10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2015

or

☐ 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 ☑     No ☐.

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

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

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

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

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, – 8,167,806 shares outstanding at July 31, 2015

PREMIER FINANCIAL BANCORP, INC.

JUNE 30, 2015

INDEX TO REPORT

Part I - Financial Information
Item 1 – Financial Statements	3
Item 2 – Management's Discussion and Analysis	42
Item 3 – Quantitative and Qualitative Disclosures about Market Risk	54
Item 4 – Controls and Procedures	54
Part II - Other Information	55
Item 1 – Legal Proceedings	55
Item 1A – Risk Factors	55
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds	55
Item 3 – Defaults Upon Senior Securities	55
Item 4 – Mine Safety Disclosures	55
Item 5 – Other Information	55
Item 6 – Exhibits	55
Signatures -	56

- 2 -

PREMIER FINANCIAL BANCORP, INC.

JUNE 30, 2015

PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

The accompanying information has not been audited by an independent registered public accounting firm; 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 registered public accounting firm.

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, 2014 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 (Loss)	6
Consolidated Statements of Cash Flows	7
Notes to Consolidated Financial Statements	9

- 3 -

PREMIER FINANCIAL BANCORP, INC.

CONSOLIDATED BALANCE SHEETS

JUNE 30, 2015 AND DECEMBER 31, 2014

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

	June 30,			December 31,
	2015			2014
ASSETS
Cash and due from banks	$	33,440		$	35,147
Interest bearing bank balances		35,437			35,251
Federal funds sold		3,265			4,986
Cash and cash equivalents		72,142			75,384
Securities available for sale		226,077			229,750
Loans held for sale		-			226
Loans		883,873			879,711
Allowance for loan losses		(10,694	)		(10,347	)
Net loans		873,179			869,364
Federal Home Loan Bank stock, at cost		3,072			2,996
Premises and equipment, net		20,127			21,384
Real estate and other property acquired through foreclosure		11,349			12,208
Interest receivable		3,271			3,219
Goodwill		33,796			33,796
Other intangible assets		2,599			3,033
Other assets		1,394			1,464
Total assets	$	1,247,006		$	1,252,824
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Non-interest bearing	$	253,094		$	252,828
Time deposits, $250,000 and over		67,532			66,216
Other interest bearing		749,905			756,199
Total deposits		1,070,531			1,075,243
Securities sold under agreements to repurchase		15,307			15,580
Other borrowed funds		12,507			11,722
Interest payable		387			434
Other liabilities		3,836			4,063
Total liabilities		1,102,568			1,107,042
Stockholders' equity
Common stock, no par value; 20,000,000 shares authorized; 8,167,806 shares issued and outstanding at June 30, 2015, and 8,142,056 shares issued and outstanding at December 31, 2014		69,257			74,568
Retained earnings		73,868			69,719
Accumulated other comprehensive income (loss)		1,313			1,495
Total stockholders' equity		144,438			145,782
Total liabilities and stockholders' equity	$	1,247,006		$	1,252,824

- 4 -

PREMIER FINANCIAL BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME

THREE AND SIX MONTHS ENDED JUNE 30, 2015 AND 2014

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Interest income
Loans, including fees	$	11,641		$	11,262		$	23,306		$	22,925
Securities available for sale
Taxable		1,206			1,400			2,463			2,715
Tax-exempt		56			63			111			98
Federal funds sold and other		52			64			88			96
Total interest income		12,955			12,789			25,968			25,834
Interest expense
Deposits		887			960			1,803			1,847
Repurchase agreements and other		9			9			19			16
Other borrowings		136			144			259			288
Total interest expense		1,032			1,113			2,081			2,151
Net interest income		11,923			11,676			23,887			23,683
Provision (credit) for loan losses		(146	)		(79	)		(77	)		(389	)
Net interest income after provision for loan losses		12,069			11,755			23,964			24,072
Non-interest income
Service charges on deposit accounts		914			899			1,792			1,638
Electronic banking income		702			655			1,346			1,150
Secondary market mortgage income		22			50			60			69
Other		124			179			269			307
		1,762			1,783			3,467			3,164
Non-interest expenses
Salaries and employee benefits		4,475			4,873			8,816			8,857
Occupancy and equipment expenses		1,263			1,307			2,590			2,460
Outside data processing		1,075			1,029			2,171			1,898
Professional fees		179			209			308			745
Taxes, other than payroll, property and income		145			152			341			304
Write-downs, expenses, sales of other real estate owned, net		340			(488	)		682			(394	)
Amortization of intangibles		209			224			434			368
FDIC insurance		206			260			421			461
Other expenses		1,037			1,148			1,958			2,044
		8,929			8,714			17,721			16,743
Income before income taxes		4,902			4,824			9,710			10,493
Provision for income taxes		1,775			1,724			3,441			3,723
Net income	$	3,127		$	3,100		$	6,269		$	6,770
Preferred stock dividends and accretion		-			(165	)		-			(330	)
Net income available to common stockholders	$	3,127		$	2,935		$	6,269		$	6,440
Net income per share:
Basic	$	0.38		$	0.36		$	0.77		$	0.80
Diluted		0.37			0.34			0.74			0.75

- 5 -

PREMIER FINANCIAL BANCORP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

THREE AND SIX MONTHS ENDED JUNE 30, 2015 AND 2014

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Net income	$	3,127		$	3,100		$	6,269		$	6,770
Other comprehensive income (loss):
Unrealized gains (losses) arising during the period		(1,582	)		741			(276	)		3,459
Reclassification of realized amount		-			-			-			-
Net change in unrealized gain on securities		(1,582	)		741			(276	)		3,459
Less tax impact		538			(252	)		94			(1,176	)
Other comprehensive income (loss)		(1,044	)		489			(182	)		2,283
Comprehensive income	$	2,083		$	3,589		$	6,087		$	9,053

- 6 -

PREMIER FINANCIAL BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED JUNE 30, 2015 AND 2014

(UNAUDITED, DOLLARS IN THOUSANDS)

	2015			2014
Cash flows from operating activities
Net income	$	6,269		$	6,770
Adjustments to reconcile net income to net cash from operating activities
Depreciation		874			735
Provision (credit) for loan losses		(77	)		(389	)
Amortization (accretion), net		307			484
OREO writedowns (gains on sales), net		254			(800	)
Stock compensation expense		163			170
Loans originated for sale		(1,679	)		(3,192	)
Secondary market loans sold		1,941			2,851
Secondary market income		(38	)		(69	)
Changes in :
Interest receivable		(52	)		417
Other assets		166			1,066
Interest payable		(47	)		(56	)
Other liabilities		(227	)		174
Net cash from operating activities		7,854			8,161
Cash flows from investing activities
Purchases of securities available for sale		(30,705	)		(34,453	)
Proceeds from maturities and calls of securities available for sale		33,557			24,298
Purchase of FHLB stock		(76	)		-
Redemption of FHLB stock		-			408
Net change in loans		(4,415	)		1,605
Acquisition of subsidiary, net of cash received		-			40,973
Purchases of premises and equipment, net		(377	)		(290	)
Improvements to OREO property		(29	)		(242	)
Proceeds from sales of other real estate acquired through foreclosure		2,649			2,803
Net cash from investing activities		604			35,102
Cash flows from financing activities
Net change in deposits		(4,618	)		(18,903	)
Net change in agreements to repurchase securities		(273	)		(316	)
Repayment of other borrowed funds		(3,215	)		(1,207	)
Proceeds from other borrowings		4,000			-
Proceeds from stock option exercises		201			449
Purchase of warrant		(5,675	)		-
Common stock dividends paid		(2,120	)		(2,822	)
Preferred stock dividends paid		-			(300	)
Net cash from financing activities		(11,700	)		(23,099	)
Net change in cash and cash equivalents		(3,242	)		20,164
Cash and cash equivalents at beginning of period		75,384			76,761
Cash and cash equivalents at end of period	$	72,142		$	96,925

- 7 -

PREMIER FINANCIAL BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

SIX MONTHS ENDED JUNE 30, 2015 AND 2014

(UNAUDITED, DOLLARS IN THOUSANDS)

	2015		2014
Supplemental disclosures of cash flow information:
Cash paid during period for interest	$	2,128	$	2,207
Cash paid during period for income taxes		2,866		2,299
Loans transferred to real estate acquired through foreclosure		1,255		1,079
Premises transferred to other real estate owned		760		-

- 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, 2015
		Year	Total		Net Income
Subsidiary	Location	Acquired	Assets		Qtr			YTD
Citizens Deposit Bank & Trust	Vanceburg, Kentucky	1991	$	387,663	$	931		$	1,945
Premier Bank, Inc.	Huntington, West Virginia	1998		853,078		2,702			5,275
Parent and Intercompany Eliminations				6,265		(506	)		(951	)
Consolidated Total			$	1,247,006	$	3,127		$	6,269

All significant intercompany transactions and balances have been eliminated.

Recently Issued Accounting Pronouncements

In January 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update 2014-04, Receivables—Troubled Debt Restructurings by Creditors (Subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure (a consensus of the FASB Emerging Issues Task Force). The ASU clarifies when an insubstance repossession or foreclosure occurs and a creditor is considered to have received physical possession of real estate property collateralizing a consumer mortgage loan. Specifically, the new ASU requires a creditor to reclassify a collateralized consumer mortgage loan to real estate property upon obtaining legal title to the real estate collateral, or the borrower voluntarily conveying all interest in the real estate property to the lender to satisfy the loan through a deed in lieu of foreclosure or similar legal agreement. Additional disclosures are required detailing the amount of foreclosed residential real estate property held by the creditor and the recorded investment in consumer mortgages collateralized by real estate property that are in the process of foreclosure. The new guidance is effective for annual periods, and interim reporting periods within those annual periods, beginning after December 15, 2014. The adoption of this guidance did not have a material impact on the Company's consolidated financial statements.

In May 2014, FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606). The ASU creates a new topic, Topic 606, to provide guidance on revenue recognition for entities that enter into contracts with customers to transfer goods or services or enter into contracts for the transfer of nonfinancial assets. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additional disclosures are required to provide quantitative and qualitative information regarding the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The new guidance is effective for annual reporting periods, and interim reporting periods within those annual periods, beginning after December 15, 2016. However, in April 2015, the FASB voted to defer the effective date of ASU 2014-09 by one year making the amendments effective for public entities for annual reporting periods beginning after December 15, 2017, including interim periods within those

- 9 -

PREMIER FINANCIAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE  1 - BASIS OF PRESENTATION - continued

reporting periods.  Companies have the option to apply ASU 2014-09 as of the original effective date. Early adoption is not permitted. Management is currently evaluating the impact of the adoption of this guidance on the Company's financial statements.

In June 2014, FASB issued Accounting Standards Update 2014-11, Transfers and Servicing (Topic 860): Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures. The amendments in this update require two accounting changes. First, the amendments in this update change the accounting for repurchase-to-maturity transactions to secured borrowing accounting. Second, for repurchase financing arrangements, the amendments require separate accounting for a transfer of a financial asset executed contemporaneously with a repurchase agreement with the same counter-party, which will result in secured borrowing accounting for the repurchase agreement. This update also requires certain disclosures for these types of transactions. This ASU became effective for the Company on January 1, 2015. The adoption of ASU 2014-11 did not have a material impact on the Company's financial statements.

- 10 -

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, 2015 are summarized as follows:

	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Available for sale
Mortgage-backed securities
U. S. sponsored agency MBS - residential	$	76,141	$	674	$	(399	)	$	76,416
U. S. sponsored agency CMO's - residential		123,441		2,140		(704	)		124,877
Total mortgage-backed securities of government sponsored agencies		199,582		2,814		(1,103	)		201,293
U. S. government sponsored agency securities		14,463		98		-			14,561
Obligations of states and political subdivisions		10,044		197		(18	)		10,223
Total available for sale	$	224,089	$	3,109	$	(1,121	)	$	226,077

Amortized cost and fair value of investment securities, by category, at December 31, 2014 are summarized as follows:

	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Available for sale
Mortgage-backed securities
U. S. sponsored agency MBS - residential	$	52,006	$	774	$	-		$	52,780
U. S. sponsored agency CMO's - residential		142,932		2,167		(911	)		144,188
Total mortgage-backed securities of government sponsored agencies		194,938		2,941		(911	)		196,968
U. S. government sponsored agency securities		22,553		30		(57	)		22,506
Obligations of states and political subdivisions		10,015		261		-			10,276
Total available for sale	$	227,486	$	3,232	$	(968	)	$	229,750

- 11 -

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, 2015 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	$	3,472	$	3,489
Due after one year through five years		17,732		17,952
Due after five years through ten years		3,054		3,093
Due after ten years		249		250
Mortgage-backed securities of government sponsored agencies		199,582		201,293
Total available for sale	$	224,089	$	226,077

There were no sales of securities during the first six months of 2015 nor the first six months of 2014.

Securities with unrealized losses at June 30, 2015 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 MBS – residential	$	30,728	$	(399	)	$	-	$	-		$	30,728	$	(399	)
U.S government sponsored agency CMO – residential		7,204		(91	)		19,292		(613	)		26,496		(704	)
Obligations of states and political subdivisions		911		(18	)		-		-			911		(18	)
Total temporarily impaired	$	38,843	$	(508	)	$	19,292	$	(613	)	$	58,135	$	(1,121	)

- 12 -

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, 2014 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	$	9,971	$	(57	)	$	-	$	-		$	9,971	$	(57	)
U.S government sponsored agency CMO's – residential		5,194		(52	)		26,471		(859	)		31,665		(911	)
Total temporarily impaired	$	15,165	$	(109	)	$	26,471	$	(859	)	$	41,636	$	(968	)

The investment portfolio is predominately high credit quality interest-bearing bonds with defined maturity dates backed by the U.S. Government or Government sponsored entities.  The unrealized losses at June 30, 2015 and December 31, 2014 are price changes resulting from changes in the interest rate environment and are considered to be temporary declines in the value of the securities.  Management does not intend to sell and it is likely that management will not be required to sell the securities prior to their anticipated recovery.  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, 2015 and December 31, 2014 are summarized as follows:

	2015		2014
Residential real estate	$	282,923	$	278,212
Multifamily real estate		37,112		30,310
Commercial real estate:
Owner occupied		122,879		120,861
Non owner occupied		217,881		230,750
Commercial and industrial		76,193		85,943
Consumer		31,561		32,745
All other		115,324		100,890
	$	883,873	$	879,711

- 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 six months ended June 30, 2015 was as follows:

Loan Class	Balance Dec 31, 2014		Provision (credit) for loan losses			Loans charged-off		Recoveries		Balance June 30, 2015
Residential real estate	$	2,093	$	372		$	78	$	79	$	2,466
Multifamily real estate		304		208			-		-		512
Commercial real estate:
Owner occupied		1,501		(24	)		2		1		1,476
Non owner occupied		2,316		(643	)		-		659		2,332
Commercial and industrial		1,444		(140	)		169		4		1,139
Consumer		243		105			132		58		274
All other		2,446		45			112		116		2,495
Total	$	10,347	$	(77	)	$	493	$	917	$	10,694

Activity in the allowance for loan losses by portfolio segment for the six months ending June 30, 2014 was as follows:

Loan Class	Balance Dec 31, 2013		Provision (credit) for loan losses			Loans charged-off		Recoveries		Balance June 30, 2014
Residential real estate	$	2,694	$	(391	)	$	171	$	8	$	2,140
Multifamily real estate		417		(106	)		-		-		311
Commercial real estate:
Owner occupied		1,407		39			82		-		1,364
Non owner occupied		2,037		556			323		-		2,270
Commercial and industrial		2,184		(616	)		84		5		1,489
Consumer		297		(33	)		59		27		232
All other		1,991		162			204		122		2,071
Total	$	11,027	$	(389	)	$	923	$	162	$	9,877

- 14 -

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 ended June 30, 2015 was as follows:

Loan Class	Balance March 31, 2015		Provision (credit) for loan losses			Loans charged-off		Recoveries		Balance June 30, 2015
Residential real estate	$	2,196	$	218		$	4	$	56	$	2,466
Multifamily real estate		287		225			-		-		512
Commercial real estate:
Owner occupied		1,489		(13	)		-		-		1,476
Non owner occupied		2,324		(651	)		-		659		2,332
Commercial and industrial		1,450		(305	)		8		2		1,139
Consumer		241		87			78		24		274
All other		2,183		293			53		72		2,495
Total	$	10,170	$	(146	)	$	143	$	813	$	10,694

Activity in the allowance for loan losses by portfolio segment for the three months ending June 30, 2014 was as follows:

Loan Class	Balance March 31, 2014		Provision (credit) for loan losses			Loans charged-off		Recoveries		Balance June 30, 2014
Residential real estate	$	2,250	$	36		$	152	$	6	$	2,140
Multifamily real estate		297		14			-		-		311
Commercial real estate:
Owner occupied		1,477		(32	)		81		-		1,364
Non owner occupied		2,385		(92	)		23		-		2,270
Commercial and industrial		1,527		(20	)		21		3		1,489
Consumer		220		37			33		8		232
All other		2,188		(22	)		167		72		2,071
Total	$	10,344	$	(79	)	$	477	$	89	$	9,877

- 15 -

PREMIER FINANCIAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE  3–LOANS - continued

Purchased Impaired Loans

The Company holds purchased loans for which there was, at their 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, 2015 and December 31, 2014.

	2015		2014
Multifamily real estate	$	460	$	497
Commercial real estate
Owner occupied		131		131
Non owner occupied		5,623		5,695
Commercial and industrial		126		136
All other		5,149		5,128
Total carrying amount	$	11,489	$	11,587
Contractual principal balance	$	21,159	$	21,250
Carrying amount, net of allowance	$	10,463	$	10,639

For those purchased loans disclosed above, the Company did not increase the allowance for loan losses for the six months ended June 30, 2015, nor did it increase the allowance for loan losses for purchased impaired loans during the six months ended June 30, 2014.

For the majority of these loans, the Company cannot reasonably estimate the cash flows expected to be collected on the loans and therefore has continued to account for those 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 on those loans accounted for using the cost recovery method.  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.

- 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 accretable yield, or income expected to be collected, on the purchased loans above is as follows at June 30, 2015 and June 30, 2014.

	2015			2014
Balance at January 1	$	204		$	217
New loans purchased		-			-
Accretion of income		(10	)		(6	)
Reclassifications from non-accretable difference		-			-
Disposals		-			-
Balance at June 30	$	194		$	211

- 17 -

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, 2015 and December 31, 2014.  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, 2015	Principal Owed on Non-accrual Loans		Recorded Investment in Non-accrual Loans		Loans Past Due Over 90 Days, still accruing
Residential  real estate	$	2,507	$	2,283	$	378
Multifamily real estate		1,532		539		-
Commercial real estate
Owner occupied		807		737		8
Non owner occupied		1,960		1,689		1,820
Commercial and industrial		1,576		471		83
Consumer		98		80		-
All other		12,635		5,183		-
Total	$	21,115	$	10,982	$	2,289

December 31, 2014	Principal Owed on Non-accrual Loans		Recorded Investment in Non-accrual Loans		Loans Past Due Over 90 Days, still accruing
Residential  real estate	$	1,996	$	1,768	$	668
Multifamily real estate		1,803		1,033		564
Commercial real estate
Owner occupied		2,115		1,928		-
Non owner occupied		2,020		1,819		26
Commercial and industrial		2,012		806		8
Consumer		213		185		-
All other		12,608		5,173		-
Total	$	22,767	$	12,712	$	1,266

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.

- 18 -

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, 2015 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	$	282,923	$	5,862	$	1,658	$	7,520	$	275,403
Multifamily real estate		37,112		460		79		539		36,573
Commercial real estate:
Owner occupied		122,879		1,769		549		2,318		120,561
Non owner occupied		217,881		125		3,509		3,634		214,247
Commercial and industrial		76,193		1,737		348		2,085		74,108
Consumer		31,561		526		15		541		31,020
All other		115,324		13,591		5,149		18,740		96,584
Total	$	883,873	$	24,070	$	11,307	$	35,377	$	848,496

The following table presents the aging of the recorded investment in past due loans as of December 31, 2014 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	$	278,212	$	5,810	$	1,706	$	7,516	$	270,696
Multifamily real estate		30,310		177		1,100		1,277		29,033
Commercial real estate:
Owner occupied		120,861		250		1,530		1,780		119,081
Non owner occupied		230,750		2,173		1,670		3,843		226,907
Commercial and industrial		85,943		1,720		608		2,328		83,615
Consumer		32,745		497		71		568		32,177
All other		100,890		234		5,127		5,361		95,529
Total	$	879,711	$	10,861	$	11,812	$	22,673	$	857,038

- 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 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, 2015:

	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	$	183	$	2,283	$	-	$	2,466	$	571	$	282,352	$	-	$	282,923
Multifamily real estate		-		512		-		512		79		36,573		460		37,112
Commercial real estate:
Owner occupied		48		1,428		-		1,476		943		121,805		131		122,879
Non-owner occupied		29		2,303		-		2,332		4,396		207,862		5,623		217,881
Commercial and industrial		230		783		126		1,139		666		75,401		126		76,193
Consumer		-		274		-		274		-		31,561		-		31,561
All other		-		1,595		900		2,495		912		109,263		5,149		115,324
Total	$	490	$	9,178	$	1,026	$	10,694	$	7,567	$	864,817	$	11,489	$	883,873

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 December 31, 2014:

	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	$	-	$	2,093	$	-	$	2,093	$	137	$	278,075	$	-	$	278,212
Multifamily real estate		-		304		-		304		536		29,277		497		30,310
Commercial real estate:
Owner occupied		107		1,394		-		1,501		2,011		118,719		131		120,861
Non-owner occupied		54		2,262		-		2,316		4,874		220,181		5,695		230,750
Commercial and industrial		291		1,105		48		1,444		902		84,905		136		85,943
Consumer		-		243		-		243		-		32,745		-		32,745
All other		-		1,546		900		2,446		1,109		94,653		5,128		100,890
Total	$	452	$	8,947	$	948	$	10,347	$	9,569	$	858,555	$	11,587	$	879,711

- 20 -

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, 2015.  The table includes $5,658,000 of loans acquired with deteriorated credit quality that the Company cannot reasonably estimate cash flows such that they are accounted for on the cost recovery method and are still individually evaluated for impairment.

	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With no related allowance recorded:
Residential real estate	$	363	$	325	$	-
Multifamily real estate		1,532		539		-
Commercial real estate
Owner occupied		612		549		-
Non owner occupied		4,049		3,778		-
Commercial and industrial		1,193		417		-
All other		967		912		-
		8,716		6,520		-
With an allowance recorded:
Residential real estate	$	252	$	246	$	183
Commercial real estate
Owner occupied		394		394		48
Non owner occupied		618		618		29
Commercial and industrial		651		375		356
All other		12,546		5,149		900
		14,461		6,782		1,516
Total	$	23,177	$	13,302	$	1,516

- 21 -

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, 2014.  The table includes $5,673,000 of loans acquired with deteriorated credit quality that the Company cannot reasonably estimate cash flows such that they are accounted for on the cost recovery method and are still individually evaluated for impairment.

	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With no related allowance recorded:
Residential  real estate	$	179	$	137	$	-
Multifamily real estate		1,803		1,033		-
Commercial real estate
Owner occupied		1,404		1,304		-
Non owner occupied		4,398		4,190		-
Commercial and industrial		1,030		270		-
All other		1,144		1,108		-
		9,958		8,042		-
With an allowance recorded:
Commercial real estate
Owner occupied	$	707	$	707	$	107
Non owner occupied		684		684		54
Commercial and industrial		929		680		339
All other		12,525		5,129		900
		14,845		7,200		1,400
Total	$	24,803	$	15,242	$	1,400

- 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 the average balance of loans individually evaluated for impairment and interest income recognized on these loans for the six months ended June 30, 2015 and June 30, 2014.   The table includes loans acquired with deteriorated credit quality that are still individually evaluated for impairment.

	Six months ended June 30, 2015						Six months ended June 30, 2014
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	$	281	$	2	$	2	$	2,536	$	61	$	61
Multifamily real estate		1,377		14		14		2,586		727		727
Commercial real estate:
Owner occupied		1,286		18		13		2,155		29		21
Non-owner occupied		4,665		94		82		800		627		627
Commercial and industrial		922		14		14		2,395		542		542
All other		6,150		30		28		7,603		81		81
Total	$	14,681	$	172	$	153	$	18,075	$	2,067	$	2,059

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, 2015 and June 30, 2014.  The table includes loans acquired with deteriorated credit quality that are still individually evaluated for impairment.

	Three months ended June 30, 2015						Three months ended June 30, 2014
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	$	352	$	1	$	1	$	2,318	$	27	$	27
Multifamily real estate		1,550		14		14		2,353		19		19
Commercial real estate:
Owner occupied		922		9		5		1,983		14		10
Non-owner occupied		4,561		46		34		214		-		-
Commercial and industrial		908		10		10		1,265		9		9
All other		6,108		14		14		7,453		38		38
Total	$	14,401	$	94	$	78	$	15,586	$	107	$	103

- 23 -

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 determination of an insignificant delay in payment is evaluated based on the facts and circumstances of the individual borrower(s).

The following table presents TDR's as of June 30, 2015 and December 31, 2014:

June 30, 2015	TDR's on Non-accrual		Other TDR's		Total TDR's
Residential  real estate	$	9	$	181	$	190
Commercial real estate
Non owner occupied		-		464		464
Commercial and industrial		-		417		417
All other		-		886		886
Total	$	9	$	1,948	$	1,957

December 31, 2014	TDR's on Non-accrual		Other TDR's		Total TDR's
Residential  real estate	$	13	$	191	$	204
Commercial real estate
Non owner occupied		-		474		474
Commercial and industrial		-		761		761
All other		-		1,063		1,063
Total	$	13	$	2,489	$	2,502

At June 30, 2015 and December 31, 2014 there were no specific reserves allocated to loans that had restructured terms and there were no commitments to lend additional amounts on these 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

The following table presents TDR's that occurred during the six months ended June 30, 2015.  There were no TDR's that occurred during the six months ended June 30, 2014.

	Six months ended June 30, 2015
Loan Class	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Multifamily Real Estate		1	$	1,543	$	1,543
Total		1	$	1,543	$	1,543

The modification of the multifamily residential real estate loan did not include a permanent reduction of the recorded investment in the loan and did not increase the allowance for loan losses during the period ended June 30, 2015.  The modification included a lengthening of the amortization period and reduction in the stated interest rate, however the maturity date was reduced to the end of a fifteen month forbearance period with a balloon payment due at maturity. The modified loan paid in full during the three months ended June 30, 2015.

During the three and six months ended June 30, 2015 and the three and six months ended June 30, 2014, 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.

- 25 -

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.

- 26 -

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, 2015 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	$	270,610	$	5,125	$	7,179	$	9	$	282,923
Multifamily real estate		32,287		4,286		539		-		37,112
Commercial real estate:
Owner occupied		115,111		5,326		2,442		-		122,879
Non-owner occupied		209,695		888		7,298		-		217,881
Commercial and industrial		74,396		714		1,034		49		76,193
Consumer		31,175		245		141		-		31,561
All other		94,355		14,310		6,659		-		115,324
Total	$	827,629	$	30,894	$	25,292	$	58	$	883,873

As of December 31, 2014, 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	$	265,285	$	8,292	$	4,622	$	13	$	278,212
Multifamily real estate		27,260		2,017		1,033		-		30,310
Commercial real estate:
Owner occupied		111,024		6,505		3,332		-		120,861
Non-owner occupied		218,971		6,652		5,127		-		230,750
Commercial and industrial		83,634		1,007		1,275		27		85,943
Consumer		32,364		267		114		-		32,745
All other		89,173		4,873		6,844		-		100,890
Total	$	827,711	$	29,613	$	22,347	$	40	$	879,711

- 27 -

PREMIER FINANCIAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE  4- STOCKHOLDERS' EQUITY AND REGULATORY MATTERS

The Company's principal source of funds for dividend payments to shareholders 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 2015 the Banks could, without prior approval, declare dividends to Premier of approximately $5.5 million plus any 2015 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 Common Equity Tier 1 Capital, Tier 1 Capital and Total Capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 Capital (as defined) to average assets (as defined).  The Common Equity Tier 1 Capital measurement became effective with the March 31, 2015 reporting period.  Management believes, as of June 30, 2015 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, 2015			December 31, 2014			Regulatory Minimum Requirements (1)			To Be Considered Well Capitalized (1)
Common Equity Tier 1 Capital (to Risk-Weighted Assets)		12.5	%		n/	a		4.5	%		6.5	%
Tier 1 Capital (to Risk-Weighted Assets) (1)		12.5	%		13.3	%		6.0	%		8.0	%
Total Capital (to Risk-Weighted Assets)		13.7	%		14.6	%		8.0	%		10.0	%
Tier 1 Capital (to Average Assets)		9.1	%		9.1	%		4.0	%		5.0	%
(1)    The regulatory requirements presented in the table are effective as of January 1, 2015. At December 31, 2014, the minimum Tier 1 capital to risk-weighted assets ratio was 4.0% and to be considered well capitalized the ratio was required to be at least 6.0%

As of June 30, 2015, 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 Common Equity Tier 1 risk-based, Tier 1 risk-based, Total risk-based and Tier 1 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.

- 28 -

PREMIER FINANCIAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE  5 – PREFERRED STOCK AND COMMON STOCK WARRANT

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 628,588 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 $22,252,000 in cash.

Under standardized TARP Capital Purchase Program terms, cumulative dividends on the Series A Preferred Stock accrued on the liquidation preference at a rate of 5% per annum until November 14, 2014.  As of November 14, 2014, all of the 22,252 shares of the Series A Preferred Stock have been repurchased or redeemed.  The Series A Preferred Stock had no maturity date and ranked 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.

Under terms of the Warrant, the exercise price and the number of shares that can be purchased were adjusted based upon certain events including common stock dividends paid to shareholders that exceed the $0.11 per share regular quarterly dividend paid by Premier at the time the Warrant was issued.  Due to dividends paid in 2015 and 2014 that were either special cash dividends or dividends that exceeded the $0.11 regular quarterly cash dividend per share defined in the terms of the Warrant, the Warrant was adjusted to permit the purchase of 636,378 shares of the Company's common stock at an exercise price of $5.25 per share.  On May 6, 2015, Premier purchased the Warrant from the U.S. Treasury for $5,675,000.  Premier borrowed $4,000,000 on its line of credit with the Bankers Bank of Kentucky and used $1,675,000 of its cash and cash equivalents to complete the purchase.  The purchase reduced shareholders' equity and regulatory capital by the $5,675,000 purchase price but also reduced the dilutive effect of potential additional common shares.  See Note 7 below for additional information on the calculation of diluted earnings per share.

- 29 -

PREMIER FINANCIAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE  6 – 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 18, 2015, 47,650 incentive stock options were granted out of the 2012 Long Term Incentive Plan at an exercise price of $14.72, the closing market price of Premier's common stock on the grant date.  These options vest in three equal annual installments ending on March 18, 2018.  On March 19, 2014, 46,300 incentive stock options were granted out of the 2012 Long Term Incentive Plan at an exercise price of $14.43, the closing market price of Premier's common stock on the grant date.  These options vest in three equal annual installments ending on March 19, 2017.

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:

	2015			2014
Risk-free interest rate		1.41	%		2.78	%
Expected option life (yrs)		10.00			10.00
Expected stock price volatility		17.20	%		31.19	%
Dividend yield		3.53	%		3.33	%
Weighted average fair value of options granted	$	1.37		$	3.74

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 for the 2015 grant was based upon the weighted-average life of options exercised from January 1, 2012 through December 31, 2014.  The expected option life for the 2014 grant was estimated since there had been little option exercise history at the time of the grant.  The expected stock price volatility is based on historical volatilities of the Company's common stock.  The dividend yield was estimated by annualizing the current quarterly dividend on the Company's common stock at the time of the option grant.

On March 18, 2015, 7,000 shares of Premier's common stock were granted to President and CEO, Robert W. Walker as stock-based bonus compensation under the 2012 Long-term Incentive Plan.  The fair value of the stock at the time of the grant was $14.72 per share based upon the closing price of Premier's stock on the date of grant and $103,000 of stock-based compensation was recorded as a result.

- 30 -

PREMIER FINANCIAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE  6 – STOCK COMPENSATION EXPENSE - continued

On April 16, 2014, 6,000 shares of Premier's common stock were granted to Robert W. Walker as stock-based bonus compensation under the 2012 Long-term Incentive Plan.  The fair value of the stock at the time of the grant was $14.20 per share based upon the closing price of Premier's stock of the date of grant and $85,000 of stock-based compensation was recorded as a result.

Stock-based compensation expense of $163,000 was recorded for the first six months of 2015 compared to $170,000 for the first six months of 2014.  For the three months ended June 30, $121,000 was recorded for 2015 while $128,000 was recorded for 2014.  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 $98,000 at June 30, 2015. 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:

	- - - - - - 2015 - - - - - -					- - - - - - 2014 - - - - - -
	Options			Weighted Average Exercise Price		Options			Weighted Average Exercise Price
Outstanding at beginning of year		273,942		$	11.06		354,281		$	9.84
Grants		47,650			14.72		46,300			14.43
Exercises		(18,450	)		10.87		(63,297	)		8.45
Forfeitures or expired		(16,733	)		17.10		(8,133	)		9.27
Outstanding at June 30,		286,409		$	11.51		329,151		$	10.77
Exercisable at June 30,		204,675					223,898
Weighted average remaining life of options outstanding		6.2					6.2
Weighted average fair value of options granted during the year	$	1.37				$	3.74

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

- 31 -

PREMIER FINANCIAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE  6 – STOCK COMPENSATION EXPENSE - continued

Additional information regarding stock options outstanding and exercisable at June 30, 2015, 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		106,949	$	7.56	$	844		106,949		5.9	$	7.56	$	844
$10.01 to $12.50		36,000		11.39		146		23,374		7.7		11.39		95
$12.51 to $15.00		122,960		14.23		150		53,852		3.8		13.75		92
$15.01 to $17.50		20,500		16.00		-		20,500		0.6		16.00		-
Outstanding - June 30, 2015		286,409		11.51	$	1,140		204,675		5.0		10.47	$	1,031

NOTE  7 – 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, 2015 and 2014 is presented below:

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Basic earnings per share
Income available to common stockholders	$	3,127	$	2,935	$	6,269	$	6,440
Weighted average common shares outstanding		8,157,785		8,079,629		8,150,596		8,061,522
Earnings per share	$	0.38	$	0.36	$	0.77	$	0.80
Diluted earnings per share
Income available to common stockholders	$	3,127	$	2,935	$	6,269	$	6,440
Weighted average common shares outstanding		8,157,785		8,079,629		8,150,596		8,061,522
Add dilutive effects of potential additional common stock		230,145		502,839		358,336		504,519
Weighted average common and dilutive potential common shares outstanding		8,387,930		8,582,468		8,508,932		8,566,041
Earnings per share assuming dilution	$	0.37	$	0.34	$	0.74	$	0.75

Stock options for 23,500 and 23,500 shares of common stock were not considered in computing diluted earnings per share for the six months ended June 30, 2015 and 2014 because they were antidilutive.  Stock options for 23,500 and 23,500 shares of common stock were not considered in computing diluted earnings per share for the three months ended June 30, 2015 and 2014 because they were antidilutive.

- 32 -

PREMIER FINANCIAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE  8 – 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.

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 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).

- 33 -

PREMIER FINANCIAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE  8 – FAIR VALUE - continued

The carrying amounts and estimated fair values of financial instruments at June 30, 2015 were as follows:

				Fair Value Measurements at June 30, 2015 Using
	Carrying Amount			Level 1			Level 2			Level 3			Total
Financial assets
Cash and due from banks	$	68,877		$	68,877		$	-		$	-		$	68,877
Federal funds sold		3,265			3,265			-			-			3,265
Securities available for sale		226,077			-			226,077			-			226,077
Loans, net		873,179			-			-			874,822			874,822
Federal Home Loan Bank stock		3,072			n/	a		n/	a		n/	a		n/	a
Interest receivable		3,271			-			584			2,687			3,271
Financial liabilities
Deposits	$	(1,070,531	)	$	(718,462	)	$	(350,961	)	$	-		$	(1,069,423	)
Securities sold under agreements to repurchase		(15,307	)		-			(15,307	)		-			(15,307	)
Other borrowed funds		(12,507	)		-			(12,539	)		-			(12,539	)
Interest payable		(387	)		(6	)		(381	)		-			(387	)

The carrying amounts and estimated fair values of financial instruments at December 31, 2014 were as follows:

				Fair Value Measurements at December 31, 2014 Using
	Carrying Amount			Level 1			Level 2			Level 3			Total
Financial assets
Cash and due from banks	$	70,398		$	70,398		$	-		$	-		$	70,398
Federal funds sold		4,986			4,986			-			-			4,986
Securities available for sale		229,750			-			229,610			140			229,750
Loans held for sale		226			-			-			226			226
Loans, net		869,364			-			-			870,273			870,273
Federal Home Loan Bank stock		2,996			n/	a		n/	a		n/	a		n/	a
Interest receivable		3,219			-			625			2,594			3,219
Financial liabilities
Deposits	$	(1,075,243	)	$	(711,118	)	$	(363,481	)	$	-		$	(1,074,599	)
Securities sold under agreements to repurchase		(15,580	)		-			(15,580	)		-			(15,580	)
Other borrowed funds		(11,722	)		-			(11,760	)		-			(11,760	)
Interest payable		(434	)		(6	)		(428	)		-			(434	)

- 34 -

PREMIER FINANCIAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE  8 – 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, 2015 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	$	76,416	$	-	$	76,416	$	-
U. S. agency CMO's - residential		124,877		-		124,877		-
Total mortgage-backed securities of government sponsored agencies		201,293		-		201,293		-
U. S. government sponsored agency securities		14,561		-		14,561		-
Obligations of states and political subdivisions		10,223		-		10,223		-
Total available for sale	$	226,077	$	-	$	226,077	$	-

			Fair Value Measurements at December 31, 2014 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	$	52,780	$	-	$	52,780	$	-
U. S. agency CMO's		144,188		-		144,188		-
Total mortgage-backed securities of government sponsored agencies		196,968		-		196,968		-
U. S. government sponsored agency securities		22,506		-		22,506		-
Obligations of states and political subdivisions		10,276		-		10,136		140
Total securities available for sale	$	229,750	$	-	$	229,610	$	140
Mortgage-backed securities

There were no transfers between Level 1 and Level 2 during 2015 or 2014.

- 35 -

PREMIER FINANCIAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE  8 – FAIR VALUE - continued

The table below presents a reconciliation of all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the quarter ended June 30, 2015:

	Securities Available-for-sale
	Quarter Ended June 30, 2015
Balance of recurring Level 3 assets at beginning of period	$	140
Total gains or losses (realized/unrealized):
Included in earnings – realized		-
Included in earnings – unrealized		-
Included in other comprehensive income		-
Purchases, sales, issuances and settlements, net		(140	)
Transfers in and/or out of Level 3		-
Balance of recurring Level 3 assets at period-end	$	-

Assets and Liabilities Measured on a Non-Recurring Basis

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.

- 36 -

PREMIER FINANCIAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE  8 – FAIR VALUE - continued

Assets and liabilities measured at fair value on a non-recurring basis at June 30, 2015 are summarized below:

			Fair Value Measurements at June 30, 2015 Using
	Carrying Value		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	$	63	$	-	$	-	$	63
Commercial real estate:
Owner occupied		346		-		-		346
Non-owner occupied		589		-		-		589
Commercial and industrial		19		-		-		19
All other		4,249		-		-		4,249
Total impaired loans	$	5,266	$	-	$	-	$	5,266
Other real estate owned:
Residential real estate	$	657	$	-	$	-	$	657
Commercial real estate:
Owner occupied		39		-		-		39
Non-owner occupied		2,003		-		-		2,003
All other		6,984		-		-		6,984
Total OREO	$	9,683	$	-	$	-	$	9,683

Impaired loans, which are measured for impairment using the fair value of the collateral for collateral dependent loans, had a carrying amount of $6,782,000 at June 30, 2015 with a valuation allowance of $1,516,000 and a carrying amount of $7,200,000 at December 31, 2014 with a valuation allowance of $1,400,000.  The change resulted in a provision for loan losses of $117,000 for the six months ended June 30, 2015, compared to an $886,000 negative provision for loan losses for the six months ended June 30, 2104 and a $108,000 provision for loan losses for the three months ended June 30, 2015, compared to a $143,000 negative provision for loan losses for the three months ended June 30, 2014.  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 $9,683,000 which is made up of the outstanding balance of $11,785,000 net of a valuation allowance of $2,102,000 at June 30, 2015.  There were $246,000 of additional write downs during the six months ended June 30, 2015, compared to $280,000 of additional write downs during the six months ended June 30, 2014.  For the three months ended June 30, 2015 there were $70,000 of additional write downs compared to $280,000 of additional write downs during the three months ended June 30, 2014.  At December 31, 2014, other real estate owned had a net carrying amount of $10,206,000, made up of the outstanding balance of $12,343,000, net of a valuation allowance of $2,137,000.

- 37 -

PREMIER FINANCIAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE  8 – FAIR VALUE - continued

The significant unobservable inputs related to assets and liabilities measured at fair value on a non-recurring basis at June 30, 2015 are summarized below:

	June 30, 2015		Valuation Techniques	Unobservable Inputs	Range (Weighted Avg)
Impaired loans:
Residential real estate	$	63	sales comparison	adjustment for differences between the comparable sales		26.5%-26.5% (26.5%)
Commercial real estate:
Owner occupied		346	sales comparison	adjustment for limited salability of specialized property		65.5%-72.4% (66.9%)
Non-owner occupied		589	sales comparison	adjustment for differences between the comparable sales		41.8%-41.8% (41.8%)
Commercial and industrial		19	sales comparison	adjustment for estimated realizable value		8.0%-8.0% (8.0%)
All other		4,249	sales comparison	adjustment for percentage of completion of construction		57.2%-57.2% (57.2%)
Total impaired loans	$	5,266
Other real estate owned:
Residential real estate	$	657	sales comparison	adjustment for differences between the comparable sales		0.7%-35.5% (25.0%)
Commercial real estate:
Owner occupied		39	sales comparison	adjustment for estimated realizable value		25.4%-25.4% (25.4%)
Non-owner occupied		2,003	sales comparison	adjustment for differences between the comparable sales		17.2%-17.2% (17.2%)
All other		6,984	sales comparison	adjustment for estimated realizable value		24.6%-67.4% (35.4%)
Total OREO	$	9,683

- 38 -

PREMIER FINANCIAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE  8 – FAIR VALUE - continued

Assets and liabilities measured at fair value on a non-recurring basis at December 31, 2014 are summarized below:

			Fair Value Measurements at December 31, 2014 Using
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Impaired loans:
Commercial real estate:
Owner occupied	$	600	$	-	$	-	$	600
Non-owner occupied		630		-		-		630
Commercial and industrial		341		-		-		341
All other		4,229		-		-		4,229
Total impaired loans	$	5,800	$	-	$	-	$	5,800
Other real estate owned:
Commercial real estate:
Non-owner occupied	$	2,003	$	-	$	-	$	2,003
All other		8,203		-		-		8,203
Total OREO	$	10,206	$	-	$	-	$	10,206

- 39 -

PREMIER FINANCIAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE  8 – FAIR VALUE - continued

The significant unobservable inputs related to assets and liabilities measured at fair value on a non-recurring basis at December 31, 2014 are summarized below:

	December 31, 2014		Valuation Techniques	Unobservable Inputs	Range (Weighted Avg)
Impaired loans:
Commercial Real Estate
Owner Occupied	$	600	sales comparison	adjustment for limited salability of specialized property	44.8%-72.4% (58.9%)
Non-owner Occupied		630	sales comparison	adjustment for differences between the comparable sales	16.9%-54.6% (16.9%)
Commercial and Industrial		341	sales comparison	adjustment for limited salability of specialized property	26.2%-41.2% (27.0%)
All Other		4,229	sales comparison	adjustment for percentage of completion of construction	57.3%-57.3% (57.3%)
Total impaired loans	$	5,800
Other real estate owned:
Commercial Real Estate
Non-owner Occupied	$	2,003	sales comparison	adjustment for differences between the comparable sales	17.8%-17.8% (17.8%)
All Other		8,203	sales comparison	adjustment for estimated realizable value	24.6%-50.3% (45.0%)
Total OREO	$	10,206

- 40 -

PREMIER FINANCIAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE  9 – SUBSEQUENT EVENT

On July 6, 2015, Premier Financial Bancorp, Inc. ("Premier") entered into a material definitive merger agreement (the "Merger Agreement") with First National Bankshares Corporation ("First National"), a $261 million single bank holding company headquartered in Ronceverte, West Virginia whereby Premier will acquire First National in exchange for a combination of cash and Premier common stock currently valued at approximately $26.5 million.

Under terms of the Merger Agreement, First National shareholders will be entitled to a combination of Premier common stock and cash currently valued at approximately $31.82 per First National share, or an aggregate value of $26.5 million, with Premier issuing approximately 1.4 million shares in the acquisition.  The transaction, which is subject to satisfaction of various contractual conditions and requires approval by bank regulatory agencies and the shareholders of First National, is anticipated to close in the fourth quarter of 2015 with a systems conversion anticipated to be completed in the first quarter of 2016.

- 41 -

PREMIER FINANCIAL BANCORP, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

JUNE 30, 2015

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, 2015 was $6,269,000, or $0.74 per diluted share, compared to net income of $6,770,000, or $0.75 per diluted share, for the six months ended June 30, 2014.  The decrease in income in 2015 is largely due to a gain on the sale of OREO in 2014 and higher negative provision for loan losses in 2014 compared to 2015, both of which more than offset an increase in net interest income and an increase in non-interest income.  The annualized returns on average common shareholders' equity and average assets were approximately 8.47% and 0.99% for the six months ended June 30, 2015 compared to 9.15% and 1.12% for the same period of 2014.

Net income for the three months ended June 30, 2015 was $3,127,000, or $0.37 per diluted share, compared to net income of $3,100,000, or $0.34 per diluted share for the three months ended June 30, 2014.  The slight increase in income for the three months ended June 30, 2015 is largely due to an increase in net interest income and a decrease in the provision for loan losses, which more than offset a decrease in non-interest income and an increase in non-interest expenses.  The annualized returns on average common shareholders' equity and average assets were approximately 8.48% and 0.98% for the three months ended June 30, 2015 compared to 8.29% and 0.96% for the same period in 2014.

- 42 -

PREMIER FINANCIAL BANCORP, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

JUNE 30, 2015

Net interest income for the six months ended June 30, 2015 totaled $23.89 million, up $204,000, or 0.9%, from the $23.68 million of net interest income earned in the first six months of 2014, as an increase in interest income was complemented by a decrease in interest expense.  Interest income in 2015 increased by $134,000, or 0.5%, largely due to a $381,000 increase in interest income on loans.  As a result of the purchase of the Bank of Gassaway ("Gassaway") on April 4, 2014, interest income on loans in the first six months of 2015 included the Gassaway loan interest income for the full six months while interest income in the first six months of 2014 included this income only in the months of April, May and June of 2014.  The impact increased 2015 interest income on loans by approximately $1.5 million.  Interest income on loans in 2015 increased by another $736,000, or 3.2%, from Premier's other operations.  These two increases more than offset approximately $1.85 million of income recognized from purchase discounts and interest income collected on non-accrual loans liquidated during the first six months of 2014.  The timing of these liquidations is difficult to predict, which creates fluctuations in reported loan interest income.  Interest earned on investments decreased by $239,000, or 8.5%, due to lower average yields and a lower average balance of investments outstanding during the first six months of 2015 compared to the same period of 2014.  Interest earned on federal funds sold and interest bearing bank balances decreased by $8,000, largely due to a lower average volume of assets held in this category.

Complementing the increase in interest income in the first six months of 2015 was $70,000 of interest expense savings.  Interest expense decreased in total during the first six months of 2015 by $70,000, or 3.3%, when compared to the same six months of 2014.    Interest expense on deposits decreased by $44,000, or 2.4%, in the first six months of 2015 largely due to a continuing decrease in rates paid on deposits.  Similar to the interest income on loans from the purchase of Gassaway, interest expense on the deposits from Gassaway are included inthe first six months of 2014 only during the months of April, May and June.  The effect is an additional $100,000 of interest expense on the interest-bearing deposits assumed from the Gassaway purchase reported in the first six months of 2015.  Otherwise, interest expense in the first six months of 2015 would have decreased by $144,000, or 7.8%, when compared to the same six months of 2014.  Interest expense on repurchase agreements and other short-term borrowings increased by $3,000 in the first six months of 2015, largely due to a higher average balance outstanding.  Interest expense on other borrowings decreased by $29,000, or 10.1%, in the first six months of 2015 compared to the first six months of 2014, largely due to a decrease in the average amount of borrowings outstanding which more than offset an additional $5,000 of interest expense from the borrowing assumed from the Gassaway purchase.

The Federal Reserve System Board of Governors' policy to maintain the federal funds rate at nearly zero, coupled with the U.S. Treasury actively buying investment securities in 2014, 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 the lower interest income by lowering the rates paid on its deposits and repurchase agreements with customers.  Premier's net interest margin during the first six months of 2015 was 4.11% compared to 4.32% for the same period in 2014.  With the recognition of additional loan interest income upon the liquidation of non-accrual loans in 2014, Premier's overall net interest margin increased in the first six months of 2014.  A portion of the interest income on loans is the result of recognizing into interest income the remaining fair value discounts on loans acquired via a business acquisition if that loan was paid-off during the period.  These events cannot be predicted with certainty and may positively or negatively affect the comparison of interest income on loans in future periods.  Also impacting the comparison of Premier's net interest margin in 2015 with its net interest margin in 2014 are the assets and liabilities acquired via the Gassaway purchase, which generated additional net interest income in the first six months of 2015 compared to the net interest income in the first six months of 2014 but not necessarily at the same net interest margin as Premier's historical yields.

- 43 -

PREMIER FINANCIAL BANCORP, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

JUNE 30, 2015

Additional information on Premier's net interest income for the first six months of 2015 and first six months of 2014 is contained in the following table.

PREMIER FINANCIAL BANCORP, INC.
AVERAGE CONSOLIDATED BALANCE SHEETS
AND NET INTEREST INCOME ANALYSIS
	Six Months Ended June 30, 2015								Six Months Ended June 30, 2014
	Balance			Interest		Yield/Rate			Balance			Interest		Yield/Rate
Assets
Interest Earning Assets
Federal funds sold and other	$	66,078		$	88		0.27	%	$	71,207		$	96		0.27	%
Securities available for sale
Taxable		223,581			2,464		2.20			239,478			2,715		2.27
Tax-exempt		8,454			110		3.94			7,208			98		4.12
Total investment securities		232,035			2,574		2.27			246,686			2,813		2.32
Total loans		876,686			23,306		5.36			788,493			22,925		5.86
Total interest-earning assets		1,174,799			25,968		4.46	%		1,106,386			25,834		4.71	%
Allowance for loan losses		(10,500	)							(10,505	)
Cash and due from banks		32,235								30,683
Other assets		73,252								74,315
Total assets	$	1,269,786							$	1,200,879
Liabilities and Equity
Interest-bearing liabilities
Interest-bearing deposits	$	827,623			1,803		0.44		$	785,019			1,847		0.47
Short-term borrowings		16,553			19		0.23			12,784			16		0.25
Other borrowings		11,883			259		4.40			13,340			288		4.35
Total interest-bearing liabilities		856,059			2,081		0.49	%		811,143			2,151		0.53	%
Non-interest bearing deposits		260,839								232,768
Other liabilities		4,861								5,016
Stockholders' equity		148,027								151,952
Total liabilities and equity	$	1,269,786							$	1,200,879
Net interest earnings				$	23,887							$	23,683
Net interest spread							3.97	%							4.18	%
Net interest margin							4.11	%							4.32	%

- 44 -

PREMIER FINANCIAL BANCORP, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

JUNE 30, 2015

Additional information on Premier's net interest income for the second quarter of 2015 and second quarter of 2014 is contained in the following table.

PREMIER FINANCIAL BANCORP, INC.
AVERAGE CONSOLIDATED BALANCE SHEETS
AND NET INTEREST INCOME ANALYSIS
	Three Months Ended June 30, 2015								Three Months Ended June 30, 2014
	Balance			Interest		Yield/Rate			Balance			Interest		Yield/Rate
Assets
Interest Earning Assets
Federal funds sold and other	$	71,701		$	52		0.29	%	$	86,456		$	64		0.30	%
Securities available for sale
Taxable		225,817			1,207		2.14			261,020			1,400		2.15
Tax-exempt		8,516			55		3.91			9,798			63		3.90
Total investment securities		234,333			1,262		2.20			270,818			1,463		2.21
Total loans		877,641			11,641		5.32			832,756			11,262		5.42
Total interest-earning assets		1,183,675			12,955		4.40	%		1,190,030			12,789		4.32	%
Allowance for loan losses		(10,588	)							(10,158	)
Cash and due from banks		32,360								35,155
Other assets		72,631								78,138
Total assets	$	1,278,078							$	1,293,165
Liabilities and Equity
Interest-bearing liabilities
Interest-bearing deposits	$	831,817			887		0.43		$	849,505			960		0.45
Short-term borrowings		17,006			9		0.21			13,200			9		0.27
Other borrowings		12,366			136		4.41			13,198			144		4.38
Total interest-bearing liabilities		861,189			1,032		0.48	%		875,903			1,113		0.51	%
Non-interest bearing deposits		264,335								258,038
Other liabilities		5,018								5,594
Stockholders' equity		147,536								153,630
Total liabilities and equity	$	1,278,078							$	1,293,165
Net interest earnings				$	11,923							$	11,676
Net interest spread							3.92	%							3.81	%
Net interest margin							4.05	%							3.94	%

- 45 -

PREMIER FINANCIAL BANCORP, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

JUNE 30, 2015

Net interest income for the quarter ended June 30, 2015 totaled $11.92 million, up $247,000, or 2.1%, from the $11.68 million of net interest income earned in the second quarter of 2014.  Interest income in the second quarter of 2015 increased by $166,000, or 1.3%, as an increase in interest income on loans more than offset a decrease in interest income on investments.  Interest income on loans increased by $379,000, or 3.4%, as an increase in average loans outstanding more than offset a lower average yield on loans.  Interest earned on investments decreased by $201,000, or 13.7%, in the second quarter of 2015 largely due to a lower average balance of investments.  Interest earned on federal funds sold and interest bearing bank balances decreased by $12,000, largely due to a lower average volume of assets held in this category.

Also adding to the increase in net interest income, interest expense decreased in total during the second quarter of 2015 by $81,000, or 7.3%, when compared to the same quarter of 2014.  Interest expense on deposits decreased by $73,000, or 7.6%, largely due to a continuing decrease in the average rates paid on interest-bearing deposits on a lower average balance outstanding.  Interest expense on repurchase agreements and other short-term borrowings remained constant, as an increase in average repurchase agreement balances was offset by an average lower rate paid.   Interest expense on other borrowings decreased by $8,000, or 5.6%, in the second quarter of 2015 compared to the second quarter of 2014, largely due to a decrease in the average amount of borrowings outstanding which more than offset the additional interest expense incurred from a slightly higher rate paid on the borrowings.  The Board of Governors' policy to reduce the federal funds rate to nearly zero, coupled with the U.S. Treasury continuing to buy investment securities in 2014, 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 the lower interest earning yields by lowering the rates paid on its deposits and repurchase agreements with customers.  During the second quarter of 2015, while the decrease in the yields earned on loans continued when compared to the same quarter of 2014, the average loans outstanding as a percentage of average earning assets was significantly higher.  As loans are Premier's highest earning asset, the overall yield of average earning assets was elevated to 4.40% compared to 4.32% in the second quarter of 2014.  Combined with the lower average rate paid on interest bearing liabilities in the second quarter of 2015, the increase in the yield on average earning assets resulted in an increase in Premier's net interest margin.    Premier's net interest margin during the second quarter of 2015 was 4.05% compared to 3.94% for the same period in 2014.

Non-interest income increased by $303,000, or 9.6%, to $3,467,000 for the first six months of 2015 compared to the same period of 2014.  Electronic banking income (income from debit/credit cards, ATM fees and internet banking charges) increased by $196,000, or 17.0%, largely due to the inclusion of the Gassaway operations for the full six months in 2015 compared to only April, May and June of 2014.  Service charges on deposit accounts increased by $154,000, or 9.4% as the increase in revenue from the Gassaway operations in the first six months of 2015 compared to Gassaway revenue for only three months in 2014.  Income from selling mortgages in the secondary market decreased by $9,000, or 13.0%, largely due to a decrease in customer demand for refinancing existing mortgage loans compared to one-year ago, while other non-interest income decreased by $38,000, or 12.4%.

For the quarter ending June 30, 2015, non-interest income decreased by $21,000 to $1,762,000 compared to $1,783,000 recognized during the same quarter of 2014.  Service charges on deposit accounts increased by $15,000, or 1.7%, and electronic banking income increased by $47,000, or 7.2%.  More than offsetting these increases, secondary market mortgage income decreased by $28,000 in 2015, largely the result of a decrease in activity compared to the same period in 2014, and other non-interest income decreased by $55,000.

- 46 -

PREMIER FINANCIAL BANCORP, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

JUNE 30, 2015

Non-interest expenses for the first six months of 2015 totaled $17.72 million, or 2.81% of average assets on an annualized basis, compared to $16.74 million, or 2.81% of average assets for the same period of 2014.  The $978,000 increase in non-interest expenses in 2015 when compared to the first six months of 2014 is largely due to $1.1 million of  gains on sale of OREO in the first six months of 2014 compared to only $39,000 of gains recorded during the first six months of 2015.  Staff costs decreased by $41,000 or 0.5%, as a $212,000, or 3.1%, increase in salaries and wages (net of deferred loan costs) was more than offset by a $253,000, or 12.1%, decrease in benefit plan costs, namely employee medical insurance benefits resulting from a change in insurance providers.  Occupancy and equipment expenses increased by $130,000, or 5.3%, largely due to the costs associated with operating the five branches from the Gassaway purchase for a full six months versus only three months in 2014, plus additional expenditures on information technology maintenance and software.   Outside data processing increased by $273,000, or 14.4%, largely due to the additional costs associated with the Gassaway operations in the first six months of 2015 compared to the first six months of 2014.  OREO expense increased by $1.1 million largely due to the $1.1 million of gains on sale of OREO in the first half of 2104.  Otherwise, an increase in the expenses of maintaining OREO properties was offset by a lower level of carrying value write downs in 2015.  Amortization of intangibles increased by $66,000 largely due to the inclusion of core deposit intangible asset amortization from the purchase of Gassaway for six months in 2015 compared to only three months in 2014.  Taxes not based on income increased $37,000 as an increase in Kentucky and Ohio equity based taxes were partially offset by a decrease in West Virginia equity based taxes.  These increases were partially offset by lower professional fees, FDIC insurance and other operating expenses in 2015.  Professional fees decreased by $437,000 largely due to higher legal fees in 2014 related to the acquisition of the Bank of Gassaway and $275,000 paid for legal related matters, plus an $114,000 decrease in audit and accounting costs and a $14,000 decrease in consulting expenses.  FDIC insurance decreased by $40,000, largely due to a decrease in the assessment base.  Other operating expenses decreased largely due to decreases in supplies and conversion expenses related to the acquisition of Gassaway in 2014.

Non-interest expenses for the second quarter of 2015 totaled $8.93 million, or 2.80% of average assets on an annualized basis, compared to $8.71 million, or 2.70% of average assets for the same period of 2014.  The $215,000 increase in non-interest expenses in the second quarter of 2015 when compared to the second quarter of 2014 is largely due to $1.0 million of gains on sale of OREO in 2014 compared to $6,000 of recorded losses on the sale of OREO in 2015.  .  Excluding the benefits of the OREO gains reducing total non-interest expense in 2014, non-interest expenses were $823,000, or 8.4%, less in the second quarter of 2015 compared to 2014.  Staff costs decreased by $398,000, or 8.2%, due to an $183,000, or 4.9%, decrease in salaries and wages (net of deferred loan costs) and a $215,000, or $19.7%, decrease in benefit plan costs, primarily employee medical insurance benefits and employer payroll taxes.  Occupancy and equipment expenses decreased by $44,000, or 3.4%, largely due to decreases in rent expense, building repairs, and a $14,000 gain on the sale of a building not yet placed in service.  FDIC insurance decreased by $54,000, largely due to the decrease in the assessment rate on the balances acquired via the purchase of Gassaway.  Amortization of intangibles decreased by $15,000 due to the decrease in the monthly amortization as Premier uses an accelerated method to amortize its core deposit intangible assets.  Professional fees decreased by $30,000 largely due to a decrease in accounting and audit fees.    Other expenses decreased by $111,000, largely due to a decrease in supplies and data system conversion costs related to the conversion of Gassaway in the second quarter of 2014.   Partially offsetting these decreases was a $46,000, or 4.5%, increase in data processing costs largely due to price increases as well as the incremental cost of new products and services offered.

- 47 -

PREMIER FINANCIAL BANCORP, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

JUNE 30, 2015

Income tax expense was $3.44 million for the first six months of 2015 compared to $3.72 million for the first six months of 2014.  The effective tax rate for the six months ended June 30, 2015 was 35.4% compared to 35.5% for the same period in 2014.  For the quarter ended June 30, 2015, income tax expense was $1.78 million, a 36.2% effective tax rate, compared to $1.72 million (a 35.7% effective tax rate) for the same period in 2014.  The decrease in income tax expense during the first six months of 2015 can be primarily attributed to the decrease in pre-tax income detailed above, as the effective tax rate was essentially unchanged.  The increase in income tax expense during the second quarter of 2015 when compared to the same quarter of 2014 can be primarily attributed to the increase in pre-tax income for the quarter as detailed above.  The increase in the effective income tax rate in 2015 is largely a result of a revised estimate during the quarter of the level of federal taxable income that will be subject to the phase-in of the 35% maximum federal corporate income tax rate versus the basic 34% federal corporate income tax rate.

- 48 -

PREMIER FINANCIAL BANCORP, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

JUNE 30, 2015

B.Financial Position

Total assets at June 30, 2015 decreased by $5.8 million to $1.247 billion from the $1.253 billion at December 31, 2014.  Earning assets decreased by $970,000 from the $1.153 billion at year-end 2014 to end the quarter at $1.152 billion.  The remaining decrease in total assets was largely due to a decrease in cash and due from banks, the sale of a building not yet placed into service and an $859,000 decrease in other real estate owned.  The decrease in total assets was in response to a $5.0 million decrease in funding from deposits and repurchase agreements.

Cash and due from banks at June 30, 2015 was $33.4 million, a $1.7 million decrease from the $35.1 million at December 31, 2014.  Interest bearing bank balances increased by $186,000 from the $35.3 million reported at December 31, 2014, while federal funds sold also decreased by $1.7 million to $3.3 million at June 30, 2015.  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 decrease in cash and due from banks and federal funds sold during the first six months of 2015 was largely in response to a decrease in total deposits outstanding at the end of the quarter combined with an increase of $4.2 million in loans outstanding.

Securities available for sale totaled $226.1 million at June 30, 2015, a $3.7 million decrease from the $229.7 million at December 31, 2014.  The decrease was largely due to $33.6 million of proceeds from monthly principal payments on Premier's mortgage backed securities portfolio and securities maturing during the first six months plus a $276,000 decrease in the market value of the securities available for sale.  These decreases more than offset $30.7 million of purchases of investment securities as surplus funding was used to satisfy deposit withdrawals and fund an increase in loans outstanding.  The investment portfolio is predominately high quality residential mortgage backed securities backed by the U.S. Government or Government sponsored agencies.  Any unrealized losses on securities within the portfolio at June 30, 2015 and December 31, 2014 are believed to be price changes resulting from increases in the long-term interest rate environment 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, 2015 were $883.9 million compared to $879.7 million at December 31, 2014, an increase of approximately $4.2 million, or 0.5%.  The increase in loans was largely due to loan demand which more than offset payoffs, transfers of loans to OREO upon foreclosure and principal payments on loans received during the first six months of the year.

Deposits totaled $1.071 billion as of June 30, 2015, a $4.7 million, or 0.4%, decrease from the $1.075 billion in deposits at December 31, 2014.  The overall decrease in deposits is largely due to a $12.1 million, or 3.3%, decrease in certificates of deposit.  This decrease more than offset a $6.1 million, or 3.3%, increase in interest bearing transaction accounts, a $972,000, or 0.4%, increase in savings and money market accounts and a $266,000, or 0.1% increase in non-interest bearing deposits.  Repurchase agreements with corporate and public entity customers decreased in the first six months of 2015 by $273,000, or 1.8%.  Other borrowed funds increased by $785,000 during the first six months of 2015 as a $2.0 million net borrowing on the line of credit at the Bankers Bank of Kentucky to purchase the outstanding warrants was partially offset by regularly scheduled principal payments.

- 49 -

PREMIER FINANCIAL BANCORP, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

JUNE 30, 2015

The following table sets forth information with respect to the Company's nonperforming assets at June 30, 2015 and December 31, 2014.

	(In Thousands)
	2015			2014
Non-accrual loans	$	10,982		$	12,712
Accruing loans which are contractually past due 90 days or more		2,289			1,266
Accruing restructured loans		1,957			2,502
Total non-performing loans		15,228			16,480
Other real estate acquired through foreclosure (OREO)		11,349			12,208
Total non-performing assets	$	26,577		$	28,688
Non-performing loans as a percentage of total loans		1.72	%		1.87	%
Non-performing assets as a percentage of total assets		2.13	%		2.29	%

Total non-performing loans have decreased since year-end, largely due to a $1.7 million decrease in non-accrual loans and a net decrease in restructured loans due to payments and payoffs in 2015.    These decreases were partially offset by a $1.0 million increase in loans 90 plus days past due during 2015.  Total non-performing assets have also decreased since year-end, largely due to the decrease in non-performing loans plus an $859,000 decrease in other real estate acquired through foreclosure (OREO) as sales of OREO exceeded new foreclosures in the first six months of 2015.

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.

Gross charge-offs totaled $493,000 during the first six months of 2015, largely due to the partial charge-off of loans upon foreclosure and placement into OREO and the charge-off of the remaining balance over and above the portion guaranteed by the Small Business Administration ("SBA") on some previously identified impaired loans during the first quarter.  Any collections on charged-off loans, or partially charged-off 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 2015 totaled $917,000, resulting in net recoveries for the first six months of 2015 of $424,000.  This compares to $761,000 of net charge-offs recorded in the first six months of 2014.  The increase in recoveries was largely due to the receipt of the guaranteed portion of an SBA guaranteed loan during the second quarter of 2015 that had previously been charged-off. The allowance for loan losses at June 30, 2015 was 1.21% of total loans compared to 1.18% at December 31, 2014.  The increase in the allowance as a percentage of total loans is largely due to an increase in the allowance allocated to newly impaired residential real estate loans and an increase in allowance allocated to loans collectively evaluated for impairment.

- 50 -

PREMIER FINANCIAL BANCORP, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

JUNE 30, 2015

During the first six months of 2015, Premier recorded a negative $77,000 of provision for loan losses.  This provision compares to $389,000 of negative provision for loan losses recorded during the same six months of 2014.  The 2015 negative provision for loan losses was the result of a large recovery in the second quarter.  The recovery exceeded calculated increases in the credit risk of the loan portfolio resulting from increases in specific loan impairments and collectively evaluated loans as a group.  The result was a $146,000 negative provision for loan losses in the second quarter of 2015, which exceeded the $69,000 of provision expense recorded in the first quarter of 2015.  The 2014 negative provision for loan losses was the result of specific reserves allocated to impaired loans that ultimately paid in full during the first quarter of 2014.  As a result, the specific reserves were no longer needed and were reversed into income.  During the second quarter of 2014 a $79,000 negative provision was recorded as scheduled payments were received on impaired loans in addition to a reduction in the estimated credit risk in the remaining loan portfolio.  The allowance for loan losses allocated to loans individually evaluated for impairment decreased from $1.9 million at December 31, 2013 to $527,000 at June 30, 2014, which included a $300,000 partial charge-off of a previously identified impaired loan that was foreclosed upon and placed into OREO during the first quarter of 2014.

The provisions for loan losses recorded in 2014 and 2015 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.  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.  Premier continues to monitor and evaluate 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 has occurred, 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 markets in West Virginia, Ohio and Kentucky. With the concentrations of commercial real estate loans acquired in the Washington, DC and Richmond, Virginia markets, fluctuations in commercial real estate values will also be monitored. For additional details on the activity in the allowance for loan losses, impaired loans, past due and non-accrual loans and restructured loans, see Note 3 to the consolidated financial statements.

- 51 -

PREMIER FINANCIAL BANCORP, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

JUNE 30, 2015

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, 2014.  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, 2014.  There have been no significant changes in the application of these accounting policies since December 31, 2014.

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 $250,000 or more.  Management believes that the majority of its $250,000 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 $226.1 million of securities at fair value as of June 30, 2015.

- 52 -

PREMIER FINANCIAL BANCORP, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

JUNE 30, 2015

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, 2015, total shareholders' equity of $144.4 million was 11.6% of total assets.  This compares to total shareholders' equity of $145.8 million, or 11.6% of total assets on December 31, 2014.  The decrease in stockholders' equity was largely due to the May 2015 purchase of the outstanding common stock warrant issued to the U.S. Treasury under the TARP program for approximately $5.7 million.  Partially offsetting this decrease in stockholders' equity was a $4.2 million net increase in retained earnings during the first half of 2015 as the $6.3 million of net income earned during the first six months of 2015 was reduced by $2.1 million, or $0.26 per share, in cash dividends declared and paid to stockholders.

Tier 1 capital totaled $112.6 million at June 30, 2015, which represents a Tier 1 leverage ratio of 9.1%.  This ratio equals the 9.1% Tier 1 leverage ratio and is just above the $112.1 million of Tier 1 capital at December 31, 2014, as the growth in Tier 1 capital was divided by a slightly higher base of average total assets at June 30, 2015.

The regulatory authorities introduced a new capital measure in the first quarter of 2015 for financial institutions of Premier's size, Common Equity Tier 1 Capital.  The Common Equity Tier 1 capital measure seeks to determine how much of the traditional Tier 1 capital is attributable to equity contributed by common shareholders by excluding Tier 1 capital from other sources such as Preferred Stockholders' equity and subordinated debt.  As of June 30, 2015, Premier's and its subsidiary bank's Common Equity Tier 1 capital is identical to their Tier 1 capital as none of the entities have any preferred stock or subordinated debt outstanding.

- 53 -

PREMIER FINANCIAL BANCORP, INC.

JUNE 30, 2015

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 2014 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 2014 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.

- 54 -

PREMIER FINANCIAL BANCORP, INC.

JUNE 30, 2015

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, 2014 for disclosures with respect to Premier's risk factors at December 31, 2014. There have been no material changes since year-end 2014 in the specified risk factors disclosed in the Annual Report on Form 10-K.
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	None
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.

2.1Agreement of Merger between Premier Financial Bancorp, Inc. and First National Bankshares Corporation dated July 6, 2015 filed as Exhibit 2.1 to Form 8-K filed on July 7, 2015 is incorporated herein by reference.

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

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

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

- 55 -

PREMIER FINANCIAL BANCORP, INC.

JUNE 30, 2015

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 10, 2015/s/ Robert W. Walker                                     

Robert W. Walker

President & Chief Executive Officer

Date: August 10, 2015/s/ Brien M. Chase                                         

Brien M. Chase

Senior Vice President & Chief Financial Officer

- 56 -

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 10, 2015

/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 10, 2015

/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, 2015 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 10, 2015

XML

PREFERRED STOCK AND COMMON STOCK WARRANT (Details) - USD ($)	May. 06, 2015	Nov. 14, 2014	Oct. 02, 2009	Jun. 30, 2015	Dec. 31, 2014
Class of Stock [Line Items]
Par value of common stock called by warrants (in dollars per share)				$ 0	$ 0
Reduction in shareholders' equity and regulatory capital	$ 5,675,000
U.S. Treasury [Member]
Class of Stock [Line Items]
Payments for purchase of warrants	5,675,000
U.S. Treasury [Member] | Bank of Kentucky [Member]
Class of Stock [Line Items]
Purchase of warrant, line of credit	4,000,000
U.S. Treasury [Member] | Cash and Cash Equivalents [Member]
Class of Stock [Line Items]
Payments for purchase of warrants	$ 1,675,000
Series A Preferred Stock [Member]
Class of Stock [Line Items]
Preferred stock issued (in shares)			22,252
Preferred stock, par value (in dollars per share)			$ 0
Liquidation preference (in dollars per share)			$ 1,000
Value of preferred stock issued			$ 22,252,000
Preferred stock repurchased (in shares)		22,252
Series A Preferred Stock [Member] | Before November 14, 2014 [Member]
Class of Stock [Line Items]
Accrued dividend rate (in hundredths)		5.00%
Warrants [Member]
Class of Stock [Line Items]
Term of warrant			10 years
Numbers of common stock to be purchased with warrants (in shares)	636,378		628,588
Par value of common stock called by warrants (in dollars per share)			$ 0
Exercise price of warrants (in dollars per share)	$ 5.25		5.31
Threshold of quarterly common stock cash dividends paid (in dollars per share)			$ 0.11

XML

FAIR VALUE, Assets and Liabilities Measured at Fair Value on Nonrecurring Basis (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Impaired Loans Additional Disclosure [Abstract]
Recorded investment in impaired loans carried at fair value	$ 6,782		$ 6,782		$ 7,200
Valuation allowance for impaired loans	1,516		1,516		1,400
Impaired collateral dependent loans, provision for loan losses	108	$ (143)	117	$ (886)
Other Real Estate Owned Additional Disclosure [Abstract]
Recorded investment in other real estate owned carried at fair value - gross	11,785		11,785		12,343
Valuation allowance for other real estate owned	2,102		2,102		2,137
Write downs	70	$ 280	246	$ 280
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		0
Non-owner occupied commercial real estate	0		0		0
Commercial and industrial	0		0		0
All other	0		0		0
Total impaired loans	0		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		0
All other	0		0		0
Total OREO	0		0		0
Nonrecurring [Member] | Significant Other Observable Inputs (Level 2) [Member]
Impaired loans: [Abstract]
Residential real estate	0		0
Owner occupied commercial real estate	0		0		0
Non-owner occupied commercial real estate	0		0		0
Commercial and industrial	0		0		0
All other	0		0		0
Total impaired loans	0		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		0
All other	0		0		0
Total OREO	0		0		0
Nonrecurring [Member] | Significant Unobservable Inputs (Level 3) [Member]
Impaired loans: [Abstract]
Residential real estate	63		63
Owner occupied commercial real estate	346		346		600
Non-owner occupied commercial real estate	589		589		630
Commercial and industrial	19		19		341
All other	4,249		4,249		4,229
Total impaired loans	5,266		5,266		5,800
Other real estate owned: [Abstract]
Residential Real Estate	657		657
Owner occupied commercial real estate	39		39
Non-owner occupied commercial real estate	2,003		2,003		2,003
All other	6,984		6,984		8,203
Total OREO	9,683		9,683		10,206
Nonrecurring [Member] | Carrying Amount [Member]
Impaired loans: [Abstract]
Residential real estate	63		63
Owner occupied commercial real estate	346		346		600
Non-owner occupied commercial real estate	589		589		630
Commercial and industrial	19		19		341
All other	4,249		4,249		4,229
Total impaired loans	5,266		5,266		5,800
Other real estate owned: [Abstract]
Residential Real Estate	657		657
Owner occupied commercial real estate	39		39
Non-owner occupied commercial real estate	2,003		2,003		2,003
All other	6,984		6,984		8,203
Total OREO	$ 9,683		$ 9,683		$ 10,206

XML

LOANS, Individually Evaluated For Impairment (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
LOANS [Abstract]
Purchased financing receivable individually evaluated for impairment	$ 5,658	$ 5,673
Loans individually evaluated for impairment [Abstract]
Unpaid Principal Balance	23,177	24,803
Recorded Investment	13,302	15,242
Allowance for Loan Losses Allocated	1,516	1,400
With no related allowance recorded: [Member]
Loans individually evaluated for impairment [Abstract]
Unpaid Principal Balance	8,716	9,958
Recorded Investment	6,520	8,042
Allowance for Loan Losses Allocated	0	0
With an allowance recorded: [Member]
Loans individually evaluated for impairment [Abstract]
Unpaid Principal Balance	14,461	14,845
Recorded Investment	6,782	7,200
Allowance for Loan Losses Allocated	1,516	1,400
Residential Real Estate [Member] | With no related allowance recorded: [Member]
Loans individually evaluated for impairment [Abstract]
Unpaid Principal Balance	363	179
Recorded Investment	325	137
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	252
Recorded Investment	246
Allowance for Loan Losses Allocated	183
Multifamily real estate [Member] | With no related allowance recorded: [Member]
Loans individually evaluated for impairment [Abstract]
Unpaid Principal Balance	1,532	1,803
Recorded Investment	539	1,033
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	612	1,404
Recorded Investment	549	1,304
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	394	707
Recorded Investment	394	707
Allowance for Loan Losses Allocated	48	107
Non Owner Occupied Commercial Real Estate [Member] | With no related allowance recorded: [Member]
Loans individually evaluated for impairment [Abstract]
Unpaid Principal Balance	4,049	4,398
Recorded Investment	3,778	4,190
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	618	684
Recorded Investment	618	684
Allowance for Loan Losses Allocated	29	54
Commercial and Industrial [Member] | With no related allowance recorded: [Member]
Loans individually evaluated for impairment [Abstract]
Unpaid Principal Balance	1,193	1,030
Recorded Investment	417	270
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	651	929
Recorded Investment	375	680
Allowance for Loan Losses Allocated	356	339
All Other [Member] | With no related allowance recorded: [Member]
Loans individually evaluated for impairment [Abstract]
Unpaid Principal Balance	967	1,144
Recorded Investment	912	1,108
Allowance for Loan Losses Allocated	0	0
All Other [Member] | With an allowance recorded: [Member]
Loans individually evaluated for impairment [Abstract]
Unpaid Principal Balance	12,546	12,525
Recorded Investment	5,149	5,129
Allowance for Loan Losses Allocated	$ 900	$ 900

XML

SECURITIES, By Contractual Maturity (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Amortized cost of available-for-sale securities by contractual maturity [Abstract]
Due in one year or less	$ 3,472
Due after one year through five years	17,732
Due after five years through ten years	3,054
Due after ten years	249
Mortgage-backed securities of government sponsored agencies	199,582
Available for sale, Amortized Cost	224,089
Fair value of available-for-sale securities by contractual maturity [Abstract]
Due in one year or less	3,489
Due after one year through five years	17,952
Due after five years through ten years	3,093
Due after ten years	250
Mortgage backed securities of government sponsored agencies	201,293
Available for sale, Fair Value	226,077		$ 229,750
Proceeds from the sale of securities	$ 0	$ 0

XML

SUBSEQUENT EVENT (Details) - Jul. 06, 2015 - Subsequent Event [Member] - Merger Agreement [Member] - First National Bankshares Corporation [Member] - USD ($) $ / shares in Units, $ in Millions	Total
Subsequent Event [Line Items]
Value of single bank holding	$ 261.0
Purchase price of entity acquired	$ 26.5
Purchase price of common stock (in dollars per share)	$ 31.82
Number of shares issued in acquisition (in shares)	1,400,000

XML

STOCK COMPENSATION EXPENSE, Stock Options Activity (Details) - $ / shares	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Stock options activity [Roll Forward]
Outstanding at beginning of year (in shares)	273,942	354,281
Grants (in shares)	47,650	46,300
Exercises (in shares)	(18,450)	(63,297)
Forfeitures or expired (in shares)	(16,733)	(8,133)
Outstanding at end of period (in shares)	286,409	329,151
Exercisable at end of period (in shares)	204,675	223,898
Weighted Average Exercise Price [Abstract]
Outstanding at beginning of year (in dollars per share)	$ 11.06	$ 9.84
Grants (in dollars per share)	14.72	14.43
Exercises (in dollars per share)	10.87	8.45
Forfeitures or expired (in dollars per share)	17.10	9.27
Outstanding at end of period (in dollars per share)	$ 11.51	$ 10.77
Weighted average remaining life of options outstanding	6 years 2 months 12 days	6 years 2 months 12 days
Weighted average fair value of options granted during the year (in dollars per share)	$ 1.37	$ 3.74

XML

LOANS, Risk Category of Loans by Class of Loans, Credit Quality Indicators (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Accounts, notes, loans and financing receivable [Line Items]
Loans	$ 883,873	$ 879,711
Residential Real Estate [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	282,923	278,212
Multifamily Real Estate [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	37,112	30,310
Owner Occupied Commercial Real Estate [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	122,879	120,861
Non Owner Occupied Commercial Real Estate [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	217,881	230,750
Commercial and Industrial [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	76,193	85,943
Consumer [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	31,561	32,745
All Other [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	115,324	100,890
Pass [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	827,629	827,711
Pass [Member] | Residential Real Estate [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	270,610	265,285
Pass [Member] | Multifamily Real Estate [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	32,287	27,260
Pass [Member] | Owner Occupied Commercial Real Estate [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	115,111	111,024
Pass [Member] | Non Owner Occupied Commercial Real Estate [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	209,695	218,971
Pass [Member] | Commercial and Industrial [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	74,396	83,634
Pass [Member] | Consumer [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	31,175	32,364
Pass [Member] | All Other [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	94,355	89,173
Special Mention [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	30,894	29,613
Special Mention [Member] | Residential Real Estate [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	5,125	8,292
Special Mention [Member] | Multifamily Real Estate [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	4,286	2,017
Special Mention [Member] | Owner Occupied Commercial Real Estate [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	5,326	6,505
Special Mention [Member] | Non Owner Occupied Commercial Real Estate [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	888	6,652
Special Mention [Member] | Commercial and Industrial [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	714	1,007
Special Mention [Member] | Consumer [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	245	267
Special Mention [Member] | All Other [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	14,310	4,873
Substandard [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	25,292	22,347
Substandard [Member] | Residential Real Estate [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	7,179	4,622
Substandard [Member] | Multifamily Real Estate [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	539	1,033
Substandard [Member] | Owner Occupied Commercial Real Estate [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	2,442	3,332
Substandard [Member] | Non Owner Occupied Commercial Real Estate [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	7,298	5,127
Substandard [Member] | Commercial and Industrial [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	1,034	1,275
Substandard [Member] | Consumer [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	141	114
Substandard [Member] | All Other [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	6,659	6,844
Doubtful [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	58	40
Doubtful [Member] | Residential Real Estate [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	9	13
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	0
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	49	27
Doubtful [Member] | Consumer [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	0	0
Doubtful [Member] | All Other [Member]
Accounts, notes, loans and financing receivable [Line Items]
Loans	$ 0	$ 0

XML

FAIR VALUE, Unobservable Input Reconciliation (Details) - Securities Available-for-sale [Member] $ in Thousands	6 Months Ended
	Jun. 30, 2015 USD ($)
Reconciliation of all assets measured at fair value on a recurring basis using significant unobservable inputs [Roll Forward]
Balance of recurring Level 3 assets at beginning of period	$ 140
Total Gains or Losses (Realized/Unrealized) [Abstract]
Included in earnings - realized	0
Included in earnings, unrealized	0
Included in other comprehensive income	0
Purchases, sales, issues and settlements, net	(140)
Transfers in and / or out of Level 3	0
Balance of recurring Level 3 assets at period-end	$ 0

XML

LOANS

6 Months Ended

Jun. 30, 2015

LOANS [Abstract]

LOANS

NOTE  3 - LOANS

Major classifications of loans at June 30, 2015 and December 31, 2014 are summarized as follows:

	2015		2014
Residential real estate	$	282,923	$	278,212
Multifamily real estate		37,112		30,310
Commercial real estate:
Owner occupied		122,879		120,861
Non owner occupied		217,881		230,750
Commercial and industrial		76,193		85,943
Consumer		31,561		32,745
All other		115,324		100,890
	$	883,873	$	879,711

Activity in the allowance for loan losses by portfolio segment for the six months ended June 30, 2015 was as follows:

Loan Class	Balance Dec 31, 2014		Provision (credit) for loan losses			Loans charged-off		Recoveries		Balance June 30, 2015
Residential real estate	$	2,093	$	372		$	78	$	79	$	2,466
Multifamily real estate		304		208			-		-		512
Commercial real estate:
Owner occupied		1,501		(24	)		2		1		1,476
Non owner occupied		2,316		(643	)		-		659		2,332
Commercial and industrial		1,444		(140	)		169		4		1,139
Consumer		243		105			132		58		274
All other		2,446		45			112		116		2,495
Total	$	10,347	$	(77	)	$	493	$	917	$	10,694

Activity in the allowance for loan losses by portfolio segment for the six months ending June 30, 2014 was as follows:

Loan Class	Balance Dec 31, 2013		Provision (credit) for loan losses			Loans charged-off		Recoveries		Balance June 30, 2014
Residential real estate	$	2,694	$	(391	)	$	171	$	8	$	2,140
Multifamily real estate		417		(106	)		-		-		311
Commercial real estate:
Owner occupied		1,407		39			82		-		1,364
Non owner occupied		2,037		556			323		-		2,270
Commercial and industrial		2,184		(616	)		84		5		1,489
Consumer		297		(33	)		59		27		232
All other		1,991		162			204		122		2,071
Total	$	11,027	$	(389	)	$	923	$	162	$	9,877

Activity in the allowance for loan losses by portfolio segment for the three months ended June 30, 2015 was as follows:

Loan Class	Balance March 31, 2015		Provision (credit) for loan losses			Loans charged-off		Recoveries		Balance June 30, 2015
Residential real estate	$	2,196	$	218		$	4	$	56	$	2,466
Multifamily real estate		287		225			-		-		512
Commercial real estate:
Owner occupied		1,489		(13	)		-		-		1,476
Non owner occupied		2,324		(651	)		-		659		2,332
Commercial and industrial		1,450		(305	)		8		2		1,139
Consumer		241		87			78		24		274
All other		2,183		293			53		72		2,495
Total	$	10,170	$	(146	)	$	143	$	813	$	10,694

Activity in the allowance for loan losses by portfolio segment for the three months ending June 30, 2014 was as follows:

Loan Class	Balance March 31, 2014		Provision (credit) for loan losses			Loans charged-off		Recoveries		Balance June 30, 2014
Residential real estate	$	2,250	$	36		$	152	$	6	$	2,140
Multifamily real estate		297		14			-		-		311
Commercial real estate:
Owner occupied		1,477		(32	)		81		-		1,364
Non owner occupied		2,385		(92	)		23		-		2,270
Commercial and industrial		1,527		(20	)		21		3		1,489
Consumer		220		37			33		8		232
All other		2,188		(22	)		167		72		2,071
Total	$	10,344	$	(79	)	$	477	$	89	$	9,877

Purchased Impaired Loans

The Company holds purchased loans for which there was, at their 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, 2015 and December 31, 2014.

	2015		2014
Multifamily real estate	$	460	$	497
Commercial real estate
Owner occupied		131		131
Non owner occupied		5,623		5,695
Commercial and industrial		126		136
All other		5,149		5,128
Total carrying amount	$	11,489	$	11,587
Contractual principal balance	$	21,159	$	21,250
Carrying amount, net of allowance	$	10,463	$	10,639

For those purchased loans disclosed above, the Company did not increase the allowance for loan losses for the six months ended June 30, 2015, nor did it increase the allowance for loan losses for purchased impaired loans during the six months ended June 30, 2014.

For the majority of these loans, the Company cannot reasonably estimate the cash flows expected to be collected on the loans and therefore has continued to account for those 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 on those loans accounted for using the cost recovery method.  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.

The accretable yield, or income expected to be collected, on the purchased loans above is as follows at June 30, 2015 and June 30, 2014.

	2015			2014
Balance at January 1	$	204		$	217
New loans purchased		-			-
Accretion of income		(10	)		(6	)
Reclassifications from non-accretable difference		-			-
Disposals		-			-
Balance at June 30	$	194		$	211

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, 2015 and December 31, 2014.  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, 2015	Principal Owed on Non-accrual Loans		Recorded Investment in Non-accrual Loans		Loans Past Due Over 90 Days, still accruing
Residential  real estate	$	2,507	$	2,283	$	378
Multifamily real estate		1,532		539		-
Commercial real estate
Owner occupied		807		737		8
Non owner occupied		1,960		1,689		1,820
Commercial and industrial		1,576		471		83
Consumer		98		80		-
All other		12,635		5,183		-
Total	$	21,115	$	10,982	$	2,289

December 31, 2014	Principal Owed on Non-accrual Loans		Recorded Investment in Non-accrual Loans		Loans Past Due Over 90 Days, still accruing
Residential  real estate	$	1,996	$	1,768	$	668
Multifamily real estate		1,803		1,033		564
Commercial real estate
Owner occupied		2,115		1,928		-
Non owner occupied		2,020		1,819		26
Commercial and industrial		2,012		806		8
Consumer		213		185		-
All other		12,608		5,173		-
Total	$	22,767	$	12,712	$	1,266

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, 2015 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	$	282,923	$	5,862	$	1,658	$	7,520	$	275,403
Multifamily real estate		37,112		460		79		539		36,573
Commercial real estate:
Owner occupied		122,879		1,769		549		2,318		120,561
Non owner occupied		217,881		125		3,509		3,634		214,247
Commercial and industrial		76,193		1,737		348		2,085		74,108
Consumer		31,561		526		15		541		31,020
All other		115,324		13,591		5,149		18,740		96,584
Total	$	883,873	$	24,070	$	11,307	$	35,377	$	848,496

The following table presents the aging of the recorded investment in past due loans as of December 31, 2014 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	$	278,212	$	5,810	$	1,706	$	7,516	$	270,696
Multifamily real estate		30,310		177		1,100		1,277		29,033
Commercial real estate:
Owner occupied		120,861		250		1,530		1,780		119,081
Non owner occupied		230,750		2,173		1,670		3,843		226,907
Commercial and industrial		85,943		1,720		608		2,328		83,615
Consumer		32,745		497		71		568		32,177
All other		100,890		234		5,127		5,361		95,529
Total	$	879,711	$	10,861	$	11,812	$	22,673	$	857,038

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, 2015:

	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	$	183	$	2,283	$	-	$	2,466	$	571	$	282,352	$	-	$	282,923
Multifamily real estate		-		512		-		512		79		36,573		460		37,112
Commercial real estate:
Owner occupied		48		1,428		-		1,476		943		121,805		131		122,879
Non-owner occupied		29		2,303		-		2,332		4,396		207,862		5,623		217,881
Commercial and industrial		230		783		126		1,139		666		75,401		126		76,193
Consumer		-		274		-		274		-		31,561		-		31,561
All other		-		1,595		900		2,495		912		109,263		5,149		115,324
Total	$	490	$	9,178	$	1,026	$	10,694	$	7,567	$	864,817	$	11,489	$	883,873

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 December 31, 2014:

	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	$	-	$	2,093	$	-	$	2,093	$	137	$	278,075	$	-	$	278,212
Multifamily real estate		-		304		-		304		536		29,277		497		30,310
Commercial real estate:
Owner occupied		107		1,394		-		1,501		2,011		118,719		131		120,861
Non-owner occupied		54		2,262		-		2,316		4,874		220,181		5,695		230,750
Commercial and industrial		291		1,105		48		1,444		902		84,905		136		85,943
Consumer		-		243		-		243		-		32,745		-		32,745
All other		-		1,546		900		2,446		1,109		94,653		5,128		100,890
Total	$	452	$	8,947	$	948	$	10,347	$	9,569	$	858,555	$	11,587	$	879,711

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, 2015.  The table includes $5,658,000 of loans acquired with deteriorated credit quality that the Company cannot reasonably estimate cash flows such that they are accounted for on the cost recovery method and are still individually evaluated for impairment.

	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With no related allowance recorded:
Residential real estate	$	363	$	325	$	-
Multifamily real estate		1,532		539		-
Commercial real estate
Owner occupied		612		549		-
Non owner occupied		4,049		3,778		-
Commercial and industrial		1,193		417		-
All other		967		912		-
		8,716		6,520		-
With an allowance recorded:
Residential real estate	$	252	$	246	$	183
Commercial real estate
Owner occupied		394		394		48
Non owner occupied		618		618		29
Commercial and industrial		651		375		356
All other		12,546		5,149		900
		14,461		6,782		1,516
Total	$	23,177	$	13,302	$	1,516

The following table presents loans individually evaluated for impairment by class of loans as of December 31, 2014.  The table includes $5,673,000 of loans acquired with deteriorated credit quality that the Company cannot reasonably estimate cash flows such that they are accounted for on the cost recovery method and are still individually evaluated for impairment.

	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With no related allowance recorded:
Residential  real estate	$	179	$	137	$	-
Multifamily real estate		1,803		1,033		-
Commercial real estate
Owner occupied		1,404		1,304		-
Non owner occupied		4,398		4,190		-
Commercial and industrial		1,030		270		-
All other		1,144		1,108		-
		9,958		8,042		-
With an allowance recorded:
Commercial real estate
Owner occupied	$	707	$	707	$	107
Non owner occupied		684		684		54
Commercial and industrial		929		680		339
All other		12,525		5,129		900
		14,845		7,200		1,400
Total	$	24,803	$	15,242	$	1,400

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, 2015 and June 30, 2014.   The table includes loans acquired with deteriorated credit quality that are still individually evaluated for impairment.

	Six months ended June 30, 2015						Six months ended June 30, 2014
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	$	281	$	2	$	2	$	2,536	$	61	$	61
Multifamily real estate		1,377		14		14		2,586		727		727
Commercial real estate:
Owner occupied		1,286		18		13		2,155		29		21
Non-owner occupied		4,665		94		82		800		627		627
Commercial and industrial		922		14		14		2,395		542		542
All other		6,150		30		28		7,603		81		81
Total	$	14,681	$	172	$	153	$	18,075	$	2,067	$	2,059

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, 2015 and June 30, 2014.  The table includes loans acquired with deteriorated credit quality that are still individually evaluated for impairment.

	Three months ended June 30, 2015						Three months ended June 30, 2014
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	$	352	$	1	$	1	$	2,318	$	27	$	27
Multifamily real estate		1,550		14		14		2,353		19		19
Commercial real estate:
Owner occupied		922		9		5		1,983		14		10
Non-owner occupied		4,561		46		34		214		-		-
Commercial and industrial		908		10		10		1,265		9		9
All other		6,108		14		14		7,453		38		38
Total	$	14,401	$	94	$	78	$	15,586	$	107	$	103

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 determination of an insignificant delay in payment is evaluated based on the facts and circumstances of the individual borrower(s).

The following table presents TDR's as of June 30, 2015 and December 31, 2014:

June 30, 2015	TDR's on Non-accrual		Other TDR's		Total TDR's
Residential  real estate	$	9	$	181	$	190
Commercial real estate
Non owner occupied		-		464		464
Commercial and industrial		-		417		417
All other		-		886		886
Total	$	9	$	1,948	$	1,957

December 31, 2014	TDR's on Non-accrual		Other TDR's		Total TDR's
Residential  real estate	$	13	$	191	$	204
Commercial real estate
Non owner occupied		-		474		474
Commercial and industrial		-		761		761
All other		-		1,063		1,063
Total	$	13	$	2,489	$	2,502

At June 30, 2015 and December 31, 2014 there were no specific reserves allocated to loans that had restructured terms and there were no commitments to lend additional amounts on these loans.

The following table presents TDR's that occurred during the six months ended June 30, 2015.  There were no TDR's that occurred during the six months ended June 30, 2014.

	Six months ended June 30, 2015
Loan Class	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Multifamily Real Estate		1	$	1,543	$	1,543
Total		1	$	1,543	$	1,543

The modification of the multifamily residential real estate loan did not include a permanent reduction of the recorded investment in the loan and did not increase the allowance for loan losses during the period ended June 30, 2015.  The modification included a lengthening of the amortization period and reduction in the stated interest rate, however the maturity date was reduced to the end of a fifteen month forbearance period with a balloon payment due at maturity. The modified loan paid in full during the three months ended June 30, 2015.

During the three and six months ended June 30, 2015 and the three and six months ended June 30, 2014, 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, 2015 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	$	270,610	$	5,125	$	7,179	$	9	$	282,923
Multifamily real estate		32,287		4,286		539		-		37,112
Commercial real estate:
Owner occupied		115,111		5,326		2,442		-		122,879
Non-owner occupied		209,695		888		7,298		-		217,881
Commercial and industrial		74,396		714		1,034		49		76,193
Consumer		31,175		245		141		-		31,561
All other		94,355		14,310		6,659		-		115,324
Total	$	827,629	$	30,894	$	25,292	$	58	$	883,873

As of December 31, 2014, 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	$	265,285	$	8,292	$	4,622	$	13	$	278,212
Multifamily real estate		27,260		2,017		1,033		-		30,310
Commercial real estate:
Owner occupied		111,024		6,505		3,332		-		120,861
Non-owner occupied		218,971		6,652		5,127		-		230,750
Commercial and industrial		83,634		1,007		1,275		27		85,943
Consumer		32,364		267		114		-		32,745
All other		89,173		4,873		6,844		-		100,890
Total	$	827,711	$	29,613	$	22,347	$	40	$	879,711

XML

STOCK COMPENSATION EXPENSE, Authorized Stock Options By Exercise Price Range (Details) - Jun. 30, 2015 - USD ($) $ / shares in Units, $ in Thousands	Total
Share-based Compensation, Shares Granted under Stock Option Plans, Exercise Price Range [Line Items]
Outstanding, Number(in shares)	286,409
Outstanding, Weighted Average Exercise Price (in dollars per share)	$ 11.51
Outstanding, Aggregate Intrinsic Value	$ 1,140
Currently Exercisable, Number (in shares)	204,675
Currently Exercisable, Weighted Average Remaining Contractual Life	5 years
Currently Exercisable, Weighted Average Exercise Price (in dollars per share)	$ 10.47
Currently Exercisable, Aggregate Intrinsic Value	$ 1,031
$6.50 to $10.00 [Member]
Share-based Compensation, Shares Granted under Stock Option Plans, Exercise Price Range [Line Items]
Range of Exercise Prices, lower range limit (in dollars per share)	$ 6.50
Range of Exercise Prices, upper range limit (in dollars per share)	$ 10.00
Outstanding, Number(in shares)	106,949
Outstanding, Weighted Average Exercise Price (in dollars per share)	$ 7.56
Outstanding, Aggregate Intrinsic Value	$ 844
Currently Exercisable, Number (in shares)	106,949
Currently Exercisable, Weighted Average Remaining Contractual Life	5 years 10 months 24 days
Currently Exercisable, Weighted Average Exercise Price (in dollars per share)	$ 7.56
Currently Exercisable, Aggregate Intrinsic Value	$ 844
$10.01 to $12.50 [Member]
Share-based Compensation, Shares Granted under Stock Option Plans, Exercise Price Range [Line Items]
Range of Exercise Prices, lower range limit (in dollars per share)	$ 10.01
Range of Exercise Prices, upper range limit (in dollars per share)	$ 12.50
Outstanding, Number(in shares)	36,000
Outstanding, Weighted Average Exercise Price (in dollars per share)	$ 11.39
Outstanding, Aggregate Intrinsic Value	$ 146
Currently Exercisable, Number (in shares)	23,374
Currently Exercisable, Weighted Average Remaining Contractual Life	7 years 8 months 12 days
Currently Exercisable, Weighted Average Exercise Price (in dollars per share)	$ 11.39
Currently Exercisable, Aggregate Intrinsic Value	$ 95
$12.51 to $15.00 [Member]
Share-based Compensation, Shares Granted under Stock Option Plans, Exercise Price Range [Line Items]
Range of Exercise Prices, lower range limit (in dollars per share)	$ 12.51
Range of Exercise Prices, upper range limit (in dollars per share)	$ 15.00
Outstanding, Number(in shares)	122,960
Outstanding, Weighted Average Exercise Price (in dollars per share)	$ 14.23
Outstanding, Aggregate Intrinsic Value	$ 150
Currently Exercisable, Number (in shares)	53,852
Currently Exercisable, Weighted Average Remaining Contractual Life	3 years 9 months 18 days
Currently Exercisable, Weighted Average Exercise Price (in dollars per share)	$ 13.75
Currently Exercisable, Aggregate Intrinsic Value	$ 92
$15.01 to $17.50 [Member]
Share-based Compensation, Shares Granted under Stock Option Plans, Exercise Price Range [Line Items]
Range of Exercise Prices, lower range limit (in dollars per share)	$ 15.01
Range of Exercise Prices, upper range limit (in dollars per share)	$ 17.50
Outstanding, Number(in shares)	20,500
Outstanding, Weighted Average Exercise Price (in dollars per share)	$ 16.00
Outstanding, Aggregate Intrinsic Value	$ 0
Currently Exercisable, Number (in shares)	20,500
Currently Exercisable, Weighted Average Remaining Contractual Life	7 months 6 days
Currently Exercisable, Weighted Average Exercise Price (in dollars per share)	$ 16.00
Currently Exercisable, Aggregate Intrinsic Value	$ 0

XML

LOANS, Purchased Loans (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Purchased loans [Abstract]
Loans and leases receivable purchased with deteriorated credit quality	$ 11,489	$ 11,489		$ 11,587
Contractual principal balance	21,159	21,159		21,250
Carrying amount, net of allowance	10,463	10,463		10,639
Increase in allowance for loan losses related to purchased loans	0		$ 0
Accretable Yield [Roll Forward]
Beginning Balance		204	217
New loans purchased		0	0
Accretion of income		(10)	(6)
Reclassifications from non-accretable difference		0	0
Disposals		0	0
Ending Balance	194	194	$ 211
Multifamily Real Estate [Member]
Purchased loans [Abstract]
Loans and leases receivable purchased with deteriorated credit quality	460	460		497
Owner Occupied Commercial Real Estate [Member]
Purchased loans [Abstract]
Loans and leases receivable purchased with deteriorated credit quality	131	131		131
Non Owner Occupied Commercial Real Estate [Member]
Purchased loans [Abstract]
Loans and leases receivable purchased with deteriorated credit quality	5,623	5,623		5,695
Commercial and Industrial [Member]
Purchased loans [Abstract]
Loans and leases receivable purchased with deteriorated credit quality	126	126		136
All Other [Member]
Purchased loans [Abstract]
Loans and leases receivable purchased with deteriorated credit quality	$ 5,149	$ 5,149		$ 5,128

XML

LOANS, Activity in The Allowance For Loan Losses by Portfolio Segment (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Activity in the allowance for loan losses by portfolio segment [Roll Forward]
Balance, beginning of period	$ 10,170	$ 10,344	$ 10,347	$ 11,027
Provision (credit) for loan losses	(146)	(79)	(77)	(389)
Loans charged-off	143	477	493	923
Recoveries	813	89	917	162
Balance, end of period	10,694	9,877	10,694	9,877
Residential Real Estate [Member]
Activity in the allowance for loan losses by portfolio segment [Roll Forward]
Balance, beginning of period	2,196	2,250	2,093	2,694
Provision (credit) for loan losses	218	36	372	(391)
Loans charged-off	4	152	78	171
Recoveries	56	6	79	8
Balance, end of period	2,466	2,140	2,466	2,140
Multifamily Real Estate [Member]
Activity in the allowance for loan losses by portfolio segment [Roll Forward]
Balance, beginning of period	287	297	304	417
Provision (credit) for loan losses	225	14	208	(106)
Loans charged-off	0	0	0	0
Recoveries	0	0	0	0
Balance, end of period	512	311	512	311
Owner Occupied Commercial Real Estate [Member]
Activity in the allowance for loan losses by portfolio segment [Roll Forward]
Balance, beginning of period	1,489	1,477	1,501	1,407
Provision (credit) for loan losses	(13)	(32)	(24)	39
Loans charged-off	0	81	2	82
Recoveries	0	0	1	0
Balance, end of period	1,476	1,364	1,476	1,364
Non Owner Occupied Commercial Real Estate [Member]
Activity in the allowance for loan losses by portfolio segment [Roll Forward]
Balance, beginning of period	2,324	2,385	2,316	2,037
Provision (credit) for loan losses	(651)	(92)	(643)	556
Loans charged-off	0	23	0	323
Recoveries	659	0	659	0
Balance, end of period	2,332	2,270	2,332	2,270
Commercial and Industrial [Member]
Activity in the allowance for loan losses by portfolio segment [Roll Forward]
Balance, beginning of period	1,450	1,527	1,444	2,184
Provision (credit) for loan losses	(305)	(20)	(140)	(616)
Loans charged-off	8	21	169	84
Recoveries	2	3	4	5
Balance, end of period	1,139	1,489	1,139	1,489
Consumer [Member]
Activity in the allowance for loan losses by portfolio segment [Roll Forward]
Balance, beginning of period	241	220	243	297
Provision (credit) for loan losses	87	37	105	(33)
Loans charged-off	78	33	132	59
Recoveries	24	8	58	27
Balance, end of period	274	232	274	232
All Other [Member]
Activity in the allowance for loan losses by portfolio segment [Roll Forward]
Balance, beginning of period	2,183	2,188	2,446	1,991
Provision (credit) for loan losses	293	(22)	45	162
Loans charged-off	53	167	112	204
Recoveries	72	72	116	122
Balance, end of period	$ 2,495	$ 2,071	$ 2,495	$ 2,071

XML

EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Basic earnings per share [Abstract]
Income available to common stockholders	$ 3,127	$ 2,935	$ 6,269	$ 6,440
Weighted average common shares outstanding (in shares)	8,157,785	8,079,629	8,150,596	8,061,522
Earnings per share (in dollars per share)	$ 0.38	$ 0.36	$ 0.77	$ 0.80
Diluted earnings per share [Abstract]
Income available to common stockholders	$ 3,127	$ 2,935	$ 6,269	$ 6,440
Weighted average common shares outstanding (in shares)	8,157,785	8,079,629	8,150,596	8,061,522
Add dilutive effects of potential additional common stock (in shares)	230,145	502,839	358,336	504,519
Weighted average common and dilutive potential common shares outstanding (in shares)	8,387,930	8,582,468	8,508,932	8,566,041
Earnings per share assuming dilution (in dollars per share)	$ 0.37	$ 0.34	$ 0.74	$ 0.75
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)	23,500	23,500	23,500	23,500

XML

LOANS, Past Due And Non-performing Loans (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Past due and non-performing loans [Abstract]
Principal Owed on Non-accrual Loans	$ 21,115	$ 22,767
Recorded Investment in Non-accrual Loans	10,982	12,712
Loans Past Due Over 90 Days, still accruing	2,289	1,266
Residential Real Estate [Member]
Past due and non-performing loans [Abstract]
Principal Owed on Non-accrual Loans	2,507	1,996
Recorded Investment in Non-accrual Loans	2,283	1,768
Loans Past Due Over 90 Days, still accruing	378	668
Multifamily Real Estate [Member]
Past due and non-performing loans [Abstract]
Principal Owed on Non-accrual Loans	1,532	1,803
Recorded Investment in Non-accrual Loans	539	1,033
Loans Past Due Over 90 Days, still accruing	0	564
Owner Occupied Commercial Real Estate [Member]
Past due and non-performing loans [Abstract]
Principal Owed on Non-accrual Loans	807	2,115
Recorded Investment in Non-accrual Loans	737	1,928
Loans Past Due Over 90 Days, still accruing	8	0
Non Owner Occupied Commercial Real Estate [Member]
Past due and non-performing loans [Abstract]
Principal Owed on Non-accrual Loans	1,960	2,020
Recorded Investment in Non-accrual Loans	1,689	1,819
Loans Past Due Over 90 Days, still accruing	1,820	26
Commercial and Industrial [Member]
Past due and non-performing loans [Abstract]
Principal Owed on Non-accrual Loans	1,576	2,012
Recorded Investment in Non-accrual Loans	471	806
Loans Past Due Over 90 Days, still accruing	83	8
Consumer [Member]
Past due and non-performing loans [Abstract]
Principal Owed on Non-accrual Loans	98	213
Recorded Investment in Non-accrual Loans	80	185
Loans Past Due Over 90 Days, still accruing	0	0
All Other [Member]
Past due and non-performing loans [Abstract]
Principal Owed on Non-accrual Loans	12,635	12,608
Recorded Investment in Non-accrual Loans	5,183	5,173
Loans Past Due Over 90 Days, still accruing	$ 0	$ 0

XML

LOANS, Past Due Aging Analysis (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Aging of recorded investment in past due loans [Abstract]
Total Loans	$ 883,873	$ 879,711
30-89 Days Past Due	24,070	10,861
Greater than 90 days past due	11,307	11,812
Total Past Due	35,377	22,673
Loans Not Past Due	848,496	857,038
Residential Real Estate [Member]
Aging of recorded investment in past due loans [Abstract]
Total Loans	282,923	278,212
30-89 Days Past Due	5,862	5,810
Greater than 90 days past due	1,658	1,706
Total Past Due	7,520	7,516
Loans Not Past Due	275,403	270,696
Multifamily Real Estate [Member]
Aging of recorded investment in past due loans [Abstract]
Total Loans	37,112	30,310
30-89 Days Past Due	460	177
Greater than 90 days past due	79	1,100
Total Past Due	539	1,277
Loans Not Past Due	36,573	29,033
Owner Occupied Commercial Real Estate [Member]
Aging of recorded investment in past due loans [Abstract]
Total Loans	122,879	120,861
30-89 Days Past Due	1,769	250
Greater than 90 days past due	549	1,530
Total Past Due	2,318	1,780
Loans Not Past Due	120,561	119,081
Non Owner Occupied Commercial Real Estate [Member]
Aging of recorded investment in past due loans [Abstract]
Total Loans	217,881	230,750
30-89 Days Past Due	125	2,173
Greater than 90 days past due	3,509	1,670
Total Past Due	3,634	3,843
Loans Not Past Due	214,247	226,907
Commercial and Industrial [Member]
Aging of recorded investment in past due loans [Abstract]
Total Loans	76,193	85,943
30-89 Days Past Due	1,737	1,720
Greater than 90 days past due	348	608
Total Past Due	2,085	2,328
Loans Not Past Due	74,108	83,615
Consumer [Member]
Aging of recorded investment in past due loans [Abstract]
Total Loans	31,561	32,745
30-89 Days Past Due	526	497
Greater than 90 days past due	15	71
Total Past Due	541	568
Loans Not Past Due	31,020	32,177
All Other [Member]
Aging of recorded investment in past due loans [Abstract]
Total Loans	115,324	100,890
30-89 Days Past Due	13,591	234
Greater than 90 days past due	5,149	5,127
Total Past Due	18,740	5,361
Loans Not Past Due	$ 96,584	$ 95,529

XML

SECURITIES

6 Months Ended

Jun. 30, 2015

SECURITIES [Abstract]

SECURITIES

NOTE  2 –SECURITIES

Amortized cost and fair value of investment securities, by category, at June 30, 2015 are summarized as follows:

	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Available for sale
Mortgage-backed securities
U. S. sponsored agency MBS - residential	$	76,141	$	674	$	(399	)	$	76,416
U. S. sponsored agency CMO's - residential		123,441		2,140		(704	)		124,877
Total mortgage-backed securities of government sponsored agencies		199,582		2,814		(1,103	)		201,293
U. S. government sponsored agency securities		14,463		98		-			14,561
Obligations of states and political subdivisions		10,044		197		(18	)		10,223
Total available for sale	$	224,089	$	3,109	$	(1,121	)	$	226,077

Amortized cost and fair value of investment securities, by category, at December 31, 2014 are summarized as follows:

	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Available for sale
Mortgage-backed securities
U. S. sponsored agency MBS - residential	$	52,006	$	774	$	-		$	52,780
U. S. sponsored agency CMO's - residential		142,932		2,167		(911	)		144,188
Total mortgage-backed securities of government sponsored agencies		194,938		2,941		(911	)		196,968
U. S. government sponsored agency securities		22,553		30		(57	)		22,506
Obligations of states and political subdivisions		10,015		261		-			10,276
Total available for sale	$	227,486	$	3,232	$	(968	)	$	229,750

The amortized cost and fair value of securities at June 30, 2015 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	$	3,472	$	3,489
Due after one year through five years		17,732		17,952
Due after five years through ten years		3,054		3,093
Due after ten years		249		250
Mortgage-backed securities of government sponsored agencies		199,582		201,293
Total available for sale	$	224,089	$	226,077

There were no sales of securities during the first six months of 2015 nor the first six months of 2014.

Securities with unrealized losses at June 30, 2015 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 MBS – residential	$	30,728	$	(399	)	$	-	$	-		$	30,728	$	(399	)
U.S government sponsored agency CMO – residential		7,204		(91	)		19,292		(613	)		26,496		(704	)
Obligations of states and political subdivisions		911		(18	)		-		-			911		(18	)
Total temporarily impaired	$	38,843	$	(508	)	$	19,292	$	(613	)	$	58,135	$	(1,121	)

Securities with unrealized losses at December 31, 2014 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	$	9,971	$	(57	)	$	-	$	-		$	9,971	$	(57	)
U.S government sponsored agency CMO's – residential		5,194		(52	)		26,471		(859	)		31,665		(911	)
Total temporarily impaired	$	15,165	$	(109	)	$	26,471	$	(859	)	$	41,636	$	(968	)

The investment portfolio is predominately high credit quality interest-bearing bonds with defined maturity dates backed by the U.S. Government or Government sponsored entities.  The unrealized losses at June 30, 2015 and December 31, 2014 are price changes resulting from changes in the interest rate environment and are considered to be temporary declines in the value of the securities.  Management does not intend to sell and it is likely that management will not be required to sell the securities prior to their anticipated recovery.  Their fair value is expected to recover as the bonds approach their maturity date and/or market conditions improve.

XML

LOANS, Allowance for Loan Losses and Recorded Investment in Loans by Portfolio Segment Based on Impairment Method (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2013
Allowance for Loan Losses [Abstract]
Individually evaluated for impairment, allowance for loan losses	$ 490		$ 452
Collectively evaluated for impairment, allowance for loan losses	9,178		8,947
Acquired with deteriorated credit quality, allowance for loan losses	1,026		948
Total allowance for loan losses	10,694	$ 10,170	10,347	$ 9,877	$ 10,344	$ 11,027
Loans Balances [Abstract]
Individually evaluated for impairment, loan balances	7,567		9,569
Collectively evaluated for impairment, loan balances	864,817		858,555
Acquired with deteriorated credit quality, loan balances	11,489		11,587
Total Loans	883,873		879,711
Residential Real Estate [Member]
Allowance for Loan Losses [Abstract]
Individually evaluated for impairment, allowance for loan losses	183		0
Collectively evaluated for impairment, allowance for loan losses	2,283		2,093
Acquired with deteriorated credit quality, allowance for loan losses	0		0
Total allowance for loan losses	2,466	2,196	2,093	2,140	2,250	2,694
Loans Balances [Abstract]
Individually evaluated for impairment, loan balances	571		137
Collectively evaluated for impairment, loan balances	282,352		278,075
Acquired with deteriorated credit quality, loan balances	0		0
Total Loans	282,923		278,212
Multifamily Real Estate [Member]
Allowance for Loan Losses [Abstract]
Individually evaluated for impairment, allowance for loan losses	0		0
Collectively evaluated for impairment, allowance for loan losses	512		304
Acquired with deteriorated credit quality, allowance for loan losses	0		0
Total allowance for loan losses	512	287	304	311	297	417
Loans Balances [Abstract]
Individually evaluated for impairment, loan balances	79		536
Collectively evaluated for impairment, loan balances	36,573		29,277
Acquired with deteriorated credit quality, loan balances	460		497
Total Loans	37,112		30,310
Owner Occupied Commercial Real Estate [Member]
Allowance for Loan Losses [Abstract]
Individually evaluated for impairment, allowance for loan losses	48		107
Collectively evaluated for impairment, allowance for loan losses	1,428		1,394
Acquired with deteriorated credit quality, allowance for loan losses	0		0
Total allowance for loan losses	1,476	1,489	1,501	1,364	1,477	1,407
Loans Balances [Abstract]
Individually evaluated for impairment, loan balances	943		2,011
Collectively evaluated for impairment, loan balances	121,805		118,719
Acquired with deteriorated credit quality, loan balances	131		131
Total Loans	122,879		120,861
Non Owner Occupied Commercial Real Estate [Member]
Allowance for Loan Losses [Abstract]
Individually evaluated for impairment, allowance for loan losses	29		54
Collectively evaluated for impairment, allowance for loan losses	2,303		2,262
Acquired with deteriorated credit quality, allowance for loan losses	0		0
Total allowance for loan losses	2,332	2,324	2,316	2,270	2,385	2,037
Loans Balances [Abstract]
Individually evaluated for impairment, loan balances	4,396		4,874
Collectively evaluated for impairment, loan balances	207,862		220,181
Acquired with deteriorated credit quality, loan balances	5,623		5,695
Total Loans	217,881		230,750
Commercial and Industrial [Member]
Allowance for Loan Losses [Abstract]
Individually evaluated for impairment, allowance for loan losses	230		291
Collectively evaluated for impairment, allowance for loan losses	783		1,105
Acquired with deteriorated credit quality, allowance for loan losses	126		48
Total allowance for loan losses	1,139	1,450	1,444	1,489	1,527	2,184
Loans Balances [Abstract]
Individually evaluated for impairment, loan balances	666		902
Collectively evaluated for impairment, loan balances	75,401		84,905
Acquired with deteriorated credit quality, loan balances	126		136
Total Loans	76,193		85,943
Consumer [Member]
Allowance for Loan Losses [Abstract]
Individually evaluated for impairment, allowance for loan losses	0		0
Collectively evaluated for impairment, allowance for loan losses	274		243
Acquired with deteriorated credit quality, allowance for loan losses	0		0
Total allowance for loan losses	274	241	243	232	220	297
Loans Balances [Abstract]
Individually evaluated for impairment, loan balances	0		0
Collectively evaluated for impairment, loan balances	31,561		32,745
Acquired with deteriorated credit quality, loan balances	0		0
Total Loans	31,561		32,745
All Other [Member]
Allowance for Loan Losses [Abstract]
Individually evaluated for impairment, allowance for loan losses	0		0
Collectively evaluated for impairment, allowance for loan losses	1,595		1,546
Acquired with deteriorated credit quality, allowance for loan losses	900		900
Total allowance for loan losses	2,495	$ 2,183	2,446	$ 2,071	$ 2,188	$ 1,991
Loans Balances [Abstract]
Individually evaluated for impairment, loan balances	912		1,109
Collectively evaluated for impairment, loan balances	109,263		94,653
Acquired with deteriorated credit quality, loan balances	5,149		5,128
Total Loans	$ 115,324		$ 100,890

XML

STOCK COMPENSATION EXPENSE (Details) - USD ($)			3 Months Ended		6 Months Ended
	Mar. 18, 2015	Apr. 16, 2014	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting period, description					three equal annual installments	three equal annual installments
Stock option vesting periods					3 years	3 years
Grants (in shares)					47,650	46,300
Grants (in dollars per share)					$ 14.72	$ 14.43
Compensation expense			$ 121,000	$ 128,000	$ 163,000	$ 170,000
Unrecognized stock-based compensation expense			$ 98,000		$ 98,000
Unrecognized stock-based compensation, period of recognition					32 months
2012 Long Term Incentive Plan [Member] | Robert W. Walker [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Grants (in shares)	7,000	6,000
Fair value of stock options granted (in dollars per share)	$ 14.72	$ 14.20
Compensation expense	$ 103,000	$ 85,000

XML

CONSOLIDATED BALANCE SHEETS (UNAUDITED) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
ASSETS
Cash and due from banks	$ 33,440	$ 35,147
Interest bearing bank balances	35,437	35,251
Federal funds sold	3,265	4,986
Cash and cash equivalents	72,142	75,384
Securities available for sale	226,077	229,750
Loans held for sale	0	226
Loans	883,873	879,711
Allowance for loan losses	(10,694)	(10,347)
Net loans	873,179	869,364
Federal Home Loan Bank stock, at cost	3,072	2,996
Premises and equipment, net	20,127	21,384
Real estate and other property acquired through foreclosure	11,349	12,208
Interest receivable	3,271	3,219
Goodwill	33,796	33,796
Other intangible assets	2,599	3,033
Other assets	1,394	1,464
Total assets	1,247,006	1,252,824
Deposits
Non-interest bearing	253,094	252,828
Time deposits, $250,000 and over	67,532	66,216
Other interest bearing	749,905	756,199
Total deposits	1,070,531	1,075,243
Securities sold under agreements to repurchase	15,307	15,580
Other borrowed funds	12,507	11,722
Interest payable	387	434
Other liabilities	3,836	4,063
Total liabilities	1,102,568	1,107,042
Stockholders' equity
Common stock, no par value; 20,000,000 shares authorized; 8,167,806 shares issued and outstanding at June 30, 2015, and 8,142,056 shares issued and outstanding at December 31, 2014	69,257	74,568
Retained earnings	73,868	69,719
Accumulated other comprehensive income (loss)	1,313	1,495
Total stockholders' equity	144,438	145,782
Total liabilities and stockholders' equity	$ 1,247,006	$ 1,252,824

XML

FAIR VALUE, Carrying Amount and Estimated Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Financial assets [Abstract]
Securities available for sale	$ 226,077	$ 229,750
Level 1 [Member]
Financial assets [Abstract]
Cash and due from banks	68,877	70,398
Federal funds sold	3,265	4,986
Securities available for sale	0	0
Loans held for sale		0
Loans, net	0	0
Interest receivable	0	0
Financial liabilities [Abstract]
Deposits	(718,462)	(711,118)
Securities sold under agreements to repurchase	0	0
Other borrowed funds	0	0
Interest payable	(6)	(6)
Level 2 [Member]
Financial assets [Abstract]
Cash and due from banks	0	0
Federal funds sold	0	0
Securities available for sale	226,077	229,610
Loans held for sale		0
Loans, net	0	0
Interest receivable	584	625
Financial liabilities [Abstract]
Deposits	(350,961)	(363,481)
Securities sold under agreements to repurchase	(15,307)	(15,580)
Other borrowed funds	(12,539)	(11,760)
Interest payable	(381)	(428)
Level 3 [Member]
Financial assets [Abstract]
Cash and due from banks	0	0
Federal funds sold	0	0
Securities available for sale	0	140
Loans held for sale		226
Loans, net	874,822	870,273
Interest receivable	2,687	2,594
Financial liabilities [Abstract]
Deposits	0	0
Securities sold under agreements to repurchase	0	0
Other borrowed funds	0	0
Interest payable	0	0
Carrying Amount [Member]
Financial assets [Abstract]
Cash and due from banks	68,877	70,398
Federal funds sold	3,265	4,986
Securities available for sale	226,077	229,750
Loans held for sale		226
Loans, net	873,179	869,364
Federal Home Loan Bank stock	3,072	2,996
Interest receivable	3,271	3,219
Financial liabilities [Abstract]
Deposits	(1,070,531)	(1,075,243)
Securities sold under agreements to repurchase	(15,307)	(15,580)
Other borrowed funds	(12,507)	(11,722)
Interest payable	(387)	(434)
Fair Value [Member]
Financial assets [Abstract]
Cash and due from banks	68,877	70,398
Federal funds sold	3,265	4,986
Securities available for sale	226,077	229,750
Loans held for sale		226
Loans, net	874,822	870,273
Interest receivable	3,271	3,219
Financial liabilities [Abstract]
Deposits	(1,069,423)	(1,074,599)
Securities sold under agreements to repurchase	(15,307)	(15,580)
Other borrowed funds	(12,539)	(11,760)
Interest payable	$ (387)	$ (434)

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Cash flows from operating activities
Net income	$ 6,269	$ 6,770
Adjustments to reconcile net income to net cash from operating activities
Depreciation	874	735
Provision (credit) for loan losses	(77)	(389)
Amortization (accretion), net	307	484
OREO writedowns (gains on sales), net	254	(800)
Stock compensation expense	163	170
Loans originated for sale	(1,679)	(3,192)
Secondary market loans sold	1,941	2,851
Secondary market income	(38)	(69)
Changes in:
Interest receivable	(52)	417
Other assets	166	1,066
Interest payable	(47)	(56)
Other liabilities	(227)	174
Net cash from operating activities	7,854	8,161
Cash flows from investing activities
Purchases of securities available for sale	(30,705)	(34,453)
Proceeds from maturities and calls of securities available for sale	33,557	24,298
Purchase of FHLB stock	(76)	0
Redemption of FHLB stock	0	408
Net change in loans	(4,415)	1,605
Acquisition of subsidiary, net of cash received	0	40,973
Purchases of premises and equipment, net	(377)	(290)
Improvements to OREO property	(29)	(242)
Proceeds from sales of other real estate acquired through foreclosure	2,649	2,803
Net cash from investing activities	604	35,102
Cash flows from financing activities
Net change in deposits	(4,618)	(18,903)
Net change in agreements to repurchase securities	(273)	(316)
Repayment of other borrowed funds	(3,215)	(1,207)
Proceeds from other borrowings	4,000	0
Proceeds from stock option exercises	201	449
Purchase of warrant	(5,675)	0
Common stock dividends paid	(2,120)	(2,822)
Preferred stock dividends paid	0	(300)
Net cash from financing activities	(11,700)	(23,099)
Net change in cash and cash equivalents	(3,242)	20,164
Cash and cash equivalents at beginning of period	75,384	76,761
Cash and cash equivalents at end of period	72,142	96,925
Supplemental disclosures of cash flow information:
Cash paid during period for interest	2,128	2,207
Cash paid during period for income taxes	2,866	2,299
Loans transferred to real estate acquired through foreclosure	1,255	1,079
Premises transferred to other real estate owned	$ 760	$ 0

XML

LOANS, Troubled Debt Restructurings (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Financing Receivable, Modifications [Line Items]
TDR's on Non-accrual	$ 9	$ 13
Other TDR's	1,948	2,489
Total TDR's	1,957	2,502
Residential Real Estate [Member]
Financing Receivable, Modifications [Line Items]
TDR's on Non-accrual	9	13
Other TDR's	181	191
Total TDR's	190	204
Non Owner Occupied Commercial Real Estate [Member]
Financing Receivable, Modifications [Line Items]
TDR's on Non-accrual	0	0
Other TDR's	464	474
Total TDR's	464	474
Commercial and Industrial [Member]
Financing Receivable, Modifications [Line Items]
TDR's on Non-accrual	0	0
Other TDR's	417	761
Total TDR's	417	761
All Other [Member]
Financing Receivable, Modifications [Line Items]
TDR's on Non-accrual	0	0
Other TDR's	886	1,063
Total TDR's	$ 886	$ 1,063

XML

FAIR VALUE (Tables)

6 Months Ended

Jun. 30, 2015

FAIR VALUE [Abstract]

Carrying Amounts and Estimated Fair Values of Financial Instruments

The carrying amounts and estimated fair values of financial instruments at June 30, 2015 were as follows:

				Fair Value Measurements at June 30, 2015 Using
	Carrying Amount			Level 1			Level 2			Level 3			Total
Financial assets
Cash and due from banks	$	68,877		$	68,877		$	-		$	-		$	68,877
Federal funds sold		3,265			3,265			-			-			3,265
Securities available for sale		226,077			-			226,077			-			226,077
Loans, net		873,179			-			-			874,822			874,822
Federal Home Loan Bank stock		3,072			n/	a		n/	a		n/	a		n/	a
Interest receivable		3,271			-			584			2,687			3,271
Financial liabilities
Deposits	$	(1,070,531	)	$	(718,462	)	$	(350,961	)	$	-		$	(1,069,423	)
Securities sold under agreements to repurchase		(15,307	)		-			(15,307	)		-			(15,307	)
Other borrowed funds		(12,507	)		-			(12,539	)		-			(12,539	)
Interest payable		(387	)		(6	)		(381	)		-			(387	)

The carrying amounts and estimated fair values of financial instruments at December 31, 2014 were as follows:

				Fair Value Measurements at December 31, 2014 Using
	Carrying Amount			Level 1			Level 2			Level 3			Total
Financial assets
Cash and due from banks	$	70,398		$	70,398		$	-		$	-		$	70,398
Federal funds sold		4,986			4,986			-			-			4,986
Securities available for sale		229,750			-			229,610			140			229,750
Loans held for sale		226			-			-			226			226
Loans, net		869,364			-			-			870,273			870,273
Federal Home Loan Bank stock		2,996			n/	a		n/	a		n/	a		n/	a
Interest receivable		3,219			-			625			2,594			3,219
Financial liabilities
Deposits	$	(1,075,243	)	$	(711,118	)	$	(363,481	)	$	-		$	(1,074,599	)
Securities sold under agreements to repurchase		(15,580	)		-			(15,580	)		-			(15,580	)
Other borrowed funds		(11,722	)		-			(11,760	)		-			(11,760	)
Interest payable		(434	)		(6	)		(428	)		-			(434	)

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, 2015 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	$	76,416	$	-	$	76,416	$	-
U. S. agency CMO's - residential		124,877		-		124,877		-
Total mortgage-backed securities of government sponsored agencies		201,293		-		201,293		-
U. S. government sponsored agency securities		14,561		-		14,561		-
Obligations of states and political subdivisions		10,223		-		10,223		-
Total available for sale	$	226,077	$	-	$	226,077	$	-

			Fair Value Measurements at December 31, 2014 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	$	52,780	$	-	$	52,780	$	-
U. S. agency CMO's		144,188		-		144,188		-
Total mortgage-backed securities of government sponsored agencies		196,968		-		196,968		-
U. S. government sponsored agency securities		22,506		-		22,506		-
Obligations of states and political subdivisions		10,276		-		10,136		140
Total securities available for sale	$	229,750	$	-	$	229,610	$	140
Mortgage-backed securities

Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation

The table below presents a reconciliation of all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the quarter ended June 30, 2015:

	Securities Available-for-sale
	Quarter Ended June 30, 2015
Balance of recurring Level 3 assets at beginning of period	$	140
Total gains or losses (realized/unrealized):
Included in earnings – realized		-
Included in earnings – unrealized		-
Included in other comprehensive income		-
Purchases, sales, issuances and settlements, net		(140	)
Transfers in and/or out of Level 3		-
Balance of recurring Level 3 assets at period-end	$	-

Assets and Liabilities Measured at Fair Value on a Non-recurring Basis

Assets and liabilities measured at fair value on a non-recurring basis at June 30, 2015 are summarized below:

			Fair Value Measurements at June 30, 2015 Using
	Carrying Value		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	$	63	$	-	$	-	$	63
Commercial real estate:
Owner occupied		346		-		-		346
Non-owner occupied		589		-		-		589
Commercial and industrial		19		-		-		19
All other		4,249		-		-		4,249
Total impaired loans	$	5,266	$	-	$	-	$	5,266
Other real estate owned:
Residential real estate	$	657	$	-	$	-	$	657
Commercial real estate:
Owner occupied		39		-		-		39
Non-owner occupied		2,003		-		-		2,003
All other		6,984		-		-		6,984
Total OREO	$	9,683	$	-	$	-	$	9,683

Assets and liabilities measured at fair value on a non-recurring basis at December 31, 2014 are summarized below:

			Fair Value Measurements at December 31, 2014 Using
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Impaired loans:
Commercial real estate:
Owner occupied	$	600	$	-	$	-	$	600
Non-owner occupied		630		-		-		630
Commercial and industrial		341		-		-		341
All other		4,229		-		-		4,229
Total impaired loans	$	5,800	$	-	$	-	$	5,800
Other real estate owned:
Commercial real estate:
Non-owner occupied	$	2,003	$	-	$	-	$	2,003
All other		8,203		-		-		8,203
Total OREO	$	10,206	$	-	$	-	$	10,206

Fair Value Inputs, Assets, Quantitative Information

The significant unobservable inputs related to assets and liabilities measured at fair value on a non-recurring basis at June 30, 2015 are summarized below:

	June 30, 2015		Valuation Techniques	Unobservable Inputs	Range (Weighted Avg)
Impaired loans:
Residential real estate	$	63	sales comparison	adjustment for differences between the comparable sales		26.5%-26.5% (26.5%)
Commercial real estate:
Owner occupied		346	sales comparison	adjustment for limited salability of specialized property		65.5%-72.4% (66.9%)
Non-owner occupied		589	sales comparison	adjustment for differences between the comparable sales		41.8%-41.8% (41.8%)
Commercial and industrial		19	sales comparison	adjustment for estimated realizable value		8.0%-8.0% (8.0%)
All other		4,249	sales comparison	adjustment for percentage of completion of construction		57.2%-57.2% (57.2%)
Total impaired loans	$	5,266
Other real estate owned:
Residential real estate	$	657	sales comparison	adjustment for differences between the comparable sales		0.7%-35.5% (25.0%)
Commercial real estate:
Owner occupied		39	sales comparison	adjustment for estimated realizable value		25.4%-25.4% (25.4%)
Non-owner occupied		2,003	sales comparison	adjustment for differences between the comparable sales		17.2%-17.2% (17.2%)
All other		6,984	sales comparison	adjustment for estimated realizable value		24.6%-67.4% (35.4%)
Total OREO	$	9,683

The significant unobservable inputs related to assets and liabilities measured at fair value on a non-recurring basis at December 31, 2014 are summarized below:

	December 31, 2014		Valuation Techniques	Unobservable Inputs	Range (Weighted Avg)
Impaired loans:
Commercial Real Estate
Owner Occupied	$	600	sales comparison	adjustment for limited salability of specialized property	44.8%-72.4% (58.9%)
Non-owner Occupied		630	sales comparison	adjustment for differences between the comparable sales	16.9%-54.6% (16.9%)
Commercial and Industrial		341	sales comparison	adjustment for limited salability of specialized property	26.2%-41.2% (27.0%)
All Other		4,229	sales comparison	adjustment for percentage of completion of construction	57.3%-57.3% (57.3%)
Total impaired loans	$	5,800
Other real estate owned:
Commercial Real Estate
Non-owner Occupied	$	2,003	sales comparison	adjustment for differences between the comparable sales	17.8%-17.8% (17.8%)
All Other		8,203	sales comparison	adjustment for estimated realizable value	24.6%-50.3% (45.0%)
Total OREO	$	10,206

XML

LOANS, TDR Modified During Period (Details) - 6 months ended Jun. 30, 2015 $ in Thousands	USD ($) Loan
Troubled Debt Restructuring Activity [Line Items]
Number of Loans | Loan	1
Pre-Modification Outstanding Recorded Investment	$ 1,543
Post-Modification Outstanding Recorded Investment	$ 1,543
Multifamily real estate [Member]
Troubled Debt Restructuring Activity [Line Items]
Number of Loans | Loan	1
Pre-Modification Outstanding Recorded Investment	$ 1,543
Post-Modification Outstanding Recorded Investment	$ 1,543

XML

SECURITIES (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Available-for-sale Investment securities [Abstract]
Amortized Cost	$ 224,089	$ 227,486
Unrealized Gains	3,109	3,232
Unrealized Losses	(1,121)	(968)
Available for sale, Fair Value	226,077	229,750
U. S. Sponsored Agency MBS - Residential [Member]
Available-for-sale Investment securities [Abstract]
Amortized Cost	76,141	52,006
Unrealized Gains	674	774
Unrealized Losses	(399)	0
Available for sale, Fair Value	76,416	52,780
U. S. Sponsored Agency CMO's - Residential [Member]
Available-for-sale Investment securities [Abstract]
Amortized Cost	123,441	142,932
Unrealized Gains	2,140	2,167
Unrealized Losses	(704)	(911)
Available for sale, Fair Value	124,877	144,188
Total Mortgage-Backed Securities of Government Sponsored Agencies [Member]
Available-for-sale Investment securities [Abstract]
Amortized Cost	199,582	194,938
Unrealized Gains	2,814	2,941
Unrealized Losses	(1,103)	(911)
Available for sale, Fair Value	201,293	196,968
U. S. Government Sponsored Agency Securities [Member]
Available-for-sale Investment securities [Abstract]
Amortized Cost	14,463	22,553
Unrealized Gains	98	30
Unrealized Losses	0	(57)
Available for sale, Fair Value	14,561	22,506
Obligations of States and Political Subdivisions [Member]
Available-for-sale Investment securities [Abstract]
Amortized Cost	10,044	10,015
Unrealized Gains	197	261
Unrealized Losses	(18)	0
Available for sale, Fair Value	$ 10,223	$ 10,276

XML

BASIS OF PRESENTATION

6 Months Ended

Jun. 30, 2015

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, 2015
		Year	Total		Net Income
Subsidiary	Location	Acquired	Assets		Qtr			YTD
Citizens Deposit Bank & Trust	Vanceburg, Kentucky	1991	$	387,663	$	931		$	1,945
Premier Bank, Inc.	Huntington, West Virginia	1998		853,078		2,702			5,275
Parent and Intercompany Eliminations				6,265		(506	)		(951	)
Consolidated Total			$	1,247,006	$	3,127		$	6,269

All significant intercompany transactions and balances have been eliminated.

Recently Issued Accounting Pronouncements

In January 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update 2014-04, Receivables—Troubled Debt Restructurings by Creditors (Subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure (a consensus of the FASB Emerging Issues Task Force). The ASU clarifies when an insubstance repossession or foreclosure occurs and a creditor is considered to have received physical possession of real estate property collateralizing a consumer mortgage loan. Specifically, the new ASU requires a creditor to reclassify a collateralized consumer mortgage loan to real estate property upon obtaining legal title to the real estate collateral, or the borrower voluntarily conveying all interest in the real estate property to the lender to satisfy the loan through a deed in lieu of foreclosure or similar legal agreement. Additional disclosures are required detailing the amount of foreclosed residential real estate property held by the creditor and the recorded investment in consumer mortgages collateralized by real estate property that are in the process of foreclosure. The new guidance is effective for annual periods, and interim reporting periods within those annual periods, beginning after December 15, 2014. The adoption of this guidance did not have a material impact on the Company's consolidated financial statements.

In May 2014, FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606). The ASU creates a new topic, Topic 606, to provide guidance on revenue recognition for entities that enter into contracts with customers to transfer goods or services or enter into contracts for the transfer of nonfinancial assets. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additional disclosures are required to provide quantitative and qualitative information regarding the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The new guidance is effective for annual reporting periods, and interim reporting periods within those annual periods, beginning after December 15, 2016. However, in April 2015, the FASB voted to defer the effective date of ASU 2014-09 by one year making the amendments effective for public entities for annual reporting periods beginning after December 15, 2017, including interim periods within those reporting periods.  Companies have the option to apply ASU 2014-09 as of the original effective date. Early adoption is not permitted. Management is currently evaluating the impact of the adoption of this guidance on the Company's financial statements.

In June 2014, FASB issued Accounting Standards Update 2014-11, Transfers and Servicing (Topic 860): Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures. The amendments in this update require two accounting changes. First, the amendments in this update change the accounting for repurchase-to-maturity transactions to secured borrowing accounting. Second, for repurchase financing arrangements, the amendments require separate accounting for a transfer of a financial asset executed contemporaneously with a repurchase agreement with the same counter-party, which will result in secured borrowing accounting for the repurchase agreement. This update also requires certain disclosures for these types of transactions. This ASU became effective for the Company on January 1, 2015. The adoption of ASU 2014-11 did not have a material impact on the Company's financial statements.

XML

CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) - $ / shares	Jun. 30, 2015	Dec. 31, 2014
Stockholders' equity
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)	8,167,806	8,142,056
Common stock, shares outstanding (in shares)	8,167,806	8,142,056

XML

SECURITIES (Tables)

6 Months Ended

Jun. 30, 2015

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, 2015 are summarized as follows:

	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Available for sale
Mortgage-backed securities
U. S. sponsored agency MBS - residential	$	76,141	$	674	$	(399	)	$	76,416
U. S. sponsored agency CMO's - residential		123,441		2,140		(704	)		124,877
Total mortgage-backed securities of government sponsored agencies		199,582		2,814		(1,103	)		201,293
U. S. government sponsored agency securities		14,463		98		-			14,561
Obligations of states and political subdivisions		10,044		197		(18	)		10,223
Total available for sale	$	224,089	$	3,109	$	(1,121	)	$	226,077

Amortized cost and fair value of investment securities, by category, at December 31, 2014 are summarized as follows:

	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Available for sale
Mortgage-backed securities
U. S. sponsored agency MBS - residential	$	52,006	$	774	$	-		$	52,780
U. S. sponsored agency CMO's - residential		142,932		2,167		(911	)		144,188
Total mortgage-backed securities of government sponsored agencies		194,938		2,941		(911	)		196,968
U. S. government sponsored agency securities		22,553		30		(57	)		22,506
Obligations of states and political subdivisions		10,015		261		-			10,276
Total available for sale	$	227,486	$	3,232	$	(968	)	$	229,750

Amortized Cost and Fair Value of Securities by Contractual Maturity

The amortized cost and fair value of securities at June 30, 2015 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	$	3,472	$	3,489
Due after one year through five years		17,732		17,952
Due after five years through ten years		3,054		3,093
Due after ten years		249		250
Mortgage-backed securities of government sponsored agencies		199,582		201,293
Total available for sale	$	224,089	$	226,077

Securities in Continuous Unrealized Loss Position

Securities with unrealized losses at June 30, 2015 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 MBS – residential	$	30,728	$	(399	)	$	-	$	-		$	30,728	$	(399	)
U.S government sponsored agency CMO – residential		7,204		(91	)		19,292		(613	)		26,496		(704	)
Obligations of states and political subdivisions		911		(18	)		-		-			911		(18	)
Total temporarily impaired	$	38,843	$	(508	)	$	19,292	$	(613	)	$	58,135	$	(1,121	)

Securities with unrealized losses at December 31, 2014 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	$	9,971	$	(57	)	$	-	$	-		$	9,971	$	(57	)
U.S government sponsored agency CMO's – residential		5,194		(52	)		26,471		(859	)		31,665		(911	)
Total temporarily impaired	$	15,165	$	(109	)	$	26,471	$	(859	)	$	41,636	$	(968	)

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2015	Jul. 31, 2015
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	Accelerated Filer
Entity Common Stock, Shares Outstanding		8,167,806
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q2
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2015

XML

LOANS (Tables)

6 Months Ended

Jun. 30, 2015

LOANS [Abstract]

Major Classifications of Loans

Major classifications of loans at June 30, 2015 and December 31, 2014 are summarized as follows:

	2015		2014
Residential real estate	$	282,923	$	278,212
Multifamily real estate		37,112		30,310
Commercial real estate:
Owner occupied		122,879		120,861
Non owner occupied		217,881		230,750
Commercial and industrial		76,193		85,943
Consumer		31,561		32,745
All other		115,324		100,890
	$	883,873	$	879,711

Activity in the Allowance for Loan Losses by Portfolio Segment

Activity in the allowance for loan losses by portfolio segment for the six months ended June 30, 2015 was as follows:

Loan Class	Balance Dec 31, 2014		Provision (credit) for loan losses			Loans charged-off		Recoveries		Balance June 30, 2015
Residential real estate	$	2,093	$	372		$	78	$	79	$	2,466
Multifamily real estate		304		208			-		-		512
Commercial real estate:
Owner occupied		1,501		(24	)		2		1		1,476
Non owner occupied		2,316		(643	)		-		659		2,332
Commercial and industrial		1,444		(140	)		169		4		1,139
Consumer		243		105			132		58		274
All other		2,446		45			112		116		2,495
Total	$	10,347	$	(77	)	$	493	$	917	$	10,694

Activity in the allowance for loan losses by portfolio segment for the six months ending June 30, 2014 was as follows:

Loan Class	Balance Dec 31, 2013		Provision (credit) for loan losses			Loans charged-off		Recoveries		Balance June 30, 2014
Residential real estate	$	2,694	$	(391	)	$	171	$	8	$	2,140
Multifamily real estate		417		(106	)		-		-		311
Commercial real estate:
Owner occupied		1,407		39			82		-		1,364
Non owner occupied		2,037		556			323		-		2,270
Commercial and industrial		2,184		(616	)		84		5		1,489
Consumer		297		(33	)		59		27		232
All other		1,991		162			204		122		2,071
Total	$	11,027	$	(389	)	$	923	$	162	$	9,877

Activity in the allowance for loan losses by portfolio segment for the three months ended June 30, 2015 was as follows:

Loan Class	Balance March 31, 2015		Provision (credit) for loan losses			Loans charged-off		Recoveries		Balance June 30, 2015
Residential real estate	$	2,196	$	218		$	4	$	56	$	2,466
Multifamily real estate		287		225			-		-		512
Commercial real estate:
Owner occupied		1,489		(13	)		-		-		1,476
Non owner occupied		2,324		(651	)		-		659		2,332
Commercial and industrial		1,450		(305	)		8		2		1,139
Consumer		241		87			78		24		274
All other		2,183		293			53		72		2,495
Total	$	10,170	$	(146	)	$	143	$	813	$	10,694

Activity in the allowance for loan losses by portfolio segment for the three months ending June 30, 2014 was as follows:

Loan Class	Balance March 31, 2014		Provision (credit) for loan losses			Loans charged-off		Recoveries		Balance June 30, 2014
Residential real estate	$	2,250	$	36		$	152	$	6	$	2,140
Multifamily real estate		297		14			-		-		311
Commercial real estate:
Owner occupied		1,477		(32	)		81		-		1,364
Non owner occupied		2,385		(92	)		23		-		2,270
Commercial and industrial		1,527		(20	)		21		3		1,489
Consumer		220		37			33		8		232
All other		2,188		(22	)		167		72		2,071
Total	$	10,344	$	(79	)	$	477	$	89	$	9,877

Purchased Loans

The carrying amount of those loans is as follows at June 30, 2015 and December 31, 2014.

	2015		2014
Multifamily real estate	$	460	$	497
Commercial real estate
Owner occupied		131		131
Non owner occupied		5,623		5,695
Commercial and industrial		126		136
All other		5,149		5,128
Total carrying amount	$	11,489	$	11,587
Contractual principal balance	$	21,159	$	21,250
Carrying amount, net of allowance	$	10,463	$	10,639

Purchase Loans Accretable Yield, or Income Expected to be Collected

The accretable yield, or income expected to be collected, on the purchased loans above is as follows at June 30, 2015 and June 30, 2014.

	2015			2014
Balance at January 1	$	204		$	217
New loans purchased		-			-
Accretion of income		(10	)		(6	)
Reclassifications from non-accretable difference		-			-
Disposals		-			-
Balance at June 30	$	194		$	211

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, 2015 and December 31, 2014.  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, 2015	Principal Owed on Non-accrual Loans		Recorded Investment in Non-accrual Loans		Loans Past Due Over 90 Days, still accruing
Residential  real estate	$	2,507	$	2,283	$	378
Multifamily real estate		1,532		539		-
Commercial real estate
Owner occupied		807		737		8
Non owner occupied		1,960		1,689		1,820
Commercial and industrial		1,576		471		83
Consumer		98		80		-
All other		12,635		5,183		-
Total	$	21,115	$	10,982	$	2,289

December 31, 2014	Principal Owed on Non-accrual Loans		Recorded Investment in Non-accrual Loans		Loans Past Due Over 90 Days, still accruing
Residential  real estate	$	1,996	$	1,768	$	668
Multifamily real estate		1,803		1,033		564
Commercial real estate
Owner occupied		2,115		1,928		-
Non owner occupied		2,020		1,819		26
Commercial and industrial		2,012		806		8
Consumer		213		185		-
All other		12,608		5,173		-
Total	$	22,767	$	12,712	$	1,266

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, 2015 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	$	282,923	$	5,862	$	1,658	$	7,520	$	275,403
Multifamily real estate		37,112		460		79		539		36,573
Commercial real estate:
Owner occupied		122,879		1,769		549		2,318		120,561
Non owner occupied		217,881		125		3,509		3,634		214,247
Commercial and industrial		76,193		1,737		348		2,085		74,108
Consumer		31,561		526		15		541		31,020
All other		115,324		13,591		5,149		18,740		96,584
Total	$	883,873	$	24,070	$	11,307	$	35,377	$	848,496

The following table presents the aging of the recorded investment in past due loans as of December 31, 2014 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	$	278,212	$	5,810	$	1,706	$	7,516	$	270,696
Multifamily real estate		30,310		177		1,100		1,277		29,033
Commercial real estate:
Owner occupied		120,861		250		1,530		1,780		119,081
Non owner occupied		230,750		2,173		1,670		3,843		226,907
Commercial and industrial		85,943		1,720		608		2,328		83,615
Consumer		32,745		497		71		568		32,177
All other		100,890		234		5,127		5,361		95,529
Total	$	879,711	$	10,861	$	11,812	$	22,673	$	857,038

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, 2015:

	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	$	183	$	2,283	$	-	$	2,466	$	571	$	282,352	$	-	$	282,923
Multifamily real estate		-		512		-		512		79		36,573		460		37,112
Commercial real estate:
Owner occupied		48		1,428		-		1,476		943		121,805		131		122,879
Non-owner occupied		29		2,303		-		2,332		4,396		207,862		5,623		217,881
Commercial and industrial		230		783		126		1,139		666		75,401		126		76,193
Consumer		-		274		-		274		-		31,561		-		31,561
All other		-		1,595		900		2,495		912		109,263		5,149		115,324
Total	$	490	$	9,178	$	1,026	$	10,694	$	7,567	$	864,817	$	11,489	$	883,873

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 December 31, 2014:

	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	$	-	$	2,093	$	-	$	2,093	$	137	$	278,075	$	-	$	278,212
Multifamily real estate		-		304		-		304		536		29,277		497		30,310
Commercial real estate:
Owner occupied		107		1,394		-		1,501		2,011		118,719		131		120,861
Non-owner occupied		54		2,262		-		2,316		4,874		220,181		5,695		230,750
Commercial and industrial		291		1,105		48		1,444		902		84,905		136		85,943
Consumer		-		243		-		243		-		32,745		-		32,745
All other		-		1,546		900		2,446		1,109		94,653		5,128		100,890
Total	$	452	$	8,947	$	948	$	10,347	$	9,569	$	858,555	$	11,587	$	879,711

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, 2015.  The table includes $5,658,000 of loans acquired with deteriorated credit quality that the Company cannot reasonably estimate cash flows such that they are accounted for on the cost recovery method and are still individually evaluated for impairment.

	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With no related allowance recorded:
Residential real estate	$	363	$	325	$	-
Multifamily real estate		1,532		539		-
Commercial real estate
Owner occupied		612		549		-
Non owner occupied		4,049		3,778		-
Commercial and industrial		1,193		417		-
All other		967		912		-
		8,716		6,520		-
With an allowance recorded:
Residential real estate	$	252	$	246	$	183
Commercial real estate
Owner occupied		394		394		48
Non owner occupied		618		618		29
Commercial and industrial		651		375		356
All other		12,546		5,149		900
		14,461		6,782		1,516
Total	$	23,177	$	13,302	$	1,516

The following table presents loans individually evaluated for impairment by class of loans as of December 31, 2014.  The table includes $5,673,000 of loans acquired with deteriorated credit quality that the Company cannot reasonably estimate cash flows such that they are accounted for on the cost recovery method and are still individually evaluated for impairment.

	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With no related allowance recorded:
Residential  real estate	$	179	$	137	$	-
Multifamily real estate		1,803		1,033		-
Commercial real estate
Owner occupied		1,404		1,304		-
Non owner occupied		4,398		4,190		-
Commercial and industrial		1,030		270		-
All other		1,144		1,108		-
		9,958		8,042		-
With an allowance recorded:
Commercial real estate
Owner occupied	$	707	$	707	$	107
Non owner occupied		684		684		54
Commercial and industrial		929		680		339
All other		12,525		5,129		900
		14,845		7,200		1,400
Total	$	24,803	$	15,242	$	1,400

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, 2015 and June 30, 2014.   The table includes loans acquired with deteriorated credit quality that are still individually evaluated for impairment.

	Six months ended June 30, 2015						Six months ended June 30, 2014
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	$	281	$	2	$	2	$	2,536	$	61	$	61
Multifamily real estate		1,377		14		14		2,586		727		727
Commercial real estate:
Owner occupied		1,286		18		13		2,155		29		21
Non-owner occupied		4,665		94		82		800		627		627
Commercial and industrial		922		14		14		2,395		542		542
All other		6,150		30		28		7,603		81		81
Total	$	14,681	$	172	$	153	$	18,075	$	2,067	$	2,059

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, 2015 and June 30, 2014.  The table includes loans acquired with deteriorated credit quality that are still individually evaluated for impairment.

	Three months ended June 30, 2015						Three months ended June 30, 2014
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	$	352	$	1	$	1	$	2,318	$	27	$	27
Multifamily real estate		1,550		14		14		2,353		19		19
Commercial real estate:
Owner occupied		922		9		5		1,983		14		10
Non-owner occupied		4,561		46		34		214		-		-
Commercial and industrial		908		10		10		1,265		9		9
All other		6,108		14		14		7,453		38		38
Total	$	14,401	$	94	$	78	$	15,586	$	107	$	103

Troubled Debt Restructurings

The following table presents TDR's as of June 30, 2015 and December 31, 2014:

June 30, 2015	TDR's on Non-accrual		Other TDR's		Total TDR's
Residential  real estate	$	9	$	181	$	190
Commercial real estate
Non owner occupied		-		464		464
Commercial and industrial		-		417		417
All other		-		886		886
Total	$	9	$	1,948	$	1,957

December 31, 2014	TDR's on Non-accrual		Other TDR's		Total TDR's
Residential  real estate	$	13	$	191	$	204
Commercial real estate
Non owner occupied		-		474		474
Commercial and industrial		-		761		761
All other		-		1,063		1,063
Total	$	13	$	2,489	$	2,502

Troubled Debt Restructuring During the Period

The following table presents TDR's that occurred during the six months ended June 30, 2015.  There were no TDR's that occurred during the six months ended June 30, 2014.

	Six months ended June 30, 2015
Loan Class	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Multifamily Real Estate		1	$	1,543	$	1,543
Total		1	$	1,543	$	1,543

Risk Category of Loans by Class of Loans

As of June 30, 2015 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	$	270,610	$	5,125	$	7,179	$	9	$	282,923
Multifamily real estate		32,287		4,286		539		-		37,112
Commercial real estate:
Owner occupied		115,111		5,326		2,442		-		122,879
Non-owner occupied		209,695		888		7,298		-		217,881
Commercial and industrial		74,396		714		1,034		49		76,193
Consumer		31,175		245		141		-		31,561
All other		94,355		14,310		6,659		-		115,324
Total	$	827,629	$	30,894	$	25,292	$	58	$	883,873

As of December 31, 2014, 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	$	265,285	$	8,292	$	4,622	$	13	$	278,212
Multifamily real estate		27,260		2,017		1,033		-		30,310
Commercial real estate:
Owner occupied		111,024		6,505		3,332		-		120,861
Non-owner occupied		218,971		6,652		5,127		-		230,750
Commercial and industrial		83,634		1,007		1,275		27		85,943
Consumer		32,364		267		114		-		32,745
All other		89,173		4,873		6,844		-		100,890
Total	$	827,711	$	29,613	$	22,347	$	40	$	879,711

XML

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Interest income
Loans, including fees	$ 11,641	$ 11,262	$ 23,306	$ 22,925
Securities available for sale
Taxable	1,206	1,400	2,463	2,715
Tax-exempt	56	63	111	98
Federal funds sold and other	52	64	88	96
Total interest income	12,955	12,789	25,968	25,834
Interest expense
Deposits	887	960	1,803	1,847
Repurchase agreements and other	9	9	19	16
Other borrowings	136	144	259	288
Total interest expense	1,032	1,113	2,081	2,151
Net interest income	11,923	11,676	23,887	23,683
Provision (credit) for loan losses	(146)	(79)	(77)	(389)
Net interest income after provision for loan losses	12,069	11,755	23,964	24,072
Non-interest income
Service charges on deposit accounts	914	899	1,792	1,638
Electronic banking income	702	655	1,346	1,150
Secondary market mortgage income	22	50	60	69
Other	124	179	269	307
Total non-interest income	1,762	1,783	3,467	3,164
Non-interest expenses
Salaries and employee benefits	4,475	4,873	8,816	8,857
Occupancy and equipment expenses	1,263	1,307	2,590	2,460
Outside data processing	1,075	1,029	2,171	1,898
Professional fees	179	209	308	745
Taxes, other than payroll, property and income	145	152	341	304
Write-downs, expenses, sales of other real estate owned, net	340	(488)	682	(394)
Amortization of intangibles	209	224	434	368
FDIC insurance	206	260	421	461
Other expenses	1,037	1,148	1,958	2,044
Total non-interest expenses	8,929	8,714	17,721	16,743
Income before income taxes	4,902	4,824	9,710	10,493
Provision for income taxes	1,775	1,724	3,441	3,723
Net income	3,127	3,100	6,269	6,770
Preferred stock dividends and accretion	0	(165)	0	(330)
Net income available to common stockholders	$ 3,127	$ 2,935	$ 6,269	$ 6,440
Net income per share:
Basic (in dollars per share)	$ 0.38	$ 0.36	$ 0.77	$ 0.80
Diluted (in dollars per share)	$ 0.37	$ 0.34	$ 0.74	$ 0.75

XML

STOCK COMPENSATION EXPENSE

6 Months Ended

Jun. 30, 2015

STOCK COMPENSATION EXPENSE [Abstract]

STOCK COMPENSATION EXPENSE

NOTE  6 – 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 18, 2015, 47,650 incentive stock options were granted out of the 2012 Long Term Incentive Plan at an exercise price of $14.72, the closing market price of Premier's common stock on the grant date.  These options vest in three equal annual installments ending on March 18, 2018.  On March 19, 2014, 46,300 incentive stock options were granted out of the 2012 Long Term Incentive Plan at an exercise price of $14.43, the closing market price of Premier's common stock on the grant date.  These options vest in three equal annual installments ending on March 19, 2017.

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:

	2015			2014
Risk-free interest rate		1.41	%		2.78	%
Expected option life (yrs)		10.00			10.00
Expected stock price volatility		17.20	%		31.19	%
Dividend yield		3.53	%		3.33	%
Weighted average fair value of options granted	$	1.37		$	3.74

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 for the 2015 grant was based upon the weighted-average life of options exercised from January 1, 2012 through December 31, 2014.  The expected option life for the 2014 grant was estimated since there had been little option exercise history at the time of the grant.  The expected stock price volatility is based on historical volatilities of the Company's common stock.  The dividend yield was estimated by annualizing the current quarterly dividend on the Company's common stock at the time of the option grant.

On March 18, 2015, 7,000 shares of Premier's common stock were granted to President and CEO, Robert W. Walker as stock-based bonus compensation under the 2012 Long-term Incentive Plan.  The fair value of the stock at the time of the grant was $14.72 per share based upon the closing price of Premier's stock on the date of grant and $103,000 of stock-based compensation was recorded as a result.

On April 16, 2014, 6,000 shares of Premier's common stock were granted to Robert W. Walker as stock-based bonus compensation under the 2012 Long-term Incentive Plan.  The fair value of the stock at the time of the grant was $14.20 per share based upon the closing price of Premier's stock of the date of grant and $85,000 of stock-based compensation was recorded as a result.

Stock-based compensation expense of $163,000 was recorded for the first six months of 2015 compared to $170,000 for the first six months of 2014.  For the three months ended June 30, $121,000 was recorded for 2015 while $128,000 was recorded for 2014.  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 $98,000 at June 30, 2015. 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:

	- - - - - - 2015 - - - - - -					- - - - - - 2014 - - - - - -
	Options			Weighted Average Exercise Price		Options			Weighted Average Exercise Price
Outstanding at beginning of year		273,942		$	11.06		354,281		$	9.84
Grants		47,650			14.72		46,300			14.43
Exercises		(18,450	)		10.87		(63,297	)		8.45
Forfeitures or expired		(16,733	)		17.10		(8,133	)		9.27
Outstanding at June 30,		286,409		$	11.51		329,151		$	10.77
Exercisable at June 30,		204,675					223,898
Weighted average remaining life of options outstanding		6.2					6.2
Weighted average fair value of options granted during the year	$	1.37				$	3.74

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

Additional information regarding stock options outstanding and exercisable at June 30, 2015, 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		106,949	$	7.56	$	844		106,949		5.9	$	7.56	$	844
$10.01 to $12.50		36,000		11.39		146		23,374		7.7		11.39		95
$12.51 to $15.00		122,960		14.23		150		53,852		3.8		13.75		92
$15.01 to $17.50		20,500		16.00		-		20,500		0.6		16.00		-
Outstanding - June 30, 2015		286,409		11.51	$	1,140		204,675		5.0		10.47	$	1,031

XML

PREFERRED STOCK AND COMMON STOCK WARRANT

6 Months Ended

Jun. 30, 2015

PREFERRED STOCK AND COMMON STOCK WARRANT [Abstract]

PREFERRED STOCK AND COMMON STOCK WARRANT

NOTE  5 – PREFERRED STOCK AND COMMON STOCK WARRANT

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 628,588 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 $22,252,000 in cash.

Under standardized TARP Capital Purchase Program terms, cumulative dividends on the Series A Preferred Stock accrued on the liquidation preference at a rate of 5% per annum until November 14, 2014.  As of November 14, 2014, all of the 22,252 shares of the Series A Preferred Stock have been repurchased or redeemed.  The Series A Preferred Stock had no maturity date and ranked 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.

Under terms of the Warrant, the exercise price and the number of shares that can be purchased were adjusted based upon certain events including common stock dividends paid to shareholders that exceed the $0.11 per share regular quarterly dividend paid by Premier at the time the Warrant was issued.  Due to dividends paid in 2015 and 2014 that were either special cash dividends or dividends that exceeded the $0.11 regular quarterly cash dividend per share defined in the terms of the Warrant, the Warrant was adjusted to permit the purchase of 636,378 shares of the Company's common stock at an exercise price of $5.25 per share.  On May 6, 2015, Premier purchased the Warrant from the U.S. Treasury for $5,675,000.  Premier borrowed $4,000,000 on its line of credit with the Bankers Bank of Kentucky and used $1,675,000 of its cash and cash equivalents to complete the purchase.  The purchase reduced shareholders' equity and regulatory capital by the $5,675,000 purchase price but also reduced the dilutive effect of potential additional common shares.  See Note 7 below for additional information on the calculation of diluted earnings per share.

XML

BASIS OF PRESENTATION (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Consolidation, Wholly Owned Subsidiaries [Line Items]
Total Assets	$ 1,247,006		$ 1,247,006		$ 1,252,824
Net Income	3,127	$ 3,100	$ 6,269	$ 6,770
Citizens Deposit Bank & Trust [Member] | Vanceburg, Kentucky [Member]
Consolidation, Wholly Owned Subsidiaries [Line Items]
Year Acquired			1991
Total Assets	387,663		$ 387,663
Net Income	931		$ 1,945
Premier Bank, Inc. [Member] | Huntington, West Virginia [Member]
Consolidation, Wholly Owned Subsidiaries [Line Items]
Year Acquired			1998
Total Assets	853,078		$ 853,078
Net Income	2,702		5,275
Parent and Intercompany Eliminations [Member]
Consolidation, Wholly Owned Subsidiaries [Line Items]
Total Assets	6,265		6,265
Net Income	$ (506)		$ (951)

XML

STOCKHOLDERS' EQUITY AND REGULATORY MATTERS (Tables)

6 Months Ended

Jun. 30, 2015

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, 2015			December 31, 2014			Regulatory Minimum Requirements (1)			To Be Considered Well Capitalized (1)
Common Equity Tier 1 Capital (to Risk-Weighted Assets)		12.5	%		n/	a		4.5	%		6.5	%
Tier 1 Capital (to Risk-Weighted Assets) (1)		12.5	%		13.3	%		6.0	%		8.0	%
Total Capital (to Risk-Weighted Assets)		13.7	%		14.6	%		8.0	%		10.0	%
Tier 1 Capital (to Average Assets)		9.1	%		9.1	%		4.0	%		5.0	%
(1)    The regulatory requirements presented in the table are effective as of January 1, 2015. At December 31, 2014, the minimum Tier 1 capital to risk-weighted assets ratio was 4.0% and to be considered well capitalized the ratio was required to be at least 6.0%

XML

SUBSEQUENT EVENT

6 Months Ended

Jun. 30, 2015

SUBSEQUENT EVENT [Abstract]

SUBSEQUENT EVENT

NOTE  9 – SUBSEQUENT EVENT

On July 6, 2015, Premier Financial Bancorp, Inc. ("Premier") entered into a material definitive merger agreement (the "Merger Agreement") with First National Bankshares Corporation ("First National"), a $261 million single bank holding company headquartered in Ronceverte, West Virginia whereby Premier will acquire First National in exchange for a combination of cash and Premier common stock currently valued at approximately $26.5 million.

Under terms of the Merger Agreement, First National shareholders will be entitled to a combination of Premier common stock and cash currently valued at approximately $31.82 per First National share, or an aggregate value of $26.5 million, with Premier issuing approximately 1.4 million shares in the acquisition.  The transaction, which is subject to satisfaction of various contractual conditions and requires approval by bank regulatory agencies and the shareholders of First National, is anticipated to close in the fourth quarter of 2015 with a systems conversion anticipated to be completed in the first quarter of 2016.

XML

EARNINGS PER SHARE

6 Months Ended

Jun. 30, 2015

EARNINGS PER SHARE [Abstract]

EARNINGS PER SHARE

NOTE  7 – 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, 2015 and 2014 is presented below:

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Basic earnings per share
Income available to common stockholders	$	3,127	$	2,935	$	6,269	$	6,440
Weighted average common shares outstanding		8,157,785		8,079,629		8,150,596		8,061,522
Earnings per share	$	0.38	$	0.36	$	0.77	$	0.80
Diluted earnings per share
Income available to common stockholders	$	3,127	$	2,935	$	6,269	$	6,440
Weighted average common shares outstanding		8,157,785		8,079,629		8,150,596		8,061,522
Add dilutive effects of potential additional common stock		230,145		502,839		358,336		504,519
Weighted average common and dilutive potential common shares outstanding		8,387,930		8,582,468		8,508,932		8,566,041
Earnings per share assuming dilution	$	0.37	$	0.34	$	0.74	$	0.75

Stock options for 23,500 and 23,500 shares of common stock were not considered in computing diluted earnings per share for the six months ended June 30, 2015 and 2014 because they were antidilutive.  Stock options for 23,500 and 23,500 shares of common stock were not considered in computing diluted earnings per share for the three months ended June 30, 2015 and 2014 because they were antidilutive.

XML

FAIR VALUE

6 Months Ended

Jun. 30, 2015

FAIR VALUE [Abstract]

FAIR VALUE

NOTE  8 – 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.

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 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).

The carrying amounts and estimated fair values of financial instruments at June 30, 2015 were as follows:

				Fair Value Measurements at June 30, 2015 Using
	Carrying Amount			Level 1			Level 2			Level 3			Total
Financial assets
Cash and due from banks	$	68,877		$	68,877		$	-		$	-		$	68,877
Federal funds sold		3,265			3,265			-			-			3,265
Securities available for sale		226,077			-			226,077			-			226,077
Loans, net		873,179			-			-			874,822			874,822
Federal Home Loan Bank stock		3,072			n/	a		n/	a		n/	a		n/	a
Interest receivable		3,271			-			584			2,687			3,271
Financial liabilities
Deposits	$	(1,070,531	)	$	(718,462	)	$	(350,961	)	$	-		$	(1,069,423	)
Securities sold under agreements to repurchase		(15,307	)		-			(15,307	)		-			(15,307	)
Other borrowed funds		(12,507	)		-			(12,539	)		-			(12,539	)
Interest payable		(387	)		(6	)		(381	)		-			(387	)

The carrying amounts and estimated fair values of financial instruments at December 31, 2014 were as follows:

				Fair Value Measurements at December 31, 2014 Using
	Carrying Amount			Level 1			Level 2			Level 3			Total
Financial assets
Cash and due from banks	$	70,398		$	70,398		$	-		$	-		$	70,398
Federal funds sold		4,986			4,986			-			-			4,986
Securities available for sale		229,750			-			229,610			140			229,750
Loans held for sale		226			-			-			226			226
Loans, net		869,364			-			-			870,273			870,273
Federal Home Loan Bank stock		2,996			n/	a		n/	a		n/	a		n/	a
Interest receivable		3,219			-			625			2,594			3,219
Financial liabilities
Deposits	$	(1,075,243	)	$	(711,118	)	$	(363,481	)	$	-		$	(1,074,599	)
Securities sold under agreements to repurchase		(15,580	)		-			(15,580	)		-			(15,580	)
Other borrowed funds		(11,722	)		-			(11,760	)		-			(11,760	)
Interest payable		(434	)		(6	)		(428	)		-			(434	)

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, 2015 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	$	76,416	$	-	$	76,416	$	-
U. S. agency CMO's - residential		124,877		-		124,877		-
Total mortgage-backed securities of government sponsored agencies		201,293		-		201,293		-
U. S. government sponsored agency securities		14,561		-		14,561		-
Obligations of states and political subdivisions		10,223		-		10,223		-
Total available for sale	$	226,077	$	-	$	226,077	$	-

			Fair Value Measurements at December 31, 2014 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	$	52,780	$	-	$	52,780	$	-
U. S. agency CMO's		144,188		-		144,188		-
Total mortgage-backed securities of government sponsored agencies		196,968		-		196,968		-
U. S. government sponsored agency securities		22,506		-		22,506		-
Obligations of states and political subdivisions		10,276		-		10,136		140
Total securities available for sale	$	229,750	$	-	$	229,610	$	140
Mortgage-backed securities

There were no transfers between Level 1 and Level 2 during 2015 or 2014.

The table below presents a reconciliation of all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the quarter ended June 30, 2015:

	Securities Available-for-sale
	Quarter Ended June 30, 2015
Balance of recurring Level 3 assets at beginning of period	$	140
Total gains or losses (realized/unrealized):
Included in earnings – realized		-
Included in earnings – unrealized		-
Included in other comprehensive income		-
Purchases, sales, issuances and settlements, net		(140	)
Transfers in and/or out of Level 3		-
Balance of recurring Level 3 assets at period-end	$	-

Assets and Liabilities Measured on a Non-Recurring Basis

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 at fair value on a non-recurring basis at June 30, 2015 are summarized below:

			Fair Value Measurements at June 30, 2015 Using
	Carrying Value		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	$	63	$	-	$	-	$	63
Commercial real estate:
Owner occupied		346		-		-		346
Non-owner occupied		589		-		-		589
Commercial and industrial		19		-		-		19
All other		4,249		-		-		4,249
Total impaired loans	$	5,266	$	-	$	-	$	5,266
Other real estate owned:
Residential real estate	$	657	$	-	$	-	$	657
Commercial real estate:
Owner occupied		39		-		-		39
Non-owner occupied		2,003		-		-		2,003
All other		6,984		-		-		6,984
Total OREO	$	9,683	$	-	$	-	$	9,683

Impaired loans, which are measured for impairment using the fair value of the collateral for collateral dependent loans, had a carrying amount of $6,782,000 at June 30, 2015 with a valuation allowance of $1,516,000 and a carrying amount of $7,200,000 at December 31, 2014 with a valuation allowance of $1,400,000.  The change resulted in a provision for loan losses of $117,000 for the six months ended June 30, 2015, compared to an $886,000 negative provision for loan losses for the six months ended June 30, 2104 and a $108,000 provision for loan losses for the three months ended June 30, 2015, compared to a $143,000 negative provision for loan losses for the three months ended June 30, 2014.  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 $9,683,000 which is made up of the outstanding balance of $11,785,000 net of a valuation allowance of $2,102,000 at June 30, 2015.  There were $246,000 of additional write downs during the six months ended June 30, 2015, compared to $280,000 of additional write downs during the six months ended June 30, 2014.  For the three months ended June 30, 2015 there were $70,000 of additional write downs compared to $280,000 of additional write downs during the three months ended June 30, 2014.  At December 31, 2014, other real estate owned had a net carrying amount of $10,206,000, made up of the outstanding balance of $12,343,000, net of a valuation allowance of $2,137,000.

The significant unobservable inputs related to assets and liabilities measured at fair value on a non-recurring basis at June 30, 2015 are summarized below:

	June 30, 2015		Valuation Techniques	Unobservable Inputs	Range (Weighted Avg)
Impaired loans:
Residential real estate	$	63	sales comparison	adjustment for differences between the comparable sales		26.5%-26.5% (26.5%)
Commercial real estate:
Owner occupied		346	sales comparison	adjustment for limited salability of specialized property		65.5%-72.4% (66.9%)
Non-owner occupied		589	sales comparison	adjustment for differences between the comparable sales		41.8%-41.8% (41.8%)
Commercial and industrial		19	sales comparison	adjustment for estimated realizable value		8.0%-8.0% (8.0%)
All other		4,249	sales comparison	adjustment for percentage of completion of construction		57.2%-57.2% (57.2%)
Total impaired loans	$	5,266
Other real estate owned:
Residential real estate	$	657	sales comparison	adjustment for differences between the comparable sales		0.7%-35.5% (25.0%)
Commercial real estate:
Owner occupied		39	sales comparison	adjustment for estimated realizable value		25.4%-25.4% (25.4%)
Non-owner occupied		2,003	sales comparison	adjustment for differences between the comparable sales		17.2%-17.2% (17.2%)
All other		6,984	sales comparison	adjustment for estimated realizable value		24.6%-67.4% (35.4%)
Total OREO	$	9,683

Assets and liabilities measured at fair value on a non-recurring basis at December 31, 2014 are summarized below:

			Fair Value Measurements at December 31, 2014 Using
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Impaired loans:
Commercial real estate:
Owner occupied	$	600	$	-	$	-	$	600
Non-owner occupied		630		-		-		630
Commercial and industrial		341		-		-		341
All other		4,229		-		-		4,229
Total impaired loans	$	5,800	$	-	$	-	$	5,800
Other real estate owned:
Commercial real estate:
Non-owner occupied	$	2,003	$	-	$	-	$	2,003
All other		8,203		-		-		8,203
Total OREO	$	10,206	$	-	$	-	$	10,206

The significant unobservable inputs related to assets and liabilities measured at fair value on a non-recurring basis at December 31, 2014 are summarized below:

	December 31, 2014		Valuation Techniques	Unobservable Inputs	Range (Weighted Avg)
Impaired loans:
Commercial Real Estate
Owner Occupied	$	600	sales comparison	adjustment for limited salability of specialized property	44.8%-72.4% (58.9%)
Non-owner Occupied		630	sales comparison	adjustment for differences between the comparable sales	16.9%-54.6% (16.9%)
Commercial and Industrial		341	sales comparison	adjustment for limited salability of specialized property	26.2%-41.2% (27.0%)
All Other		4,229	sales comparison	adjustment for percentage of completion of construction	57.3%-57.3% (57.3%)
Total impaired loans	$	5,800
Other real estate owned:
Commercial Real Estate
Non-owner Occupied	$	2,003	sales comparison	adjustment for differences between the comparable sales	17.8%-17.8% (17.8%)
All Other		8,203	sales comparison	adjustment for estimated realizable value	24.6%-50.3% (45.0%)
Total OREO	$	10,206

XML

BASIS OF PRESENTATION (Tables)

6 Months Ended

Jun. 30, 2015

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, 2015
		Year	Total		Net Income
Subsidiary	Location	Acquired	Assets		Qtr			YTD
Citizens Deposit Bank & Trust	Vanceburg, Kentucky	1991	$	387,663	$	931		$	1,945
Premier Bank, Inc.	Huntington, West Virginia	1998		853,078		2,702			5,275
Parent and Intercompany Eliminations				6,265		(506	)		(951	)
Consolidated Total			$	1,247,006	$	3,127		$	6,269

XML

LOANS, Average Balance of Loans Individually Evaluated For Impairment (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Financing receivable average balance individually evaluated for impairment [Line Items]
Average Recorded Investment	$ 14,401	$ 15,586	$ 14,681	$ 18,075
Interest Income Recognized	94	107	172	2,067
Cash Basis Interest Recognized	78	103	153	2,059
Residential Real Estate [Member]
Financing receivable average balance individually evaluated for impairment [Line Items]
Average Recorded Investment	352	2,318	281	2,536
Interest Income Recognized	1	27	2	61
Cash Basis Interest Recognized	1	27	2	61
Multifamily Real Estate [Member]
Financing receivable average balance individually evaluated for impairment [Line Items]
Average Recorded Investment	1,550	2,353	1,377	2,586
Interest Income Recognized	14	19	14	727
Cash Basis Interest Recognized	14	19	14	727
Owner Occupied Commercial Real Estate [Member]
Financing receivable average balance individually evaluated for impairment [Line Items]
Average Recorded Investment	922	1,983	1,286	2,155
Interest Income Recognized	9	14	18	29
Cash Basis Interest Recognized	5	10	13	21
Non Owner Occupied Commercial Real Estate [Member]
Financing receivable average balance individually evaluated for impairment [Line Items]
Average Recorded Investment	4,561	214	4,665	800
Interest Income Recognized	46	0	94	627
Cash Basis Interest Recognized	34	0	82	627
Commercial and Industrial [Member]
Financing receivable average balance individually evaluated for impairment [Line Items]
Average Recorded Investment	908	1,265	922	2,395
Interest Income Recognized	10	9	14	542
Cash Basis Interest Recognized	10	9	14	542
All Other [Member]
Financing receivable average balance individually evaluated for impairment [Line Items]
Average Recorded Investment	6,108	7,453	6,150	7,603
Interest Income Recognized	14	38	30	81
Cash Basis Interest Recognized	$ 14	$ 38	$ 28	$ 81

XML

EARNINGS PER SHARE (Tables)

6 Months Ended

Jun. 30, 2015

EARNINGS PER SHARE [Abstract]

Reconciliation of Numerators and Denominators of the 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, 2015 and 2014 is presented below:

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Basic earnings per share
Income available to common stockholders	$	3,127	$	2,935	$	6,269	$	6,440
Weighted average common shares outstanding		8,157,785		8,079,629		8,150,596		8,061,522
Earnings per share	$	0.38	$	0.36	$	0.77	$	0.80
Diluted earnings per share
Income available to common stockholders	$	3,127	$	2,935	$	6,269	$	6,440
Weighted average common shares outstanding		8,157,785		8,079,629		8,150,596		8,061,522
Add dilutive effects of potential additional common stock		230,145		502,839		358,336		504,519
Weighted average common and dilutive potential common shares outstanding		8,387,930		8,582,468		8,508,932		8,566,041
Earnings per share assuming dilution	$	0.37	$	0.34	$	0.74	$	0.75

XML

SECURITIES, With Unrealized Losses (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Continuous Unrealized Loss Position, Fair Value [Abstract]
Less than 12 Months, Fair Value	$ 38,843	$ 15,165
12 Months or More, Fair Value	19,292	26,471
Total Fair Value	58,135	41,636
Continuous Unrealized Loss Position, Accumulated Loss [Abstract]
Less than 12 Months, Unrealized Loss	(508)	(109)
12 Months or More, Unrealized Loss	(613)	(859)
Total Unrealized Loss	(1,121)	(968)
U. S. Government Sponsored Agency Securities [Member]
Continuous Unrealized Loss Position, Fair Value [Abstract]
Less than 12 Months, Fair Value		9,971
12 Months or More, Fair Value		0
Total Fair Value		9,971
Continuous Unrealized Loss Position, Accumulated Loss [Abstract]
Less than 12 Months, Unrealized Loss		(57)
12 Months or More, Unrealized Loss		0
Total Unrealized Loss		(57)
U. S. Sponsored Agency MBS - Residential [Member]
Continuous Unrealized Loss Position, Fair Value [Abstract]
Less than 12 Months, Fair Value	30,728
12 Months or More, Fair Value	0
Total Fair Value	30,728
Continuous Unrealized Loss Position, Accumulated Loss [Abstract]
Less than 12 Months, Unrealized Loss	(399)
12 Months or More, Unrealized Loss	0
Total Unrealized Loss	(399)
U. S. Government Sponsored Agency CMO's - Residential [Member]
Continuous Unrealized Loss Position, Fair Value [Abstract]
Less than 12 Months, Fair Value	7,204	5,194
12 Months or More, Fair Value	19,292	26,471
Total Fair Value	26,496	31,665
Continuous Unrealized Loss Position, Accumulated Loss [Abstract]
Less than 12 Months, Unrealized Loss	(91)	(52)
12 Months or More, Unrealized Loss	(613)	(859)
Total Unrealized Loss	(704)	$ (911)
Obligations of States and Political Subdivisions [Member]
Continuous Unrealized Loss Position, Fair Value [Abstract]
Less than 12 Months, Fair Value	911
12 Months or More, Fair Value	0
Total Fair Value	911
Continuous Unrealized Loss Position, Accumulated Loss [Abstract]
Less than 12 Months, Unrealized Loss	(18)
12 Months or More, Unrealized Loss	0
Total Unrealized Loss	$ (18)

XML

FAIR VALUE, Asset Quantitative Information (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
Impaired Loans [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Asset fair value	$ 5,266	$ 5,800
Impaired Loans [Member] | Residential Real Estate [Member] | Sales Comparison [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Asset fair value	$ 63
Impaired Loans [Member] | Residential Real Estate [Member] | Sales Comparison [Member] | Minimum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Comparability of sales (in hundredths)	26.50%
Impaired Loans [Member] | Residential Real Estate [Member] | Sales Comparison [Member] | Maximum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Comparability of sales (in hundredths)	26.50%
Impaired Loans [Member] | Residential Real Estate [Member] | Sales Comparison [Member] | Weighted Average [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Comparability of sales (in hundredths)	26.50%
Impaired Loans [Member] | Owner Occupied Commercial Real Estate [Member] | Sales Comparison [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Asset fair value	$ 346	$ 600
Impaired Loans [Member] | Owner Occupied Commercial Real Estate [Member] | Sales Comparison [Member] | Minimum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Comparability of sales (in hundredths)	65.50%	44.80%
Impaired Loans [Member] | Owner Occupied Commercial Real Estate [Member] | Sales Comparison [Member] | Maximum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Comparability of sales (in hundredths)	72.40%	72.40%
Impaired Loans [Member] | Owner Occupied Commercial Real Estate [Member] | Sales Comparison [Member] | Weighted Average [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Comparability of sales (in hundredths)	66.90%	58.90%
Impaired Loans [Member] | Non Owner Occupied Commercial Real Estate [Member] | Sales Comparison [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Asset fair value	$ 589	$ 630
Impaired Loans [Member] | Non Owner Occupied Commercial Real Estate [Member] | Sales Comparison [Member] | Minimum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Comparability of sales (in hundredths)	41.80%	16.90%
Impaired Loans [Member] | Non Owner Occupied Commercial Real Estate [Member] | Sales Comparison [Member] | Maximum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Comparability of sales (in hundredths)	41.80%	54.60%
Impaired Loans [Member] | Non Owner Occupied Commercial Real Estate [Member] | Sales Comparison [Member] | Weighted Average [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Comparability of sales (in hundredths)	41.80%	16.90%
Impaired Loans [Member] | Commercial and Industrial [Member] | Sales Comparison [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Asset fair value	$ 19	$ 341
Impaired Loans [Member] | Commercial and Industrial [Member] | Sales Comparison [Member] | Minimum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Comparability of sales (in hundredths)	8.00%	26.20%
Impaired Loans [Member] | Commercial and Industrial [Member] | Sales Comparison [Member] | Maximum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Comparability of sales (in hundredths)	8.00%	41.20%
Impaired Loans [Member] | Commercial and Industrial [Member] | Sales Comparison [Member] | Weighted Average [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Comparability of sales (in hundredths)	8.00%	27.00%
Impaired Loans [Member] | All Other [Member] | Sales Comparison [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Asset fair value	$ 4,249	$ 4,229
Impaired Loans [Member] | All Other [Member] | Sales Comparison [Member] | Minimum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Comparability of sales (in hundredths)	57.20%	57.30%
Impaired Loans [Member] | All Other [Member] | Sales Comparison [Member] | Maximum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Comparability of sales (in hundredths)	57.20%	57.30%
Impaired Loans [Member] | All Other [Member] | Sales Comparison [Member] | Weighted Average [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Comparability of sales (in hundredths)	57.20%	57.30%
Other Real Estate Owned [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Asset fair value	$ 9,683	$ 10,206
Other Real Estate Owned [Member] | Residential Real Estate [Member] | Sales Comparison [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Asset fair value	$ 657
Other Real Estate Owned [Member] | Residential Real Estate [Member] | Sales Comparison [Member] | Minimum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Comparability of sales (in hundredths)	0.70%
Other Real Estate Owned [Member] | Residential Real Estate [Member] | Sales Comparison [Member] | Maximum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Comparability of sales (in hundredths)	35.50%
Other Real Estate Owned [Member] | Residential Real Estate [Member] | Sales Comparison [Member] | Weighted Average [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Comparability of sales (in hundredths)	25.00%
Other Real Estate Owned [Member] | Owner Occupied Commercial Real Estate [Member] | Sales Comparison [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Asset fair value	$ 39
Other Real Estate Owned [Member] | Owner Occupied Commercial Real Estate [Member] | Sales Comparison [Member] | Minimum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Comparability of sales (in hundredths)	25.40%
Other Real Estate Owned [Member] | Owner Occupied Commercial Real Estate [Member] | Sales Comparison [Member] | Maximum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Comparability of sales (in hundredths)	25.40%
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]
Comparability of sales (in hundredths)	25.40%
Other Real Estate Owned [Member] | Non Owner Occupied Commercial Real Estate [Member] | Sales Comparison [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Asset fair value	$ 2,003	$ 2,003
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]
Comparability of sales (in hundredths)	17.20%	17.80%
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]
Comparability of sales (in hundredths)	17.20%	17.80%
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]
Comparability of sales (in hundredths)	17.20%	17.80%
Other Real Estate Owned [Member] | All Other [Member] | Sales Comparison [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Asset fair value	$ 6,984	$ 8,203
Other Real Estate Owned [Member] | All Other [Member] | Sales Comparison [Member] | Minimum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Comparability of sales (in hundredths)	24.60%	24.60%
Other Real Estate Owned [Member] | All Other [Member] | Sales Comparison [Member] | Maximum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Comparability of sales (in hundredths)	67.40%	50.30%
Other Real Estate Owned [Member] | All Other [Member] | Sales Comparison [Member] | Weighted Average [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Comparability of sales (in hundredths)	35.40%	45.00%

XML

STOCK COMPENSATION EXPENSE, Assumptions (Details) - $ / shares	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Assumptions used in the black-scholes option-pricing model [Abstract]
Risk-free interest rate (in hundredths)	1.41%	2.78%
Expected option life (yrs)	10 years	10 years
Expected stock price volatility (in hundredths)	17.20%	31.19%
Dividend yield (in hundredths)	3.53%	3.33%
Weighted average fair value of options granted (in dollars per share)	$ 1.37	$ 3.74

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) [Abstract]
Net income	$ 3,127	$ 3,100	$ 6,269	$ 6,770
Other comprehensive income (loss):
Unrealized gains (losses) arising during the period	(1,582)	741	(276)	3,459
Reclassification of realized amount	0	0	0	0
Net change in unrealized gain on securities	(1,582)	741	(276)	3,459
Less tax impact	538	(252)	94	(1,176)
Other comprehensive income (loss)	(1,044)	489	(182)	2,283
Comprehensive income	$ 2,083	$ 3,589	$ 6,087	$ 9,053

XML

STOCKHOLDERS' EQUITY AND REGULATORY MATTERS

6 Months Ended

Jun. 30, 2015

STOCKHOLDERS' EQUITY AND REGULATORY MATTERS [Abstract]

STOCKHOLDERS' EQUITY AND REGULATORY MATTERS

NOTE  4- STOCKHOLDERS' EQUITY AND REGULATORY MATTERS

The Company's principal source of funds for dividend payments to shareholders 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 2015 the Banks could, without prior approval, declare dividends to Premier of approximately $5.5 million plus any 2015 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 Common Equity Tier 1 Capital, Tier 1 Capital and Total Capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 Capital (as defined) to average assets (as defined).  The Common Equity Tier 1 Capital measurement became effective with the March 31, 2015 reporting period.  Management believes, as of June 30, 2015 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, 2015			December 31, 2014			Regulatory Minimum Requirements (1)			To Be Considered Well Capitalized (1)
Common Equity Tier 1 Capital (to Risk-Weighted Assets)		12.5	%		n/	a		4.5	%		6.5	%
Tier 1 Capital (to Risk-Weighted Assets) (1)		12.5	%		13.3	%		6.0	%		8.0	%
Total Capital (to Risk-Weighted Assets)		13.7	%		14.6	%		8.0	%		10.0	%
Tier 1 Capital (to Average Assets)		9.1	%		9.1	%		4.0	%		5.0	%
(1)    The regulatory requirements presented in the table are effective as of January 1, 2015. At December 31, 2014, the minimum Tier 1 capital to risk-weighted assets ratio was 4.0% and to be considered well capitalized the ratio was required to be at least 6.0%

As of June 30, 2015, 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 Common Equity Tier 1 risk-based, Tier 1 risk-based, Total risk-based and Tier 1 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.

XML

LOANS, Major Classifications of Loans (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	$ 883,873	$ 879,711
Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	282,923	278,212
Multifamily Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	37,112	30,310
Owner Occupied Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	122,879	120,861
Non Owner Occupied Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	217,881	230,750
Commercial and Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	76,193	85,943
Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	31,561	32,745
All Other [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	$ 115,324	$ 100,890

XML

Label	Element	Value
Provision (credit) for loan losses	us-gaap_ProvisionForLoanAndLeaseLosses	$ (146)
Provision (credit) for loan losses	us-gaap_ProvisionForLoanAndLeaseLosses	$ (79)

XML

STOCKHOLDERS' EQUITY AND REGULATORY MATTERS (Details) - USD ($) $ in Millions		6 Months Ended
		Jun. 30, 2015	Dec. 31, 2014
STOCKHOLDERS' EQUITY AND REGULATORY MATTERS [Abstract]
Number of previous years retained profit taken for dividend calculation		2 years
Funds available for dividends without prior approval		$ 5.5
Common Equity Tier I Capital (to Risk-Weighted Assets) (in hundredths)		12.50%
Common Equity Tier I Capital (to Risk-Weighted Assets), Regulatory Minimum Requirements (in hundredths)		4.50%
Common Equity Tier I Capital (to Risk-Weighted Assets), To Be Considered Well Capitalized (in hundredths)		6.50%
Tier I Capital (to Risk-Weighted Assets) (in hundredths)		12.50%	13.30%
Tier I Capital (to Risk-Weighted Assets), Regulatory Minimum Requirements (in hundredths)	[1]	6.00%
Tier I Capital (to Risk-Weighted Assets), To Be Considered Well Capitalized (in hundredths)	[1]	8.00%
Total Capital (to Risk-Weighted Assets) (in hundredths)		13.70%	14.60%
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)		9.10%	9.10%
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%

[1] The regulatory requirements presented in the table are effective as of January 1, 2015. At December 31, 2014, the minimum Tier 1 capital to risk-weighted assets ratio was 4.0% and to be considered well capitalized the ratio was required to be at least 6.0%

XML

STOCK COMPENSATION EXPENSE (Tables)

6 Months Ended

Jun. 30, 2015

STOCK COMPENSATION EXPENSE [Abstract]

Assumption Used in the Black-Scholes Option-pricing Model

The assumptions used in the Black-Scholes option-pricing model are as follows:

	2015			2014
Risk-free interest rate		1.41	%		2.78	%
Expected option life (yrs)		10.00			10.00
Expected stock price volatility		17.20	%		31.19	%
Dividend yield		3.53	%		3.33	%
Weighted average fair value of options granted	$	1.37		$	3.74

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:

	- - - - - - 2015 - - - - - -					- - - - - - 2014 - - - - - -
	Options			Weighted Average Exercise Price		Options			Weighted Average Exercise Price
Outstanding at beginning of year		273,942		$	11.06		354,281		$	9.84
Grants		47,650			14.72		46,300			14.43
Exercises		(18,450	)		10.87		(63,297	)		8.45
Forfeitures or expired		(16,733	)		17.10		(8,133	)		9.27
Outstanding at June 30,		286,409		$	11.51		329,151		$	10.77
Exercisable at June 30,		204,675					223,898
Weighted average remaining life of options outstanding		6.2					6.2
Weighted average fair value of options granted during the year	$	1.37				$	3.74

Stock Option Activity by Range of Exercise Prices

Additional information regarding stock options outstanding and exercisable at June 30, 2015, 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		106,949	$	7.56	$	844		106,949		5.9	$	7.56	$	844
$10.01 to $12.50		36,000		11.39		146		23,374		7.7		11.39		95
$12.51 to $15.00		122,960		14.23		150		53,852		3.8		13.75		92
$15.01 to $17.50		20,500		16.00		-		20,500		0.6		16.00		-
Outstanding - June 30, 2015		286,409		11.51	$	1,140		204,675		5.0		10.47	$	1,031