans, past due	78	0
Real Estate Portfolio Segment [Member] | Real Estate Construction and Land Development [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Real Estate:
Loans, past due	272	272
Real Estate Portfolio Segment [Member] | Real Estate Mortgage Residential [Member]
Real Estate:
Loans, past due	3,293	2,990
Loans, current	349,839	358,032
Loans, total	353,132	361,022
Real Estate Portfolio Segment [Member] | Real Estate Mortgage Residential [Member] | Financing Receivables, 30 to 89 Days Past Due [Member]
Real Estate:
Loans, past due	1,678	1,395
Real Estate Portfolio Segment [Member] | Real Estate Mortgage Residential [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Real Estate:
Loans, past due	1,615	1,595
Real Estate Portfolio Segment [Member] | Real Estate Mortgage Farmland and Other Commercial Enterprises [Member]
Real Estate:
Loans, past due	3,700	3,559
Loans, current	365,594	371,718
Loans, total	369,294	375,277
Real Estate Portfolio Segment [Member] | Real Estate Mortgage Farmland and Other Commercial Enterprises [Member] | Financing Receivables, 30 to 89 Days Past Due [Member]
Real Estate:
Loans, past due	857	75
Real Estate Portfolio Segment [Member] | Real Estate Mortgage Farmland and Other Commercial Enterprises [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Real Estate:
Loans, past due	2,843	3,484
Commercial Portfolio Segment [Member]
Real Estate:
Loans, total	92,733	85,186
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Real Estate:
Loans, past due	13	13
Loans, current	52,300	47,099
Loans, total	52,313	47,112
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member] | Financing Receivables, 30 to 89 Days Past Due [Member]
Real Estate:
Loans, past due	0	0
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Real Estate:
Loans, past due	13	13
Commercial Portfolio Segment [Member] | States and Political Subdivisions [Member]
Real Estate:
Loans, past due	0	0
Loans, current	21,037	22,369
Loans, total	21,037	22,369
Commercial Portfolio Segment [Member] | States and Political Subdivisions [Member] | Financing Receivables, 30 to 89 Days Past Due [Member]
Real Estate:
Loans, past due	0	0
Commercial Portfolio Segment [Member] | States and Political Subdivisions [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Real Estate:
Loans, past due	0	0
Commercial Portfolio Segment [Member] | Lease Financing [Member]
Real Estate:
Loans, past due	50	0
Loans, current	0	158
Loans, total	50	158
Commercial Portfolio Segment [Member] | Lease Financing [Member] | Financing Receivables, 30 to 89 Days Past Due [Member]
Real Estate:
Loans, past due	50	0
Commercial Portfolio Segment [Member] | Lease Financing [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Real Estate:
Loans, past due	0	0
Commercial Portfolio Segment [Member] | Commercial Other [Member]
Real Estate:
Loans, past due	5	47
Loans, current	19,328	15,500
Loans, total	19,333	15,547
Commercial Portfolio Segment [Member] | Commercial Other [Member] | Financing Receivables, 30 to 89 Days Past Due [Member]
Real Estate:
Loans, past due	5	40
Commercial Portfolio Segment [Member] | Commercial Other [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Real Estate:
Loans, past due	0	7
Consumer Portfolio Segment [Member]
Real Estate:
Loans, total	12,235	13,413
Consumer Portfolio Segment [Member] | Consumer Secured [Member]
Real Estate:
Loans, past due	34	58
Loans, current	7,118	7,905
Loans, total	7,152	7,963
Consumer Portfolio Segment [Member] | Consumer Secured [Member] | Financing Receivables, 30 to 89 Days Past Due [Member]
Real Estate:
Loans, past due	34	58
Consumer Portfolio Segment [Member] | Consumer Secured [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Real Estate:
Loans, past due	0	0
Consumer Portfolio Segment [Member] | Consumer Unsecured [Member]
Real Estate:
Loans, past due	223	17
Loans, current	4,860	5,433
Loans, total	5,083	5,450
Consumer Portfolio Segment [Member] | Consumer Unsecured [Member] | Financing Receivables, 30 to 89 Days Past Due [Member]
Real Estate:
Loans, past due	223	16
Consumer Portfolio Segment [Member] | Consumer Unsecured [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Real Estate:
Loans, past due	$ 0	$ 1

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Note 7 - Loans and Allowance for Loan Losses (Details)	3 Months Ended		6 Months Ended	12 Months Ended
	Jun. 30, 2015 USD ($)	Mar. 31, 2015 USD ($)	Jun. 30, 2015 USD ($)	Dec. 31, 2014 USD ($)
Note 7 - Loans and Allowance for Loan Losses (Details) [Line Items]
Allowance for Credit Losses, Change in Method of Calculating Impairment	$ 2,000,000		$ 2,000,000	$ 2,200,000
Loans and Leases Receivable, Impaired, Commitment to Lend	0		0	0
Financing Receivable, Modifications, Recorded Investment	$ 24,272,000		$ 24,272,000	$ 24,429,000
Financing Receivable, Modifications, Number of Contracts	3		3	0
Financing Receivables, Impaired, Troubled Debt Restructuring, Write-down	$ 0		$ 0
Financing Receivable, Modifications, Subsequent Default, Number of Contracts			0	0
Interest Rate Concession and Extended Amortization Term [Member]
Note 7 - Loans and Allowance for Loan Losses (Details) [Line Items]
Financing Receivable, Modifications, Purchase Price Discount		$ 482,000
Financing Receivable, Modifications, Discount in Percentage		15.00%
Financing Receivable, Modifications, Recorded Investment	$ 11,400,000		$ 11,400,000
Percent of Total Restructured Loans	46.90%		46.90%
TDR Financing Receivable [Member]
Note 7 - Loans and Allowance for Loan Losses (Details) [Line Items]
Allowance for Loan and Lease Losses, Period Increase (Decrease)	$ 356,000		$ 356,000

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Unaudited Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Net Income	$ 3,502	$ 4,824	$ 7,576	$ 8,194
Other comprehensive income (loss):
Unrealized holding (loss) gain on available for sale securities arising during the period on securities held at end of period, net of tax of $(1,634), $2,678 $(613) and $4,618, respectively	(3,035)	4,973	(1,138)	8,577
Reclassification adjustment for prior period unrealized (gain) loss previously reported in other comprehensive income recognized during current period, net of tax of $17, $8, $54 and $(36), respectively	(31)	(15)	(101)	67
Change in unfunded portion of postretirement benefit obligation, net of tax of $8, $13, $(657) and $25, respectively	15	23	(1,221)	46
Other comprehensive (loss) income	(3,051)	4,981	(2,460)	8,690
Comprehensive income	$ 451	$ 9,805	$ 5,116	$ 16,884

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Note 1 - Basis of Presentation and Nature of Operations

6 Months Ended

Jun. 30, 2015

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, Inc. (“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. 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 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 two active nonbank subsidiaries, FCB Services, Inc. (“FCB Services”), and FFKT Insurance Services, Inc. (“FFKT Insurance”). 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. 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.

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 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, 2014 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, 2014 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.

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Note 11 - Regulatory Matters (Details) - USD ($) $ / shares in Units, $ in Thousands			1 Months Ended
		Jun. 08, 2015	Jan. 31, 2009	Jun. 30, 2015	Dec. 31, 2014	Jun. 30, 2014
Note 11 - Regulatory Matters (Details) [Line Items]
Dividends Payable (in Dollars)				$ 0	$ 113	$ 225
Safest Assets [Member]
Note 11 - Regulatory Matters (Details) [Line Items]
Risk Weighting of Assets				0.00%
Riskier Assets [Member]
Note 11 - Regulatory Matters (Details) [Line Items]
Risk Weighting of Assets				100.00%
Series A Preferred Stock [Member]
Note 11 - Regulatory Matters (Details) [Line Items]
Stock Redeemed or Called During Period, Shares (in Shares)		10,000
Preferred Stock, Liquidation Preference Per Share (in Dollars per share)		$ 1,000
Dividends Payable (in Dollars)		$ 58
Stock Issued During Period, Shares, New Issues (in Shares)			30,000
Citizens Northern [Member]
Note 11 - Regulatory Matters (Details) [Line Items]
Tier One Leverage Capital to Average Assets	[1]			9.89%	10.11%
Compliance [Member] | Citizens Northern [Member]
Note 11 - Regulatory Matters (Details) [Line Items]
Tier One Leverage Capital to Average Assets				9.00%

[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.

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Note 8 - Other Real Estate Owned (Tables)

6 Months Ended

Jun. 30, 2015

Disclosure Text Block [Abstract]

OREO Detail [Table Text Block]

(In thousands)	June 30, 2015		December 31, 2014
Construction and land development	$	14,058	$	17,628
Residential real estate		1,252		2,219
Farmland and other commercial enterprises		10,904		12,113
Total	$	26,214	$	31,960

OREO Activity [Table Text Block]

Six months ended June 30, (In thousands)	2015			2014
Beginning balance	$	31,960		$	37,826
Transfers from loans and other increases		475			6,978
Proceeds from sales		(5,664	)		(4,262	)
Gain (loss) on sales, net		9			(94	)
Write downs and other decreases, net		(566	)		(1,414	)
Ending balance	$	26,214		$	39,034

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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	Jun. 30, 2015	Dec. 31, 2014
The Amortized Cost and Estimated Fair Value of the Securities Portfolio by Contractual Maturity [Abstract]
Due in one year or less	$ 12,034
Due in one year or less	12,062
Due in one year or less	0
Due in one year or less	0
Due after one year through five years	156,768
Due after one year through five years	157,760
Due after one year through five years	0
Due after one year through five years	0
Due after five years through ten years	92,094
Due after five years through ten years	92,396
Due after five years through ten years	705
Due after five years through ten years	799
Due after ten years	14,270
Due after ten years	13,800
Due after ten years	2,998
Due after ten years	3,072
Mortgage-backed securities	336,194
Mortgage-backed securities	341,427
Mortgage-backed securities	0
Mortgage-backed securities	0
Total	611,360
Total	617,445
Total	3,703	$ 3,728
Total	$ 3,871	$ 3,923

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Note 11 - Regulatory Matters

6 Months Ended

Jun. 30, 2015

Disclosure Text Block [Abstract]

Regulatory Capital Requirements under Banking Regulations [Text Block]

11. Regulatory Matters

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

In July 2013, U.S. banking regulators adopted final rules related to standards on bank capital adequacy and liquidity (commonly referred to “Basel III”). The new rules were effective for the Company beginning on January 1, 2015, subject to a phase-in period for certain provisions extending through January 1, 2019. The rules include a new common equity Tier 1 capital ratio, an increase to the minimum Tier 1 capital ratio, an increase to risk-weightings of certain assets, implementation of a new capital conservation buffer in excess of the required minimum (which is set to be phased in beginning in 2016), and changes to how regulatory capital is defined. The Company and each of its bank subsidiaries meet the minimum capital ratios and a fully phased-in capital conservation buffer under the new rules.

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

	June 30, 2015												December 31, 2014
	Common Equity Tier 1 Risk-based Capital1			Tier 1 Risk-based Capital1			Total Risk-based Capital1			Tier 1 Leverage2			Common Equity Tier 1 Risk-based Capital1	Tier 1 Risk-based Capital1			Total Risk-based Capital1			Tier 1 Leverage2
Consolidated		14.54	%		18.71	%		19.79	%		11.91	%	N/A		19.75	%		21.00	%		12.04	%
Farmers Bank		16.58			16.58			17.53			9.36		N/A		17.71			18.70			9.40
United Bank		18.74			18.74			19.99			12.51		N/A		18.00			19.26			11.08
First Citizens		13.36			13.36			13.98			9.32		N/A		13.66			14.30			9.44
Citizens Northern		13.98			13.98			15.23			9.89		N/A		14.46			15.71			10.11

¹Common Equity Tier 1 Risked-based, Tier 1 Risk-based, and Total Risk-based Capital ratios are computed by dividing a bank’s Common Equity Tier 1, 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.

N/A – Not applicable.

On June 8, 2015, the Company redeemed the final 10,000 shares of its remaining outstanding Series A preferred stock. The shares were redeemed at the stated liquidation value of $1,000 per share, plus accrued dividends of $58 thousand. The Company originally issued 30,000 shares of its Series A preferred stock in 2009. The redemption was the third and final partial redemption of the original shares issued. No additional debt or equity was issued in connection with any of the shares redeemed.

Summary of Regulatory Agreements

The Company has one subsidiary bank, Citizens Northern, which is currently under an agreement with its primary banking regulators. This agreement is summarized below.

Citizens Northern  

The Federal Deposit Insurance Corporation (“FDIC”) and Kentucky Department of Financial Institutions (“KDFI”) entered into a Memorandum of Understanding (“Memorandum”) with Citizens Northern in September 2010.  This Memorandum was terminated and replaced in July 2013. 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 agreement through periodic on-site examinations, regular communications, and quarterly data analysis. The Company believes it is adequately addressing all issues of the regulatory agreement. However, only the regulatory agencies can determine if compliance with the agreement has been met. The Company believes that Citizens Northern is in compliance with the requirements identified in its regulatory agreement as of June 30, 2015.

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.