10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2012

or

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

For the transition period from ___________ to ___________

Commission file number 000-20908

PREMIER FINANCIAL BANCORP, INC.

(Exact name of registrant as specified in its charter)

Kentucky	61-1206757
(State or other jurisdiction of incorporation organization)	(I.R.S. Employer Identification No.)
2883 Fifth Avenue Huntington, West Virginia	25702
(Address of principal executive offices)	(Zip Code)
Registrant’s telephone number    (304) 525-1600

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 filing requirements for the past 90 days.  Yes þ     No o.

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

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

Large accelerated filer o. Accelerated filer  o.    Non-accelerated filer  o (Do not check if smaller reporting company) Smaller reporting company  þ

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

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

Common stock, no par value, – 7,937,143 shares outstanding at August 1, 2012

PREMIER FINANCIAL BANCORP, INC.

JUNE 30, 2012

INDEX TO REPORT

Part I - Financial Information
Item 1 – Financial Statements	3
Item 2 – Management’s Discussion and Analysis	40
Item 3 – Quantitative and Qualitative Disclosures about Market Risk	53
Item 4 – Controls and Procedures	53
Part II - Other Information	54
Item 1 – Legal Proceedings	54
Item 1A – Risk Factors	54
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds	54
Item 3 – Defaults Upon Senior Securities	54
Item 4 – Mine Safety Disclosures	54
Item 5 – Other Information	54
Item 6 – Exhibits	54
Signatures -	55

2.

PREMIER FINANCIAL BANCORP, INC.

JUNE 30, 2012

PART I  - FINANCIAL INFORMATION

Item 1.  Financial Statements

The accompanying information has not been audited by independent public accountants; however, in the opinion of management such information reflects all adjustments necessary for a fair presentation of the results for the interim period.  All such adjustments are of a normal and recurring nature.  Premier Financial Bancorp, Inc.’s (“Premier’s”) accounting and reporting policies are in accordance with accounting principles generally accepted in the United States of America.  Certain accounting principles used by Premier involve a significant amount of judgment about future events and require the use of estimates in their application.  The following policies are particularly sensitive in terms of judgments and the extent to which estimates are used: allowance for loan losses, the identification and evaluation of impaired loans, the impairment of goodwill, the realization of deferred tax assets and stock based compensation disclosures.  These estimates are based on assumptions that may involve significant uncertainty at the time of their use.  However, the policies, the estimates and the estimation process as well as the resulting disclosures are periodically reviewed by the Audit Committee of the Board of Directors and material estimates are subject to review as part of the external audit by the independent public accountants.

The accompanying financial statements are presented in accordance with the requirements of Form 10-Q and consequently do not include all of the disclosures normally required by accounting principles generally accepted in the United States of America or those normally made in the registrant’s annual report on Form 10-K.  Accordingly, the reader of the Form 10-Q may wish to refer to the registrant’s Form 10-K for the year ended December 31, 2011 for further information in this regard.

Index to consolidated financial statements:

Consolidated Balance Sheets	4
Consolidated Statements of Income	5
Consolidated Statements of Comprehensive Income	6
Consolidated Statements of Cash Flows	7
Notes to Consolidated Financial Statements	9

3.

PREMIER FINANCIAL BANCORP, INC.

CONSOLIDATED BALANCE SHEETS

JUNE 30, 2012 AND DECEMBER 31, 2011

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

	(UNAUDITED)
	2012			2011
ASSETS
Cash and due from banks	$	30,474		$	29,380
Interest bearing bank balances		54,718			42,676
Federal funds sold		12,022			10,832
Cash and cash equivalents		97,214			82,888
Securities available for sale		305,368			278,479
Loans held for sale		221			70
Loans		670,268			690,923
Allowance for loan losses		(9,862	)		(9,795	)
Net loans		660,406			681,128
Federal Home Loan Bank stock		4,405			5,216
Premises and equipment, net		16,157			16,355
Real estate and other property acquired through foreclosure		15,735			14,642
Interest receivable		3,448			3,497
Goodwill		29,875			29,875
Other intangible assets		3,046			3,393
Prepaid FDIC insurance premiums		720			1,167
Deferred taxes		2,531			3,997
Other assets		888			3,380
Total assets	$	1,140,014		$	1,124,087
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Non-interest bearing	$	201,596		$	196,125
Time deposits, $100,000 and over		155,122			155,208
Other interest bearing		593,153			573,745
Total deposits		949,871			925,078
Securities sold under agreements to repurchase		19,707			23,205
Federal Home Loan Bank advances		6			10,083
Other borrowed funds		17,094			18,130
Interest payable		596			712
Other liabilities		3,098			2,872
Total liabilities		990,372			980,080
Stockholders' equity
Preferred stock, no par value; $22,252 liquidation preference,
5% cumulative, 1,000,000 shares authorized; 22,252 shares issued and outstanding		22,005			21,949
Common stock, no par value; 20,000,000 shares authorized;
7,937,143 shares issued and outstanding		71,656			71,571
Retained earnings		49,785			45,474
Accumulated other comprehensive income		6,196			5,013
Total stockholders' equity		149,642			144,007
Total liabilities and stockholders' equity	$	1,140,014		$	1,124,087

4.

PREMIER FINANCIAL BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME

THREE AND SIX MONTHS ENDED JUNE 30, 2012 AND 2011

(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Interest income
Loans, including fees	$	10,027	$	11,287	$	22,364	$	22,227
Securities available for sale
Taxable		1,829		2,121		3,620		4,057
Tax-exempt		56		60		112		122
Federal funds sold and other		44		40		76		93
Total interest income		11,956		13,508		26,172		26,499
Interest expense
Deposits		1,437		1,826		2,972		3,758
Repurchase agreements and other		22		40		48		87
FHLB advances and other borrowings		189		270		426		533
Total interest expense		1,648		2,136		3,446		4,378
Net interest income		10,308		11,372		22,726		22,121
Provision for loan losses		750		1,820		1,700		2,340
Net interest income after provision for loan losses		9,558		9,552		21,026		19,781
Non-interest income
Service charges on deposit accounts		873		981		1,703		1,869
Electronic banking income		522		479		1,010		928
Secondary market mortgage income		103		52		128		140
Other		134		222		308		408
		1,632		1,734		3,149		3,345
Non-interest expenses
Salaries and employee benefits		3,858		4,012		7,821		8,043
Occupancy and equipment expenses		1,121		1,282		2,301		2,518
Outside data processing		873		1,180		1,745		2,387
Professional fees		300		222		584		482
Taxes, other than payroll, property and income		190		222		345		415
Write-downs, expenses, sales of other real estate owned, net		293		323		507		407
Amortization of intangibles		174		205		347		415
Conversion expenses		-		463		-		842
FDIC insurance		239		469		481		977
Loan collection expenses		184		180		853		370
Other expenses		834		1,158		1,676		2,167
		8,066		9,716		16,660		19,023
Income before income taxes		3,124		1,570		7,515		4,103
Provision for income taxes		1,032		541		2,593		1,403
Net income	$	2,092	$	1,029	$	4,922	$	2,700
Preferred stock dividends and accretion		306		305		611		611
Net income available to common stockholders	$	1,786	$	724	$	4,311	$	2,089
Net income per share:
Basic	$	0.23	$	0.09	$	0.54	$	0.26
Diluted		0.22		0.09		0.53		0.26

5.

PREMIER FINANCIAL BANCORP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

THREE AND SIX MONTHS ENDED JUNE 30, 2012 AND 2011

(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

	Three Months Ended June 30,					Six Months Ended June 30,
	2012		2011			2012		2011
Net income	$	2,092	$	1,029		$	4,922	$	2,700
Other comprehensive income:
Unrealized gains arising during the period		786		6,953			1,792		8,642
Reclassification of realized amount		-		(18	)		-		(18	)
Net change in unrealized gain (loss) on securities		786		6,935			1,792		8,624
Less tax impact		267		2,358			609		2,932
Other comprehensive income:		519		4,577			1,183		5,692
Comprehensive income	$	2,611	$	5,606		$	6,105	$	8,392

6.

PREMIER FINANCIAL BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED JUNE 30, 2012 AND 2011

(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

	2012			2011
Cash flows from operating activities
Net income	$	4,922		$	2,700
Adjustments to reconcile net income to net cash from operating activities
Depreciation		731			748
Provision for loan losses		1,700			2,340
Amortization (accretion), net		(1,121	)		(885	)
OREO writedowns (gains on sales), net		(38	)		32
Stock compensation expense		85			47
Loans originated for sale		(7,084	)		(8,387	)
Secondary market loans sold		7,061			8,606
Secondary market income		(128	)		(140	)
Gain on sale of securities		-			(18	)
Changes in :
Interest receivable		50			318
Other assets		3,796			(476	)
Interest payable		(116	)		(51	)
Other liabilities		226			197
Net cash from operating activities		10,084			5,031
Cash flows from investing activities
Purchases of securities available for sale		(57,685	)		(89,429	)
Proceeds from the sale of securities available for sale		-			2,017
Proceeds from maturities and calls of securities available for sale		31,736			51,366
Redemption of FRB and FHLB  stock, (net of purchases)		811			1,261
Net change in loans		18,400			20,890
Purchases of premises and equipment, net		(533	)		(514	)
Proceeds from sales of other real estate acquired through foreclosure		1,782			1,767
Net cash from investing activities		(5,489	)		(12,642	)
Cash flows from financing activities
Net change in deposits		24,857			(44,854	)
Preferred Stock dividends paid		(556	)		(834	)
Net change in short-term Federal Home Loan Bank advances		-			(2,400	)
Repayment of Federal Home Loan Bank advances		(10,036	)		(83	)
Repayment of other borrowed funds		(1,036	)		(1,020	)
Net change in federal funds purchased		-			1,444
Net change in agreements to repurchase securities		(3,498	)		(3,579	)
Net cash from financing activities		9,731			(51,326	)
Net change in cash and cash equivalents		14,326			(58,937	)
Cash and cash equivalents at beginning of period		82,888			122,248
Cash and cash equivalents at end of period	$	97,214		$	63,311

7.

PREMIER FINANCIAL BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

SIX MONTHS ENDED JUNE 30, 2012 AND 2011

(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

	2012			2011
Supplemental disclosures of cash flow information:
Cash paid during period for interest	$	3,562		$	4,429
Cash (received) paid during period for income taxes		(623	)		2,305
Loans transferred to real estate acquired through foreclosure		2,837			2,124

8.

PREMIER FINANCIAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE  1 - BASIS OF PRESENTATION

The consolidated financial statements include the accounts of Premier Financial Bancorp, Inc. (the Company) and its wholly owned subsidiaries (the “Banks”):

					June 30, 2012
		Year	Total		Net Income
Subsidiary	Location	Acquired	Assets		Qtr			YTD
Citizens Deposit Bank & Trust	Vanceburg, Kentucky	1991	$	215,608	$	613		$	1,589
Farmers Deposit Bank	Eminence, Kentucky	1996		58,824		119			238
Ohio River Bank	Ironton, Ohio	1998		107,028		328			570
Premier Bank, Inc.	Huntington, West Virginia	1998		751,013		1,530			3,546
Parent and Intercompany Eliminations				7,541		(498	)		(1,021	)
Consolidated Total			$	1,140,014	$	2,092		$	4,922

All significant intercompany transactions and balances have been eliminated.

Recently Issued Accounting Pronouncements

In June 2011, the FASB issued ASU No. 2011-05, "Comprehensive Income (Topic 220) - Presentation of Comprehensive Income." The ASU requires entities to present items of net income and other comprehensive income either in one continuous statement - referred to as the statement of comprehensive income - or in two separate, but consecutive, statements of net income and other comprehensive income. The ASU is effective for the first interim period and annual period beginning after December 15, 2011. The adoption of this guidance did not  have a material impact upon the Company’s financial statements.

In May 2011, the FASB issued ASU No. 2011-04, "Fair Value Measurement (Topic 820) - Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs." This ASU represents the converged guidance of the FASB and the IASB (the "Boards") on fair value measurement. The collective efforts of the Boards and their staffs, reflected in ASU 2011-04, have resulted in common requirements for measuring fair value and for disclosing information about fair value measurements, including a consistent meaning of the term "fair value." The Boards have concluded the common requirements will result in greater comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and IFRSs. Included in the ASU are requirements to disclose additional quantitative disclosures about unobservable inputs for all Level 3 fair value measurements, as well as qualitative disclosures about the sensitivity inherent in recurring Level 3 fair value measurements. The ASU is effective during interim and annual periods beginning after December 15, 2011. The adoption of this guidance did not have a material impact upon the Company’s financial statements.

9.

PREMIER FINANCIAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE  2 –SECURITIES

Amortized cost and fair value of investment securities, by category, at June 30, 2012 are summarized as follows:

2012	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Available for sale
Mortgage-backed securities
U. S. sponsored agency MBS - residential	$	42,031	$	1,991	$	-		$	44,022
U. S. sponsored agency CMO’s - residential		211,457		5,654		(29	)		217,082
Total mortgage-backed securities of government sponsored agencies		253,488		7,645		(29	)		261,104
U. S. government sponsored agency securities		29,066		181		-			29,247
Obligations of states and political subdivisions		9,084		485		-			9,569
Other securities		4,342		1,178		(72	)		5,448
Total available for sale	$	295,980	$	9,489	$	(101	)	$	305,368

Amortized cost and fair value of investment securities, by category, at December 31, 2011 are summarized as follows:

2011	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Available for sale
Mortgage-backed securities
U. S. sponsored agency MBS - residential	$	38,403	$	1,856	$	(4	)	$	40,255
U. S. sponsored agency CMO’s - residential		200,835		4,933		(30	)		205,738
Total mortgage-backed securities of government sponsored agencies		239,238		6,789		(34	)		245,993
U. S. government sponsored agency securities		18,114		58		(31	)		18,141
Obligations of states and political subdivisions		9,193		457		-			9,650
Other securities		4,338		440		(83	)		4,695
Total available for sale	$	270,883	$	7,744	$	(148	)	$	278,479

10.

PREMIER FINANCIAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE  2–SECURITIES - continued

The amortized cost and fair value of securities at June 30, 2012 by contractual maturity are shown below.  Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized Cost		Fair Value
Available for sale
Due in one year or less	$	1,695	$	1,949
Due after one year through five years		13,616		13,844
Due after five years through ten years		24,131		24,536
Due after ten years		1,958		2,526
Corporate preferred securities		1,092		1,409
Mortgage-backed securities of government sponsored agencies		253,488		261,104
Total available for sale	$	295,980	$	305,368

Proceeds from the sale of securities during the first six months of 2011 were $2,017,000.  An $18,000 gain was recorded from the sale of securities during the first six months of 2011.  There were no sales of securities in the first six months of 2012.

Securities with unrealized losses at June 30, 2012 aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position are as follows:

	Less than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
U.S sponsored agency CMO – residential	$	4,482	$	(29	)	$	-	$	-		$	4,482	$	(29	)
Other securities		-		-			4		(72	)		4		(72	)
Total temporarily impaired	$	4,482	$	(29	)	$	4	$	(72	)	$	4,486	$	(101	)

11.

PREMIER FINANCIAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE  2–SECURITIES - continued

Securities with unrealized losses at December 31, 2011 aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position are as follows:

	Less than 12 Months					12 Months or More				Total
Description of Securities	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
U.S. government sponsored agency securities	$	7,080	$	(31	)	$	-	$	-	$	7,080	$	(31	)
U.S sponsored agency MBS – residential		2,544		(4	)		-		-		2,544		(4	)
U.S sponsored agency CMO – residential		3,941		(30	)		-		-		3,941		(30	)
Other securities		370		(83	)		-		-		370		(83	)
Total temporarily impaired	$	13,935	$	(148	)	$	-	$	-	$	13,935	$	(148	)

The investment portfolio is predominately high quality interest-bearing debt securities with defined maturity dates backed by the U.S. Government or Government sponsored entities.  The unrealized losses at June 30, 2012 and December 31, 2011 are price changes resulting from changes in the interest rate environment and are not considered to be other than temporary declines in the value of the securities.  Their fair value is expected to recover as the bonds approach their maturity date and/or market conditions improve.

NOTE  3 - LOANS

Major classifications of loans at June 30, 2012 and December 31, 2011 are summarized as follows:

	2012		2011
Residential real estate	$	219,113	$	221,756
Multifamily real estate		30,722		34,335
Commercial real estate:
Owner occupied		99,057		101,864
Non owner occupied		164,116		166,540
Commercial and industrial		67,439		76,960
Consumer		28,934		30,090
All other		60,887		59,378
	$	670,268	$	690,923

12.

PREMIER FINANCIAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE  3–LOANS - continued

Activity in the allowance for loan losses by portfolio segment for the six months ending June 30, 2012 was as follows:

Loan Class	Balance Dec 31, 2011		Provision for loan losses			Loans charged-off		Recoveries		Balance June 30, 2012
Residential real estate	$	2,134	$	221		$	119	$	32	$	2,268
Multifamily real estate		284		143			-		-		427
Commercial real estate:
Owner occupied		918		76			15		-		979
Non owner occupied		2,381		(37	)		41		3		2,306
Commercial and industrial		1,880		1,095			992		1		1,984
Consumer		298		98			139		53		310
All other		1,900		104			474		58		1,588
Total	$	9,795	$	1,700		$	1,780	$	147	$	9,862

Activity in the allowance for loan losses by portfolio segment for the six months ending June 30, 2011 was as follows:

Loan Class	Balance Dec 31, 2010		Provision for loan losses			Loans charged-off		Recoveries		Balance June 30, 2011
Residential real estate	$	2,666	$	152		$	168	$	16	$	2,666
Multifamily real estate		252		95			-		2		349
Commercial real estate:
Owner occupied		1,141		(155	)		-		2		988
Non owner occupied		1,644		253			261		3		1,639
Commercial and industrial		2,421		2,218			16		8		4,631
Consumer		366		18			60		40		364
All other		1,375		(241	)		73		50		1,111
Total	$	9,865	$	2,340		$	578	$	121	$	11,748

13.

PREMIER FINANCIAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE  3–LOANS - continued

Activity in the allowance for loan losses by portfolio segment for the three months ending June 30, 2012 was as follows:

Loan Class	Balance March 31, 2012		Provision for loan losses			Loans charged-off		Recoveries		Balance June 30, 2012
Residential real estate	$	2,368	$	(55	)	$	54	$	9	$	2,268
Multifamily real estate		434		(7	)		-		-		427
Commercial real estate:
Owner occupied		1,024		(45	)		-		-		979
Non owner occupied		2,321		(15	)		3		3		2,306
Commercial and industrial		2,422		551			990		1		1,984
Consumer		305		51			73		27		310
All other		1,437		270			139		20		1,588
Total	$	10,311	$	750		$	1,259	$	60	$	9,862

Activity in the allowance for loan losses by portfolio segment for the three months ending June 30, 2011 was as follows:

Loan Class	Balance March 31, 2011		Provision for loan losses			Loans charged-off		Recoveries		Balance June 30, 2011
Residential real estate	$	2,760	$	(16	)	$	88	$	10	$	2,666
Multifamily real estate		303		44			-		2		349
Commercial real estate:
Owner occupied		1,258		(270	)		-		-		988
Non owner occupied		1,896		(14	)		245		2		1,639
Commercial and industrial		2,262		2,369			-		-		4,631
Consumer		386		(5	)		32		15		364
All other		1,417		(288	)		33		15		1,111
Total	$	10,282	$	1,820		$	398	$	44	$	11,748

14.

PREMIER FINANCIAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE  3–LOANS - continued

Purchased Loans

As a result of the acquisition of Abigail Adams National Bancorp, the Company holds purchased loans for which there was, at the October 1, 2009 acquisition date, evidence of deterioration of credit quality since their origination and it was probable, at acquisition, that all contractually required payments would not be collected.  The carrying amount of those loans is as follows at June 30, 2012 and December 31, 2011.

	2012		2011
Residential real estate	$	210	$	282
Multifamily real estate		3,524		3,708
Commercial real estate
Owner occupied		280		1,934
Non owner occupied		6,207		6,427
Commercial and industrial		548		583
All other		1,553		1,925
Total carrying amount	$	12,322	$	14,859
Carrying amount, net of allowance	$	12,322	$	14,859

The Company cannot reasonably estimate the cash flows expected to be collected on these loans and therefore has continued to account for these loans using the cost recovery method of income recognition.  As such, no portion of a purchase discount adjustment has been determined to meet the definition of an accretable yield adjustment.  If, in the future, cash flows from the borrower(s) can be reasonably estimated, a portion of the purchase discount would be allocated to an accretable yield adjustment based upon the present value of the future estimated cash flows versus the current carrying value of the loan and the accretable yield portion would be recognized as interest income over the remaining life of the loan. Until such accretable yield can be calculated, under the cost recovery method of income recognition, all payments will be used to reduce the carrying value of the loan and no income will be recognized on the loan until the carrying value is reduced to zero.  Any loan accounted for under the cost recovery method is also still included as a non-accrual loan in the amounts presented in the tables below.

For those purchased loans disclosed above, the Company did not increase the allowance for loan losses during the six months ended June 30, 2012 and decreased the allowance for loan losses by $190,000 during the six months ended June 30, 2011.

15.

PREMIER FINANCIAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE  3–LOANS - continued

Past Due and Non-performing Loans

The following tables present the recorded investment in nonaccrual and loans past due over 90 days still on accrual by class of loans as of June 30, 2012 and December 31 2011.  The recorded investment in non-accrual loans is less than the principal owed on non-accrual loans due to discounts applied to the carrying value of the loan at time of their acquisition and interest payments made by the borrower which have been used to reduce the recorded investment in the loan rather than recognized as interest income.

June 30, 2012	Principal Owed on   Non-accrual Loans		Recorded Investment in Non-accrual Loans		Loans Past Due Over 90 Days, still accruing
Residential real estate	$	3,825	$	3,494	$	1,530
Multifamily real estate		8,251		6,492		1,034
Commercial real estate
Owner occupied		6,200		5,372		790
Non owner occupied		10,868		7,416		918
Commercial and industrial		3,768		2,435		27
Consumer		137		125		9
All other		7,775		4,433		-
Total	$	40,824	$	29,767	$	4,308

December 31, 2011	Principal Owed on   Non-accrual Loans		Recorded Investment in Non-accrual Loans		Loans Past Due Over 90 Days, still accruing
Residential real estate	$	4,479	$	4,111	$	1,216
Multifamily real estate		13,118		11,139		-
Commercial real estate
Owner occupied		9,970		8,260		851
Non owner occupied		12,938		9,835		1,596
Commercial and industrial		4,756		3,227		814
Consumer		246		237		50
All other		9,198		5,545		-
Total	$	54,705	$	42,354	$	4,527

Nonaccrual loans and impaired loans are defined differently. Some loans may be included in both categories, and some may only be included in one category. Nonaccrual loans include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.

16.

PREMIER FINANCIAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE  3–LOANS - continued

The following table presents the aging of the recorded investment in past due loans as of June 30, 2012 by class of loans:

Loan Class	Total Loans		30-89 Days Past Due		Greater than 90 days past due		Total Past Due		Loans Not Past Due
Residential real estate	$	219,113	$	6,882	$	4,311	$	11,193	$	207,920
Multifamily real estate		30,722		1,377		6,058		7,435		23,287
Commercial real estate:
Owner occupied		99,057		1,638		1,339		2,977		96,080
Non owner occupied		164,116		697		3,102		3,799		160,317
Commercial and industrial		67,439		564		2,246		2,810		64,629
Consumer		28,934		339		98		437		28,497
All other		60,887		2,230		4,433		6,663		54,224
Total	$	670,268	$	13,727	$	21,587	$	35,314	$	634,954

The following table presents the aging of the recorded investment in past due loans as of December 31, 2011 by class of loans:

Loan Class	Total Loans		30-89 Days Past Due		Greater than 90 days past due		Total Past Due		Loans Not Past Due
Residential real estate	$	221,756	$	6,729	$	3,635	$	10,364	$	211,392
Multifamily real estate		34,335		3,249		8,892		12,141		22,194
Commercial real estate:
Owner occupied		101,864		8,081		3,981		12,062		89,802
Non owner occupied		166,540		2,444		6,065		8,509		158,031
Commercial and industrial		76,960		1,714		3,153		4,867		72,093
Consumer		30,090		497		233		730		29,360
All other		59,378		222		5,532		5,754		53,624
Total	$	690,923	$	22,936	$	31,491	$	54,427	$	636,496

17.

PREMIER FINANCIAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE  3–LOANS - continued

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of June 30, 2012:

	Allowance for Loan Losses								Loan Balances
Loan Class	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Acquired with Deteriorated Credit Quality		Total		Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Acquired with Deteriorated Credit Quality		Total
Residential real estate	$	507	$	1,761	$	-	$	2,268	$	9,955	$	208,948	$	210	$	219,113
Multifamily real estate		-		427		-		427		1,283		25,915		3,524		30,722
Commercial real estate:
Owner occupied		132		847		-		979		7,213		91,564		280		99,057
Non-owner occupied		878		1,428		-		2,306		5,028		152,881		6,207		164,116
Commercial and industrial		1,379		605		-		1,984		11,084		55,807		548		67,439
Consumer		36		274		-		310		36		28,898		-		28,934
All other		116		1,472		-		1,588		4,970		54,364		1,553		60,887
Total	$	3,048	$	6,814	$	-	$	9,862	$	39,569	$	618,377	$	12,322	$	670,268

The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of December 31, 2011:

	Allowance for Loan Losses								Loan Balances
Loan Class	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Acquired with Deteriorated Credit Quality		Total		Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Acquired with Deteriorated Credit Quality		Total
Residential real estate	$	451	$	1,683	$	-	$	2,134	$	9,795	$	211,679	$	282	$	221,756
Multifamily real estate		-		284		-		284		8,594		22,033		3,708		34,335
Commercial real estate:
Owner occupied		138		780		-		918		8,663		91,267		1,934		101,864
Non-owner occupied		922		1,459		-		2,381		5,147		154,966		6,427		166,540
Commercial and industrial		894		986		-		1,880		3,636		72,741		583		76,960
Consumer		37		261		-		298		37		30,053		-		30,090
All other		605		1,295		-		1,900		8,372		49,081		1,925		59,378
Total	$	3,047	$	6,748	$	-	$	9,795	$	44,244	$	631,820	$	14,859	$	690,923

18.

PREMIER FINANCIAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE  3–LOANS - continued

In the tables below, total individually evaluated impaired loans include certain purchased loans that were acquired with deteriorated credit quality that are still individually evaluated for impairment.

The following table presents loans individually evaluated for impairment by class of loans as of June 30, 2012.  The table includes $12,322 of loans acquired with deteriorated credit quality that are still individually evaluated for impairment.

	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With no related allowance recorded:
Residential real estate	$	5,398	$	5,155	$	-
Multifamily real estate		7,077		4,807		-
Commercial real estate
Owner occupied		8,159		6,859		-
Non owner occupied		12,355		9,102		-
Commercial and industrial		3,773		2,599		-
All other		9,737		5,910		-
		46,499		34,432		-
With an allowance recorded:
Residential real estate	$	5,048	$	5,010	$	507
Commercial real estate
Owner occupied		634		634		132
Non owner occupied		2,197		2,133		878
Commercial and industrial		9,249		9,033		1,379
Consumer		36		36		36
All other		615		613		116
		17,779		17,459		3,048
Total	$	64,278	$	51,891	$	3,048

19.

PREMIER FINANCIAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE  3–LOANS - continued

The following table presents loans individually evaluated for impairment by class of loans as of December 31, 2011.  The table includes $14,859 of loans acquired with deteriorated credit quality that are still individually evaluated for impairment.

	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With no related allowance recorded:
Residential real estate	$	5,602	$	5,329	$	-
Multifamily real estate		15,513		12,302		-
Commercial real estate
Owner occupied		10,939		9,291		-
Non owner occupied		12,296		9,383		-
Commercial and industrial		3,392		2,287		-
All other		8,957		5,306		-
		56,699		43,898		-
With an allowance recorded:
Residential real estate	$	4,803	$	4,748	$	451
Commercial real estate
Owner occupied		1,384		1,306		138
Non owner occupied		2,240		2,191		922
Commercial and industrial		2,242		1,932		894
Consumer		37		37		37
All other		4,992		4,991		605
		15,698		15,205		3,047
Total	$	72,397	$	59,103	$	3,047

20.

PREMIER FINANCIAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE  3–LOANS - continued

The following table presents the average balance of loans individually evaluated for impairment and interest income recognized on these loans for the six months ended June 30, 2012 and June 30, 2011.   The table includes loans acquired with deteriorated credit quality that are still individually evaluated for impairment.

	Six months ended June 30, 2012						Six months ended June 30, 2011
Loan Class	Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized
Residential real estate	$	10,165	$	318	$	304	$	281	$	84	$	93
Multifamily real estate		7,334		1,350		1,341		6,748		16		16
Commercial real estate:
Owner occupied		8,612		938		923		11,949		25		26
Non-owner occupied		11,479		55		51		10,147		30		32
Commercial and industrial		9,055		240		233		8,441		189		192
Consumer		37		1		1		41		4		4
All other		7,896		194		183		12,865		25		25
Total	$	54,578	$	3,096	$	3,036	$	50,472	$	373	$	388

The following table presents the average balance of loans individually evaluated for impairment and interest income recognized on these loans for the three months ended June 30, 2012 and      June 30, 2011.   The table includes loans acquired with deteriorated credit quality that are still individually evaluated for impairment.

	Three months ended June 30, 2012						Three months ended June 30, 2011
Loan Class	Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized
Residential real estate	$	10,209	$	189	$	181	$	319	$	82	$	91
Multifamily real estate		4,850		43		37		7,751		16		16
Commercial real estate:
Owner occupied		7,619		44		38		11,977		12		12
Non-owner occupied		11,432		20		25		9,111		23		24
Commercial and industrial		11,473		133		126		8,390		16		18
Consumer		36		1		1		40		3		3
All other		6,696		98		101		13,571		19		17
Total	$	52,315	$	528	$	509	$	51,159	$	171	$	181

21.

PREMIER FINANCIAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE  3–LOANS - continued

Troubled Debt Restructurings

A loan is classified as a troubled debt restructuring ("TDR") when loan terms are modified due to a borrower's financial difficulties and a concession is granted to a borrower that would not have otherwise been considered. Most of the Company’s loan modifications involve a restructuring of loan terms prior to maturity to temporarily reduce the payment amount and/or to require only interest for a temporary period, usually up to six months.  These modifications generally do not meet the definition of a TDR because the modifications are considered to be an insignificant delay in payment.

The following table presents TDR’s as of June 30, 2012 and December 31, 2011:

June 30, 2012	TDR’s on Non-accrual		Other TDR’s		Total TDR’s
Residential real estate	$	317	$	1,079	$	1,396
Commercial real estate
Owner occupied		4,391		-		4,391
Non owner occupied		2,971		1,612		4,583
Commercial and industrial		3		2,795		2,798
All other		-		2,039		2,039
Total	$	7,682	$	7,525	$	15,207

December 31, 2011	TDR’s on Non-accrual		Other TDR’s		Total TDR’s
Residential real estate	$	59	$	1,371	$	1,430
Commercial real estate
Owner occupied		4,541		-		4,541
Non owner occupied		3,135		1,641		4,776
Commercial and industrial		42		897		939
Consumer		11		1		12
All other		-		2,041		2,041
Total	$	7,788	$	5,951	$	13,739

At June 30, 2012 $131,000 in specific reserves was allocated to loans that had restructured terms.  At December 31, 2011 $238,000 in specific reserves was allocated to loans that had restructured terms.

22.

PREMIER FINANCIAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE  3–LOANS - continued

The following table presents TDR’s that occurred during the three and six months ended June 30, 2012:

	Three months ended June 30, 2012						Six months ended June 30, 2012
Loan Class	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial and industrial		-	$	-	$	-		2	$	1,999	$	1,999

The troubled debt restructurings described above increased the allowance for loan losses by $40,000 during the six month period ending June 30, 2012.

During the three months and six months ended June 30, 2012 there were no TDR’s for which there as a payment default within twelve months following the modification. During the three months and six months ended June 30, 2011 there were no TDR’s for which there as a payment default within twelve months following the modification.

A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms.

23.

PREMIER FINANCIAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE  3–LOANS - continued

Credit Quality Indicators:

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors.  The Company analyzes non-homogeneous loans, such as commercial, commercial real estate, multifamily residential and commercial purpose loans secured residential real estate, on a monthly basis.  For consumer loans, including consumer loans secured by residential real estate, the analysis involves monitoring the performing status of the loan.  At the time such loans become past due by 30 days or more, the Company evaluates the loan to determine if a change in risk category is warranted. The Company uses the following definitions for risk ratings:

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

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

Doubtful.  Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans.

24.

PREMIER FINANCIAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE  3–LOANS - continued

As of June 30, 2012, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

Loan Class	Pass		Special Mention		Substandard		Doubtful		Total Loans
Residential real estate	$	197,990	$	6,863	$	14,010	$	250	$	219,113
Multifamily real estate		20,735		2,210		7,777		-		30,722
Commercial real estate:
Owner occupied		80,746		4,201		14,110		-		99,057
Non-owner occupied		143,756		4,805		15,555		-		164,116
Commercial and industrial		51,948		3,679		11,795		17		67,439
Consumer		28,693		157		48		36		28,934
All other		49,845		725		9,629		688		60,887
Total	$	573,713	$	22,640	$	72,924	$	991	$	670,268

As of December 31, 2011, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

Loan Class	Pass		Special Mention		Substandard		Doubtful		Total Loans
Residential real estate	$	198,865	$	8,105	$	14,731	$	55	$	221,756
Multifamily real estate		16,798		2,218		15,319		-		34,335
Commercial real estate:
Owner occupied		79,753		5,377		16,600		134		101,864
Non-owner occupied		146,305		4,883		15,352		-		166,540
Commercial and industrial		58,158		8,675		10,095		32		76,960
Consumer		29,753		198		102		37		30,090
All other		43,485		1,052		14,064		777		59,378
Total	$	573,117	$	30,508	$	86,263	$	1,035	$	690,923

25.

PREMIER FINANCIAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE  4 – FEDERAL HOME LOAN BANK ADVANCES

The Banks own stock of the Federal Home Loan Bank (FHLB) of Cincinnati, Ohio, the FHLB of Pittsburgh, Pennsylvania, and the FHLB of Atlanta, Georgia. This stock allows the Banks to borrow advances from the FHLB.

Advances from the FHLB at June 30, 2012 and December 31, 2011 were as follows:

	2012		2011
Payments due at maturity in March 2012, fixed rate at 1.81%	$	-	$	10,042
Payments due monthly with maturity in July 2012, fixed rate at 4.40%		6		41
	$	6	$	10,083

Advances are secured by the FHLB stock, certain pledged investment securities and substantially all single family first mortgage loans of the participating Banks.  Principal payments on all FHLB advances are due during the year ending December 31, 2012.

NOTE  5 - STOCKHOLDERS’ EQUITY AND REGULATORY MATTERS

The Company’s principal source of funds for dividend payments is dividends received from the subsidiary Banks.  Banking regulations limit the amount of dividends that may be paid without prior approval of regulatory agencies.  Under these regulations, the amount of dividends that may be paid in any calendar year is limited to the current year’s net profits, as defined, combined with the retained net profits of the preceding two years, subject to the capital requirements and additional restrictions as discussed below.  During 2012 the Banks could, without prior approval, declare dividends to Premier of approximately $7.4 million plus any 2012 net profits retained to the date of the dividend declaration.

The Company and the subsidiary Banks are subject to various regulatory capital requirements administered by the federal banking agencies.  Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a 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 guidelines that involve quantitative measures of their assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices.

26.

PREMIER FINANCIAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE  5 - STOCKHOLDERS’ EQUITY AND REGULATORY MATTERS (continued)

These quantitative measures established by regulation to ensure capital adequacy require the Company and Banks to maintain minimum amounts and ratios (set forth in the following table) of Total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier I capital (as defined) to average assets (as defined). Management believes, as of June 30, 2012, that the Company and the Banks meet all quantitative capital adequacy requirements to which they are subject.

Shown below is a summary of regulatory capital ratios for the Company:

	June 30, 2012			December 31, 2011			Regulatory Minimum Requirements			To Be Considered Well Capitalized
Tier I Capital (to Risk-Weighted Assets)		17.4	%		16.0	%		4.0	%		6.0	%
Total Capital (to Risk-Weighted Assets)		18.6	%		17.2	%		8.0	%		10.0	%
Tier I Capital (to Average Assets)		10.4	%		10.0	%		4.0	%		5.0	%

As of June 30, 2012, the most recent notification from each of the Banks’ primary Federal regulators categorized the subsidiary Banks as well capitalized under the regulatory framework for prompt corrective action.  To be categorized as well capitalized, the Banks must maintain minimum Total risk-based, Tier I risk-based and Tier I leverage ratios as set forth in the preceding table.  There are no conditions or events since that notification that management believes have changed the Banks’ categories.

The July 29, 2010 Written Agreement between Premier, the Federal Reserve Bank of Richmond (“FRB”) and the Virginia Bureau required Premier to obtain prior written approval of the FRB and the Director of the Division of Banking Supervision and Regulation of the Board of Governors of the Federal Reserve System for declaring or paying any dividends, and also required prior written approval of the FRB before incurring, increasing or guaranteeing any debt or purchasing or redeeming any shares of its stock.

On July 24, 2012 the FRB announced that it had terminated the July 29, 2010 Written Agreement.

27.

PREMIER FINANCIAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE  6 – PREFERRED STOCK

On October 2, 2009, as part of the Troubled Asset Relief Program (“TARP”) Capital Purchase Program, the Company entered into a Letter Agreement and Securities Purchase Agreement (collectively, the “Purchase Agreement”) with the United States Department of the Treasury (“U.S. Treasury”).  Pursuant to the Purchase Agreement, the Company issued and sold to the U.S. Treasury 22,252 shares of Fixed Rate Cumulative Perpetual Preferred Stock, Series A, no par value, with a liquidation preference of one thousand dollars per share (the “Series A Preferred Stock”) and a ten-year warrant (the “Warrant”) to purchase 628,587 shares of the Company’s common stock, no par value, at an exercise price of $5.31 per share, for an aggregate purchase price of $22,252 in cash.

Under standardized TARP Capital Purchase Program terms, cumulative dividends on the Series A Preferred Stock will accrue on the liquidation preference at a rate of 5% per annum until November 14, 2014, and at a rate of 9% per annum thereafter.  These dividends will be paid only if, as and when declared by Premier’s Board of Directors.  The Series A Preferred Stock has no maturity date and ranks senior to the Company’s common stock with respect to the payment of dividends and distributions and amounts payable upon liquidation, dissolution and winding up of Premier.  Subject to the approval of the Appropriate Federal Banking Agency (as defined in the Securities Purchase Agreement, which for Premier is the Board of Governors of the Federal Reserve System), the Series A Preferred Stock is redeemable at the option of Premier at 100% of its liquidation preference plus accrued and unpaid dividends, without penalty, delay or the need to raise additional replacement capital.

The Series A Preferred Stock is non-voting, but has class voting rights on (i) any authorization or issuance of shares ranking senior to the Series A Preferred Stock; (ii) any amendment to the rights of the Series A Preferred Stock; or (iii) any merger, consolidation, share exchange, reclassification or similar transaction which would adversely affect the rights of the Series A Preferred Stock.  In the event that the cumulative dividends described above are not paid in full for an aggregate of six dividend periods or more, whether or not consecutive, the authorized number of directors of Premier would automatically be increased by two and the holders of the Series A Preferred Stock would have the right to elect two directors.  The right to elect directors would end when dividends have been paid in full for four consecutive dividend periods.As previously disclosed, Premier has already deferred two dividend payments on the Series A Preferred Stock as a result of the Federal Reserve Board’s refusal to initially approve the November 15, 2010 and February 15, 2011 dividends under the Written Agreement dated July 29, 2010, among CB&T, a wholly owned subsidiary of Premier; the FRB, and the Virginia Bureau. These deferred dividends were paid along with the regularly scheduled May 15, 2011 Series A Preferred Stock quarterly dividend.

The U.S. Treasury has agreed not to exercise voting power with respect to any common stock issued to it upon exercise of the Warrant.  The common stock will be issued from authorized but unissued common stock and thus will dilute the interests of existing Premier common shareholders.  As of June 30, 2012, the Warrant has not yet been exercised.

28.

PREMIER FINANCIAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE  6 – PREFERRED STOCK - continued

Pursuant to the terms of the Purchase Agreement, the ability of the Company to declare or pay dividends or distributions on, or purchase, redeem or otherwise acquire for consideration, shares of its common stock will be subject to restrictions, including a restriction against increasing dividends from the last quarterly cash dividend per share ($0.11) declared on the common stock prior to October 2, 2009.

On July 27, 2012, the U.S. Treasury announced that it has sold 22,252 shares, or 100%, of its interest in the Series A Preferred Stock in a modified Dutch Auction conducted from July 23, 2012 through July 26, 2012 (the “Auction”).  Premier sought and obtained regulatory approval to participate in the Auction and successfully repurchased 10,252 shares of the Series A Preferred Stock at the closing price of $901.03 per share.  On August 10, 2012, Premier redeemed the 10,252 shares of the Series A Preferred Stock at the discounted price of $901.03 per share.  The redemption reduces Tier I Capital and Preferred Equity by approximately $9,237,000.

NOTE  7 – STOCK COMPENSATION EXPENSE

From time to time the Company grants stock options to its employees.  The Company estimates the fair value of the options at the time they are granted to employees and expenses that fair value over the vesting period of the option grant.

On March 21, 2012, 105,700 incentive stock options were granted out of the 2002 Employee Stock Option Plan at an exercise price of $7.47, the closing market price of Premier on the grant date.  These options vest in three equal annual installments ending on March 21, 2015.  On March 18, 2011, 102,000 incentive stock options were granted out of the 2002 Employee Stock Option Plan at an exercise price of $6.95 the closing market price of Premier on the grant date.  These options vest in three equal annual installments ending on March 18, 2014.  On March 17, 2010, 47,700 incentive stock options were granted out of the 2002 Plan at an exercise price of $8.90.  These options vest in three equal annual installments ending on March 17, 2013.

The fair value of the Company's employee stock options granted is estimated at the date of grant using the Black-Scholes option-pricing model. This model requires the input of highly subjective assumptions, changes to which can materially affect the fair value estimate. Additionally, there may be other factors that would otherwise have a significant effect on the value of employee stock options granted but are not considered by the model. The assumptions used in the Black-Scholes option-pricing model are as follows

	2012			2011			2010
Risk-free interest rate		2.31	%		3.58	%		3.65	%
Expected option life (yrs)		10.00			10.00			10.00
Expected stock price volatility		34.93	%		30.01	%		24.67	%
Dividend yield		2.68	%		4.03	%		4.94	%
Weighted average fair value of options granted during the year	$	2.34		$	1.63		$	1.41

29.

PREMIER FINANCIAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE  7– STOCK COMPENSATION EXPENSE - continued

The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield in effect at the time of the grant.  The expected option life was estimated since there has been little option exercise history.  The expected stock price volatility is based on historical volatilities of the Company’s common stock.  The dividend yield was estimated using historical dividends and dividend yields since at the time of the option grant the Company is restricted from paying dividends by its primary regulator.

Compensation expense of $85,000 was recorded for the first six months of 2012 compared to $47,000 for the first six months of 2011.  For the three months ended June 30, $57,000 was recorded for 2012 while $30,000 was recorded for 2011.  Stock-based compensation expense is recognized ratably over the requisite vesting period for all awards. Unrecognized stock-based compensation expense related to stock options totaled $248,000 at June 30, 2012. This unrecognized expense is expected to be recognized over the next 32 months based on the vesting periods of the options.

A summary of the Company’s stock option activity and related information is presented below for the six months ended June 30:

	- - - - - - 2012 - - - - - -					- - - - - - 2011 - - - - - -
	Options			Weighted Average Exercise  Price		Options		Weighted Average Exercise Price
Outstanding at beginning of year		350,949		$	9.69		255,649	$	10.77
Grants		105,700			7.47		102,000		6.95
Exercises		-			-		-		-
Forfeitures or expired		(7,000	)		7.73		-		-
Outstanding at June 30,		449,649		$	9.20		357,649	$	9.68
Exercisable at June 30,		265,696					209,996
Weighted average remaining life of options outstanding		6.8					6.9
Weighted average fair value of options granted during the year	$	2.34				$	1.63

Options outstanding at period-end are expected to fully vest.

30.

PREMIER FINANCIAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE  7 – STOCK COMPENSATION EXPENSE - continued

Additional information regarding stock options outstanding and exercisable at June 30, 2012, is provided in the following table:

	- - - - - - - - Outstanding - - - - - - - -						- - - - - - - - Currently Exercisable - - - - - - - -
Range of Exercise Prices	Number		Weighted Average Exercise Price		Aggregate Intrinsic Value		Number		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Aggregate Intrinsic Value
$6.50 to $10.00		325,016	$	7.51	$	74		141,063		5.9	$	7.66	$	48
$10.01 to $12.50		28,333		11.62		-		28,333		2.6		11.62		-
$12.51 to $15.00		68,800		13.47		-		68,800		5.2		13.47		-
$15.01 to $17.50		27,500		16.00		-		27,500		3.6		16.00		-
Outstanding - Jun 30, 2012		449,649		9.20	$	74		265,696		5.1		10.45	$	48

NOTE  8 – EARNINGS PER SHARE

A reconciliation of the numerators and denominators of the earnings per common share and earnings per common share assuming dilution computations for the three and six months ended June 30, 2012 and 2011 is presented below:

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Basic earnings per share
Income available to common stockholders	$	1,786	$	724	$	4,311	$	2,089
Weighted average common shares outstanding		7,937,143		7,937,143		7,937,143		7,937,143
Earnings per share	$	0.23	$	0.09	$	0.54	$	0.26
Diluted earnings per share
Income available to common stockholders	$	1,786	$	724	$	4,311	$	2,089
Weighted average common shares outstanding		7,937,143		7,937,143		7,937,143		7,937,143
Add dilutive effects of potential additional common stock		202,258		176,092		144,075		158,482
Weighted average common and dilutive potential common shares outstanding		8,139,401		8,113,235		8,081,218		8,095,625
Earnings per share assuming dilution	$	0.22	$	0.09	$	0.53	$	0.26

Stock options for 405,349 and 209,049 shares of common stock were not considered in computing diluted earnings per share for the six months ended June 30, 2012 and 2011 because they were antidilutive.  Stock options for 202,449 and 209,049 shares of common stock were not considered in computing diluted earnings per share for the three months ended June 30, 2012 and 2011 because they were antidilutive.

31.

PREMIER FINANCIAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE  9 – FAIR VALUE

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

When possible, the Company looks to active and observable markets to price identical assets or liabilities. When identical assets and liabilities are not traded in active markets, the Company looks to observable market data for similar assets and liabilities. However, certain assets and liabilities are not traded in observable markets and the Company must use other valuation methods to develop a fair value.

The Company used the following methods and significant assumptions to estimate the fair value of each type of financial instrument measured on a recurring basis:

Investment Securities:  The fair values for investment securities are determined by quoted market prices, if available (Level 1). For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2). For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3).

32.

PREMIER FINANCIAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE  9 – FAIR VALUE - continued

Assets and Liabilities Measured on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are summarized below:

			Fair Value Measurements at  June 30, 2012 Using:
	Carrying Value		Quoted Prices in Active Markets for Identical Assets  (Level 1)		Significant Other Observable Inputs  (Level 2)		Significant Unobservable Inputs  (Level 3)
Available for sale
Mortgage-backed securities
U. S. agency MBS - residential	$	44,022	$	-	$	44,022	$	-
U. S. agency CMO’s - residential		217,082		-		217,082		-
Total mortgage-backed securities of government sponsored agencies		261,104		-		261,104		-
U. S. government sponsored agency securities		29,247		-		29,247		-
Obligations of states and political subdivisions		9,569		-		9,429		140
Other securities		5,448		-		5,448		-
Total available for sale	$	305,368	$	-	$	305,228	$	140

			Fair Value Measurements at  December 31, 2011 Using:
	Carrying Value		Quoted Prices in Active Markets for Identical Assets  (Level 1)		Significant Other Observable Inputs  (Level 2)		Significant Unobservable Inputs  (Level 3)
Available for sale
Mortgage-backed securities
U. S. agency MBS - residential	$	40,255	$	-	$	40,255	$	-
U. S. agency CMO’s - residential		205,738		-		205,738		-
Total mortgage-backed securities of government sponsored agencies		245,993		-		245,993		-
U. S. government sponsored agency securities		18,141		-		18,141		-
Obligations of states and political subdivisions		9,650		-		9,510		140
Other securities		4,695		-		4,695		-
Total available for sale	$	278,479	$	-	$	278,339	$	140

33.

PREMIER FINANCIAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE  9 – FAIR VALUE - continued

The carrying amounts and estimated fair values of financial instruments at June 30, 2012 were as follows:

				Fair Value Measurements at June 30, 2012 Using
	Carrying Amount			Level 1			Level 2			Level 3		Total
Financial assets
Cash and due from banks	$	85,192		$	85,192		$	-		$	-	$	85,192
Federal funds sold		12,022			12,022			-			-		12,022
Securities available for sale		305,368			-			305,228			140		305,368
Loans held for sale		221			-			221			-		221
Loans, net		660,406			-			-			657,902		657,902
Federal Home Loan Bank stock		4,405			n/a			n/a			n/a		n/a
Interest receivable		3,448			-			950			2,498		3,448
Financial liabilities
Deposits	$	(949,871	)	$	(571,632	)	$	(382,675	)	$	-	$	(954,307	)
Securities sold under agreements to repurchase		(19,707	)		-			(19,707	)-		-		(19,707	)
Federal Home Loan Bank advances		(6	)		-			(6	)		-		(6	)
Other borrowed funds		(17,094	)		-			(17,066	)		-		(17,066	)
Interest payable		(596	)		(6	)		(590	)		-		(596	)

The carrying amounts and estimated fair values of financial instruments at December 31, 2011 were as follows:

	Carrying Amount			Fair Value
Financial assets
Cash and due from banks	$	72,056		$	72,056
Federal funds sold		10,832			10,832
Securities available for sale		278,479			278,479
Loans held for sale		70			70
Loans, net		681,128			675,616
Federal Home Loan Bank stock		5,216			n/a
Interest receivable		3,497			3,497
Financial liabilities
Deposits	$	(925,078	)	$	(929,796	)
Securities sold under agreements to repurchase		(23,205	)		(23,205	)
Federal Home Loan Bank advances		(10,083	)		(10,141	)
Other borrowed funds		(18,130	)		(18,101	)
Interest payable		(712	)		(712	)

34.

PREMIER FINANCIAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE  9 – FAIR VALUE - continued

Carrying amount is the estimated fair value for cash and due from banks, Federal funds sold, accrued interest receivable and payable, demand deposits, short-term debt, and variable rate loans or deposits that reprice frequently and fully.  It was not practicable to determine the fair value of Federal Home Loan Bank stock due to the restrictions placed on its transferability.  For fixed rate loans or deposits and for variable rate loans or deposits with infrequent repricing or repricing limits, fair value is based on discounted cash flows using current market rates applied to the estimated life and credit risk.  Fair values for impaired loans are estimated using discounted cash flow analysis or underlying collateral values.  Fair value of debt is based on current rates for similar financing. The fair value of commitments to extend credit and standby letters of credit is not material.

The Company used the following methods and significant assumptions to estimate the fair value of each type of financial instrument measured on a non-recurring basis:

Impaired Loans:  The fair value of impaired loans with specific allocations of the allowance for loan losses is generally based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are typically significant and unique to each property and result in a Level 3 classification of the inputs for determining fair value.  Management periodically evaluates the appraised values and will discount a property’s appraised value to account for a number of factors including but not limited to the cost of liquidating the collateral, the age of the appraisal, observable deterioration since the appraisal, or other factors unique to the property.  To the extent an adjusted appraised value is lower than the carrying value of an impaired loan, a specific allocation of the allowance for loan losses is assigned to the loan.

Other real estate owned (OREO):  The fair value of OREO is based on appraisals less cost to sell at the date of foreclosure.  These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are typically significant and result in a Level 3 classification of the inputs for determining fair value.  Management periodically evaluates the appraised values and will discount a property’s appraised value to account for a number of factors including but not limited to the cost of liquidating the collateral, the age of the appraisal, observable deterioration since the appraisal, or other factors unique to the property. To the extent an adjusted appraised value is lower than the carrying value of an OREO property, a direct charge to earnings is recorded as an OREO writedown.

35.

PREMIER FINANCIAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE  9 – FAIR VALUE - continued

Assets and Liabilities Measured on a Non-Recurring Basis

Assets and liabilities measured at fair value on a non-recurring basis are summarized below:

			Fair Value Measurements at June 30, 2012 Using
	June 30, 2012		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Impaired loans:
Residential Real Estate	$	4,503	$	-	$	-	$	4,503
Commercial Real Estate
Owner Occupied		502		-		-		502
Non-owner Occupied		1,255		-		-		1,255
Commercial and Industrial		7,654		-		-		7,654
All Other		497		-		-		497
Total impaired loans		14,411	$	-	$	-	$	14,411
Other real estate owned:
Residential Real Estate	$	265	$	-	$	-	$	265
Commercial Real Estate
Owner Occupied		100		-		-		100
Non-owner Occupied		2,931		-		-		2,931
All Other		224		-		-		224
Total OREO	$	3,520	$	-	$	-	$	3,520

36.

PREMIER FINANCIAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE  9 – FAIR VALUE - continued

Assets and liabilities measured at fair value on a non-recurring basis are summarized below:

			Fair Value Measurements at December 31, 2011 Using
	Dec 31, 2011		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Impaired loans:
Residential Real Estate	$	4,297	$	-	$	-	$	4,297
Commercial Real Estate
Owner Occupied		1,168		-		-		1,168
Non-owner Occupied		1,269		-		-		1,269
Commercial and Industrial		1,038		-		-		1,038
All Other		4,386		-		-		4,386
Total impaired loans		12,158	$	-	$	-	$	12,158
Other real estate owned:
Residential Real Estate	$	1,608	$	-	$	-	$	1,608
Commercial Real Estate
Owner Occupied		701		-		-		701
Non-owner Occupied		2,931		-		-		2,931
Commercial and Industrial		55		-		-		55
All Other		8,788		-		-		8,788
Total OREO	$	14,083	$	-	$	-	$	14,083

Impaired loans, which are measured for impairment using the fair value of the collateral for collateral dependent loans, had a carrying amount of $17,459,000 at June 30, 2012 with a valuation allowance of $3,048,000 and a carrying amount of $15,205,000 at December 31, 2011 with a valuation allowance of $3,047,000, resulting in a provision for loan losses of $1,000 for the six months ended June 30, 2012, compared to a $2,342,000 provision for loan losses for the six months ended June 30, 2011;  and a negative $527,000 provision for loan losses for the three months ended June 30, 2012, compared to a $2,327,000 provision for loan losses for the three months ended    June 30, 2011.  The detail of impaired loans by loan class is contained in Note 3 above.

Other real estate owned measured at fair value less costs to sell, had a net carrying amount of $3,520,000 which is made up of the outstanding balance of $4,547,000 net of a valuation allowance of $1,027,000 at June 30, 2012, resulting in write downs of $85,000 for the six months ending June 30, 2012 compared to $362,000 for the six months ending June 30, 2011; and write downs of $41,000 for the three months ending June 30, 2012 compared to $76,000 for the three months ending June 30, 2011.  At December 31, 2011, other real estate owned had a net carrying amount of $14,083,000, made up of the outstanding balance of $15,288,000, net of a valuation allowance of $1,205,000.

37.

PREMIER FINANCIAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE  9 – FAIR VALUE - continued

Assets and Liabilities Measured on a Non-Recurring Basis

Assets and liabilities measured at fair value on a non-recurring basis are summarized below:

	June 30, 2012		Valuation  Techniques	Unobservable Inputs	Range  (Weighted Avg)
Impaired loans:
Residential Real Estate	$	4,503	sales comparison	adjustment for differences between the comparable sales	0.8%-49.9% (8.7%)
Commercial Real Estate
Owner Occupied		502	sales comparison	adjustment for limited saleablity of specialized property	40.0%-70.0% (44.1%)
Non-owner Occupied		1,255	sales comparison	adjustment for differences between the comparable sales	10.0%-59.0% (37.5%)
			income approach	capitalization rate	9.50%
Commercial and Industrial		7,654	sales comparison	adjustment for differences between the comparable sales	0.0%-43.3% (36.4%)
All Other		497	sales comparison	adjustment for percentage of completion of construction	35.0%-91.4% (38.4%)
Total impaired loans		14,411
Other real estate owned:
Residential Real Estate	$	265	sales comparison	adjustment for differences between the comparable sales	26.1%-47.8% (35.2%)
Commercial Real Estate
Owner Occupied		100	sales comparison	adjustment for estimated realizable value	17.9%-17.9% (17.9%)
Non-owner Occupied		2,931	sales comparison	adjustment for differences between the comparable sales	0.0%-82.7% (17.5%)
All Other		224	sales comparison	adjustment for estimated realizable value	0.0%-49.7% (23.8%)
Total OREO	$	3,250

38.

PREMIER FINANCIAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE  10 – SUBSEQUENT EVENTS

On July 24, 2012, Premier issued a press release announcing that the July 29, 2010 Written Agreement with the Federal Reserve Bank of Richmond (“FRB”) had been terminated by the FRB.  In a notice posted on the Federal Reserve System Board of Governors’ website on July 24, 2012, (www.federalreserve.gov), the Federal Reserve Bank noted that Premier has fully satisfied all of the provisions of the Written Agreement and, accordingly, the FRB had terminated the agreement effective July 23, 2012.

On August 10, 2012, Premier redeemed 10,252 shares of the Series A Preferred Stock at a discounted price of $901.03 per share.  On July 27, 2012, Premier was notified that it successfully bid to repurchase 10,252 shares of the 22,252 shares of Series A Preferred Stock issued to the U.S. Treasury as part of TARP.  Using a modified Dutch auction methodology that establishes a market price by allowing investors to submit bids at specified increments during the period of July 23, 2012 through July 26, 2012, the U.S. Treasury auctioned all of Premier’s 22,252 Series A Preferred Stock.  The closing price of the auctioned shares was $901.03 per share.  The redemption reduces Tier I Capital and Preferred Equity by approximately $9,237,000.

39.

PREMIER FINANCIAL BANCORP, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS

JUNE 30, 2012

Item 2.  Management’s Discussion and Analysis

   of Financial Condition and Results of Operations

FORWARD-LOOKING STATEMENTS

Management's discussion and analysis contains forward-looking statements that are provided to assist in the understanding of anticipated future financial performance. However, such performance involves risks and uncertainties, and there are certain important factors that may cause actual results to differ materially from those anticipated. These important factors include, but are not limited to, economic conditions (both generally and more specifically in the markets in which Premier operates), competition for Premier's customers from other providers of financial services, government legislation and regulation (which changes from time to time), changes in interest rates, Premier's ability to originate quality loans, collect delinquent loans and attract and retain deposits, the impact of Premier's growth, Premier's ability to control costs, and new accounting pronouncements, all of which are difficult to predict and many of which are beyond the control of Premier.  The words “may,” “could,” “should,” “would,” “will,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” “project,” “predict,” “continue” and similar expressions are intended to identify forward-looking statements.

A.         Results of Operations

A financial institution’s primary sources of revenue are generated by interest income on loans, investments and other earning assets, while its major expenses are produced by the funding of these assets with interest bearing liabilities.  Effective management of these sources and uses of funds is essential in attaining a financial institution’s optimal profitability while maintaining a minimum amount of interest rate risk and credit risk.

Net income for the six months ended June 30, 2012 was $4,922,000, or $0.53 per diluted share, compared to net income of $2,700,000, or $0.26 per diluted share, for the six months ended June 30, 2011.  The increase in net income in 2012 is largely due to a decrease in total interest expense, a decrease in the provision for loan losses, and decreases in data processing expense, conversion costs and FDIC insurance costs more than offsetting decreases in interest income and non-interest income.  The annualized returns on average common shareholders’ equity and average assets were approximately 6.76% and 0.86% for the six months ended June 30, 2012 compared to 3.67% and 0.45% for the same period in 2011.

Net income for the three months ended June 30, 2012 was $2,092,000, or $0.22 per diluted share, compared to net income of $1,029,000 or $0.09 per diluted share for the three months ended June 30, 2011.  The increase in income in 2012 is also largely due to a decrease in total interest expense, a decrease in the provision for loan losses, and decreases in data processing expense, conversion costs and FDIC insurance costs more than offsetting decreases in interest income and non-interest income.  The annualized returns on common shareholders’ equity and average assets were approximately 5.62% and 0.73% for the three months ended June 30, 2012 compared to 2.53% and 0.35% for the same period in 2011.

40.

PREMIER FINANCIAL BANCORP, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS

JUNE 30, 2012

 Net interest income for the six months ended June 30, 2012 totaled $22.73 million, up $605,000, or 2.7%, from the $22.12 million of net interest income earned in the first six months of 2011, as the decrease in total interest expense exceeded the decrease in total interest income.  Interest income in 2012 decreased by $327,000, or 1.2%, largely due to a decrease in interest income on investments.  Interest earned on investments decreased by $447,000, or 10.7%, due to lower average yields even though on a higher average volume of investments.  Interest earned on federal funds sold and interest bearing bank balances decreased by $17,000, largely due to a lower average volume of assets held in this category.  The decreases in interest income were partially offset by an increase in interest income on loans.  In the first six months of 2012, interest income on loans increased by $137,000, or 0.6%, compared to the same period in 2011.  In 2012, interest income on loans included $1.56 million from the recognition of deferred interest and purchase discounts on non-accrual loans liquidated during the first quarter of 2012.  The timing of these liquidations is difficult to predict, which creates fluctuations in reported loan interest income.  Otherwise, interest income on loans would have decreased by $1.4 million in the first six months of 2012 due to lower yields on a lower average balance of loans outstanding.

 More than offsetting the decrease in interest income, interest expense decreased in total during the first six months of 2012 by $932,000, or 21.3%, when compared to the same six months of 2011.  Interest expense on deposits decreased by $786,000, or 20.9%, largely due to a continuing decrease in the rates paid on deposits combined with a lower average balance of interest-bearing deposits outstanding.  Interest expense on repurchase agreements and other short-term borrowings decreased by $39,000, largely due to lower rates paid and a lower average balance outstanding.  Interest expense on FHLB advances decreased by $53,000, or 56.4%, due to a decrease in the average balance outstanding resulting from the payoff of borrowings at maturity during the first quarter of 2012.  Interest expense on other borrowings decreased by $54,000, or 12.3%, in the first six months of 2012 compared to the first six months of 2011, largely due to a decrease in the average amount of borrowings outstanding.

 The Board of Governors’ policy to reduce the federal funds rate to nearly zero, coupled with the U.S. Treasury actively buying investment securities, has significantly reduced the yield on much of Premier’s earning assets, including investments, federal funds sold and variable rate loans.  Premier has tried to offset some of the lower interest income by lowering the rates paid on its deposits and repurchase agreements with customers.  The recognition of additional loan interest income combined with the lower rates paid on interest-bearing deposits and repurchase agreements have combined to increase Premier’s overall net interest margin.  Premier’s net interest margin during the first six months of 2012 was 4.38% compared to 4.11% for the same period in 2011.  A portion of the interest income on loans is the result of recognizing into interest income the remaining fair value discounts on notes acquired via a business acquisition if that note was paid-off during the quarter.  These events cannot be predicted with certainty and may positively or negatively affect interest income on loans in future periods.

41.

PREMIER FINANCIAL BANCORP, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS

JUNE 30, 2012

Additional information on Premier’s net interest income for the first six months of 2012 and 2011 is contained in the following table.

PREMIER FINANCIAL BANCORP, INC.
AVERAGE CONSOLIDATED BALANCE SHEETS
AND NET INTEREST INCOME ANALYSIS
	Six Months Ended June 30, 2012								Six Months Ended June 30, 2011
	Balance			Interest		Yield/Rate			Balance			Interest		Yield/Rate
Assets
Interest Earning Assets
Federal funds sold and other	$	65,767		$	76		0.23	%	$	86,272		$	93		0.22	%
Securities available for sale
Taxable		291,631			3,620		2.48			280,049			4,057		2.90
Tax-exempt		7,647			112		4.44			8,318			122		4.44
Total investment securities		299,278			3,732		2.53			288,367			4,179		2.94
Total loans		677,189			22,364		6.62			712,433			22,227		6.29
Total interest-earning assets		1,042,234			26,172		5.05	%		1,087,072			26,499		4.92	%
Allowance for loan losses		(10,039	)							(10,255	)
Cash and due from banks		28,689								27,435
Other assets		75,598								78,574
Total assets	$	1,136,482							$	1,182,826
Liabilities and Equity
Interest-bearing liabilities
Interest-bearing deposits	$	745,796			2,972		0.80		$	766,720			3,758		0.99
Short-term borrowings		21,323			48		0.45			25,509			87		0.69
FHLB advances		3,757			41		2.19			10,657			94		1.78
Other borrowings		17,482			385		4.42			19,640			439		4.51
Total interest-bearing liabilities		788,358			3,446		0.88	%		822,526			4,378		1.07	%
Non-interest bearing deposits		195,866								221,898
Other liabilities		4,185								3,479
Shareholders’ equity		148,073								134,923
Total liabilities and equity	$	1,136,482							$	1,182,826
Net interest earnings				$	22,726							$	22,121
Net interest spread							4.17	%							3.85	%
Net interest margin							4.38	%							4.11	%

42.

PREMIER FINANCIAL BANCORP, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS

JUNE 30, 2012

Additional information on Premier’s net interest income for the second quarter of 2012 and second quarter of 2011 is contained in the following table.

PREMIER FINANCIAL BANCORP, INC.
AVERAGE CONSOLIDATED BALANCE SHEETS
AND NET INTEREST INCOME ANALYSIS
	Three Months Ended June 30, 2012								Three Months Ended June 30, 2011
	Balance			Interest		Yield/Rate			Balance			Interest		Yield/Rate
Assets
Interest Earning Assets
Federal funds sold and other	$	66,149		$	44		0.27	%	$	72,662		$	40		0.22	%
Securities available for sale
Taxable		300,694			1,829		2.43			293,970			2,121		2.89
Tax-exempt		7,608			56		4.46			8,264			60		4.40
Total investment securities		308,302			1,885		2.48			302,234			2,181		2.93
Total loans		674,332			10,027		5.96			706,158			11,287		6.41
Total interest-earning assets		1,048,783			11,956		4.58	%		1,081,054			13,508		5.02	%
Allowance for loan losses		(10,244	)							(10,486	)
Cash and due from banks		28,937								30,497
Other assets		74,931								77,079
Total assets	$	1,142,407							$	1,178,143
Liabilities and Equity
Interest-bearing liabilities
Interest-bearing deposits	$	752,332			1,437		0.77		$	761,236			1,826		0.96
Short-term borrowings		20,260			22		0.44			23,732			40		0.68
FHLB advances		12			-		0.00			10,203			47		1.85
Other borrowings		17,323			189		4.38			19,386			223		4.61
Total interest-bearing liabilities		789,927			1,648		0.84	%		814,557			2,136		1.05	%
Non-interest bearing deposits		198,816								224,021
Other liabilities		4,474								3,039
Shareholders’ equity		149,190								136,526
Total liabilities and equity	$	1,142,407							$	1,178,143
Net interest earnings				$	10,308							$	11,372
Net interest spread							3.74	%							3.97	%
Net interest margin							3.95	%							4.23	%

Net interest income for the quarter ending June 30, 2012 totaled $10.31 million, down $1.06 million, or 9.4%, from the $11.37 million of net interest income earned in the second quarter of 2011.  Interest income in the second quarter of 2012 decreased by $1.55 million, or 11.5%, largely due to a decrease in interest income on loans.  Interest income on loans decreased by $1.26 million, or 11.2%, due to lower yields earned on a lower average volume of loans outstanding.  A portion of the interest income on loans in the second quarter of 2011 was the result of loans purchased at a discount being fully paid-off during the period.  When a loan that has been discounted as a result being purchased in a business acquisition is paid-off, any remaining discount is recognized as interest income on loans.  These events cannot be predicted with certainty and may positively or negatively affect interest income on loans in future periods.  Interest earned on investments decreased by $296,000, or 13.6%, due to lower average yields even though on a higher average volume of investments.  Interest earned on federal funds sold and interest bearing bank balances increased by $4,000, largely due to slightly higher yields on a lower average volume of assets held in this category.

43.

PREMIER FINANCIAL BANCORP, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS

JUNE 30, 2012

Offsetting a portion of the decrease in interest income, interest expense decreased in total during the second quarter of 2012 by $488,000, or 22.8%, when compared to the same quarter of 2011.  Interest expense on deposits decreased by $389,000, or 21.3%, largely due to a continuing decrease in the rates paid combined with a lower average balance of interest-bearing deposits outstanding.  Interest expense on repurchase agreements and other short-term borrowings decreased by $18,000, again largely due to a decrease in the interest rates paid combined with a lower average balance outstanding.  Interest expense on FHLB advances decreased by $47,000 (to less than $1,000 for the quarter), due to a decrease in the average balance outstanding resulting from the payoff of borrowings at maturity during the first quarter of 2012.  The remaining balance of FHLB advances outstanding at June 30, 2012 will mature in the third quarter of 2012.  Interest expense on other borrowings decreased by $34,000 in the second quarter of 2012 compared to the second quarter of 2011, largely due to a decrease in the average amount of borrowings outstanding.  The Board of Governors’ policy to reduce the federal funds rate to nearly zero, coupled with the U.S. Treasury actively buying investment securities, has significantly reduced the yield on much of Premier’s earning assets, including investments, federal funds sold and variable rate loans.  New fixed rate loans are also pricing lower than loans originated in prior periods.  Premier has tried to offset some of the lower interest income by lowering the rates paid on its deposits and repurchase agreements with customers.  However, the lower yield on loans and investments has outpaced the decrease in interest rates paid on total interest-bearing liabilities, resulting in a decrease in Premier’s overall net interest margin.  Premier’s net interest margin during the second quarter of 2012 was 3.95% compared to 4.23% for the same period in 2011.

Non-interest income (including $18,000 of gains on the sale of securities recorded in 2011) decreased by $196,000, or 5.9% to $3,149,000 for the first six months of 2012 compared to the same period of 2011.  Service charges on deposit accounts decreased by $166,000, or 8.9%, as customers reduced their propensity to incur overdraft charges as they managed their checking accounts more closely during the economic downturn.  Secondary market mortgage income decreased by $12,000, or 8.6%, in the first six months of 2012 when compared to the first six months of 2011 due to stricter underwriting criteria of secondary market mortgage purchasers resulting in longer timeframes for approval and fewer loans approved during the period.  These decreases were partially offset by an $82,000, or 8.8% increase in electronic banking income (income from debit/credit cards, ATM fees and internet banking charges).  Electronic banking income increased largely due to continued increases in Premier’s deposit customer base and customers’ greater propensity to use electronic means to conduct their banking business.  Other non-interest income decreased by $100,000, largely due to decreases in fee income from loans and currency exchange fees plus the $18,000 of gains on the sale of securities recorded in 2011, partially offset by an increase in checkbook sales.

For the quarter ending June 30, 2012, non-interest income (including $18,000 of gains on the sale of securities in 2011) decreased $102,000 to $1,632,000 compared to $1,734,000 recognized during the same quarter of 2011.  Service charges on deposit accounts decreased by $108,000, or 11.0%, and other income decreased by $88,000 (including $18,000 of gains on the sale of securities in 2011).  These decreases in non-interest income were partially offset by a $43,000, or 9.0%, increase in electronic banking income and a $51,000, or 98.1%, increase in secondary market mortgage income.  The increase in secondary market income is due to a change in processing operations which has resulted in an a greater percentage of revenue per loan originated and sold in the secondary market.

44.

PREMIER FINANCIAL BANCORP, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS

JUNE 30, 2012

Non-interest expenses for the first six months of 2012 totaled $16.66 million, or 2.95% of average assets on an annualized basis, compared to $19.02 million, or 3.24% of average assets for the same period of 2011.  The $2.36 million decrease in non-interest expenses in 2012 when compared to the first six months of 2011 is largely due to a $642,000, or 26.9%, decrease in data processing expenses and $842,000 of conversion expenses incurred during the first six months of 2011 as Premier changed its operating and customer delivery systems to a more unified platform last year.  Also contributing to the decrease in non-interest expenses in 2012 was a $496,000, or 50.8%, decrease in FDIC insurance costs.  In the second quarter of 2011, Premier merged five of its subsidiary banks together to form Premier Bank, Inc.  The FDIC insurance expense of Premier Bank is substantially less than the combined insurance costs of the five individual subsidiary banks.  Other decreases in non-interest expense during the first six months of 2012 include a $222,000, or 2.8%, decrease in staff costs, a $217,000, or 8.6%, decrease in occupancy and equipment expense, a $70,000, or 16.9%, decrease in taxes not on income, a $68,000, or 16.4%, decrease in core deposit amortization expense and a $491,000, or 22.7%, decrease in other operating expenses.  Staff costs have decreased as normal salary and benefit increases have been offset by a reduction in the number of employees.  Occupancy and equipment expense decreased due to lower utility costs and snow removal expenses as a result of the milder winter, lower building repair costs and lower equipment maintenance expenses.  Taxes not on income have decreased due to enacted rate decreases in equity based taxes in West Virginia.  Core deposit amortization expense decreased as Premier utilizes an accelerated method to amortize its core deposit intangible asset.  Decreases in other operating expenses include savings on regulatory assessments and correspondent bank charges resulting from the merger of the five subsidiary banks plus higher levels of expenses in 2011 due to the conversion such as supplies, postage, marketing and travel as well as decreases in loan processing costs.  These expense decreases more than offset a $102,000, or 21.2%, increase in professional fees, a $100,000, or 24.6%, increase in expenses and writedowns on other real estate owned (OREO), and a $483,000 increase in collection costs, namely foreclosure and other loan collection expenses associated with the liquidation of non-accrual loans during the first quarter of 2012.

Non-interest expenses for the second quarter of 2012 totaled $8.07 million, or 2.84% of average assets on an annualized basis, compared to $9.72 million, or 3.31% of average assets for the same period of 2011.  The $1.65 million decrease in non-interest expenses in the second quarter of 2012 when compared to the second quarter of 2011 is largely due to a $307,000, or 26.0%, decrease in data processing expenses and $463,000 of conversion expenses incurred during the second quarter of 2011, as Premier changed its operating and customer delivery systems to a more unified platform last year.  Also contributing to the decrease in non-interest expenses in 2012 was a $230,000, or 49.0%, decrease in FDIC insurance costs.  In the second quarter of 2011, Premier merged five of its subsidiary banks together to form Premier Bank, Inc.  The FDIC insurance expense of Premier Bank, Inc. is substantially less than the combined insurance costs of the five individual subsidiary banks.  Other decreases in non-interest expense during the second quarter of 2012 include a $154,000, or 3.8%, decrease in staff costs, a $161,000, or 12.6%, decrease in occupancy and equipment expense, a $32,000, or 14.4%, decrease in taxes not on income, a $30,000, or 9.3%, decrease in expenses and writedowns on OREO,  a $31,000, or 15.1%, decrease in core deposit amortization expense, and a $324,000, or 28.0%, decrease in other operating expenses.  Staff costs have decreased as normal salary and benefit increases have been offset by a reduction in the number of employees.  Occupancy and equipment expense decreased due to lower utility costs, lower building repair costs, lower equipment maintenance expenses and lower software costs.  Decreases in other operating expenses include savings on regulatory assessments and correspondent bank charges resulting from the merger of the five subsidiary banks plus higher levels of expenses in 2011 due to the conversion such as supplies, postage, marketing and travel as well as decreases in loan processing costs.  These expense decreases more than offset a $78,000, or 35.1%, increase in professional fees.

45.

PREMIER FINANCIAL BANCORP, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS

JUNE 30, 2012

Income tax expense was $2.59 million for the first six months of 2012 compared to $1.40 million for the first six months of 2011.  The effective tax rate for the six months ended June 30, 2012 was 34.5% compared to 34.2% for the same period in 2011.   For the quarter ending June 30, 2012, income tax expense was $1.03 million, a 33.0% effective tax rate, compared to $541,000 (a 34.5% effective tax rate) for the same period in 2011.   The increase in income tax expense can be primarily attributed to the increase in pre-tax income detailed above, while changes in the effective income tax rate are largely due to changes in the amount of income subject to state income taxes.

46.

PREMIER FINANCIAL BANCORP, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS

JUNE 30, 2012

B.         Financial Position

Total assets at June 30, 2012 increased by $15.9 million to just over $1.140 billion from the $1.124 billion at December 31, 2011.  Similarly, earning assets increased by $18.7 million from the $1.028 billion at year-end 2011 to end the quarter at $1.047 billion.  The increase in earning assets was largely due to an increase in securities available for sale and interest-bearing bank balances partially offset by a decrease in total loans outstanding (see below).

Cash and due from banks at June 30, 2012 was $30.5 million, a $1.1 million increase from the $29.4 million at December 31, 2011.  Interest-bearing bank balances increased by $12.0 million from the $42.7 million reported at December 31, 2011, while federal funds sold increased by $1.2 million to $12.0 million at June 30, 2012.  Changes in these highly liquid assets are generally in response to increases in deposits, the demand for deposit withdrawals or the funding of loans or investment purchases and are part of Premier’s management of its liquidity and interest rate risks.  The increase in interest bearing bank balances during the first six months of 2012 was largely in response to an increase in funding primarily via an increase in total deposits during the first six months of 2012.

Securities available for sale totaled $305.4 million at June 30, 2012, a $26.9 million increase from the $278.5 million at December 31, 2011.  The increase was largely due to the investment of surplus funds from the repayment or complete payoff of loans in the first six months exceeding new loan volume plus additional funds from the net growth in deposits during the period.  During the first six months of 2012, Premier used some of its surplus liquid assets to purchase bonds in the short- to mid-term maturity range in an effort to improve its overall yield on earning assets without unduly increasing interest rate risk.  The investment portfolio is predominately high quality residential mortgage backed securities backed by the U.S. Government or Government sponsored agencies.  The unrealized losses at June 30, 2012 and December 31, 2011 are believed to be price changes resulting from increases in the long-term interest rate environment since the investments’ purchase and management anticipates receiving all principal and interest on these investments as they come due.  Additional details on investment activities can be found in the Consolidated Statements of Cash Flows.

Total loans at June 30, 2012 were $670.3 million compared to $690.9 million at December 31, 2011, a decrease of approximately $20.6 million.  The decrease in loans was largely due to loan payoffs, transfers of loans to OREO upon foreclosure and principal payments which more than offset sluggish new loan demand during the first six months of 2012.  New loan demand continues to be minimal due to the slow pace of the economic recovery in 2012.

Deposits totaled $949.9 million as of June 30, 2012, a $24.8 million increase from the $925.1 million in deposits at December 31, 2011.  The overall increase in deposits is largely due to a $19.4 million increase in interest bearing transaction accounts and time deposits less than $100,000 (other interest bearing deposits).  Non-interest bearing deposits increased by $5.5 million to $201.6 million during the first six months of 2012.  These increases were partially offset by an $86,000, or 0.1%, decrease in interest bearing time deposits $100,000 and over.  Contrary to the growth in total deposits, repurchase agreements with corporate and public entity customers decreased in the first six months of 2012, declining by $3.5 million to $19.7 million as of June 30, 2012.

47.

PREMIER FINANCIAL BANCORP, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS

JUNE 30, 2012

During the first quarter of 2012, a portion of the increase in deposits was used to repay $10.0 million of Federal Home Loan Bank (FHLB) advances upon maturity.  FHLB advances declined by $10.1 million during the first six months of 2012 leaving only $6,000 of FHLB advances outstanding at June 30, 2012.  Other borrowed funds decreased by $1.0 million during the first six months of 2012 due to regularly scheduled principal payments plus accelerated principal payments.  See Note 4 to the consolidated financial statements for additional information on the Company’s outstanding FHLB advances.

The following table sets forth information with respect to the Company’s nonperforming assets at June 30, 2012 and December 31, 2011.

	(In Thousands)
	2012			2011
Non-accrual loans	$	29,767		$	42,354
Accruing loans which are contractually past due 90 days or more		4,308			4,527
Accruing restructured loans		7,525			5,951
Total non-performing loans		41,600			52,832
Other real estate acquired through foreclosure (OREO)		15,735			14,642
Total non-performing assets	$	57,335		$	67,474
Non-performing loans as a percentage of total loans		6.21	%		7.65	%
Non-performing assets as a percentage of total assets		5.03	%		6.00	%

Total non-performing loans have decreased since year-end, largely due to a $12.6 million decrease in non-accrual loans.  During the first quarter of 2012, non-accrual loans decreased by $9.4 million due to payoffs upon the liquidation of collateral and by another $2.7 million due to the transfer of collateral upon foreclosure to OREO, resulting in the increase in other real estate owned.  During the first six months of 2012, a total of $5.8 million of loans have been placed on non-accrual status, while approximately $15.5 million of payments and payoffs have been received on non-accrual loans during that time.  The change in other real estate owned (“OREO”) during the first six months of 2012 is largely due to the foreclosure of approximately $2.8 million of loans partially offset by sales of $1.7 million of OREO properties and writedowns of $85,000.  The writedowns were more than offset by $123,000 of gains on the disposition of the OREO sold.  The significant level of non-accrual loans and OREO is due to the non-performing assets that came with the acquisition of Abigail Adams and its two subsidiary banks (the “Acquired Banks”).

At December 31, 2011, the Acquired Banks accounted for $44.4 million or 65.9% of Premier’s non-performing assets while at June 30, 2012 the Acquired Banks accounted for $35.7 million or 62.2% of Premier’s non-performing assets.  However, since these assets were recorded at an estimated fair value on the date of acquisition, the amount of credit risk assumed by Premier is not nearly as great as the volume of non-performing assets suggests taken at face value.  The estimate of fair value on all loans, but particularly on non-performing assets, included factors for the measurement of credit risk, interest rate risk and re-salability in the most advantageous market for the loans in an orderly transaction between market participants. These estimates included significant discounts on the non-accrual loans.  Since the estimated fair value of these loans was believed to have accounted for the reasonably estimable credit risk in the loans,

48.

PREMIER FINANCIAL BANCORP, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS

JUNE 30, 2012

consistent with new accounting guidance for acquisitions after 2008, no allowance for loan losses for these loans was recorded at the date of acquisition.  Under previous accounting standards, the loan loss allowance of acquired banks would have carried over to Premier’s books and records, as was the case for the Traders Bank and Citizens First Bank acquisitions.  The following table illustrates the face value of the non-performing assets of the Acquired Banks as of June 30, 2012 and December 31, 2011 and the discounted net carrying value of those non-performing assets.

NON-PERFORMING ASSETS AT ACQUIRED SUBSIDIARY BANKS
(Dollars in thousands)
	June 30, 2012				December 31, 2011
	Face Value		Discounted Net Carrying Value		Face Value		Discounted Net Carrying Value
Non-performing Assets
Non-accrual loans	$	27,273	$	21,035	$	37,201	$	29,824
Loans 90+ days past due		3,356		3,303		4,087		3,997
Restructured loans		1,601		1,581		-		-
Other real estate owned		10,330		9,731		10,978		10,622
Total non-performing assets	$	42,560	$	35,650	$	52,266	$	44,443
(1) Face value includes reductions for interest payments received on loans while on non-accrual status in accordance with the cost recovery method of accounting for non-accrual loans.

Many of the non-accrual loans obtained from the Acquired Banks are continuing to be accounted for under cost recovery methods of income recognition as permitted by the guidance for accounting for non-accrual loans acquired in a business combination.  Most of the non-accrual loans at the Acquired Banks were placed in that status due to a lack of predictable cash flows from the borrower.  At acquisition by Premier, these loans were recorded at their estimated fair value.  These estimates included significant discounts on the non-accrual loans.  However, the lack of predictable cash flows from the borrowers remains.  As a result, accounting guidance requires these loans to continue to be accounted for under cost recovery methods of income recognition, even though the estimated collateral value may exceed the discounted net carrying value.

Premier continues to make a significant effort to reduce its past due and non-performing loans by reviewing loan files, using the courts to bring borrowers current with the terms of their loan agreements and/or the foreclosure and sale of OREO properties.  As in the past, when these plans are executed, Premier may experience increases in non-performing loans and non-performing assets.  Furthermore, any resulting increases in loans placed on non-accrual status will have a negative impact on future loan interest income.  Also, as these plans are executed, other loans may be identified that would necessitate additional charge-offs and potentially additional provisions for loan losses.

During the second quarter of 2012, Premier recorded $750,000 of provisions for loan losses compared to $1.8 million of provisions for loan losses during the same quarter of 2011.  The decrease in the level of provision expense was largely due to a higher provision in the second quarter of 2011 largely to provide for a calculated increase in exposure to credit risk related to one borrowing relationship in the Company’s Kentucky market. In management’s opinion, sufficient evidence existed in the second quarter of 2011 to reduce the likelihood of full repayment and

49.

PREMIER FINANCIAL BANCORP, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS

JUNE 30, 2012

increase the related estimated credit risk on the borrowing relationship.  As the pace of economic recovery continues to be sluggish in Premier’s markets, the ability of borrowers to consistently make their loan payments is increasingly being tested.  Evidence of the continuing higher level of credit risk includes a high level of past due and non-accrual loans, loan charge-offs and increases in other real estate owned as a result of foreclosures.  During the first six months of 2012, Premier recorded $1.7 million of provision expense which compares to the $2.3 million of provision expense recorded during the first six months of 2011.  While total non-accrual loans decreased by $12.6 million during the first six months of 2012, most of these loans were discounted at the time of purchase and therefore a significant level of specific reserves on these loans was deemed not to be necessary.  As a result,the allowance for loan losses was minimally affected by the reduction in non-accrual loans.  The provisions for loan losses were made in accordance with Premier’s policies regarding management’s estimation of probable incurred losses in the loan portfolio and the adequacy of the allowance for loan losses, which are in accordance with accounting principles generally accepted in the United States of America.  In the coming months, Premier will continue to monitor the impact that national housing market price declines may have on its local markets and collateral valuations as management evaluates the adequacy of the allowance for loan losses.  While some price deterioration is expected, it is not currently anticipated that Premier’s markets will be impacted as severely as other areas of the country due to the historically modest increases in real estate values in the Company’s Appalachian markets.  However, as local and national unemployment rates remain at elevated levels and the downturn in housing prices extends further into the future, there is an increasing risk of price deterioration in real estate values in the Company’s markets.  Future provisions to the allowance for loan losses, positive or negative, will depend on future improvement or deterioration in estimated credit risk in the loan portfolio as well as whether additional payments are received on loans having significant credit risk.

Gross charge-offs totaled $1.78 million during the first six months of 2012.  Any collections on these loans would be presented in future financial statements as recoveries of the amounts charged against the allowance.  Recoveries recorded during the first six months of 2012 totaled $147,000 resulting in net charge-offs for the first six months of 2012 of $1.63 million.  These amounts compare to the $578,000 of gross charge-offs and $121,000 of recoveries recorded during the first six months of 2011, resulting in net charge of $457,000.  During the second quarter of 2012, Premier charged-off loans and portions of loans that had previously been identified as impaired whereby management determined that any eventual liquidation of collateral would be insufficient to repay the entire amount due on the loans.  The allowance for loan losses at June 30, 2012 was 1.47% of total loans compared to 1.42% at December 31, 2011.  The increase in the ratio is largely due to the $20.7 million decrease in total loans outstanding as the $1.70 million of additional provisions for loan losses was substantially offset by the $1.63 million of net charge-offs during the first six months of 2012.

50.

PREMIER FINANCIAL BANCORP, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS

JUNE 30, 2012

C.         Critical Accounting Policies

The Company follows financial accounting and reporting policies that are in accordance with generally accepted accounting principles in the United States of America.  These policies are presented in Note 1 to the consolidated audited financial statements in the Company's annual report on Form 10-K for the year ended December 31, 2011.  Some of these accounting policies, as discussed below, are considered to be critical accounting policies.  Critical accounting policies are those policies that require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.  The Company has identified four accounting policies that are critical accounting policies, and an understanding of these policies is necessary to understand the financial statements.  These policies relate to determining the adequacy of the allowance for loan losses, the identification and evaluation of impaired loans, the impairment of goodwill and the realization of deferred tax assets.  A detailed description of these accounting policies is contained in the Company’s annual report on Form 10-K for the year ended December 31, 2011.  There have been no significant changes in the application of these accounting policies since December 31, 2011.

Management believes that the judgments, estimates and assumptions used in the preparation of the consolidated financial statements are appropriate given the factual circumstances at the time.

D.         Liquidity

Liquidity objectives for the Company can be expressed in terms of maintaining sufficient cash flows to meet both existing and unplanned obligations in a cost effective manner.  Adequate liquidity allows the Company to meet the demands of both the borrower and the depositor on a timely basis, as well as pursuing other business opportunities as they arise.  Thus, liquidity management embodies both an asset and liability aspect while attempting to maximize profitability. In order to provide for funds on a current and long-term basis, the Company’s subsidiary banks rely primarily on the following sources:

1. Core deposits consisting of both consumer and commercial deposits and certificates of deposit of $100,000 or more.  Management believes that the majority of its $100,000 or more certificates of deposit are no more volatile than its other deposits.  This is due to the nature of the markets in which the subsidiaries operate.

2. Cash flow generated by repayment of loans and interest.

3. Arrangements with correspondent banks for purchase of unsecured federal funds.

4. The sale of securities under repurchase agreements and borrowing from the Federal Home Loan Bank.

5. Maintenance of an adequate available-for-sale security portfolio.  The Company owns $305.4 million of securities at fair value as of June 30, 2012.

51.

PREMIER FINANCIAL BANCORP, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS

JUNE 30, 2012

The cash flow statements for the periods presented in the financial statements provide an indication of the Company’s sources and uses of cash as well as an indication of the ability of the Company to maintain an adequate level of liquidity.

E.         Capital

At June 30, 2012, total shareholders’ equity of $149.6 million was 13.1% of total assets.  This compares to total shareholders’ equity of $144.0 million or 12.8% of total assets on December 31, 2011.

Tier I capital totaled $114.4million at June 30, 2012, which represents a Tier I leverage ratio of 10.4%.  This ratio is up slightly from the 10.0% at December 31, 2011 as the percentage growth in Tier I capital exceeded percentage increase in total assets during the first six months of 2012.

On August 10, 2012, Premier redeemed 10,252 shares of the Series A Preferred Stock at a discounted price of $901.03 per share.  On July 27, 2012, Premier was notified that it successfully bid to repurchase 10,252 shares of the 22,252 shares of Series A Preferred Stock issued to the U.S. Treasury as part of TARP.  Using a modified Dutch auction methodology that establishes a market price by allowing investors to submit bids at specified increments during the period of July 23, 2012 through July 26, 2012, the U.S. Treasury auctioned all of Premier’s 22,252 Series A Preferred Stock.  The closing price of the auctioned shares was $901.03 per share.  The redemption reduces Tier I Capital and Preferred Equity by approximately $9,237,000.

Book value per common share was $16.08 at June 30, 2012, and $15.38 at December 31, 2011.  The increase in book value per share was the result of the $0.53 per diluted share earned during the quarter, including an approximate $0.08 per share reduction for the $611,000 of preferred stock dividends accrued and related accretion.  Also increasing the book value per share was $1,183,000 of other comprehensive income for the first six months of 2012 related to the after tax increase in the market value of investment securities available for sale, which increased book value by approximately $0.15 per share.

52.

PREMIER FINANCIAL BANCORP, INC.

JUNE 30, 2012

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

The Company currently does not engage in any derivative or hedging activity.  Refer to the Company’s 2011 10-K for analysis of the interest rate sensitivity.  The Company believes there have been no significant changes in the interest rate sensitivity since previously reported on the Company’s 2011 10-K.

Item 4. Controls and Procedures

A.         Disclosure Controls & Procedures

Premier management, including the Chief Executive Officer and Chief Financial Officer, has conducted an evaluation of the effectiveness of disclosure controls and procedures pursuant to the Securities and Exchange Act of 1934 Rule 13a-15c as of the end of the period covered by this quarterly report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures are effective in ensuring that all material information required to be filed in this quarterly report has been made known to them in a timely fashion.

B.         Changes in Internal Controls over Financial Reporting

There were no changes in internal controls over financial reporting during the second fiscal quarter that have materially affected or are reasonably likely to materially affect Premier's internal controls over financial reporting.

C.         Inherent Limitations on Internal Control

"Internal controls" are procedures, which are designed with the objective of providing reasonable assurance that (1) transactions are properly authorized; (2) assets are safeguarded against unauthorized or improper use; and (3) transactions are properly recorded and reported, all so as to permit the preparation of reports and financial statements in conformity with generally accepted accounting principles. However, a control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their cost. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. The design of any system of controls is also based, in part, upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, a control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. Finally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control.

53.

PREMIER FINANCIAL BANCORP, INC.

JUNE 30, 2012

PART II - OTHER INFORMATION

Item 1.         Legal Proceedings                                                                                     None

Item 1A.      Risk Factors

Please refer to Premier’s Annual Report on Form 10-K for the year ended December 31, 2011 for disclosures with respect to Premier’s risk factors at December 31, 2011. There have been no material changes since year-end 2011 in the specified risk factors disclosed in the Annual Report on Form 10-K.

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

Item 3.         Defaults Upon Senior Securities                                                                None

Item 4.         Mine Safety Disclosures                                                                     Not Applicable

Item 5.         Other Information                                                                                      None

Item 6.         Exhibits

 (a)  The following exhibits are furnished in accordance with the provisions of Item 601 of Regulation S-K.

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

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

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

54.

PREMIER FINANCIAL BANCORP, INC.

JUNE 30, 2012

SIGNATURES

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

PREMIER FINANCIAL BANCORP, INC.

Date: August 14, 2012                                    /s/ Robert W. Walker                                                                                  

Robert W. Walker

President & Chief Executive Officer

Date: August 14, 2012                                    /s/ Brien M. Chase                                                                                      

Brien M. Chase

Senior Vice President & Chief Financial Officer

55.

EX-31.1

Exhibit 31.1

PRINCIPAL EXECUTIVE OFFICER CERTIFICATION

PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Robert W. Walker, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Premier Financial Bancorp, Inc.;

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(s) 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(s) 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 14, 2012

/s/ Robert W. Walker                                                                              

Robert W. Walker

President & Chief Executive Officer

EX-31.2

Exhibit 31.2

PRINCIPAL FINANCIAL OFFICER CERTIFICATION

PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Brien M. Chase, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Premier Financial Bancorp, Inc.;

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(s) 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(s) 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 14, 2012

/s/ Brien M. Chase                                                                                       

Brien M. Chase

Senior Vice President & Chief Financial Officer

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 Quarterly Report of Premier Financial Bancorp, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”),  we,  Robert W. Walker and Brien M. Chase, Chief Executive Officer and Chief Financial Officer, respectively, of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to our knowledge:

· The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, and

· The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By: /s/Robert W. Walker                                                                                           

Robert W. Walker

President and Chief Executive Officer

By: /s/ Brien M. Chase                                                                                   

Brien M. Chase

Senior Vice President and Chief Financial Officer

Date: August 14, 2012

XML

FEDERAL HOME LOAN BANK ADVANCES (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
FEDERAL HOME LOAN BANK ADVANCES [Abstract]
Payments due at maturity in March 2012, fixed rate at 1.81%	$ 0	$ 10,042
Payments due monthly with maturity in July 2012, fixed rate at 4.40%	6	41
Total advances	$ 6	$ 10,083

XML

FAIR VALUE, Recurring (Details) (Recurring [Member], USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Securities available for sale
U. S. agency MBS - residential	$ 0	$ 0
U. S. agency CMO's - residential	0	0
Total mortgage-backed securities of government sponsored agencies	0	0
U. S. government sponsored agency securities	0	0
Obligations of states and political subdivisions	0	0
Other securities	0	0
Total available for sale	0	0
Significant Other Observable Inputs (Level 2) [Member]
Securities available for sale
U. S. agency MBS - residential	44,022	40,255
U. S. agency CMO's - residential	217,082	205,738
Total mortgage-backed securities of government sponsored agencies	261,104	245,993
U. S. government sponsored agency securities	29,247	18,141
Obligations of states and political subdivisions	9,429	9,510
Other securities	5,448	4,695
Total available for sale	305,228	278,339
Significant Unobservable Inputs (Level 3) [Member]
Securities available for sale
U. S. agency MBS - residential	0	0
U. S. agency CMO's - residential	0	0
Total mortgage-backed securities of government sponsored agencies	0	0
U. S. government sponsored agency securities	0	0
Obligations of states and political subdivisions	140	140
Other securities	0	0
Total available for sale	140	140
Carrying Amount [Member]
Securities available for sale
U. S. agency MBS - residential	44,022	40,255
U. S. agency CMO's - residential	217,082	205,738
Total mortgage-backed securities of government sponsored agencies	261,104	245,993
U. S. government sponsored agency securities	29,247	18,141
Obligations of states and political subdivisions	9,569	9,650
Other securities	5,448	4,695
Total available for sale	$ 305,368	$ 278,479

XML

EARNINGS PER SHARE (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Basic earnings per share [Abstract]
Income available to common stockholders	$ 1,786	$ 724	$ 4,311	$ 2,089
Weighted average common shares outstanding (in shares)	7,937,143	7,937,143	7,937,143	7,937,143
Earnings per share (in dollars per share)	$ 0.23	$ 0.09	$ 0.54	$ 0.26
Diluted earnings per share [Abstract]
Income available to common stockholders	$ 1,786	$ 724	$ 4,311	$ 2,089
Weighted average common shares outstanding (in shares)	7,937,143	7,937,143	7,937,143	7,937,143
Add dilutive effects of potential additional common stock (in shares)	202,258	176,092	144,075	158,482
Weighted average common and dilutive potential common shares outstanding (in shares)	8,139,401	8,113,235	8,081,218	8,095,625
Earnings per share assuming dilution (in dollars per share)	$ 0.22	$ 0.09	$ 0.53	$ 0.26
Stock Options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Securities not considered in computing diluted earnings per share (in shares)	202,449	209,049	405,349	209,049

XML

LOANS, Past Due Aging Analysis (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Aging of recorded investment in past due loans [Abstract]
Total Loans	$ 670,268	$ 690,923
30-89 Days Past Due	13,727	22,936
Greater than 90 days past due	21,587	31,491
Total Past Due	35,314	54,427
Loans Not Past Due	634,954	636,496
Residential Real Estate [Member]
Aging of recorded investment in past due loans [Abstract]
Total Loans	219,113	221,756
30-89 Days Past Due	6,882	6,729
Greater than 90 days past due	4,311	3,635
Total Past Due	11,193	10,364
Loans Not Past Due	207,920	211,392
Multifamily Real Estate [Member]
Aging of recorded investment in past due loans [Abstract]
Total Loans	30,722	34,335
30-89 Days Past Due	1,377	3,249
Greater than 90 days past due	6,058	8,892
Total Past Due	7,435	12,141
Loans Not Past Due	23,287	22,194
Owner Occupied Commercial Real Estate [Member]
Aging of recorded investment in past due loans [Abstract]
Total Loans	99,057	101,864
30-89 Days Past Due	1,638	8,081
Greater than 90 days past due	1,339	3,981
Total Past Due	2,977	12,062
Loans Not Past Due	96,080	89,802
Non Owner Occupied Commercial Real Estate [Member]
Aging of recorded investment in past due loans [Abstract]
Total Loans	164,116	166,540
30-89 Days Past Due	697	2,444
Greater than 90 days past due	3,102	6,065
Total Past Due	3,799	8,509
Loans Not Past Due	160,317	158,031
Commercial and Industrial [Member]
Aging of recorded investment in past due loans [Abstract]
Total Loans	67,439	76,960
30-89 Days Past Due	564	1,714
Greater than 90 days past due	2,246	3,153
Total Past Due	2,810	4,867
Loans Not Past Due	64,629	72,093
Consumer [Member]
Aging of recorded investment in past due loans [Abstract]
Total Loans	28,934	30,090
30-89 Days Past Due	339	497
Greater than 90 days past due	98	233
Total Past Due	437	730
Loans Not Past Due	28,497	29,360
All other [Member]
Aging of recorded investment in past due loans [Abstract]
Total Loans	60,887	59,378
30-89 Days Past Due	2,230	222
Greater than 90 days past due	4,433	5,532
Total Past Due	6,663	5,754
Loans Not Past Due	$ 54,224	$ 53,624

XML

BASIS OF PRESENTATION (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Total Assets	$ 1,140,014		$ 1,140,014		$ 1,124,087
Net Income	2,092	1,029	4,922	2,700
Citizens Deposit Bank & Trust [Member] | Vanceburg, Kentucky [Member]
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Year Acquired			1991
Total Assets	215,608		215,608
Net Income	613		1,589
Farmers Deposit Bank [Member] | Eminence, Kentucky [Member]
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Year Acquired			1996
Total Assets	58,824		58,824
Net Income	119		238
Ohio River Bank [Member] | Ironton, Ohio [Member]
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Year Acquired			1998
Total Assets	107,028		107,028
Net Income	328		570
Premier Bank, Inc. [Member] | Huntington, West Virginia [Member]
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Year Acquired			1998
Total Assets	751,013		751,013
Net Income	1,530		3,546
Parent and Intercompany Eliminations [Member]
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Total Assets	7,541		7,541
Net Income	$ (498)		$ (1,021)

XML

FAIR VALUE, Asset Quantitative Information (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012
Impaired Loans [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Asset fair value	14,411
Other Real Estate Owned [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Asset fair value	3,250
Impaired Loans [Member] | Residential Real Estate [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Asset fair value	4,503
Impaired Loans [Member] | Residential Real Estate [Member] | Sales Comparison [Member] | Maximum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value Inputs, Comparability of sales	49.90%
Impaired Loans [Member] | Residential Real Estate [Member] | Sales Comparison [Member] | Minimum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value Inputs, Comparability of sales	0.80%
Impaired Loans [Member] | Residential Real Estate [Member] | Sales Comparison [Member] | Weighted Average [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value Inputs, Comparability of sales	8.70%
Impaired Loans [Member] | Owner Occupied Commercial Real Estate [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Asset fair value	502
Impaired Loans [Member] | Owner Occupied Commercial Real Estate [Member] | Sales Comparison [Member] | Maximum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value Inputs, Comparability of sales	70.00%
Impaired Loans [Member] | Owner Occupied Commercial Real Estate [Member] | Sales Comparison [Member] | Minimum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value Inputs, Comparability of sales	40.00%
Impaired Loans [Member] | Owner Occupied Commercial Real Estate [Member] | Sales Comparison [Member] | Weighted Average [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value Inputs, Comparability of sales	44.10%
Impaired Loans [Member] | Non Owner Occupied Commercial Real Estate [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Asset fair value	1,255
Impaired Loans [Member] | Non Owner Occupied Commercial Real Estate [Member] | Sales Comparison [Member] | Maximum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value Inputs, Comparability of sales	59.00%
Impaired Loans [Member] | Non Owner Occupied Commercial Real Estate [Member] | Sales Comparison [Member] | Minimum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value Inputs, Comparability of sales	10.00%
Impaired Loans [Member] | Non Owner Occupied Commercial Real Estate [Member] | Sales Comparison [Member] | Weighted Average [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value Inputs, Comparability of sales	37.50%
Impaired Loans [Member] | Non Owner Occupied Commercial Real Estate [Member] | Income Approach Valuation Technique [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value Inputs, Capitalization Rate	9.50%
Impaired Loans [Member] | Commercial and Industrial [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Asset fair value	7,654
Impaired Loans [Member] | Commercial and Industrial [Member] | Sales Comparison [Member] | Maximum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value Inputs, Comparability of sales	43.30%
Impaired Loans [Member] | Commercial and Industrial [Member] | Sales Comparison [Member] | Minimum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value Inputs, Comparability of sales	0.00%
Impaired Loans [Member] | Commercial and Industrial [Member] | Sales Comparison [Member] | Weighted Average [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value Inputs, Comparability of sales	36.40%
Impaired Loans [Member] | All other [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Asset fair value	497
Impaired Loans [Member] | All other [Member] | Sales Comparison [Member] | Maximum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value Inputs Completion Of Construction	91.40%
Impaired Loans [Member] | All other [Member] | Sales Comparison [Member] | Minimum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value Inputs Completion Of Construction	35.00%
Impaired Loans [Member] | All other [Member] | Sales Comparison [Member] | Weighted Average [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value Inputs Completion Of Construction	38.40%
Other Real Estate Owned [Member] | Residential Real Estate [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Asset fair value	265
Other Real Estate Owned [Member] | Residential Real Estate [Member] | Sales Comparison [Member] | Maximum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value Inputs, Comparability of sales	47.80%
Other Real Estate Owned [Member] | Residential Real Estate [Member] | Sales Comparison [Member] | Minimum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value Inputs, Comparability of sales	26.10%
Other Real Estate Owned [Member] | Residential Real Estate [Member] | Sales Comparison [Member] | Weighted Average [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value Inputs, Comparability of sales	35.20%
Other Real Estate Owned [Member] | Owner Occupied Commercial Real Estate [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Asset fair value	100
Other Real Estate Owned [Member] | Owner Occupied Commercial Real Estate [Member] | Sales Comparison [Member] | Maximum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value Inputs, Discount for Lack of Marketability	17.90%
Other Real Estate Owned [Member] | Owner Occupied Commercial Real Estate [Member] | Sales Comparison [Member] | Minimum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value Inputs, Discount for Lack of Marketability	17.90%
Other Real Estate Owned [Member] | Owner Occupied Commercial Real Estate [Member] | Sales Comparison [Member] | Weighted Average [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value Inputs, Discount for Lack of Marketability	17.90%
Other Real Estate Owned [Member] | Non Owner Occupied Commercial Real Estate [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Asset fair value	2,931
Other Real Estate Owned [Member] | Non Owner Occupied Commercial Real Estate [Member] | Sales Comparison [Member] | Maximum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value Inputs, Comparability of sales	82.70%
Other Real Estate Owned [Member] | Non Owner Occupied Commercial Real Estate [Member] | Sales Comparison [Member] | Minimum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value Inputs, Comparability of sales	0.00%
Other Real Estate Owned [Member] | Non Owner Occupied Commercial Real Estate [Member] | Sales Comparison [Member] | Weighted Average [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value Inputs, Comparability of sales	17.50%
Other Real Estate Owned [Member] | All other [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Asset fair value	224
Other Real Estate Owned [Member] | All other [Member] | Sales Comparison [Member] | Maximum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value Inputs, Discount for Lack of Marketability	49.70%
Other Real Estate Owned [Member] | All other [Member] | Sales Comparison [Member] | Minimum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value Inputs, Discount for Lack of Marketability	0.00%
Other Real Estate Owned [Member] | All other [Member] | Sales Comparison [Member] | Weighted Average [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value Inputs, Discount for Lack of Marketability	23.80%

XML

STOCK COMPENSATION EXPENSE (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Compensation expense	$ 57,000	$ 30,000	$ 85,000	$ 47,000
Unrecognized stock-based compensation expense	$ 248,000		$ 248,000
Unrecognized stock-based compensation, period of recognition	32 months		32 months

XML

LOANS, Troubled Debt Restructurings (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2012	Dec. 31, 2011
Financing Receivable, Modifications [Line Items]
TDR's on Non-accrual	$ 7,682	$ 7,682	$ 7,788
Other TDR's	7,525	7,525	5,951
Total TDR's	15,207	15,207	13,739
Specific reserves allocated to loans that have restructured terms	131	131	238
Increase in allowance for loan losses due to troubled debt resructuring		40
Residential Real Estate [Member]
Financing Receivable, Modifications [Line Items]
TDR's on Non-accrual	317	317	59
Other TDR's	1,079	1,079	1,371
Total TDR's	1,396	1,396	1,430
Owner Occupied Commercial Real Estate [Member]
Financing Receivable, Modifications [Line Items]
TDR's on Non-accrual	4,391	4,391	4,541
Other TDR's	0	0	0
Total TDR's	4,391	4,391	4,541
Non Owner Occupied Commercial Real Estate [Member]
Financing Receivable, Modifications [Line Items]
TDR's on Non-accrual	2,971	2,971	3,135
Other TDR's	1,612	1,612	1,641
Total TDR's	4,583	4,583	4,776
Commercial and Industrial [Member]
Financing Receivable, Modifications [Line Items]
TDR's on Non-accrual	3	3	42
Other TDR's	2,795	2,795	897
Total TDR's	2,798	2,798	939
Financing Receivable, Modification, Number of Contracts	0	2
Financing Receivable, Modification, Pre-Modification Recorded Investment	0	1,999
Financing Receivable, Modification, Post-Modification Recorded Investment	0	1,999
Consumer [Member]
Financing Receivable, Modifications [Line Items]
TDR's on Non-accrual			11
Other TDR's			1
Total TDR's			12
All other [Member]
Financing Receivable, Modifications [Line Items]
TDR's on Non-accrual	0	0	0
Other TDR's	2,039	2,039	2,041
Total TDR's	$ 2,039	$ 2,039	$ 2,041

XML

FAIR VALUE (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Financial assets [Abstract]
Cash and due from banks	$ 85,192	$ 72,056
Federal funds sold	12,022	10,832
Securities available for sale	305,368	278,479
Loans held for sale	221	70
Loans, net	657,902	675,616
Interest receivable	3,448	3,497
Financial liabilities [Abstract]
Deposits	(954,307)	(929,796)
Securities sold under agreements to repurchase	(19,707)	(23,205)
Federal Home Loan Bank advances	(6)	(10,141)
Other borrowed funds	(17,066)	(18,101)
Interest payable	(596)	(712)
Level 1 [Member]
Financial assets [Abstract]
Cash and due from banks	85,192
Federal funds sold	12,022
Securities available for sale	0
Loans held for sale	0
Loans, net	0
Interest receivable	0
Financial liabilities [Abstract]
Deposits	(571,632)
Securities sold under agreements to repurchase	0
Federal Home Loan Bank advances	0
Other borrowed funds	0
Interest payable	(6)
Level 2 [Member]
Financial assets [Abstract]
Cash and due from banks	0
Federal funds sold	0
Securities available for sale	305,228
Loans held for sale	221
Loans, net	0
Interest receivable	950
Financial liabilities [Abstract]
Deposits	(382,675)
Securities sold under agreements to repurchase	(19,707)
Federal Home Loan Bank advances	(6)
Other borrowed funds	(17,066)
Interest payable	(590)
Level 3 [Member]
Financial assets [Abstract]
Cash and due from banks	0
Federal funds sold	0
Securities available for sale	140
Loans held for sale	0
Loans, net	657,902
Interest receivable	2,498
Financial liabilities [Abstract]
Deposits	0
Securities sold under agreements to repurchase	0
Federal Home Loan Bank advances	0
Other borrowed funds	0
Interest payable	0
Carrying Amount [Member]
Financial assets [Abstract]
Cash and due from banks	85,192	72,056
Federal funds sold	12,022	10,832
Securities available for sale	305,368	278,479
Loans held for sale	221	70
Loans, net	660,406	681,128
Federal Home Loan Bank stock	4,405	5,216
Interest receivable	3,448	3,497
Financial liabilities [Abstract]
Deposits	(949,871)	(925,078)
Securities sold under agreements to repurchase	(19,707)	(23,205)
Federal Home Loan Bank advances	(6)	(10,083)
Other borrowed funds	(17,094)	(18,130)
Interest payable	$ (596)	$ (712)

XML

LOANS

6 Months Ended

Jun. 30, 2012

LOANS [Abstract]

LOANS

NOTE  3 - LOANS

Major classifications of loans at June 30, 2012 and December 31, 2011 are summarized as follows:

	2012		2011
Residential real estate	$	219,113	$	221,756
Multifamily real estate		30,722		34,335
Commercial real estate:
Owner occupied		99,057		101,864
Non owner occupied		164,116		166,540
Commercial and industrial		67,439		76,960
Consumer		28,934		30,090
All other		60,887		59,378
	$	670,268	$	690,923

Activity in the allowance for loan losses by portfolio segment for the six months ending June 30, 2012 was as follows:

Loan Class	Balance Dec 31, 2011		Provision for loan losses			Loans charged-off		Recoveries		Balance June 30, 2012
Residential real estate	$	2,134	$	221		$	119	$	32	$	2,268
Multifamily real estate		284		143			-		-		427
Commercial real estate:
Owner occupied		918		76			15		-		979
Non owner occupied		2,381		(37	)		41		3		2,306
Commercial and industrial		1,880		1,095			992		1		1,984
Consumer		298		98			139		53		310
All other		1,900		104			474		58		1,588
Total	$	9,795	$	1,700		$	1,780	$	147	$	9,862

Activity in the allowance for loan losses by portfolio segment for the six months ending June 30, 2011 was as follows:

Loan Class	Balance Dec 31, 2010		Provision for loan losses			Loans charged- off		Recoveries		Balance June 30, 2011
Residential real estate	$	2,666	$	152		$	168	$	16	$	2,666
Multifamily real estate		252		95			-		2		349
Commercial real estate:
Owner occupied		1,141		(155	)		-		2		988
Non owner occupied		1,644		253			261		3		1,639
Commercial and industrial		2,421		2,218			16		8		4,631
Consumer		366		18			60		40		364
All other		1,375		(241	)		73		50		1,111
Total	$	9,865	$	2,340		$	578	$	121	$	11,748

Activity in the allowance for loan losses by portfolio segment for the three months ending June 30, 2012 was as follows:

Loan Class	Balance March 31, 2012		Provision for loan losses			Loans charged- off		Recoveries		Balance June 30, 2012
Residential real estate	$	2,368	$	(55	)	$	54	$	9	$	2,268
Multifamily real estate		434		(7	)		-		-		427
Commercial real estate:
Owner occupied		1,024		(45	)		-		-		979
Non owner occupied		2,321		(15	)		3		3		2,306
Commercial and industrial		2,422		551			990		1		1,984
Consumer		305		51			73		27		310
All other		1,437		270			139		20		1,588
Total	$	10,311	$	750		$	1,259	$	60	$	9,862

Activity in the allowance for loan losses by portfolio segment for the three months ending June 30, 2011 was as follows:

Loan Class	Balance March 31, 2011		Provision for loan losses			Loans charged-off		Recoveries		Balance June 30, 2011
Residential real estate	$	2,760	$	(16	)	$	88	$	10	$	2,666
Multifamily real estate		303		44			-		2		349
Commercial real estate:
Owner occupied		1,258		(270	)		-		-		988
Non owner occupied		1,896		(14	)		245		2		1,639
Commercial and industrial		2,262		2,369			-		-		4,631
Consumer		386		(5	)		32		15		364
All other		1,417		(288	)		33		15		1,111
Total	$	10,282	$	1,820		$	398	$	44	$	11,748

Purchased Loans

As a result of the acquisition of Abigail Adams National Bancorp, the Company holds purchased loans for which there was, at the October 1, 2009 acquisition date, evidence of deterioration of credit quality since their origination and it was probable, at acquisition, that all contractually required payments would not be collected.  The carrying amount of those loans is as follows at June 30, 2012 and December 31, 2011.

	2012		2011
Residential real estate	$	210	$	282
Multifamily real estate		3,524		3,708
Commercial real estate
Owner occupied		280		1,934
Non owner occupied		6,207		6,427
Commercial and industrial		548		583
All other		1,553		1,925
Total carrying amount	$	12,322	$	14,859
Carrying amount, net of allowance	$	12,322	$	14,859

The Company cannot reasonably estimate the cash flows expected to be collected on these loans and therefore has continued to account for these loans using the cost recovery method of income recognition.  As such, no portion of a purchase discount adjustment has been determined to meet the definition of an accretable yield adjustment.  If, in the future, cash flows from the borrower(s) can be reasonably estimated, a portion of the purchase discount would be allocated to an accretable yield adjustment based upon the present value of the future estimated cash flows versus the current carrying value of the loan and the accretable yield portion would be recognized as interest income over the remaining life of the loan. Until such accretable yield can be calculated, under the cost recovery method of income recognition, all payments will be used to reduce the carrying value of the loan and no income will be recognized on the loan until the carrying value is reduced to zero.  Any loan accounted for under the cost recovery method is also still included as a non-accrual loan in the amounts presented in the tables below.

For those purchased loans disclosed above, the Company did not increase the allowance for loan losses during the six months ended June 30, 2012 and decreased the allowance for loan losses by $190,000 during the six months ended June 30, 2011.

Past Due and Non-performing Loans

The following tables present the recorded investment in nonaccrual and loans past due over 90 days still on accrual by class of loans as of June 30, 2012 and December 31 2011.  The recorded investment in non-accrual loans is less than the principal owed on non-accrual loans due to discounts applied to the carrying value of the loan at time of their acquisition and interest payments made by the borrower which have been used to reduce the recorded investment in the loan rather than recognized as interest income.

June 30, 2012	Principal Owed on Non-accrual Loans		Recorded Investment in Non-accrual Loans		Loans Past Due Over 90 Days, still accruing
Residential real estate	$	3,825	$	3,494	$	1,530
Multifamily real estate		8,251		6,492		1,034
Commercial real estate
Owner occupied		6,200		5,372		790
Non owner occupied		10,868		7,416		918
Commercial and industrial		3,768		2,435		27
Consumer		137		125		9
All other		7,775		4,433		-
Total	$	40,824	$	29,767	$	4,308

December 31, 2011	Principal Owed on Non-accrual Loans		Recorded Investment in Non-accrual Loans		Loans Past Due Over 90 Days, still accruing
Residential real estate	$	4,479	$	4,111	$	1,216
Multifamily real estate		13,118		11,139		-
Commercial real estate
Owner occupied		9,970		8,260		851
Non owner occupied		12,938		9,835		1,596
Commercial and industrial		4,756		3,227		814
Consumer		246		237		50
All other		9,198		5,545		-
Total	$	54,705	$	42,354	$	4,527

Nonaccrual loans and impaired loans are defined differently. Some loans may be included in both categories, and some may only be included in one category. Nonaccrual loans include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.

The following table presents the aging of the recorded investment in past due loans as of June 30, 2012 by class of loans:

Loan Class	Total Loans		30-89 Days Past Due		Greater than 90 days past due		Total Past Due		Loans Not Past Due
Residential real estate	$	219,113	$	6,882	$	4,311	$	11,193	$	207,920
Multifamily real estate		30,722		1,377		6,058		7,435		23,287
Commercial real estate:
Owner occupied		99,057		1,638		1,339		2,977		96,080
Non owner occupied		164,116		697		3,102		3,799		160,317
Commercial and industrial		67,439		564		2,246		2,810		64,629
Consumer		28,934		339		98		437		28,497
All other		60,887		2,230		4,433		6,663		54,224
Total	$	670,268	$	13,727	$	21,587	$	35,314	$	634,954

The following table presents the aging of the recorded investment in past due loans as of December 31, 2011 by class of loans:

Loan Class	Total Loans		30-89 Days Past Due		Greater than 90 days past due		Total Past Due		Loans Not Past Due
Residential real estate	$	221,756	$	6,729	$	3,635	$	10,364	$	211,392
Multifamily real estate		34,335		3,249		8,892		12,141		22,194
Commercial real estate:
Owner occupied		101,864		8,081		3,981		12,062		89,802
Non owner occupied		166,540		2,444		6,065		8,509		158,031
Commercial and industrial		76,960		1,714		3,153		4,867		72,093
Consumer		30,090		497		233		730		29,360
All other		59,378		222		5,532		5,754		53,624
Total	$	690,923	$	22,936	$	31,491	$	54,427	$	636,496

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of June 30, 2012:

	Allowance for Loan Losses								Loan Balances
Loan Class	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Acquired with Deteriorated Credit Quality		Total		Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Acquired with Deteriorated Credit Quality		Total
Residential real estate	$	507	$	1,761	$	-	$	2,268	$	9,955	$	208,948	$	210	$	219,113
Multifamily real estate		-		427		-		427		1,283		25,915		3,524		30,722
Commercial real estate:
Owner occupied		132		847		-		979		7,213		91,564		280		99,057
Non-owner occupied		878		1,428		-		2,306		5,028		152,881		6,207		164,116
Commercial and industrial		1,379		605		-		1,984		11,084		55,807		548		67,439
Consumer		36		274		-		310		36		28,898		-		28,934
All other		116		1,472		-		1,588		4,970		54,364		1,553		60,887
Total	$	3,048	$	6,814	$	-	$	9,862	$	39,569	$	618,377	$	12,322	$	670,268

The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of December 31, 2011:

	Allowance for Loan Losses								Loan Balances
Loan Class	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Acquired with Deteriorated Credit Quality		Total		Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Acquired with Deteriorated Credit Quality		Total
Residential real estate	$	451	$	1,683	$	-	$	2,134	$	9,795	$	211,679	$	282	$	221,756
Multifamily real estate		-		284		-		284		8,594		22,033		3,708		34,335
Commercial real estate:
Owner occupied		138		780		-		918		8,663		91,267		1,934		101,864
Non-owner occupied		922		1,459		-		2,381		5,147		154,966		6,427		166,540
Commercial and industrial		894		986		-		1,880		3,636		72,741		583		76,960
Consumer		37		261		-		298		37		30,053		-		30,090
All other		605		1,295		-		1,900		8,372		49,081		1,925		59,378
Total	$	3,047	$	6,748	$	-	$	9,795	$	44,244	$	631,820	$	14,859	$	690,923

In the tables below, total individually evaluated impaired loans include certain purchased loans that were acquired with deteriorated credit quality that are still individually evaluated for impairment.

The following table presents loans individually evaluated for impairment by class of loans as of June 30, 2012.  The table includes $12,322 of loans acquired with deteriorated credit quality that are still individually evaluated for impairment.

	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With no related allowance recorded:
Residential real estate	$	5,398	$	5,155	$	-
Multifamily real estate		7,077		4,807		-
Commercial real estate
Owner occupied		8,159		6,859		-
Non owner occupied		12,355		9,102		-
Commercial and industrial		3,773		2,599		-
All other		9,737		5,910		-
		46,499		34,432		-
With an allowance recorded:
Residential real estate	$	5,048	$	5,010	$	507
Commercial real estate
Owner occupied		634		634		132
Non owner occupied		2,197		2,133		878
Commercial and industrial		9,249		9,033		1,379
Consumer		36		36		36
All other		615		613		116
		17,779		17,459		3,048
Total	$	64,278	$	51,891	$	3,048

The following table presents loans individually evaluated for impairment by class of loans as of December 31, 2011.  The table includes $14,859 of loans acquired with deteriorated credit quality that are still individually evaluated for impairment.

	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With no related allowance recorded:
Residential real estate	$	5,602	$	5,329	$	-
Multifamily real estate		15,513		12,302		-
Commercial real estate
Owner occupied		10,939		9,291		-
Non owner occupied		12,296		9,383		-
Commercial and industrial		3,392		2,287		-
All other		8,957		5,306		-
		56,699		43,898		-
With an allowance recorded:
Residential real estate	$	4,803	$	4,748	$	451
Commercial real estate
Owner occupied		1,384		1,306		138
Non owner occupied		2,240		2,191		922
Commercial and industrial		2,242		1,932		894
Consumer		37		37		37
All other		4,992		4,991		605
		15,698		15,205		3,047
Total	$	72,397	$	59,103	$	3,047

The following table presents the average balance of loans individually evaluated for impairment and interest income recognized on these loans for the six months ended June 30, 2012 and June 30, 2011.   The table includes loans acquired with deteriorated credit quality that are still individually evaluated for impairment.

	Six months ended June 30, 2012						Six months ended June 30, 2011
Loan Class	Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized
Residential real estate	$	10,165	$	318	$	304	$	281	$	84	$	93
Multifamily real estate		7,334		1,350		1,341		6,748		16		16
Commercial real estate:
Owner occupied		8,612		938		923		11,949		25		26
Non-owner occupied		11,479		55		51		10,147		30		32
Commercial and industrial		9,055		240		233		8,441		189		192
Consumer		37		1		1		41		4		4
All other		7,896		194		183		12,865		25		25
Total	$	54,578	$	3,096	$	3,036	$	50,472	$	373	$	388

The following table presents the average balance of loans individually evaluated for impairment and interest income recognized on these loans for the three months ended June 30, 2012 and June 30, 2011.   The table includes loans acquired with deteriorated credit quality that are still individually evaluated for impairment.

	Three months ended June 30, 2012						Three months ended June 30, 2011
Loan Class	Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized
Residential real estate	$	10,209	$	189	$	181	$	319	$	82	$	91
Multifamily real estate		4,850		43		37		7,751		16		16
Commercial real estate:
Owner occupied		7,619		44		38		11,977		12		12
Non-owner occupied		11,432		20		25		9,111		23		24
Commercial and industrial		11,473		133		126		8,390		16		18
Consumer		36		1		1		40		3		3
All other		6,696		98		101		13,571		19		17
Total	$	52,315	$	528	$	509	$	51,159	$	171	$	181

Troubled Debt Restructurings

A loan is classified as a troubled debt restructuring ("TDR") when loan terms are modified due to a borrower's financial difficulties and a concession is granted to a borrower that would not have otherwise been considered. Most of the Company's loan modifications involve a restructuring of loan terms prior to maturity to temporarily reduce the payment amount and/or to require only interest for a temporary period, usually up to six months.  These modifications generally do not meet the definition of a TDR because the modifications are considered to be an insignificant delay in payment.

The following table presents TDR's as of June 30, 2012 and December 31, 2011:

June 30, 2012	TDR's on Non-accrual		Other TDR's		Total TDR's
Residential  real estate	$	317	$	1,079	$	1,396
Commercial real estate
Owner occupied		4,391		-		4,391
Non owner occupied		2,971		1,612		4,583
Commercial and industrial		3		2,795		2,798
All other		-		2,039		2,039
Total	$	7,682	$	7,525	$	15,207

December 31, 2011	TDR's on Non-accrual		Other TDR's		Total TDR's
Residential  real estate	$	59	$	1,371	$	1,430
Commercial real estate
Owner occupied		4,541		-		4,541
Non owner occupied		3,135		1,641		4,776
Commercial and industrial		42		897		939
Consumer		11		1		12
All other		-		2,041		2,041
Total	$	7,788	$	5,951	$	13,739

At June 30, 2012 $131,000 in specific reserves was allocated to loans that had restructured terms.  At December 31, 2011 $238,000 in specific reserves was allocated to loans that had restructured terms.

The following table presents TDR's that occurred during the three and six months ended June 30, 2012:

	Three months ended June 30, 2012						Six months ended June 30, 2012
Loan Class	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial and industrial		-	$	-	$	-		2	$	1,999	$	1,999

The troubled debt restructurings described above increased the allowance for loan losses by $40,000 during the six month period ending June 30, 2012.

During the three months and six months ended June 30, 2012 there were no TDR's for which there as a payment default within twelve months following the modification. During the three months and six months ended June 30, 2011 there were no TDR's for which there as a payment default within twelve months following the modification.

A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms.

Credit Quality Indicators:

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors.  The Company analyzes non-homogeneous loans, such as commercial, commercial real estate, multifamily residential and commercial purpose loans secured residential real estate, on a monthly basis.  For consumer loans, including consumer loans secured by residential real estate, the analysis involves monitoring the performing status of the loan.  At the time such loans become past due by 30 days or more, the Company evaluates the loan to determine if a change in risk category is warranted. The Company uses the following definitions for risk ratings:

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

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

Doubtful.  Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans.

As of June 30, 2012, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

Loan Class	Pass		Special Mention		Substandard		Doubtful		Total Loans
Residential real estate	$	197,990	$	6,863	$	14,010	$	250	$	219,113
Multifamily real estate		20,735		2,210		7,777		-		30,722
Commercial real estate:
Owner occupied		80,746		4,201		14,110		-		99,057
Non-owner occupied		143,756		4,805		15,555		-		164,116
Commercial and industrial		51,948		3,679		11,795		17		67,439
Consumer		28,693		157		48		36		28,934
All other		49,845		725		9,629		688		60,887
Total	$	573,713	$	22,640	$	72,924	$	991	$	670,268

As of December 31, 2011, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

Loan Class	Pass		Special Mention		Substandard		Doubtful		Total Loans
Residential real estate	$	198,865	$	8,105	$	14,731	$	55	$	221,756
Multifamily real estate		16,798		2,218		15,319		-		34,335
Commercial real estate:
Owner occupied		79,753		5,377		16,600		134		101,864
Non-owner occupied		146,305		4,883		15,352		-		166,540
Commercial and industrial		58,158		8,675		10,095		32		76,960
Consumer		29,753		198		102		37		30,090
All other		43,485		1,052		14,064		777		59,378
Total	$	573,117	$	30,508	$	86,263	$	1,035	$	690,923

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STOCK COMPENSATION EXPENSE, Assumptions (Details) (USD $)	1 Months Ended
	Mar. 21, 2012	Mar. 18, 2011	Mar. 17, 2010
Assumptions used in the black-scholes option-pricing model [Abstract]
Risk-free interest rate (in hundredths)	2.31%	3.58%	3.65%
Expected option life (yrs)	10 years	10 years	10 years
Expected stock price volatility (in hundredths)	34.93%	30.01%	24.67%
Dividend yield (in hundredths)	2.68%	4.03%	4.94%
Weighted average fair value of options granted during the year (in dollars per share)	$ 2.34	$ 1.63	$ 1.41
Stock option vesting periods (in years)	3 years	3 years	3 years

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LOANS, Major Classifications of Loans (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	$ 670,268	$ 690,923
Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	219,113	221,756
Multifamily Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	30,722	34,335
Owner Occupied Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	99,057	101,864
Non Owner Occupied Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	164,116	166,540
Commercial and Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	67,439	76,960
Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	28,934	30,090
All other [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	$ 60,887	$ 59,378

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SECURITIES, With Unrealized Losses (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Continuous Unrealized Loss Position, Fair Value [Abstract]
Less than 12 Months, Fair Value	$ 4,482	$ 13,935
Less than 12 Months, Unrealized Loss	(29)	(148)
12 Months or More, Fair Value	4	0
12 Months or More, Unrealized Loss	(72)	0
Total Fair Value	4,486	13,935
Total Unrealized Loss	(101)	(148)
U. S. sponsored agency MBS - residential [Member]
Continuous Unrealized Loss Position, Fair Value [Abstract]
Less than 12 Months, Fair Value		2,544
Less than 12 Months, Unrealized Loss		(4)
12 Months or More, Fair Value		0
12 Months or More, Unrealized Loss		0
Total Fair Value		2,544
Total Unrealized Loss		(4)
U. S. sponsored agency CMO's - residential [Member]
Continuous Unrealized Loss Position, Fair Value [Abstract]
Less than 12 Months, Fair Value	4,482	3,941
Less than 12 Months, Unrealized Loss	(29)	(30)
12 Months or More, Fair Value	0	0
12 Months or More, Unrealized Loss	0	0
Total Fair Value	4,482	3,941
Total Unrealized Loss	(29)	(30)
U. S. government sponsored agency securities [Member]
Continuous Unrealized Loss Position, Fair Value [Abstract]
Less than 12 Months, Fair Value		7,080
Less than 12 Months, Unrealized Loss		(31)
12 Months or More, Fair Value		0
12 Months or More, Unrealized Loss		0
Total Fair Value		7,080
Total Unrealized Loss		(31)
Other securities [Member]
Continuous Unrealized Loss Position, Fair Value [Abstract]
Less than 12 Months, Fair Value	0	370
Less than 12 Months, Unrealized Loss	0	(83)
12 Months or More, Fair Value	4	0
12 Months or More, Unrealized Loss	(72)	0
Total Fair Value	4	370
Total Unrealized Loss	$ (72)	$ (83)

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STOCK COMPENSATION EXPENSE, Stock Options Activity (Details) (USD $)	6 Months Ended		12 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2010
Stock options activity [Roll Forward]
Outstanding at beginning of year (in shares)	350,949	255,649
Grants (in shares)	105,700	102,000	47,700
Exercises (in shares)	0	0
Forfeitures or expired (in shares)	(7,000)	0
Outstanding at end of period (in shares)	449,649	357,649	255,649
Weighted Average Exercise Price [Abstract]
Outstanding at beginning of year (in dollars per share)	$ 9.69	$ 10.77
Grants (in dollars per share)	$ 7.47	$ 6.95	$ 8.9
Exercises (in dollars per share)	$ 0	$ 0
Forfeitures or expired (in dollars per share)	$ 7.73	$ 0
Outstanding at end of period (in dollars per share)	$ 9.20	$ 9.68	$ 10.77
Exercisable at end of period (in shares)	265,696	209,996
Weighted average remaining life of options outstanding	6 years 8 months 18 days	6 years 9 months 24 days
Weighted average fair value of options granted during the year (in dollars per share)	$ 2.34	$ 1.63

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LOANS, Activity in The Allowance For Loan Losses by Portfolio Segment (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance, beginning of period	$ 10,311	$ 10,282	$ 9,795	$ 9,865
Provision for loan losses	750	1,820	1,700	2,340
Loans charged-off	1,259	398	1,780	578
Recoveries	60	44	147	121
Balance, end of period	9,862	11,748	9,862	11,748
Residential Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance, beginning of period	2,368	2,760	2,134	2,666
Provision for loan losses	(55)	(16)	221	152
Loans charged-off	54	88	119	168
Recoveries	9	10	32	16
Balance, end of period	2,268	2,666	2,268	2,666
Multifamily Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance, beginning of period	434	303	284	252
Provision for loan losses	(7)	44	143	95
Loans charged-off	0	0	0	0
Recoveries	0	2	0	2
Balance, end of period	427	349	427	349
Owner Occupied Commercial Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance, beginning of period	1,024	1,258	918	1,141
Provision for loan losses	(45)	(270)	76	(155)
Loans charged-off	0	0	15	0
Recoveries	0	0	0	2
Balance, end of period	979	988	979	988
Non Owner Occupied Commercial Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance, beginning of period	2,321	1,896	2,381	1,644
Provision for loan losses	(15)	(14)	(37)	253
Loans charged-off	3	245	41	261
Recoveries	3	2	3	3
Balance, end of period	2,306	1,639	2,306	1,639
Commercial and Industrial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance, beginning of period	2,422	2,262	1,880	2,421
Provision for loan losses	551	2,369	1,095	2,218
Loans charged-off	990	0	992	16
Recoveries	1	0	1	8
Balance, end of period	1,984	4,631	1,984	4,631
Consumer [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance, beginning of period	305	386	298	366
Provision for loan losses	51	(5)	98	18
Loans charged-off	73	32	139	60
Recoveries	27	15	53	40
Balance, end of period	310	364	310	364
All other [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance, beginning of period	1,437	1,417	1,900	1,375
Provision for loan losses	270	(288)	104	(241)
Loans charged-off	139	33	474	73
Recoveries	20	15	58	50
Balance, end of period	$ 1,588	$ 1,111	$ 1,588	$ 1,111

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LOANS, Purchased In Acquisition (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011
Purchased loans [Abstract]
Loans And Leases Receivable Purchased With Deteriorated Credit Quality	$ 12,322		$ 14,859
Loans And Leases Receivable Purchased with Deteriorated Credit Quality Net Of Allowance	12,322		14,859
Increase (Decrease) in loan allowance related to acquisitions	0	190
Residential Real Estate [Member]
Purchased loans [Abstract]
Loans And Leases Receivable Purchased With Deteriorated Credit Quality	210		282
Multifamily Real Estate [Member]
Purchased loans [Abstract]
Loans And Leases Receivable Purchased With Deteriorated Credit Quality	3,524		3,708
Owner Occupied Commercial Real Estate [Member]
Purchased loans [Abstract]
Loans And Leases Receivable Purchased With Deteriorated Credit Quality	280		1,934
Non Owner Occupied Commercial Real Estate [Member]
Purchased loans [Abstract]
Loans And Leases Receivable Purchased With Deteriorated Credit Quality	6,207		6,427
Commercial and Industrial [Member]
Purchased loans [Abstract]
Loans And Leases Receivable Purchased With Deteriorated Credit Quality	548		583
All other [Member]
Purchased loans [Abstract]
Loans And Leases Receivable Purchased With Deteriorated Credit Quality	$ 1,553		$ 1,925

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SECURITIES

6 Months Ended

Jun. 30, 2012

SECURITIES [Abstract]

SECURITIES

NOTE  2 -SECURITIES

Amortized cost and fair value of investment securities, by category, at June 30, 2012 are summarized as follows:

2012	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Available for sale
Mortgage-backed securities
U. S. sponsored agency MBS - residential	$	42,031	$	1,991	$	-		$	44,022
U. S. sponsored agency CMO's - residential		211,457		5,654		(29	)		217,082
Total mortgage-backed securities of government sponsored agencies		253,488		7,645		(29	)		261,104
U. S. government sponsored agency securities		29,066		181		-			29,247
Obligations of states and political subdivisions		9,084		485		-			9,569
Other securities		4,342		1,178		(72	)		5,448
Total available for sale	$	295,980	$	9,489	$	(101	)	$	305,368

Amortized cost and fair value of investment securities, by category, at December 31, 2011 are summarized as follows:

2011	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Available for sale
Mortgage-backed securities
U. S. sponsored agency MBS - residential	$	38,403	$	1,856	$	(4	)	$	40,255
U. S. sponsored agency CMO's - residential		200,835		4,933		(30	)		205,738
Total mortgage-backed securities of government sponsored agencies		239,238		6,789		(34	)		245,993
U. S. government sponsored agency securities		18,114		58		(31	)		18,141
Obligations of states and political subdivisions		9,193		457		-			9,650
Other securities		4,338		440		(83	)		4,695
Total available for sale	$	270,883	$	7,744	$	(148	)	$	278,479

The amortized cost and fair value of securities at June 30, 2012 by contractual maturity are shown below.  Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized Cost		Fair Value
Available for sale
Due in one year or less	$	1,695	$	1,949
Due after one year through five years		13,616		13,844
Due after five years through ten years		24,131		24,536
Due after ten years		1,958		2,526
Corporate preferred securities		1,092		1,409
Mortgage-backed securities of government sponsored agencies		253,488		261,104
Total available for sale	$	295,980	$	305,368

Proceeds from the sale of securities during the first six months of 2011 were $2,017,000.  An $18,000 gain was recorded from the sale of securities during the first six months of 2011.  There were no sales of securities in the first six months of 2012

Securities with unrealized losses at June 30, 2012 aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position are as follows:

	Less than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
U.S sponsored agency CMO - residential	$	4,482	$	(29	)	$	-	$	-		$	4,482	$	(29	)
Other securities		-		-			4		(72	)		4		(72	)
Total temporarily impaired	$	4,482	$	(29	)	$	4	$	(72	)	$	4,486	$	(101	)

Securities with unrealized losses at December 31, 2011 aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position are as follows:

	Less than 12 Months					12 Months or More				Total
Description of Securities	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
U.S. government sponsored agency securities	$	7,080	$	(31	)	$	-	$	-	$	7,080	$	(31	)
U.S sponsored agency MBS - residential		2,544		(4	)		-		-		2,544		(4	)
U.S sponsored agency CMO - residential		3,941		(30	)		-		-		3,941		(30	)
Other securities		370		(83	)		-		-		370		(83	)
Total temporarily impaired	$	13,935	$	(148	)	$	-	$	-	$	13,935	$	(148	)

The investment portfolio is predominately high quality interest-bearing debt securities with defined maturity dates backed by the U.S. Government or Government sponsored entities.  The unrealized losses at June 30, 2012 and December 31, 2011 are price changes resulting from changes in the interest rate environment and are not considered to be other than temporary declines in the value of the securities.  Their fair value is expected to recover as the bonds approach their maturity date and/or market conditions improve.

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LOANS, Past Due And Non-performing Loans (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Past due and non-performing loans [Abstract]
Principal Owed on Non-accrual Loans	$ 40,824	$ 54,705
Recorded Investment in Non-accrual Loans	29,767	42,354
Loans Past Due Over 90 Days, still accruing	4,308	4,527
Residential Real Estate [Member]
Past due and non-performing loans [Abstract]
Principal Owed on Non-accrual Loans	3,825	4,479
Recorded Investment in Non-accrual Loans	3,494	4,111
Loans Past Due Over 90 Days, still accruing	1,530	1,216
Multifamily Real Estate [Member]
Past due and non-performing loans [Abstract]
Principal Owed on Non-accrual Loans	8,251	13,118
Recorded Investment in Non-accrual Loans	6,492	11,139
Loans Past Due Over 90 Days, still accruing	1,034	0
Owner Occupied Commercial Real Estate [Member]
Past due and non-performing loans [Abstract]
Principal Owed on Non-accrual Loans	6,200	9,970
Recorded Investment in Non-accrual Loans	5,372	8,260
Loans Past Due Over 90 Days, still accruing	790	851
Non Owner Occupied Commercial Real Estate [Member]
Past due and non-performing loans [Abstract]
Principal Owed on Non-accrual Loans	10,868	12,938
Recorded Investment in Non-accrual Loans	7,416	9,835
Loans Past Due Over 90 Days, still accruing	918	1,596
Commercial and Industrial [Member]
Past due and non-performing loans [Abstract]
Principal Owed on Non-accrual Loans	3,768	4,756
Recorded Investment in Non-accrual Loans	2,435	3,227
Loans Past Due Over 90 Days, still accruing	27	814
Consumer [Member]
Past due and non-performing loans [Abstract]
Principal Owed on Non-accrual Loans	137	246
Recorded Investment in Non-accrual Loans	125	237
Loans Past Due Over 90 Days, still accruing	9	50
All other [Member]
Past due and non-performing loans [Abstract]
Principal Owed on Non-accrual Loans	7,775	9,198
Recorded Investment in Non-accrual Loans	4,433	5,545
Loans Past Due Over 90 Days, still accruing	$ 0	$ 0

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STOCKHOLDERS' EQUITY AND REGULATORY MATTERS (Details) (Consolidated Entity [Member])	Jun. 30, 2012	Dec. 31, 2011
Consolidated Entity [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Tier I Capital (to Risk-Weighted Assets) (in hundredths)	17.40%	16.00%
Tier I Capital (to Risk-Weighted Assets), Regulatory Minimum Requirements (in hundredths)	4.00%
Tier I Capital (to Risk-Weighted Assets), To Be Considered Well Capitalized (in hundredths)	6.00%
Total Capital (to Risk-Weighted Assets) (in hundredths)	18.60%	17.20%
Total Capital (to Risk-Weighted Assets), Regulatory Minimum Requirements (in hundredths)	8.00%
Total Capital (to Risk-Weighted Assets), To Be Considered Well Capitalized (in hundredths)	10.00%
Tier I Capital (to Average Assets) (in hundredths)	10.40%	10.00%
Tier I Capital (to Average Assets), Regulatory Minimum Requirements (in hundredths)	4.00%
Tier I Capital (to Average Assets), To Be Considered Well Capitalized (in hundredths)	5.00%

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CONSOLIDATED BALANCE SHEETS (UNAUDITED) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
ASSETS
Cash and due from banks	$ 30,474	$ 29,380
Interest bearing bank balances	54,718	42,676
Federal funds sold	12,022	10,832
Cash and cash equivalents	97,214	82,888
Securities available for sale	305,368	278,479
Loans held for sale	221	70
Loans	670,268	690,923
Allowance for loan losses	(9,862)	(9,795)
Net loans	660,406	681,128
Federal Home Loan Bank stock	4,405	5,216
Premises and equipment, net	16,157	16,355
Real estate and other property acquired through foreclosure	15,735	14,642
Interest receivable	3,448	3,497
Goodwill	29,875	29,875
Other intangible assets	3,046	3,393
Prepaid FDIC insurance premiums	720	1,167
Deferred taxes	2,531	3,997
Other assets	888	3,380
Total assets	1,140,014	1,124,087
Deposits
Non-interest bearing	201,596	196,125
Time deposits, $100,000 and over	155,122	155,208
Other interest bearing	593,153	573,745
Total deposits	949,871	925,078
Securities sold under agreements to repurchase	19,707	23,205
Federal Home Loan Bank advances	6	10,083
Other borrowed funds	17,094	18,130
Interest payable	596	712
Other liabilities	3,098	2,872
Total liabilities	990,372	980,080
Stockholders' equity
Preferred stock, no par value; $22,252 liquidation preference, 5% cumulative, 1,000,000 shares authorized; 22,252 shares issued and outstanding	22,005	21,949
Common stock, no par value; 20,000,000 shares authorized; 7,937,143 shares issued and outstanding	71,656	71,571
Retained earnings	49,785	45,474
Accumulated other comprehensive income	6,196	5,013
Total stockholders' equity	149,642	144,007
Total liabilities and stockholders' equity	$ 1,140,014	$ 1,124,087

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STOCK COMPENSATION EXPENSE, Authorized Stock Options By Exercise Price Range (Details) (USD $)	6 Months Ended
	Jun. 30, 2012
Share-based Compensation, Shares Granted under Stock Option Plans, Exercise Price Range [Line Items]
Number of shares outstanding (in shares)	449,649
Weighted average exercise price of shares outstanding (in dollars per share)	$ 9.20
Aggregate intrinsic value	$ 74
Number of exercisable options (in shares)	265,696
Weighted average remaining contractual life	5 years 1 month 6 days
Weighted average exercise price of shares exercisable (in dollars per share)	$ 10.45
Aggregate intrinsic value of exercisable shares	48
$6.50 to $10.00 [Member]
Share-based Compensation, Shares Granted under Stock Option Plans, Exercise Price Range [Line Items]
Lower range of exercise price on stock options (in dollars per share)	$ 6.50
Upper range of exercise price on stock options (in dollars per share)	$ 10.00
Number of shares outstanding (in shares)	325,016
Weighted average exercise price of shares outstanding (in dollars per share)	$ 7.51
Aggregate intrinsic value	74
Number of exercisable options (in shares)	141,063
Weighted average remaining contractual life	5 years 10 months 24 days
Weighted average exercise price of shares exercisable (in dollars per share)	$ 7.66
Aggregate intrinsic value of exercisable shares	48
$10.01 to $12.50 [Member]
Share-based Compensation, Shares Granted under Stock Option Plans, Exercise Price Range [Line Items]
Lower range of exercise price on stock options (in dollars per share)	$ 10.01
Upper range of exercise price on stock options (in dollars per share)	$ 12.50
Number of shares outstanding (in shares)	28,333
Weighted average exercise price of shares outstanding (in dollars per share)	$ 11.62
Aggregate intrinsic value	0
Number of exercisable options (in shares)	28,333
Weighted average remaining contractual life	2 years 7 months 6 days
Weighted average exercise price of shares exercisable (in dollars per share)	$ 11.62
Aggregate intrinsic value of exercisable shares	0
$12.51 to $15.00 [Member]
Share-based Compensation, Shares Granted under Stock Option Plans, Exercise Price Range [Line Items]
Lower range of exercise price on stock options (in dollars per share)	$ 12.51
Upper range of exercise price on stock options (in dollars per share)	$ 15.00
Number of shares outstanding (in shares)	68,800
Weighted average exercise price of shares outstanding (in dollars per share)	$ 13.47
Aggregate intrinsic value	0
Number of exercisable options (in shares)	68,800
Weighted average remaining contractual life	5 years 2 months 12 days
Weighted average exercise price of shares exercisable (in dollars per share)	$ 13.47
Aggregate intrinsic value of exercisable shares	0
$15.01 to $17.50 [Member]
Share-based Compensation, Shares Granted under Stock Option Plans, Exercise Price Range [Line Items]
Lower range of exercise price on stock options (in dollars per share)	$ 15.01
Upper range of exercise price on stock options (in dollars per share)	$ 17.50
Number of shares outstanding (in shares)	27,500
Weighted average exercise price of shares outstanding (in dollars per share)	$ 16.00
Aggregate intrinsic value	0
Number of exercisable options (in shares)	27,500
Weighted average remaining contractual life	3 years 7 months 6 days
Weighted average exercise price of shares exercisable (in dollars per share)	$ 16.00
Aggregate intrinsic value of exercisable shares	$ 0

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CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Cash flows from operating activities
Net income	$ 4,922	$ 2,700
Adjustments to reconcile net income to net cash from operating activities
Depreciation	731	748
Provision for loan losses	1,700	2,340
Amortization (accretion), net	(1,121)	(885)
OREO writedowns (gains on sales), net	(38)	32
Stock compensation expense	85	47
Loans originated for sale	(7,084)	(8,387)
Secondary market loans sold	7,061	8,606
Secondary market income	(128)	(140)
Gain on sale of securities	0	(18)
Changes in :
Interest receivable	50	318
Other assets	3,796	(476)
Interest payable	(116)	(51)
Other liabilities	226	197
Net cash from operating activities	10,084	5,031
Cash flows from investing activities
Purchases of securities available for sale	(57,685)	(89,429)
Proceeds from the sale of securities available for sale	0	2,017
Proceeds from maturities and calls of securities available for sale	31,736	51,366
Redemption of FRB and FHLB stock, (net of purchases)	811	1,261
Net change in loans	18,400	20,890
Purchases of premises and equipment, net	(533)	(514)
Proceeds from sales of other real estate acquired through foreclosure	1,782	1,767
Net cash from investing activities	(5,489)	(12,642)
Cash flows from financing activities
Net change in deposits	24,857	(44,854)
Preferred Stock dividends paid	(556)	(834)
Net change in short-term Federal Home Loan Bank advances	0	(2,400)
Repayment of Federal Home Loan Bank advances	(10,036)	(83)
Repayment of other borrowed funds	(1,036)	(1,020)
Net change in federal funds purchased	0	1,444
Net change in agreements to repurchase securities	(3,498)	(3,579)
Net cash from financing activities	9,731	(51,326)
Net change in cash and cash equivalents	14,326	(58,937)
Cash and cash equivalents at beginning of period	82,888	122,248
Cash and cash equivalents at end of period	97,214	63,311
Supplemental disclosures of cash flow information:
Cash paid during period for interest	3,562	4,429
Cash (received) paid during period for income taxes	(623)	2,305
Loans transferred to real estate acquired through foreclosure	$ 2,837	$ 2,124

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LOANS, Individually Evaluated For Impairment (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Loans individually evaluated for impairment [Abstract]
Unpaid Principal Balance	$ 64,278	$ 72,397
Recorded Investment	51,891	59,103
Allowance for Loan Losses Allocated	3,048	3,047
With no related allowance recorded: [Member]
Loans individually evaluated for impairment [Abstract]
Unpaid Principal Balance	46,499	56,699
Recorded Investment	34,432	43,898
Allowance for Loan Losses Allocated	0	0
With an allowance recorded: [Member]
Loans individually evaluated for impairment [Abstract]
Unpaid Principal Balance	17,779	15,698
Recorded Investment	17,459	15,205
Allowance for Loan Losses Allocated	3,048	3,047
Residential Real Estate [Member] | With no related allowance recorded: [Member]
Loans individually evaluated for impairment [Abstract]
Unpaid Principal Balance	5,398	5,602
Recorded Investment	5,155	5,329
Allowance for Loan Losses Allocated	0	0
Residential Real Estate [Member] | With an allowance recorded: [Member]
Loans individually evaluated for impairment [Abstract]
Unpaid Principal Balance	5,048	4,803
Recorded Investment	5,010	4,748
Allowance for Loan Losses Allocated	507	451
Multifamily real estate [Member] | With no related allowance recorded: [Member]
Loans individually evaluated for impairment [Abstract]
Unpaid Principal Balance	7,077	15,513
Recorded Investment	4,807	12,302
Allowance for Loan Losses Allocated	0	0
Owner Occupied Commercial Real Estate [Member] | With no related allowance recorded: [Member]
Loans individually evaluated for impairment [Abstract]
Unpaid Principal Balance	8,159	10,939
Recorded Investment	6,859	9,291
Allowance for Loan Losses Allocated	0	0
Owner Occupied Commercial Real Estate [Member] | With an allowance recorded: [Member]
Loans individually evaluated for impairment [Abstract]
Unpaid Principal Balance	634	1,384
Recorded Investment	634	1,306
Allowance for Loan Losses Allocated	132	138
Non Owner Occupied Commercial Real Estate [Member] | With no related allowance recorded: [Member]
Loans individually evaluated for impairment [Abstract]
Unpaid Principal Balance	12,355	12,296
Recorded Investment	9,102	9,383
Allowance for Loan Losses Allocated	0	0
Non Owner Occupied Commercial Real Estate [Member] | With an allowance recorded: [Member]
Loans individually evaluated for impairment [Abstract]
Unpaid Principal Balance	2,197	2,240
Recorded Investment	2,133	2,191
Allowance for Loan Losses Allocated	878	922
Commercial and Industrial [Member] | With no related allowance recorded: [Member]
Loans individually evaluated for impairment [Abstract]
Unpaid Principal Balance	3,773	3,392
Recorded Investment	2,599	2,287
Allowance for Loan Losses Allocated	0	0
Commercial and Industrial [Member] | With an allowance recorded: [Member]
Loans individually evaluated for impairment [Abstract]
Unpaid Principal Balance	9,249	2,242
Recorded Investment	9,033	1,932
Allowance for Loan Losses Allocated	1,379	894
Consumer [Member] | With an allowance recorded: [Member]
Loans individually evaluated for impairment [Abstract]
Unpaid Principal Balance	36	37
Recorded Investment	36	37
Allowance for Loan Losses Allocated	36	37
All other [Member] | With no related allowance recorded: [Member]
Loans individually evaluated for impairment [Abstract]
Unpaid Principal Balance	9,737	8,957
Recorded Investment	5,910	5,306
Allowance for Loan Losses Allocated	0	0
All other [Member] | With an allowance recorded: [Member]
Loans individually evaluated for impairment [Abstract]
Unpaid Principal Balance	615	4,992
Recorded Investment	613	4,991
Allowance for Loan Losses Allocated	$ 116	$ 605

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STOCK COMPENSATION EXPENSE (Tables)

6 Months Ended

Jun. 30, 2012

STOCK COMPENSATION EXPENSE [Abstract]

Assumption used in the Black-Scholes option-pricing model

The fair value of the Company's employee stock options granted is estimated at the date of grant using the Black-Scholes option-pricing model. This model requires the input of highly subjective assumptions, changes to which can materially affect the fair value estimate. Additionally, there may be other factors that would otherwise have a significant effect on the value of employee stock options granted but are not considered by the model. The assumptions used in the Black-Scholes option-pricing model are as follows

	2012			2011			2010
Risk-free interest rate		2.31	%		3.58	%		3.65	%
Expected option life (yrs)		10.00			10.00			10.00
Expected stock price volatility		34.93	%		30.01	%		24.67	%
Dividend yield		2.68	%		4.03	%		4.94	%
Weighted average fair value of options granted during the year	$	2.34		$	1.63		$	1.41

Summary of stock option activity

A summary of the Company's stock option activity and related information is presented below for the six months ended June 30:

	2012					2011
				Weighted Average Exercise				Weighted Average Exercise
	Options			Price		Options		Price
Outstanding at beginning of year		350,949		$	9.69		255,649	$	10.77
Grants		105,700			7.47		102,000		6.95
Exercises		-			-		-		-
Forfeitures or expired		(7,000	)		7.73		-		-
Outstanding at June 30,		449,649		$	9.20		357,649	$	9.68
Exercisable at June 30,		265,696					209,996
Weighted average remaining life of options outstanding		6.8					6.9
Weighted average fair value of options granted during the year	$	2.34				$	1.63

Stock option activity by range of exercise prices

Additional information regarding stock options outstanding and exercisable at June 30, 2012, is provided in the following table:

		Outstanding						Currently Exercisable
Range of Exercise Prices		Number		Weighted Average Exercise Price		Aggregate Intrinsic Value		Number		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Aggregate Intrinsic Value
$	6.50 to $10.00		325,016	$	7.51	$	74		141,063		5.9	$	7.66	$	48
$	10.01 to $12.50		28,333		11.62		-		28,333		2.6		11.62		-
$	12.51 to $15.00		68,800		13.47		-		68,800		5.2		13.47		-
$	15.01 to $17.50		27,500		16.00		-		27,500		3.6		16.00		-
Outstanding - Jun 30, 2012			449,649		9.20	$	74		265,696		5.1		10.45	$	48

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LOANS, Average Balance Loans Individually Evaluated For Impairment (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Financing receivable average balance individually evaluated for impairment [Line Items]
Average Recorded Investment	$ 52,315	$ 51,159	$ 54,578	$ 50,472
Interest Income Recognized	528	171	3,096	373
Cash Basis Interest Recognized	509	181	3,036	388
Residential Real Estate [Member]
Financing receivable average balance individually evaluated for impairment [Line Items]
Average Recorded Investment	10,209	319	10,165	281
Interest Income Recognized	189	82	318	84
Cash Basis Interest Recognized	181	91	304	93
Multifamily Real Estate [Member]
Financing receivable average balance individually evaluated for impairment [Line Items]
Average Recorded Investment	4,850	7,751	7,334	6,748
Interest Income Recognized	43	16	1,350	16
Cash Basis Interest Recognized	37	16	1,341	16
Owner Occupied Commercial Real Estate [Member]
Financing receivable average balance individually evaluated for impairment [Line Items]
Average Recorded Investment	7,619	11,977	8,612	11,949
Interest Income Recognized	44	12	938	25
Cash Basis Interest Recognized	38	12	923	26
Non Owner Occupied Commercial Real Estate [Member]
Financing receivable average balance individually evaluated for impairment [Line Items]
Average Recorded Investment	11,432	9,111	11,479	10,147
Interest Income Recognized	20	23	55	30
Cash Basis Interest Recognized	25	24	51	32
Commercial and Industrial [Member]
Financing receivable average balance individually evaluated for impairment [Line Items]
Average Recorded Investment	11,473	8,390	9,055	8,441
Interest Income Recognized	133	16	240	189
Cash Basis Interest Recognized	126	18	233	192
Consumer [Member]
Financing receivable average balance individually evaluated for impairment [Line Items]
Average Recorded Investment	36	40	37	41
Interest Income Recognized	1	3	1	4
Cash Basis Interest Recognized	1	3	1	4
All other [Member]
Financing receivable average balance individually evaluated for impairment [Line Items]
Average Recorded Investment	6,696	13,571	7,896	12,865
Interest Income Recognized	98	19	194	25
Cash Basis Interest Recognized	$ 101	$ 17	$ 183	$ 25

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FAIR VALUE (Tables)

6 Months Ended

Jun. 30, 2012

FAIR VALUE [Abstract]

Assets and liabilities measured at fair value on a recurring basis

Assets and liabilities measured at fair value on a recurring basis are summarized below:

			Fair Value Measurements at  June 30, 2012 Using:
	Carrying Value		Quoted Prices in Active Markets for Identical Assets  (Level 1)		Significant Other Observable Inputs  (Level 2)		Significant Unobservable Inputs  (Level 3)
Available for sale
Mortgage-backed securities
U. S. agency MBS - residential	$	44,022	$	-	$	44,022	$	-
U. S. agency CMO's - residential		217,082		-		217,082		-
Total mortgage-backed securities of government sponsored agencies		261,104		-		261,104		-
U. S. government sponsored agency securities		29,247		-		29,247		-
Obligations of states and political subdivisions		9,569		-		9,429		140
Other securities		5,448		-		5,448		-
Total available for sale	$	305,368	$	-	$	305,228	$	140

			Fair Value Measurements at  December 31, 2011 Using:
	Carrying Value		Quoted Prices in Active Markets for Identical Assets  (Level 1)		Significant Other Observable Inputs  (Level 2)		Significant Unobservable Inputs  (Level 3)
Available for sale
Mortgage-backed securities
U. S. agency MBS - residential	$	40,255	$	-	$	40,255	$	-
U. S. agency CMO's - residential		205,738		-		205,738		-
Total mortgage-backed securities of government sponsored agencies		245,993		-		245,993		-
U. S. government sponsored agency securities		18,141		-		18,141		-
Obligations of states and political subdivisions		9,650		-		9,510		140
Other securities		4,695		-		4,695		-
Total available for sale	$	278,479	$	-	$	278,339	$	140

Carrying amounts and estimated fair values of financial instruments

The carrying amounts and estimated fair values of financial instruments at June 30, 2012 were as follows:

				Fair Value Measurements at June 30, 2012 Using
	Carrying Amount			Level 1			Level 2			Level 3		Total
Financial assets
Cash and due from banks	$	85,192		$	85,192		$	-		$	-	$	85,192
Federal funds sold		12,022			12,022			-			-		12,022
Securities available for sale		305,368			-			305,228			140		305,368
Loans held for sale		221			-			221			-		221
Loans, net		660,406			-			-			657,902		657,902
Federal Home Loan Bank stock		4,405			n/a			n/a			n/a		n/a
Interest receivable		3,448			-			950			2,498		3,448
Financial liabilities
Deposits	$	(949,871	)	$	(571,632	)	$	(382,675	)	$	-	$	(954,307	)
Securities sold under agreements to repurchase		(19,707	)		-			(19,707	)-		-		(19,707	)
Federal Home Loan Bank advances		(6	)		-			(6	)		-		(6	)
Other borrowed funds		(17,094	)		-			(17,066	)		-		(17,066	)
Interest payable		(596	)		(6	)		(590	)		-		(596	)

The carrying amounts and estimated fair values of financial instruments at December 31, 2011 were as follows:

	Carrying Amount			Fair Value
Financial assets
Cash and due from banks	$	72,056		$	72,056
Federal funds sold		10,832			10,832
Securities available for sale		278,479			278,479
Loans held for sale		70			70
Loans, net		681,128			675,616
Federal Home Loan Bank stock		5,216			n/a
Interest receivable		3,497			3,497
Financial liabilities
Deposits	$	(925,078	)	$	(929,796	)
Securities sold under agreements to repurchase		(23,205	)		(23,205	)
Federal Home Loan Bank advances		(10,083	)		(10,141	)
Other borrowed funds		(18,130	)		(18,101	)
Interest payable		(712	)		(712	)

Assets and liabilities measured at fair value on a non-recurring basis

Assets and liabilities measured at fair value on a non-recurring basis are summarized below:

			Fair Value Measurements at June 30, 2012 Using
	June 30, 2012		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Impaired loans:
Residential Real Estate	$	4,503	$	-	$	-	$	4,503
Commercial Real Estate
Owner Occupied		502		-		-		502
Non-owner Occupied		1,255		-		-		1,255
Commercial and Industrial		7,654		-		-		7,654
All Other		497		-		-		497
Total impaired loans		14,411	$	-	$	-	$	14,411
Other real estate owned:
Residential Real Estate	$	265	$	-	$	-	$	265
Commercial Real Estate
Owner Occupied		100		-		-		100
Non-owner Occupied		2,931		-		-		2,931
All Other		224		-		-		224
Total OREO	$	3,520	$	-	$	-	$	3,520

Assets and liabilities measured at fair value on a non-recurring basis are summarized below:

			Fair Value Measurements at December 31, 2011 Using
	Dec 31, 2011		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Impaired loans:
Residential Real Estate	$	4,297	$	-	$	-	$	4,297
Commercial Real Estate
Owner Occupied		1,168		-		-		1,168
Non-owner Occupied		1,269		-		-		1,269
Commercial and Industrial		1,038		-		-		1,038
All Other		4,386		-		-		4,386
Total impaired loans		12,158	$	-	$	-	$	12,158
Other real estate owned:
Residential Real Estate	$	1,608	$	-	$	-	$	1,608
Commercial Real Estate
Owner Occupied		701		-		-		701
Non-owner Occupied		2,931		-		-		2,931
Commercial and Industrial		55		-		-		55
All Other		8,788		-		-		8,788
Total OREO	$	14,083	$	-	$	-	$	14,083

Fair Value Inputs, Assets, Quantitative Information [Table Text Block]

Assets and Liabilities measured at fair value on a non-recurring basis are summarized below:

	June 30, 2012		Valuation Techniques	Unobservable Inputs	Range (Weighted Avg)
Impaired loans:
Residential Real Estate	$	4,503	sales comparison	adjustment for differences between the comparable sales		0.8%-49.9% (8.7%)
Commercial Real Estate
Owner Occupied		502	sales comparison	adjustment for limited saleablity of specialized property		40.0%-70.0% (44.1%)
Non-owner Occupied		1,255	sales comparison	adjustment for differences between the comparable sales		10.0%-59.0% (37.5%)
			income approach	capitalization rate		9.50%
Commercial and Industrial		7,654	sales comparison	adjustment for differences between the comparable sales		0.0%-43.3% (36.4%)
All Other		497	sales comparison	adjustment for percentage of completion of construction		35.0%-91.4% (38.4%)
Total impaired loans	$	14,411
Other real estate owned:
Residential Real Estate	$	265	sales comparison	adjustment for differences between the comparable sales		26.1%-47.8% (35.2%)
Commercial Real Estate
Owner Occupied		100	sales comparison	adjustment for estimated realizable value		17.9%-17.9% (17.9%)
Non-owner Occupied		2,931	sales comparison	adjustment for differences between the comparable sales		0.0%-82.7% (17.5%)
All Other		224	sales comparison	adjustment for estimated realizable value		0.0%-49.7% (23.8%)
Total OREO	$	3,250

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BASIS OF PRESENTATION

6 Months Ended

Jun. 30, 2012

BASIS OF PRESENTATION [Abstract]

BASIS OF PRESENTATION

NOTE  1 - BASIS OF PRESENTATION

The consolidated financial statements include the accounts of Premier Financial Bancorp, Inc. (the Company) and its wholly owned subsidiaries (the "Banks"):

					June 30, 2012
		Year	Total		Net Income
Subsidiary	Location	Acquired	Assets		Qtr			YTD
Citizens Deposit Bank & Trust	Vanceburg, Kentucky	1991	$	215,608	$	613		$	1,589
Farmers Deposit Bank	Eminence, Kentucky	1996		58,824		119			238
Ohio River Bank	Ironton, Ohio	1998		107,028		328			570
Premier Bank, Inc.	Huntington, West Virginia	1998		751,013		1,530			3,546
Parent and Intercompany Eliminations				7,541		(498	)		(1,021	)
Consolidated Total			$	1,140,014	$	2,092		$	4,922

All significant intercompany transactions and balances have been eliminated.

Recently Issued Accounting Pronouncements

In June 2011, the FASB issued ASU No. 2011-05, "Comprehensive Income (Topic 220) - Presentation of Comprehensive Income." The ASU requires entities to present items of net income and other comprehensive income either in one continuous statement - referred to as the statement of comprehensive income - or in two separate, but consecutive, statements of net income and other comprehensive income. The ASU is effective for the first interim period and annual period beginning after December 15, 2011. The adoption of this guidance did not  have a material impact upon the Company's financial statements.

In May 2011, the FASB issued ASU No. 2011-04, "Fair Value Measurement (Topic 820) - Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs." This ASU represents the converged guidance of the FASB and the IASB (the "Boards") on fair value measurement. The collective efforts of the Boards and their staffs, reflected in ASU 2011-04, have resulted in common requirements for measuring fair value and for disclosing information about fair value measurements, including a consistent meaning of the term "fair value." The Boards have concluded the common requirements will result in greater comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and IFRSs. Included in the ASU are requirements to disclose additional quantitative disclosures about unobservable inputs for all Level 3 fair value measurements, as well as qualitative disclosures about the sensitivity inherent in recurring Level 3 fair value measurements. The ASU is effective during interim and annual periods beginning after December 15, 2011. The adoption of this guidance did not have a material impact upon the Company's financial statements.

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CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Stockholders' equity
Preferred stock, par value (in dollars per share)	$ 0	$ 0
Preferred stock, liquidation preference	$ 22,252	$ 22,252
Preferred stock, dividend rate (in hundredths)	5.00%	5.00%
Preferred stock, shares authorized (in shares)	1,000,000	1,000,000
Preferred stock, shares issued (in shares)	22,252	22,252
Preferred stock, shares outstanding (in shares)	22,252	22,252
Common stock, par value (in dollars per share)	$ 0	$ 0
Common stock, shares authorized (in shares)	20,000,000	20,000,000
Common stock, shares issued (in shares)	7,937,143	7,937,143
Common stock, shares outstanding (in shares)	7,937,143	7,937,143

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BASIS OF PRESENTATION (Tables)

6 Months Ended

Jun. 30, 2012

BASIS OF PRESENTATION [Abstract]

Accounts of the company and its wholly owned subsidiaries

The consolidated financial statements include the accounts of Premier Financial Bancorp, Inc. (the Company) and its wholly owned subsidiaries (the "Banks"):

					June 30, 2012
		Year	Total		Net Income
Subsidiary	Location	Acquired	Assets		Qtr			YTD
Citizens Deposit Bank & Trust	Vanceburg, Kentucky	1991	$	215,608	$	613		$	1,589
Farmers Deposit Bank	Eminence, Kentucky	1996		58,824		119			238
Ohio River Bank	Ironton, Ohio	1998		107,028		328			570
Premier Bank, Inc.	Huntington, West Virginia	1998		751,013		1,530			3,546
Parent and Intercompany Eliminations				7,541		(498	)		(1,021	)
Consolidated Total			$	1,140,014	$	2,092		$	4,922

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Document and Entity Information	6 Months Ended
	Jun. 30, 2012	Aug. 01, 2012
Document and Entity Information [Abstract]
Entity Registrant Name	PREMIER FINANCIAL BANCORP INC
Entity Central Index Key	0000887919
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		7,937,143
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q2
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2012

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SECURITIES (Tables)

6 Months Ended

Jun. 30, 2012

SECURITIES [Abstract]

Amortized cost and fair value of investment securities, by category

Amortized cost and fair value of investment securities, by category, at June 30, 2012 are summarized as follows:

2012	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Available for sale
Mortgage-backed securities
U. S. sponsored agency MBS - residential	$	42,031	$	1,991	$	-		$	44,022
U. S. sponsored agency CMO's - residential		211,457		5,654		(29	)		217,082
Total mortgage-backed securities of government sponsored agencies		253,488		7,645		(29	)		261,104
U. S. government sponsored agency securities		29,066		181		-			29,247
Obligations of states and political subdivisions		9,084		485		-			9,569
Other securities		4,342		1,178		(72	)		5,448
Total available for sale	$	295,980	$	9,489	$	(101	)	$	305,368

Amortized cost and fair value of investment securities, by category, at December 31, 2011 are summarized as follows:

2011	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Available for sale
Mortgage-backed securities
U. S. sponsored agency MBS - residential	$	38,403	$	1,856	$	(4	)	$	40,255
U. S. sponsored agency CMO's - residential		200,835		4,933		(30	)		205,738
Total mortgage-backed securities of government sponsored agencies		239,238		6,789		(34	)		245,993
U. S. government sponsored agency securities		18,114		58		(31	)		18,141
Obligations of states and political subdivisions		9,193		457		-			9,650
Other securities		4,338		440		(83	)		4,695
Total available for sale	$	270,883	$	7,744	$	(148	)	$	278,479

Amortized cost and fair value of securities by contractual maturity

The amortized cost and fair value of securities at June 30, 2012 by contractual maturity are shown below.  Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized Cost		Fair Value
Available for sale
Due in one year or less	$	1,695	$	1,949
Due after one year through five years		13,616		13,844
Due after five years through ten years		24,131		24,536
Due after ten years		1,958		2,526
Corporate preferred securities		1,092		1,409
Mortgage-backed securities of government sponsored agencies		253,488		261,104
Total available for sale	$	295,980	$	305,368

Securities in continuous unrealized loss position

Proceeds from the sale of securities during the first six months of 2011 were $2,017,000.  An $18,000 gain was recorded from the sale of securities during the first six months of 2011.  There were no sales of securities in the first six months of 2012

Securities with unrealized losses at June 30, 2012 aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position are as follows:

	Less than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
U.S sponsored agency CMO - residential	$	4,482	$	(29	)	$	-	$	-		$	4,482	$	(29	)
Other securities		-		-			4		(72	)		4		(72	)
Total temporarily impaired	$	4,482	$	(29	)	$	4	$	(72	)	$	4,486	$	(101	)

Securities with unrealized losses at December 31, 2011 aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position are as follows:

	Less than 12 Months					12 Months or More				Total
Description of Securities	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
U.S. government sponsored agency securities	$	7,080	$	(31	)	$	-	$	-	$	7,080	$	(31	)
U.S sponsored agency MBS - residential		2,544		(4	)		-		-		2,544		(4	)
U.S sponsored agency CMO - residential		3,941		(30	)		-		-		3,941		(30	)
Other securities		370		(83	)		-		-		370		(83	)
Total temporarily impaired	$	13,935	$	(148	)	$	-	$	-	$	13,935	$	(148	)

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CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Interest income
Loans, including fees	$ 10,027	$ 11,287	$ 22,364	$ 22,227
Securities available for sale
Taxable	1,829	2,121	3,620	4,057
Tax-exempt	56	60	112	122
Federal funds sold and other	44	40	76	93
Total interest income	11,956	13,508	26,172	26,499
Interest expense
Deposits	1,437	1,826	2,972	3,758
Repurchase agreements and other	22	40	48	87
FHLB advances and other borrowings	189	270	426	533
Total interest expense	1,648	2,136	3,446	4,378
Net interest income	10,308	11,372	22,726	22,121
Provision for loan losses	750	1,820	1,700	2,340
Net interest income after provision for loan losses	9,558	9,552	21,026	19,781
Non-interest income
Service charges on deposit accounts	873	981	1,703	1,869
Electronic banking income	522	479	1,010	928
Secondary market mortgage income	103	52	128	140
Other	134	222	308	408
Total non-interest income	1,632	1,734	3,149	3,345
Non-interest expenses
Salaries and employee benefits	3,858	4,012	7,821	8,043
Occupancy and equipment expenses	1,121	1,282	2,301	2,518
Outside data processing	873	1,180	1,745	2,387
Professional fees	300	222	584	482
Taxes, other than payroll, property and income	190	222	345	415
Write-downs, expenses, sales of other real estate owned, net	293	323	507	407
Amortization of intangibles	174	205	347	415
Conversion expenses	0	463	0	842
FDIC insurance	239	469	481	977
Loan collection expenses	184	180	853	370
Other expenses	834	1,158	1,676	2,167
Total non-interest expenses	8,066	9,716	16,660	19,023
Income before income taxes	3,124	1,570	7,515	4,103
Provision for income taxes	1,032	541	2,593	1,403
Net income	2,092	1,029	4,922	2,700
Preferred stock dividends and accretion	306	305	611	611
Net income available to common stockholders	$ 1,786	$ 724	$ 4,311	$ 2,089
Net income per share:
Basic (in dollars per share)	$ 0.23	$ 0.09	$ 0.54	$ 0.26
Diluted (in dollars per share)	$ 0.22	$ 0.09	$ 0.53	$ 0.26

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PREFERRED STOCK

6 Months Ended

Jun. 30, 2012

PREFERRED STOCK [Abstract]

PREFERRED STOCK

NOTE  6 - PREFERRED STOCK

On October 2, 2009, as part of the Troubled Asset Relief Program ("TARP") Capital Purchase Program, the Company entered into a Letter Agreement and Securities Purchase Agreement (collectively, the "Purchase Agreement") with the United States Department of the Treasury ("U.S. Treasury").  Pursuant to the Purchase Agreement, the Company issued and sold to the U.S. Treasury 22,252 shares of Fixed Rate Cumulative Perpetual Preferred Stock, Series A, no par value, with a liquidation preference of one thousand dollars per share (the "Series A Preferred Stock") and a ten-year warrant (the "Warrant") to purchase 628,587 shares of the Company's common stock, no par value, at an exercise price of $5.31 per share, for an aggregate purchase price of $22,252 in cash.

Under standardized TARP Capital Purchase Program terms, cumulative dividends on the Series A Preferred Stock will accrue on the liquidation preference at a rate of 5% per annum until November 14, 2014, and at a rate of 9% per annum thereafter.  These dividends will be paid only if, as and when declared by Premier's Board of Directors.  The Series A Preferred Stock has no maturity date and ranks senior to the Company's common stock with respect to the payment of dividends and distributions and amounts payable upon liquidation, dissolution and winding up of Premier.  Subject to the approval of the Appropriate Federal Banking Agency (as defined in the Securities Purchase Agreement, which for Premier is the Board of Governors of the Federal Reserve System), the Series A Preferred Stock is redeemable at the option of Premier at 100% of its liquidation preference plus accrued and unpaid dividends, without penalty, delay or the need to raise additional replacement capital.

The Series A Preferred Stock is non-voting, but has class voting rights on (i) any authorization or issuance of shares ranking senior to the Series A Preferred Stock; (ii) any amendment to the rights of the Series A Preferred Stock; or (iii) any merger, consolidation, share exchange, reclassification or similar transaction which would adversely affect the rights of the Series A Preferred Stock.  In the event that the cumulative dividends described above are not paid in full for an aggregate of six dividend periods or more, whether or not consecutive, the authorized number of directors of Premier would automatically be increased by two and the holders of the Series A Preferred Stock would have the right to elect two directors.  The right to elect directors would end when dividends have been paid in full for four consecutive dividend periods.As previously disclosed, Premier has already deferred two dividend payments on the Series A Preferred Stock as a result of the Federal Reserve Board's refusal to initially approve the November 15, 2010 and February 15, 2011 dividends under the Written Agreement dated July 29, 2010, among CB&T, a wholly owned subsidiary of Premier; the FRB, and the Virginia Bureau. These deferred dividends were paid along with the regularly scheduled May 15, 2011 Series A Preferred Stock quarterly dividend.

The U.S. Treasury has agreed not to exercise voting power with respect to any common stock issued to it upon exercise of the Warrant.  The common stock will be issued from authorized but unissued common stock and thus will dilute the interests of existing Premier common shareholders.  As of June 30, 2012, the Warrant has not yet been exercised.

Pursuant to the terms of the Purchase Agreement, the ability of the Company to declare or pay dividends or distributions on, or purchase, redeem or otherwise acquire for consideration, shares of its common stock will be subject to restrictions, including a restriction against increasing dividends from the last quarterly cash dividend per share ($0.11) declared on the common stock prior to October 2, 2009.

On July 27, 2012, the U.S. Treasury announced that it has sold 22,252 shares, or 100%, of its interest in the Series A Preferred Stock in a modified Dutch Auction conducted from July 23, 2012 through July 26, 2012 (the "Auction").  Premier sought and obtained regulatory approval to participate in the Auction and successfully repurchased 10,252 shares of the Series A Preferred Stock at the closing price of $901.03 per share.  On August 10, 2012, Premier redeemed the 10,252 shares of the Series A Preferred Stock at the discounted price of $901.03 per share.  The redemption reduces Tier I Capital and Preferred Equity by approximately $9,237,000.

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STOCKHOLDERS' EQUITY AND REGULATORY MATTERS

6 Months Ended

Jun. 30, 2012

STOCKHOLDERS' EQUITY AND REGULATORY MATTERS [Abstract]

STOCKHOLDERS' EQUITY AND REGULATORY MATTERS

NOTE  5 - STOCKHOLDERS' EQUITY AND REGULATORY MATTERS

The Company's principal source of funds for dividend payments is dividends received from the subsidiary Banks.  Banking regulations limit the amount of dividends that may be paid without prior approval of regulatory agencies.  Under these regulations, the amount of dividends that may be paid in any calendar year is limited to the current year's net profits, as defined, combined with the retained net profits of the preceding two years, subject to the capital requirements and additional restrictions as discussed below.  During 2012 the Banks could, without prior approval, declare dividends to Premier of approximately $7.4 million plus any 2012 net profits retained to the date of the dividend declaration.

The Company and the subsidiary Banks are subject to various regulatory capital requirements administered by the federal banking agencies.  Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a 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 guidelines that involve quantitative measures of their assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices.

These quantitative measures established by regulation to ensure capital adequacy require the Company and Banks to maintain minimum amounts and ratios (set forth in the following table) of Total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier I capital (as defined) to average assets (as defined). Management believes, as of June 30, 2012, that the Company and the Banks meet all quantitative capital adequacy requirements to which they are subject.

Shown below is a summary of regulatory capital ratios for the Company:

	June 30, 2012			December 31, 2011			Regulatory Minimum Requirements			To Be Considered Well Capitalized
Tier I Capital (to Risk-Weighted Assets)		17.4	%		16.0	%		4.0	%		6.0	%
Total Capital (to Risk-Weighted Assets)		18.6	%		17.2	%		8.0	%		10.0	%
Tier I Capital (to Average Assets)		10.4	%		10.0	%		4.0	%		5.0	%

As of June 30, 2012, the most recent notification from each of the Banks' primary Federal regulators categorized the subsidiary Banks as well capitalized under the regulatory framework for prompt corrective action.  To be categorized as well capitalized, the Banks must maintain minimum Total risk-based, Tier I risk-based and Tier I leverage ratios as set forth in the preceding table.  There are no conditions or events since that notification that management believes have changed the Banks' categories.

The July 29, 2010 Written Agreement between Premier, the Federal Reserve Bank of Richmond ("FRB") and the Virginia Bureau required Premier to obtain prior written approval of the FRB and the Director of the Division of Banking Supervision and Regulation of the Board of Governors of the Federal Reserve System for declaring or paying any dividends, and also required prior written approval of the FRB before incurring, increasing or guaranteeing any debt or purchasing or redeeming any shares of its stock.

On July 24, 2012 the FRB announced that it had terminated the July 29, 2010 Written Agreement.

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EARNINGS PER SHARE (Tables)

6 Months Ended

Jun. 30, 2012

EARNINGS PER SHARE [Abstract]

Reconciliation of numerators and denominators of the earnings per share

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Basic earnings per share
Income available to common stockholders	$	1,786	$	724	$	4,311	$	2,089
Weighted average common shares outstanding		7,937,143		7,937,143		7,937,143		7,937,143
Earnings per share	$	0.23	$	0.09	$	0.54	$	0.26
Diluted earnings per share
Income available to common stockholders	$	1,786	$	724	$	4,311	$	2,089
Weighted average common shares outstanding		7,937,143		7,937,143		7,937,143		7,937,143
Add dilutive effects of potential additional common stock		202,258		176,092		144,075		158,482
Weighted average common and dilutive potential common shares outstanding		8,139,401		8,113,235		8,081,218		8,095,625
Earnings per share assuming dilution	$	0.22	$	0.09	$	0.53	$	0.26

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LOANS (Tables)

6 Months Ended

Jun. 30, 2012

LOANS [Abstract]

Major classifications of loans

Major classifications of loans at June 30, 2012 and December 31, 2011 are summarized as follows:

	2012		2011
Residential real estate	$	219,113	$	221,756
Multifamily real estate		30,722		34,335
Commercial real estate:
Owner occupied		99,057		101,864
Non owner occupied		164,116		166,540
Commercial and industrial		67,439		76,960
Consumer		28,934		30,090
All other		60,887		59,378
	$	670,268	$	690,923

Activity in the allowance for loan losses by portfolio segment

Activity in the allowance for loan losses by portfolio segment for the six months ending June 30, 2012 was as follows:

Loan Class	Balance Dec 31, 2011		Provision for loan losses			Loans charged-off		Recoveries		Balance June 30, 2012
Residential real estate	$	2,134	$	221		$	119	$	32	$	2,268
Multifamily real estate		284		143			-		-		427
Commercial real estate:
Owner occupied		918		76			15		-		979
Non owner occupied		2,381		(37	)		41		3		2,306
Commercial and industrial		1,880		1,095			992		1		1,984
Consumer		298		98			139		53		310
All other		1,900		104			474		58		1,588
Total	$	9,795	$	1,700		$	1,780	$	147	$	9,862

Activity in the allowance for loan losses by portfolio segment for the six months ending June 30, 2011 was as follows:

Loan Class	Balance Dec 31, 2010		Provision for loan losses			Loans charged- off		Recoveries		Balance June 30, 2011
Residential real estate	$	2,666	$	152		$	168	$	16	$	2,666
Multifamily real estate		252		95			-		2		349
Commercial real estate:
Owner occupied		1,141		(155	)		-		2		988
Non owner occupied		1,644		253			261		3		1,639
Commercial and industrial		2,421		2,218			16		8		4,631
Consumer		366		18			60		40		364
All other		1,375		(241	)		73		50		1,111
Total	$	9,865	$	2,340		$	578	$	121	$	11,748

Activity in the allowance for loan losses by portfolio segment for the three months ending June 30, 2012 was as follows:

Loan Class	Balance March 31, 2012		Provision for loan losses			Loans charged- off		Recoveries		Balance June 30, 2012
Residential real estate	$	2,368	$	(55	)	$	54	$	9	$	2,268
Multifamily real estate		434		(7	)		-		-		427
Commercial real estate:
Owner occupied		1,024		(45	)		-		-		979
Non owner occupied		2,321		(15	)		3		3		2,306
Commercial and industrial		2,422		551			990		1		1,984
Consumer		305		51			73		27		310
All other		1,437		270			139		20		1,588
Total	$	10,311	$	750		$	1,259	$	60	$	9,862

Activity in the allowance for loan losses by portfolio segment for the three months ending June 30, 2011 was as follows:

Loan Class	Balance March 31, 2011		Provision for loan losses			Loans charged-off		Recoveries		Balance June 30, 2011
Residential real estate	$	2,760	$	(16	)	$	88	$	10	$	2,666
Multifamily real estate		303		44			-		2		349
Commercial real estate:
Owner occupied		1,258		(270	)		-		-		988
Non owner occupied		1,896		(14	)		245		2		1,639
Commercial and industrial		2,262		2,369			-		-		4,631
Consumer		386		(5	)		32		15		364
All other		1,417		(288	)		33		15		1,111
Total	$	10,282	$	1,820		$	398	$	44	$	11,748

Purchased loans

As a result of the acquisition of Abigail Adams National Bancorp, the Company holds purchased loans for which there was, at the October 1, 2009 acquisition date, evidence of deterioration of credit quality since their origination and it was probable, at acquisition, that all contractually required payments would not be collected.  The carrying amount of those loans is as follows at June 30, 2012 and December 31, 2011.

	2012		2011
Residential real estate	$	210	$	282
Multifamily real estate		3,524		3,708
Commercial real estate
Owner occupied		280		1,934
Non owner occupied		6,207		6,427
Commercial and industrial		548		583
All other		1,553		1,925
Total carrying amount	$	12,322	$	14,859
Carrying amount, net of allowance	$	12,322	$	14,859

Past due and non-performing loans

The following tables present the recorded investment in nonaccrual and loans past due over 90 days still on accrual by class of loans as of June 30, 2012 and December 31 2011.  The recorded investment in non-accrual loans is less than the principal owed on non-accrual loans due to discounts applied to the carrying value of the loan at time of their acquisition and interest payments made by the borrower which have been used to reduce the recorded investment in the loan rather than recognized as interest income.

June 30, 2012	Principal Owed on Non-accrual Loans		Recorded Investment in Non-accrual Loans		Loans Past Due Over 90 Days, still accruing
Residential real estate	$	3,825	$	3,494	$	1,530
Multifamily real estate		8,251		6,492		1,034
Commercial real estate
Owner occupied		6,200		5,372		790
Non owner occupied		10,868		7,416		918
Commercial and industrial		3,768		2,435		27
Consumer		137		125		9
All other		7,775		4,433		-
Total	$	40,824	$	29,767	$	4,308

December 31, 2011	Principal Owed on Non-accrual Loans		Recorded Investment in Non-accrual Loans		Loans Past Due Over 90 Days, still accruing
Residential real estate	$	4,479	$	4,111	$	1,216
Multifamily real estate		13,118		11,139		-
Commercial real estate
Owner occupied		9,970		8,260		851
Non owner occupied		12,938		9,835		1,596
Commercial and industrial		4,756		3,227		814
Consumer		246		237		50
All other		9,198		5,545		-
Total	$	54,705	$	42,354	$	4,527

Aging of recorded investment in past due loans by loan class

The following table presents the aging of the recorded investment in past due loans as of June 30, 2012 by class of loans:

Loan Class	Total Loans		30-89 Days Past Due		Greater than 90 days past due		Total Past Due		Loans Not Past Due
Residential real estate	$	219,113	$	6,882	$	4,311	$	11,193	$	207,920
Multifamily real estate		30,722		1,377		6,058		7,435		23,287
Commercial real estate:
Owner occupied		99,057		1,638		1,339		2,977		96,080
Non owner occupied		164,116		697		3,102		3,799		160,317
Commercial and industrial		67,439		564		2,246		2,810		64,629
Consumer		28,934		339		98		437		28,497
All other		60,887		2,230		4,433		6,663		54,224
Total	$	670,268	$	13,727	$	21,587	$	35,314	$	634,954

The following table presents the aging of the recorded investment in past due loans as of December 31, 2011 by class of loans:

Loan Class	Total Loans		30-89 Days Past Due		Greater than 90 days past due		Total Past Due		Loans Not Past Due
Residential real estate	$	221,756	$	6,729	$	3,635	$	10,364	$	211,392
Multifamily real estate		34,335		3,249		8,892		12,141		22,194
Commercial real estate:
Owner occupied		101,864		8,081		3,981		12,062		89,802
Non owner occupied		166,540		2,444		6,065		8,509		158,031
Commercial and industrial		76,960		1,714		3,153		4,867		72,093
Consumer		30,090		497		233		730		29,360
All other		59,378		222		5,532		5,754		53,624
Total	$	690,923	$	22,936	$	31,491	$	54,427	$	636,496

Allowance for loan losses and recorded investment in loans by portfolio segment based on impairment method

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of June 30, 2012:

	Allowance for Loan Losses								Loan Balances
Loan Class	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Acquired with Deteriorated Credit Quality		Total		Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Acquired with Deteriorated Credit Quality		Total
Residential real estate	$	507	$	1,761	$	-	$	2,268	$	9,955	$	208,948	$	210	$	219,113
Multifamily real estate		-		427		-		427		1,283		25,915		3,524		30,722
Commercial real estate:
Owner occupied		132		847		-		979		7,213		91,564		280		99,057
Non-owner occupied		878		1,428		-		2,306		5,028		152,881		6,207		164,116
Commercial and industrial		1,379		605		-		1,984		11,084		55,807		548		67,439
Consumer		36		274		-		310		36		28,898		-		28,934
All other		116		1,472		-		1,588		4,970		54,364		1,553		60,887
Total	$	3,048	$	6,814	$	-	$	9,862	$	39,569	$	618,377	$	12,322	$	670,268

The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of December 31, 2011:

	Allowance for Loan Losses								Loan Balances
Loan Class	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Acquired with Deteriorated Credit Quality		Total		Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Acquired with Deteriorated Credit Quality		Total
Residential real estate	$	451	$	1,683	$	-	$	2,134	$	9,795	$	211,679	$	282	$	221,756
Multifamily real estate		-		284		-		284		8,594		22,033		3,708		34,335
Commercial real estate:
Owner occupied		138		780		-		918		8,663		91,267		1,934		101,864
Non-owner occupied		922		1,459		-		2,381		5,147		154,966		6,427		166,540
Commercial and industrial		894		986		-		1,880		3,636		72,741		583		76,960
Consumer		37		261		-		298		37		30,053		-		30,090
All other		605		1,295		-		1,900		8,372		49,081		1,925		59,378
Total	$	3,047	$	6,748	$	-	$	9,795	$	44,244	$	631,820	$	14,859	$	690,923

Loans individually evaluated for impairment by class of loans

The following table presents loans individually evaluated for impairment by class of loans as of June 30, 2012.  The table includes $12,322 of loans acquired with deteriorated credit quality that are still individually evaluated for impairment.

	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With no related allowance recorded:
Residential real estate	$	5,398	$	5,155	$	-
Multifamily real estate		7,077		4,807		-
Commercial real estate
Owner occupied		8,159		6,859		-
Non owner occupied		12,355		9,102		-
Commercial and industrial		3,773		2,599		-
All other		9,737		5,910		-
		46,499		34,432		-
With an allowance recorded:
Residential real estate	$	5,048	$	5,010	$	507
Commercial real estate
Owner occupied		634		634		132
Non owner occupied		2,197		2,133		878
Commercial and industrial		9,249		9,033		1,379
Consumer		36		36		36
All other		615		613		116
		17,779		17,459		3,048
Total	$	64,278	$	51,891	$	3,048

The following table presents loans individually evaluated for impairment by class of loans as of December 31, 2011.  The table includes $14,859 of loans acquired with deteriorated credit quality that are still individually evaluated for impairment.

	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With no related allowance recorded:
Residential real estate	$	5,602	$	5,329	$	-
Multifamily real estate		15,513		12,302		-
Commercial real estate
Owner occupied		10,939		9,291		-
Non owner occupied		12,296		9,383		-
Commercial and industrial		3,392		2,287		-
All other		8,957		5,306		-
		56,699		43,898		-
With an allowance recorded:
Residential real estate	$	4,803	$	4,748	$	451
Commercial real estate
Owner occupied		1,384		1,306		138
Non owner occupied		2,240		2,191		922
Commercial and industrial		2,242		1,932		894
Consumer		37		37		37
All other		4,992		4,991		605
		15,698		15,205		3,047
Total	$	72,397	$	59,103	$	3,047

The average balance of loans individually evaluated for impairment and interest income recognized

The following table presents the average balance of loans individually evaluated for impairment and interest income recognized on these loans for the six months ended June 30, 2012 and June 30, 2011.   The table includes loans acquired with deteriorated credit quality that are still individually evaluated for impairment.

	Six months ended June 30, 2012						Six months ended June 30, 2011
Loan Class	Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized
Residential real estate	$	10,165	$	318	$	304	$	281	$	84	$	93
Multifamily real estate		7,334		1,350		1,341		6,748		16		16
Commercial real estate:
Owner occupied		8,612		938		923		11,949		25		26
Non-owner occupied		11,479		55		51		10,147		30		32
Commercial and industrial		9,055		240		233		8,441		189		192
Consumer		37		1		1		41		4		4
All other		7,896		194		183		12,865		25		25
Total	$	54,578	$	3,096	$	3,036	$	50,472	$	373	$	388

The following table presents the average balance of loans individually evaluated for impairment and interest income recognized on these loans for the three months ended June 30, 2012 and June 30, 2011.   The table includes loans acquired with deteriorated credit quality that are still individually evaluated for impairment.

	Three months ended June 30, 2012						Three months ended June 30, 2011
Loan Class	Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized
Residential real estate	$	10,209	$	189	$	181	$	319	$	82	$	91
Multifamily real estate		4,850		43		37		7,751		16		16
Commercial real estate:
Owner occupied		7,619		44		38		11,977		12		12
Non-owner occupied		11,432		20		25		9,111		23		24
Commercial and industrial		11,473		133		126		8,390		16		18
Consumer		36		1		1		40		3		3
All other		6,696		98		101		13,571		19		17
Total	$	52,315	$	528	$	509	$	51,159	$	171	$	181

Troubled debt restructurings

The following table presents TDR's as of June 30, 2012 and December 31, 2011:

June 30, 2012	TDR's on Non-accrual		Other TDR's		Total TDR's
Residential  real estate	$	317	$	1,079	$	1,396
Commercial real estate
Owner occupied		4,391		-		4,391
Non owner occupied		2,971		1,612		4,583
Commercial and industrial		3		2,795		2,798
All other		-		2,039		2,039
Total	$	7,682	$	7,525	$	15,207

December 31, 2011	TDR's on Non-accrual		Other TDR's		Total TDR's
Residential  real estate	$	59	$	1,371	$	1,430
Commercial real estate
Owner occupied		4,541		-		4,541
Non owner occupied		3,135		1,641		4,776
Commercial and industrial		42		897		939
Consumer		11		1		12
All other		-		2,041		2,041
Total	$	7,788	$	5,951	$	13,739

Troubled debt restructuring during the period

The following table presents TDR's that occurred during the three and six months ended June 30, 2012:

	Three months ended June 30, 2012						Six months ended June 30, 2012
Loan Class	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial and industrial		-	$	-	$	-		2	$	1,999	$	1,999

Risk category of loans by class of loans

As of June 30, 2012, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

Loan Class	Pass		Special Mention		Substandard		Doubtful		Total Loans
Residential real estate	$	197,990	$	6,863	$	14,010	$	250	$	219,113
Multifamily real estate		20,735		2,210		7,777		-		30,722
Commercial real estate:
Owner occupied		80,746		4,201		14,110		-		99,057
Non-owner occupied		143,756		4,805		15,555		-		164,116
Commercial and industrial		51,948		3,679		11,795		17		67,439
Consumer		28,693		157		48		36		28,934
All other		49,845		725		9,629		688		60,887
Total	$	573,713	$	22,640	$	72,924	$	991	$	670,268

As of December 31, 2011, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

Loan Class	Pass		Special Mention		Substandard		Doubtful		Total Loans
Residential real estate	$	198,865	$	8,105	$	14,731	$	55	$	221,756
Multifamily real estate		16,798		2,218		15,319		-		34,335
Commercial real estate:
Owner occupied		79,753		5,377		16,600		134		101,864
Non-owner occupied		146,305		4,883		15,352		-		166,540
Commercial and industrial		58,158		8,675		10,095		32		76,960
Consumer		29,753		198		102		37		30,090
All other		43,485		1,052		14,064		777		59,378
Total	$	573,117	$	30,508	$	86,263	$	1,035	$	690,923

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FAIR VALUE

6 Months Ended

Jun. 30, 2012

FAIR VALUE [Abstract]

FAIR VALUE

NOTE  9 - FAIR VALUE

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a company's own assumptions about the assumptions that market participants would use in pricing an asset or liability.

When possible, the Company looks to active and observable markets to price identical assets or liabilities. When identical assets and liabilities are not traded in active markets, the Company looks to observable market data for similar assets and liabilities. However, certain assets and liabilities are not traded in observable markets and the Company must use other valuation methods to develop a fair value.

The Company used the following methods and significant assumptions to estimate the fair value of each type of financial instrument measured on a recurring basis:

Investment Securities:  The fair values for investment securities are determined by quoted market prices, if available (Level 1). For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2). For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3).

Assets and Liabilities Measured on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are summarized below:

			Fair Value Measurements at  June 30, 2012 Using:
	Carrying Value		Quoted Prices in Active Markets for Identical Assets  (Level 1)		Significant Other Observable Inputs  (Level 2)		Significant Unobservable Inputs  (Level 3)
Available for sale
Mortgage-backed securities
U. S. agency MBS - residential	$	44,022	$	-	$	44,022	$	-
U. S. agency CMO's - residential		217,082		-		217,082		-
Total mortgage-backed securities of government sponsored agencies		261,104		-		261,104		-
U. S. government sponsored agency securities		29,247		-		29,247		-
Obligations of states and political subdivisions		9,569		-		9,429		140
Other securities		5,448		-		5,448		-
Total available for sale	$	305,368	$	-	$	305,228	$	140

			Fair Value Measurements at  December 31, 2011 Using:
	Carrying Value		Quoted Prices in Active Markets for Identical Assets  (Level 1)		Significant Other Observable Inputs  (Level 2)		Significant Unobservable Inputs  (Level 3)
Available for sale
Mortgage-backed securities
U. S. agency MBS - residential	$	40,255	$	-	$	40,255	$	-
U. S. agency CMO's - residential		205,738		-		205,738		-
Total mortgage-backed securities of government sponsored agencies		245,993		-		245,993		-
U. S. government sponsored agency securities		18,141		-		18,141		-
Obligations of states and political subdivisions		9,650		-		9,510		140
Other securities		4,695		-		4,695		-
Total available for sale	$	278,479	$	-	$	278,339	$	140

The carrying amounts and estimated fair values of financial instruments at June 30, 2012 were as follows:

				Fair Value Measurements at June 30, 2012 Using
	Carrying Amount			Level 1			Level 2			Level 3		Total
Financial assets
Cash and due from banks	$	85,192		$	85,192		$	-		$	-	$	85,192
Federal funds sold		12,022			12,022			-			-		12,022
Securities available for sale		305,368			-			305,228			140		305,368
Loans held for sale		221			-			221			-		221
Loans, net		660,406			-			-			657,902		657,902
Federal Home Loan Bank stock		4,405			n/a			n/a			n/a		n/a
Interest receivable		3,448			-			950			2,498		3,448
Financial liabilities
Deposits	$	(949,871	)	$	(571,632	)	$	(382,675	)	$	-	$	(954,307	)
Securities sold under agreements to repurchase		(19,707	)		-			(19,707	)-		-		(19,707	)
Federal Home Loan Bank advances		(6	)		-			(6	)		-		(6	)
Other borrowed funds		(17,094	)		-			(17,066	)		-		(17,066	)
Interest payable		(596	)		(6	)		(590	)		-		(596	)

The carrying amounts and estimated fair values of financial instruments at December 31, 2011 were as follows:

	Carrying Amount			Fair Value
Financial assets
Cash and due from banks	$	72,056		$	72,056
Federal funds sold		10,832			10,832
Securities available for sale		278,479			278,479
Loans held for sale		70			70
Loans, net		681,128			675,616
Federal Home Loan Bank stock		5,216			n/a
Interest receivable		3,497			3,497
Financial liabilities
Deposits	$	(925,078	)	$	(929,796	)
Securities sold under agreements to repurchase		(23,205	)		(23,205	)
Federal Home Loan Bank advances		(10,083	)		(10,141	)
Other borrowed funds		(18,130	)		(18,101	)
Interest payable		(712	)		(712	)

Carrying amount is the estimated fair value for cash and due from banks, Federal funds sold, accrued interest receivable and payable, demand deposits, short-term debt, and variable rate loans or deposits that reprice frequently and fully.  It was not practicable to determine the fair value of Federal Home Loan Bank stock due to the restrictions placed on its transferability.  For fixed rate loans or deposits and for variable rate loans or deposits with infrequent repricing or repricing limits, fair value is based on discounted cash flows using current market rates applied to the estimated life and credit risk.  Fair values for impaired loans are estimated using discounted cash flow analysis or underlying collateral values.  Fair value of debt is based on current rates for similar financing. The fair value of commitments to extend credit and standby letters of credit is not material.

The Company used the following methods and significant assumptions to estimate the fair value of each type of financial instrument measured on a non-recurring basis:

Impaired Loans:  The fair value of impaired loans with specific allocations of the allowance for loan losses is generally based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are typically significant and unique to each property and result in a Level 3 classification of the inputs for determining fair value.  Management periodically evaluates the appraised values and will discount a property's appraised value to account for a number of factors including but not limited to the cost of liquidating the collateral, the age of the appraisal, observable deterioration since the appraisal, or other factors unique to the property.  To the extent an adjusted appraised value is lower than the carrying value of an impaired loan, a specific allocation of the allowance for loan losses is assigned to the loan.

Other real estate owned (OREO):  The fair value of OREO is based on appraisals less cost to sell at the date of foreclosure.  These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are typically significant and result in a Level 3 classification of the inputs for determining fair value.  Management periodically evaluates the appraised values and will discount a property's appraised value to account for a number of factors including but not limited to the cost of liquidating the collateral, the age of the appraisal, observable deterioration since the appraisal, or other factors unique to the property. To the extent an adjusted appraised value is lower than the carrying value of an OREO property, a direct charge to earnings is recorded as an OREO writedown.

Assets and Liabilities Measured on a Non-Recurring Basis

Assets and liabilities measured at fair value on a non-recurring basis are summarized below:

			Fair Value Measurements at June 30, 2012 Using
	June 30, 2012		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Impaired loans:
Residential Real Estate	$	4,503	$	-	$	-	$	4,503
Commercial Real Estate
Owner Occupied		502		-		-		502
Non-owner Occupied		1,255		-		-		1,255
Commercial and Industrial		7,654		-		-		7,654
All Other		497		-		-		497
Total impaired loans		14,411	$	-	$	-	$	14,411
Other real estate owned:
Residential Real Estate	$	265	$	-	$	-	$	265
Commercial Real Estate
Owner Occupied		100		-		-		100
Non-owner Occupied		2,931		-		-		2,931
All Other		224		-		-		224
Total OREO	$	3,520	$	-	$	-	$	3,520

Assets and liabilities measured at fair value on a non-recurring basis are summarized below:

			Fair Value Measurements at December 31, 2011 Using
	Dec 31, 2011		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Impaired loans:
Residential Real Estate	$	4,297	$	-	$	-	$	4,297
Commercial Real Estate
Owner Occupied		1,168		-		-		1,168
Non-owner Occupied		1,269		-		-		1,269
Commercial and Industrial		1,038		-		-		1,038
All Other		4,386		-		-		4,386
Total impaired loans		12,158	$	-	$	-	$	12,158
Other real estate owned:
Residential Real Estate	$	1,608	$	-	$	-	$	1,608
Commercial Real Estate
Owner Occupied		701		-		-		701
Non-owner Occupied		2,931		-		-		2,931
Commercial and Industrial		55		-		-		55
All Other		8,788		-		-		8,788
Total OREO	$	14,083	$	-	$	-	$	14,083

Impaired loans, which are measured for impairment using the fair value of the collateral for collateral dependent loans, had a carrying amount of $17,459,000 at June 30, 2012 with a valuation allowance of $3,048,000 and a carrying amount of $15,205,000 at December 31, 2011 with a valuation allowance of $3,047,000, resulting in a provision for loan losses of $1,000 for the six months ended June 30, 2012, compared to a $2,342,000 provision for loan losses for the six months ended June 30, 2011;  and a negative $527,000 provision for loan losses for the three months ended June 30, 2012, compared to a $2,327,000 provision for loan losses for the three months ended    June 30, 2011.  The detail of impaired loans by loan class is contained in Note 3 above.

Other real estate owned measured at fair value less costs to sell, had a net carrying amount of $3,520,000 which is made up of the outstanding balance of $4,547,000 net of a valuation allowance of $1,027,000 at June 30, 2012, resulting in write downs of $85,000 for the six months ending June 30, 2012 compared to $362,000 for the six months ending June 30, 2011; and write downs of $41,000 for the three months ending June 30, 2012 compared to $76,000 for the three months ending June 30, 2011.  At December 31, 2011, other real estate owned had a net carrying amount of $14,083,000, made up of the outstanding balance of $15,288,000, net of a valuation allowance of $1,205,000.

Assets and Liabilities Measured on a Non-Recurring Basis

Assets and Liabilities measured at fair value on a non-recurring basis are summarized below:

	June 30, 2012		Valuation Techniques	Unobservable Inputs	Range (Weighted Avg)
Impaired loans:
Residential Real Estate	$	4,503	sales comparison	adjustment for differences between the comparable sales		0.8%-49.9% (8.7%)
Commercial Real Estate
Owner Occupied		502	sales comparison	adjustment for limited saleablity of specialized property		40.0%-70.0% (44.1%)
Non-owner Occupied		1,255	sales comparison	adjustment for differences between the comparable sales		10.0%-59.0% (37.5%)
			income approach	capitalization rate		9.50%
Commercial and Industrial		7,654	sales comparison	adjustment for differences between the comparable sales		0.0%-43.3% (36.4%)
All Other		497	sales comparison	adjustment for percentage of completion of construction		35.0%-91.4% (38.4%)
Total impaired loans	$	14,411
Other real estate owned:
Residential Real Estate	$	265	sales comparison	adjustment for differences between the comparable sales		26.1%-47.8% (35.2%)
Commercial Real Estate
Owner Occupied		100	sales comparison	adjustment for estimated realizable value		17.9%-17.9% (17.9%)
Non-owner Occupied		2,931	sales comparison	adjustment for differences between the comparable sales		0.0%-82.7% (17.5%)
All Other		224	sales comparison	adjustment for estimated realizable value		0.0%-49.7% (23.8%)
Total OREO	$	3,250

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STOCK COMPENSATION EXPENSE

6 Months Ended

Jun. 30, 2012

STOCK COMPENSATION EXPENSE [Abstract]

STOCK COMPENSATION EXPENSE

NOTE  7 - STOCK COMPENSATION EXPENSE

From time to time the Company grants stock options to its employees.  The Company estimates the fair value of the options at the time they are granted to employees and expenses that fair value over the vesting period of the option grant.

On March 21, 2012, 105,700 incentive stock options were granted out of the 2002 Employee Stock Option Plan at an exercise price of $7.47, the closing market price of Premier on the grant date.  These options vest in three equal annual installments ending on March 21, 2015.  On March 18, 2011, 102,000 incentive stock options were granted out of the 2002 Employee Stock Option Plan at an exercise price of $6.95 the closing market price of Premier on the grant date.  These options vest in three equal annual installments ending on March 18, 2014.  On March 17, 2010, 47,700 incentive stock options were granted out of the 2002 Plan at an exercise price of $8.90.  These options vest in three equal annual installments ending on March 17, 2013.

The fair value of the Company's employee stock options granted is estimated at the date of grant using the Black-Scholes option-pricing model. This model requires the input of highly subjective assumptions, changes to which can materially affect the fair value estimate. Additionally, there may be other factors that would otherwise have a significant effect on the value of employee stock options granted but are not considered by the model. The assumptions used in the Black-Scholes option-pricing model are as follows

	2012			2011			2010
Risk-free interest rate		2.31	%		3.58	%		3.65	%
Expected option life (yrs)		10.00			10.00			10.00
Expected stock price volatility		34.93	%		30.01	%		24.67	%
Dividend yield		2.68	%		4.03	%		4.94	%
Weighted average fair value of options granted during the year	$	2.34		$	1.63		$	1.41

The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield in effect at the time of the grant.  The expected option life was estimated since there has been little option exercise history.  The expected stock price volatility is based on historical volatilities of the Company's common stock.  The dividend yield was estimated using historical dividends and dividend yields since at the time of the option grant the Company is restricted from paying dividends by its primary regulator.

Compensation expense of $85,000 was recorded for the first six months of 2012 compared to $47,000 for the first six months of 2011.  For the three months ended June 30, $57,000 was recorded for 2012 while $30,000 was recorded for 2011.  Stock-based compensation expense is recognized ratably over the requisite vesting period for all awards. Unrecognized stock-based compensation expense related to stock options totaled $248,000 at June 30, 2012. This unrecognized expense is expected to be recognized over the next 32 months based on the vesting periods of the options.

A summary of the Company's stock option activity and related information is presented below for the six months ended June 30:

	2012					2011
				Weighted Average Exercise				Weighted Average Exercise
	Options			Price		Options		Price
Outstanding at beginning of year		350,949		$	9.69		255,649	$	10.77
Grants		105,700			7.47		102,000		6.95
Exercises		-			-		-		-
Forfeitures or expired		(7,000	)		7.73		-		-
Outstanding at June 30,		449,649		$	9.20		357,649	$	9.68
Exercisable at June 30,		265,696					209,996
Weighted average remaining life of options outstanding		6.8					6.9
Weighted average fair value of options granted during the year	$	2.34				$	1.63

Options outstanding at period-end are expected to fully vest.

Additional information regarding stock options outstanding and exercisable at June 30, 2012, is provided in the following table:

		Outstanding						Currently Exercisable
Range of Exercise Prices		Number		Weighted Average Exercise Price		Aggregate Intrinsic Value		Number		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Aggregate Intrinsic Value
$	6.50 to $10.00		325,016	$	7.51	$	74		141,063		5.9	$	7.66	$	48
$	10.01 to $12.50		28,333		11.62		-		28,333		2.6		11.62		-
$	12.51 to $15.00		68,800		13.47		-		68,800		5.2		13.47		-
$	15.01 to $17.50		27,500		16.00		-		27,500		3.6		16.00		-
Outstanding - Jun 30, 2012			449,649		9.20	$	74		265,696		5.1		10.45	$	48

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EARNINGS PER SHARE

6 Months Ended

Jun. 30, 2012

EARNINGS PER SHARE [Abstract]

EARNINGS PER SHARE

NOTE  8 - EARNINGS PER SHARE

A reconciliation of the numerators and denominators of the earnings per common share and earnings per common share assuming dilution computations for the three and six months ended June 30, 2012 and 2011 is presented below:

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Basic earnings per share
Income available to common stockholders	$	1,786	$	724	$	4,311	$	2,089
Weighted average common shares outstanding		7,937,143		7,937,143		7,937,143		7,937,143
Earnings per share	$	0.23	$	0.09	$	0.54	$	0.26
Diluted earnings per share
Income available to common stockholders	$	1,786	$	724	$	4,311	$	2,089
Weighted average common shares outstanding		7,937,143		7,937,143		7,937,143		7,937,143
Add dilutive effects of potential additional common stock		202,258		176,092		144,075		158,482
Weighted average common and dilutive potential common shares outstanding		8,139,401		8,113,235		8,081,218		8,095,625
Earnings per share assuming dilution	$	0.22	$	0.09	$	0.53	$	0.26

Stock options for 405,349 and 209,049 shares of common stock were not considered in computing diluted earnings per share for the six months ended June 30, 2012 and 2011 because they were antidilutive.  Stock options for 202,449 and 209,049 shares of common stock were not considered in computing diluted earnings per share for the three months ended June 30, 2012 and 2011 because they were antidilutive.

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SUBSEQUENT EVENTS

6 Months Ended

Jun. 30, 2012

SUBSEQUENT EVENTS [Abstract]

SUBSEQUENT EVENTS

NOTE  10 - SUBSEQUENT EVENTS

On July 24, 2012, Premier issued a press release announcing that the July 29, 2010 Written Agreement with the Federal Reserve Bank of Richmond ("FRB") had been terminated by the FRB.  In a notice posted on the Federal Reserve System Board of Governors' website on July 24, 2012, (www.federalreserve.gov), the Federal Reserve Bank noted that Premier has fully satisfied all of the provisions of the Written Agreement and, accordingly, the FRB had terminated the agreement effective July 23, 2012.

On August 10, 2012, Premier redeemed 10,252 shares of the Series A Preferred Stock at a discounted price of $901.03 per share.  On July 27, 2012, Premier was notified that it successfully bid to repurchase 10,252 shares of the 22,252 shares of Series A Preferred Stock issued to the U.S. Treasury as part of TARP.  Using a modified Dutch auction methodology that establishes a market price by allowing investors to submit bids at specified increments during the period of July 23, 2012 through July 26, 2012, the U.S. Treasury auctioned all of Premier's 22,252 Series A Preferred Stock.  The closing price of the auctioned shares was $901.03 per share.  The redemption reduces Tier I Capital and Preferred Equity by approximately $9,237,000.

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LOANS, Recorded Investment in Loans by Portfolio Segment Based on Impairment Method (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2012	Dec. 31, 2011
Financing receivable impaired [Line Items]
Individually Evaluated for Impairment, Allowance for Loan Losses	$ 3,048	$ 3,047
Collectively Evaluated for Impairment, Allowance for Loan Losses	6,814	6,748
Acquired with Deteriorated Credit Quality, Allowance for Loan Losses	0	0
Total Allowance for Loan Losses	9,862	9,795
Loans balances [Abstract]
Individually Evaluated for Impairment, Loan Balances	39,569	44,244
Collectively Evaluated for Impairment, Loan Balances	618,377	631,820
Acquired with Deteriorated Credit Quality, Loan Balances	12,322	14,859
Total Loan Balances	670,268	690,923
Residential Real Estate [Member]
Financing receivable impaired [Line Items]
Individually Evaluated for Impairment, Allowance for Loan Losses	507	451
Collectively Evaluated for Impairment, Allowance for Loan Losses	1,761	1,683
Acquired with Deteriorated Credit Quality, Allowance for Loan Losses	0	0
Total Allowance for Loan Losses	2,268	2,134
Loans balances [Abstract]
Individually Evaluated for Impairment, Loan Balances	9,955	9,795
Collectively Evaluated for Impairment, Loan Balances	208,948	211,679
Acquired with Deteriorated Credit Quality, Loan Balances	210	282
Total Loan Balances	219,113	221,756
Multifamily Real Estate [Member]
Financing receivable impaired [Line Items]
Individually Evaluated for Impairment, Allowance for Loan Losses	0	0
Collectively Evaluated for Impairment, Allowance for Loan Losses	427	284
Acquired with Deteriorated Credit Quality, Allowance for Loan Losses	0	0
Total Allowance for Loan Losses	427	284
Loans balances [Abstract]
Individually Evaluated for Impairment, Loan Balances	1,283	8,594
Collectively Evaluated for Impairment, Loan Balances	25,915	22,033
Acquired with Deteriorated Credit Quality, Loan Balances	3,524	3,708
Total Loan Balances	30,722	34,335
Owner Occupied Commercial Real Estate [Member]
Financing receivable impaired [Line Items]
Individually Evaluated for Impairment, Allowance for Loan Losses	132	138
Collectively Evaluated for Impairment, Allowance for Loan Losses	847	780
Acquired with Deteriorated Credit Quality, Allowance for Loan Losses	0	0
Total Allowance for Loan Losses	979	918
Loans balances [Abstract]
Individually Evaluated for Impairment, Loan Balances	7,213	8,663
Collectively Evaluated for Impairment, Loan Balances	91,564	91,267
Acquired with Deteriorated Credit Quality, Loan Balances	280	1,934
Total Loan Balances	99,057	101,864
Non Owner Occupied Commercial Real Estate [Member]
Financing receivable impaired [Line Items]
Individually Evaluated for Impairment, Allowance for Loan Losses	878	922
Collectively Evaluated for Impairment, Allowance for Loan Losses	1,428	1,459
Acquired with Deteriorated Credit Quality, Allowance for Loan Losses	0	0
Total Allowance for Loan Losses	2,306	2,381
Loans balances [Abstract]
Individually Evaluated for Impairment, Loan Balances	5,028	5,147
Collectively Evaluated for Impairment, Loan Balances	152,881	154,966
Acquired with Deteriorated Credit Quality, Loan Balances	6,207	6,427
Total Loan Balances	164,116	166,540
Commercial and Industrial [Member]
Financing receivable impaired [Line Items]
Individually Evaluated for Impairment, Allowance for Loan Losses	1,379	894
Collectively Evaluated for Impairment, Allowance for Loan Losses	605	986
Acquired with Deteriorated Credit Quality, Allowance for Loan Losses	0	0
Total Allowance for Loan Losses	1,984	1,880
Loans balances [Abstract]
Individually Evaluated for Impairment, Loan Balances	11,084	3,636
Collectively Evaluated for Impairment, Loan Balances	55,807	72,741
Acquired with Deteriorated Credit Quality, Loan Balances	548	583
Total Loan Balances	67,439	76,960
Consumer [Member]
Financing receivable impaired [Line Items]
Individually Evaluated for Impairment, Allowance for Loan Losses	36	37
Collectively Evaluated for Impairment, Allowance for Loan Losses	274	261
Acquired with Deteriorated Credit Quality, Allowance for Loan Losses	0	0
Total Allowance for Loan Losses	310	298
Loans balances [Abstract]
Individually Evaluated for Impairment, Loan Balances	36	37
Collectively Evaluated for Impairment, Loan Balances	28,898	30,053
Acquired with Deteriorated Credit Quality, Loan Balances	0	0
Total Loan Balances	28,934	30,090
All other [Member]
Financing receivable impaired [Line Items]
Individually Evaluated for Impairment, Allowance for Loan Losses	116	605
Collectively Evaluated for Impairment, Allowance for Loan Losses	1,472	1,295
Acquired with Deteriorated Credit Quality, Allowance for Loan Losses	0	0
Total Allowance for Loan Losses	1,588	1,900
Loans balances [Abstract]
Individually Evaluated for Impairment, Loan Balances	4,970	8,372
Collectively Evaluated for Impairment, Loan Balances	54,364	49,081
Acquired with Deteriorated Credit Quality, Loan Balances	1,553	1,925
Total Loan Balances	$ 60,887	$ 59,378

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STOCKHOLDERS' EQUITY AND REGULATORY MATTERS (Tables)

6 Months Ended

Jun. 30, 2012

STOCKHOLDERS' EQUITY AND REGULATORY MATTERS [Abstract]

Summary of regulatory capital ratios

Shown below is a summary of regulatory capital ratios for the Company:

	June 30, 2012			December 31, 2011			Regulatory Minimum Requirements			To Be Considered Well Capitalized
Tier I Capital (to Risk-Weighted Assets)		17.4	%		16.0	%		4.0	%		6.0	%
Total Capital (to Risk-Weighted Assets)		18.6	%		17.2	%		8.0	%		10.0	%
Tier I Capital (to Average Assets)		10.4	%		10.0	%		4.0	%		5.0	%

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SECURITIES (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Available-for-sale Investment securities [Abstract]
Amortized Cost	$ 295,980	$ 270,883
Unrealized Gains	9,489	7,744
Unrealized Losses	(101)	(148)
Fair Value	305,368	278,479
U. S. sponsored agency MBS - residential [Member]
Available-for-sale Investment securities [Abstract]
Amortized Cost	42,031	38,403
Unrealized Gains	1,991	1,856
Unrealized Losses	0	(4)
Fair Value	44,022	40,255
U. S. sponsored agency CMO's - residential [Member]
Available-for-sale Investment securities [Abstract]
Amortized Cost	211,457	200,835
Unrealized Gains	5,654	4,933
Unrealized Losses	(29)	(30)
Fair Value	217,082	205,738
Total mortgage-backed securities of government sponsored agencies [Member]
Available-for-sale Investment securities [Abstract]
Amortized Cost	253,488	239,238
Unrealized Gains	7,645	6,789
Unrealized Losses	(29)	(34)
Fair Value	261,104	245,993
U. S. government sponsored agency securities [Member]
Available-for-sale Investment securities [Abstract]
Amortized Cost	29,066	18,114
Unrealized Gains	181	58
Unrealized Losses	0	(31)
Fair Value	29,247	18,141
Obligations of states and political subdivisions [Member]
Available-for-sale Investment securities [Abstract]
Amortized Cost	9,084	9,193
Unrealized Gains	485	457
Unrealized Losses	0	0
Fair Value	9,569	9,650
Other securities subdivisions [Member]
Available-for-sale Investment securities [Abstract]
Amortized Cost	4,342	4,338
Unrealized Gains	1,178	440
Unrealized Losses	(72)	(83)
Fair Value	$ 5,448	$ 4,695

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FAIR VALUE, Assets and Liabilities Measured on Nonrecurring Basis (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Impaired Loans Additional Disclosure [Abstract]
Valuation allowance for impaired loans	$ 3,048	$ 3,047
Carrying Amount [Member]
Impaired Loans Additional Disclosure [Abstract]
Recorded investment in impaired loans carried at fair value	17,459	15,205
Valuation allowance for impaired loans	3,048	3,047
Other Real Estate Owned Additional Disclosure [Abstract]
Recorded investment in other real estate owned carried at fair value - gross	4,547	15,288
Valuation allowance for other real estate owned	1,027	1,205
Fair Value, Measurements, Nonrecurring [Member]
Impaired loans: [Abstract]
Residential Real Estate	4,503	4,297
Owner Occupied Commercial Real Estate	502	1,168
Non-owner Occupied Commercial Real Estate	1,255	1,269
Commercial and Industrial	7,654	1,038
All Other	497	4,386
Total impaired loans	14,411	12,158
Other real estate owned: [Abstract]
Residential Real Estate	265	1,608
Owner occupied commercial real estate	100	701
Non-owner occupied commercial real estate	2,931	2,931
Commercial and Industrial		55
All Other	224	8,788
Total OREO	3,520	14,083
Fair Value, Measurements, Nonrecurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Impaired loans: [Abstract]
Residential Real Estate	0	0
Owner Occupied Commercial Real Estate	0	0
Non-owner Occupied Commercial Real Estate	0	0
Commercial and Industrial	0	0
All Other	0	0
Total impaired loans	0	0
Other real estate owned: [Abstract]
Residential Real Estate	0	0
Owner occupied commercial real estate	0	0
Non-owner occupied commercial real estate	0	0
Commercial and Industrial		0
All Other	0	0
Total OREO	0	0
Fair Value, Measurements, Nonrecurring [Member] | Significant Other Observable Inputs (Level 2) [Member]
Impaired loans: [Abstract]
Residential Real Estate	0	0
Owner Occupied Commercial Real Estate	0	0
Non-owner Occupied Commercial Real Estate	0	0
Commercial and Industrial	0	0
All Other	0	0
Total impaired loans	0	0
Other real estate owned: [Abstract]
Residential Real Estate	0	0
Owner occupied commercial real estate	0	0
Non-owner occupied commercial real estate	0	0
Commercial and Industrial		0
All Other	0	0
Total OREO	0	0
Fair Value, Measurements, Nonrecurring [Member] | Significant Unobservable Inputs (Level 3) [Member]
Impaired loans: [Abstract]
Residential Real Estate	4,503	4,297
Owner Occupied Commercial Real Estate	502	1,168
Non-owner Occupied Commercial Real Estate	1,255	1,269
Commercial and Industrial	7,654	1,038
All Other	497	4,386
Total impaired loans	14,411	12,158
Other real estate owned: [Abstract]
Residential Real Estate	265	1,608
Owner occupied commercial real estate	100	701
Non-owner occupied commercial real estate	2,931	2,931
Commercial and Industrial		55
All Other	224	8,788
Total OREO	$ 3,520	$ 14,083

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PREFERRED STOCK (Details) (USD $)			6 Months Ended
	Oct. 02, 2009	Oct. 02, 2009 Series A Preferred Stock [Member]	Jun. 30, 2012 Series A Preferred Stock [Member] Before November 14, 2014 [Member]	Jun. 30, 2012 Series A Preferred Stock [Member] After November 14, 2014 [Member]
Class of Stock [Line Items]
Liquidation preference per share (in dollars per share)		$ 1,000
Warrants issued to purchase common stock (in shares)	628,587
Exercise price of warrants (in dollars per share)	$ 5.31
Accrued dividend rate (in hundredths)			5.00%	9.00%

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) [Abstract]
Net income	$ 2,092	$ 1,029	$ 4,922	$ 2,700
Other comprehensive income:
Unrealized gains arising during the period	786	6,953	1,792	8,642
Reclassification of realized amount	0	(18)	0	(18)
Net change in unrealized gain (loss) on securities	786	6,935	1,792	8,624
Less tax impact	267	2,358	609	2,932
Other comprehensive income:	519	4,577	1,183	5,692
Comprehensive income	$ 2,611	$ 5,606	$ 6,105	$ 8,392

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FEDERAL HOME LOAN BANK ADVANCES

6 Months Ended

Jun. 30, 2012

FEDERAL HOME LOAN BANK ADVANCES [Abstract]

FEDERAL HOME LOAN BANK ADVANCES

NOTE  4 - FEDERAL HOME LOAN BANK ADVANCES

The Banks own stock of the Federal Home Loan Bank (FHLB) of Cincinnati, Ohio, the FHLB of Pittsburgh, Pennsylvania, and the FHLB of Atlanta, Georgia. This stock allows the Banks to borrow advances from the FHLB.

Advances from the FHLB at June 30, 2012 and December 31, 2011 were as follows:

	2012		2011
Payments due at maturity in March 2012, fixed rate at 1.81%	$	-	$	10,042
Payments due monthly with maturity in July 2012, fixed rate at 4.40%		6		41
	$	6	$	10,083

Advances are secured by the FHLB stock, certain pledged investment securities and substantially all single family first mortgage loans of the participating Banks.  Principal payments on all FHLB advances are due during the year ending December 31, 2012.

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SECURITIES, By Contractual Maturity (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011
Amortized cost of securities by contractual maturity [Abstract]
Due in one year or less	$ 1,695
Due after one year through five years	13,616
Due after five years through ten years	24,131
Due after ten years	1,958
Corporate preferred securities	1,092
Mortgage-backed securities of government sponsored agencies	253,488
Available for sale, Amortized Cost	295,980
Fair value of securities by contractual maturity [Abstract]
Due in one year or less	1,949
Due after one year through five years	13,844
Due after five years through ten years	24,536
Due after ten years	2,526
Corporate preferred securities	1,409
Mortgage backed securities of government sponsored agencies	261,104
Available for sale, Fair Value	305,368		278,479
Proceeds from Sale of Available-for-sale Securities, Total	0	2,017
Gain on sale of securities	$ 0	$ 18

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LOANS, Risk Category of Loans by Class of Loans, Credit Quality Indicators (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Accounts, notes, loans and financing receivable [Line Items]
Loans	$ 670,268	$ 690,923
Residential Real Estate [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	219,113	221,756
Multifamily Real Estate [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	30,722	34,335
Owner Occupied Commercial Real Estate [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	99,057	101,864
Non Owner Occupied Commercial Real Estate [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	164,116	166,540
Commercial and Industrial [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	67,439	76,960
Consumer [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	28,934	30,090
All other [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	60,887	59,378
Pass [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	573,713	573,117
Pass [Member] | Residential Real Estate [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	197,990	198,865
Pass [Member] | Multifamily Real Estate [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	20,735	16,798
Pass [Member] | Owner Occupied Commercial Real Estate [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	80,746	79,753
Pass [Member] | Non Owner Occupied Commercial Real Estate [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	143,756	146,305
Pass [Member] | Commercial and Industrial [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	51,948	58,158
Pass [Member] | Consumer [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	28,693	29,753
Pass [Member] | All other [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	49,845	43,485
Special Mention [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	22,640	30,508
Special Mention [Member] | Residential Real Estate [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	6,863	8,105
Special Mention [Member] | Multifamily Real Estate [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	2,210	2,218
Special Mention [Member] | Owner Occupied Commercial Real Estate [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	4,201	5,377
Special Mention [Member] | Non Owner Occupied Commercial Real Estate [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	4,805	4,883
Special Mention [Member] | Commercial and Industrial [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	3,679	8,675
Special Mention [Member] | Consumer [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	157	198
Special Mention [Member] | All other [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	725	1,052
Substandard [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	72,924	86,263
Substandard [Member] | Residential Real Estate [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	14,010	14,731
Substandard [Member] | Multifamily Real Estate [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	7,777	15,319
Substandard [Member] | Owner Occupied Commercial Real Estate [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	14,110	16,600
Substandard [Member] | Non Owner Occupied Commercial Real Estate [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	15,555	15,352
Substandard [Member] | Commercial and Industrial [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	11,795	10,095
Substandard [Member] | Consumer [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	48	102
Substandard [Member] | All other [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	9,629	14,064
Doubtful [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	991	1,035
Doubtful [Member] | Residential Real Estate [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	250	55
Doubtful [Member] | Multifamily Real Estate [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	0	0
Doubtful [Member] | Owner Occupied Commercial Real Estate [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	0	134
Doubtful [Member] | Non Owner Occupied Commercial Real Estate [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	0	0
Doubtful [Member] | Commercial and Industrial [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	17	32
Doubtful [Member] | Consumer [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	36	37
Doubtful [Member] | All other [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	$ 688	$ 777

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FEDERAL HOME LOAN BANK ADVANCES (Tables)

6 Months Ended

Jun. 30, 2012

FEDERAL HOME LOAN BANK ADVANCES [Abstract]

Advances from the FHLB

Advances from the FHLB at June 30, 2012 and December 31, 2011 were as follows:

	2012		2011
Payments due at maturity in March 2012, fixed rate at 1.81%	$	-	$	10,042
Payments due monthly with maturity in July 2012, fixed rate at 4.40%		6		41
	$	6	$	10,083