CITIZENS FIRST CORP (Form: 10-Q, Received: 11/09/2017 12:06:53)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


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

For the Quarterly Period Ended September 30, 2017


☐	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: 001-33126

CITIZENS FIRST CORPORATION

(Exact name of registrant as specified in its charter)


Kentucky	61-0912615
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1065 Ashley Street, Bowling Green, Kentucky	42103
(Address of principal executive offices)	(Zip Code)

(270) 393-0700

(Registrant’s telephone number, including area code)

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 shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ◻

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ◻

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


Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☒
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

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

2,526,377 shares of Common Stock, no par value, were outstanding at November 9, 2017.

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CITIZENS FIRST CORPORATION

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

ITEM 1	FINANCIAL STATEMENTS	3

ITEM 2	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	26

ITEM 3	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	37

ITEM 4	CONTROLS AND PROCEDURES	38

PART II – OTHER INFORMATION

ITEM 6	EXHIBITS	39

SIGNATURES		40

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Part 1. Financial Information

Item 1. Financial Statements

Citizens First Corporation

Consolidated Balance Sheets


	(In Thousands, Except Share Data)
	September 30,		December 31,
	2017		2016
	Unaudited
Assets
Cash and due from financial institutions	$	7,452	$	8,542
Interest-bearing deposits in other financial institutions		18,086		11,018
Available-for-sale securities		45,044		53,547
Loans held for sale		341		264
Loans, net of allowance for loan losses of $4,852 and $4,854 at September 30, 2017 and December 31, 2016, respectively		357,356		354,537
Premises and equipment, net		9,115		9,390
Bank owned life insurance (BOLI)		8,483		8,351
Federal Home Loan Bank (FHLB) stock, at cost		2,053		2,025
Accrued interest receivable		1,505		1,622
Deferred income taxes		1,105		1,464
Goodwill and other intangible assets		4,238		4,291
Other assets		597		371
Total assets	$	455,375	$	455,422
Liabilities
Deposits
Noninterest bearing	$	51,306	$	52,322
Savings, NOW and money market		172,178		173,620
Time		139,113		144,497
Total deposits		362,597		370,439
FHLB advances and other borrowings		40,000		35,000
Subordinated debentures		5,000		5,000
Accrued interest payable		254		220
Other liabilities		2,083		2,399
Total liabilities		409,934		413,058
Stockholders’ equity
6.5% cumulative preferred stock, no par value, authorized 250 shares, aggregate liquidation preference of $7,998; issued and outstanding 0 and 237 shares at September 30, 2017 and December 31, 2016, respectively		—		7,261
Common stock, no par value, authorized 5,000,000 shares; issued and outstanding 2,526,377 and 2,000,852 shares at September 30, 2017 and December 31, 2016, respectively		33,081		25,920
Retained earnings		12,443		9,706
Accumulated other comprehensive income (loss)		(83)		(523)
Total stockholders’ equity		45,441		42,364
Total liabilities and stockholders’ equity	$	455,375	$	455,422

See Notes to Unaudited Consolidated Financial Statements

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Citizens First Corporation

Unaudited Consolidated Statements of Income


	Three months ended
	(In Thousands, Except Per Share Data)
	September 30, 2017		September 30, 2016
Interest and dividend income
Loans	$	4,316	$	4,213
Taxable securities		142		156
Non-taxable securities		115		146
Federal funds sold and other		67		42
Total interest and dividend income		4,640		4,557
Interest expense
Deposits		628		520
FHLB advances and other borrowings		112		89
Subordinated debentures		37		30
Total interest expense		777		639
Net interest income		3,863		3,918
Provision (credit) for loan losses		(30)		—
Net interest income after provision for loan losses		3,893		3,918
Non-interest income
Service charges on deposit accounts		317		361
Other service charges and fees		317		262
Gain on sale of mortgage loans		79		110
Non-deposit brokerage fees		90		83
Lease income		53		61
BOLI income		44		45
Gain on sale of available-for-sale securities		25		20
Total non-interest income		925		942
Non-interest expenses
Salaries and employee benefits		1,673		1,674
Net occupancy expense		449		481
Advertising and public relations		111		86
Professional fees		160		98
Data processing services		214		262
Franchise shares and deposit tax		132		132
FDIC insurance		52		58
Other real estate owned expenses		—		(8)
Other		415		452
Total non-interest expenses		3,206		3,235
Income before income taxes		1,612		1,625
Income taxes		490		490
Net income		1,122		1,135
Dividends on preferred stock		—		124
Net income available for common stockholders	$	1,122	$	1,011
Basic earnings per common share	$	0.44	$	0.50
Diluted earnings per common share	$	0.44	$	0.45

See Notes to Unaudited Consolidated Financial Statements

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Citizens First Corporation

Unaudited Consolidated Statements of Income


	Nine months ended
	(In Thousands, Except Per Share Data)
	September 30, 2017		September 30, 2016
Interest and dividend income
Loans	$	12,697	$	12,478
Taxable securities		433		510
Non-taxable securities		379		464
Federal funds sold and other		181		117
Total interest and dividend income		13,690		13,569
Interest expense
Deposits		1,769		1,562
FHLB advances and other borrowings		305		228
Subordinated debentures		106		86
Total interest expense		2,180		1,876
Net interest income		11,510		11,693
Provision (credit) for loan losses		—		(85)
Net interest income after provision (credit) for loan losses		11,510		11,778
Non-interest income
Service charges on deposit accounts		922		1,025
Other service charges and fees		882		782
Gain on sale of mortgage loans		235		278
Non-deposit brokerage fees		268		230
Lease income		185		155
BOLI income		132		133
Gain on sale of available-for-sale securities		48		126
Total non-interest income		2,672		2,729
Non-interest expenses
Salaries and employee benefits		5,062		5,134
Net occupancy expense		1,356		1,456
Advertising and public relations		259		245
Professional fees		461		415
Data processing services		718		781
Franchise shares and deposit tax		396		396
FDIC insurance		150		176
Other real estate owned expenses		—		16
Other		1,308		1,460
Total non-interest expenses		9,710		10,079
Income before income taxes		4,472		4,428
Income taxes		1,335		1,314
Net income		3,137		3,114
Dividends and accretion on preferred stock		238		371
Net income available for common stockholders	$	2,899	$	2,743
Basic earnings per common share	$	1.30	$	1.37
Diluted earnings per common share	$	1.23	$	1.23

See Notes to Unaudited Consolidated Financial Statements

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Citizens First Corporation

Unaudited Consolidated Statements of Comprehensive Income

In thousands, except share data


	Three months ended
	(In Thousands, Except Per Share Data)
	September 30, 2017		September 30, 2016
Comprehensive income, net of tax
Net income	$	1,122	$	1,135
Other comprehensive income (loss)
Reclassification adjustment for gains included in net income, net of taxes		(17)		(13)
Change in unrealized gain on available for sale securities, net of taxes		(34)		(92)
Total other comprehensive income (loss)		(51)		(105)
Comprehensive income	$	1,071	$	1,030


		Nine months ended
	(In Thousands, Except Per Share Data)
	September 30, 2017		September 30, 2016
Comprehensive income, net of tax
Net income	$	3,137	$	3,114
Other comprehensive income
Reclassification adjustment for gains included in net income, net of taxes		(32)		(83)
Change in unrealized gain on available for sale securities, net of taxes		472		271
Total other comprehensive income		440		188
Comprehensive income	$	3,577	$	3,302

See Notes to Unaudited Consolidated Financial Statements

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Citizens First Corporation

Unaudited Consolidated Statements of Changes in Stockholders’ Equity

In thousands, except share data


							Accumulated Other
	Preferred		Common		Retained		Comprehensive
	Stock		Stock		Earnings		Income (Loss)		Total
Balance, January 1, 2017	$	7,261	$	25,920	$	9,706	$	(523)	$	42,364
Net income		—		—		3,137		—		3,137
Conversion of cumulative preferred		(7,077)		7,077		—		—		—
Redemption of cumulative preferred		(184)		(8)						(192)
Stock based compensation		—		92		—		—		92
Change in accumulated other comprehensive income		—		—		—		440		440
Dividend declared and paid on common stock ($.08 per share)		—		—		(162)		—		(162)
Dividend declared and paid on preferred stock		—		—		(238)		—		(238)
Balance, September 30, 2017	$	—	$	33,081	$	12,443	$	(83)	$	45,441


							Accumulated Other
	Preferred		Common		Retained		Comprehensive
	Stock		Stock		Earnings		Income (Loss)		Total
Balance, January 1, 2016	$	7,659	$	25,406	$	6,304	$	155	$	39,524
Net income		—		—		3,114		—		3,114
Conversion of cumulative preferred		(398)		398		—		—		—
Stock based compensation		—		63		—		—		63
Change in accumulated other comprehensive income		—		—		—		188		188
Exercise of director stock options		—		32		—		—		32
Dividend declared and paid on common stock ($.08 per share)		—		—		(160)		—		(160)
Dividend declared and paid on preferred stock		—		—		(371)		—		(371)
Balance, September 30, 2016	$	7,261	$	25,899	$	8,887	$	343	$	42,390

See Notes to Unaudited Consolidated Financial Statements

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Citizens First Corporation

Unaudited Consolidated Statements of Cash Flows


	(In Thousands)
	September 30, 2017		September 30, 2016
Operating Activities
Net income	$	3,137	$	3,114
Items not requiring (providing) cash:
Depreciation		337		401
Provision (credit) for loan losses		—		(85)
Amortization of premiums and discounts on securities		166		233
Amortization of core deposit intangible		53		53
Deferred income taxes		131		214
Stock based compensation		92		63
BOLI Income		(132)		(133)
Proceeds from sale of mortgage loans held for sale		11,566		13,252
Origination of mortgage loans held for sale		(11,408)		(12,974)
Gains on sales of available-for-sale securities		(48)		(126)
Gains on sales of mortgage loans held for sale		(235)		(278)
Write-downs and losses (gains) on other real estate owned		—		(11)
Loss (gain) on sale of premises and equipment		(10)		31
Changes in:
Accrued interest receivable		117		133
Other assets		(226)		56
Accrued interest payable and other liabilities		(282)		190
Net cash provided by operating activities		3,258		4,133
Investing Activities
Loan originations and payments, net		(2,819)		(12,330)
Increase in interest-bearing deposits in other financial institutions		(7,068)		(12,883)
Purchase of premises and equipment		(64)		(92)
Proceeds from maturities of available-for-sale securities		6,831		10,090
Purchase of available-for-sale securities		(4,276)		(9,494)
Proceeds from sales of available-for-sale securities		6,498		4,358
Proceeds from sales of other real estate owned		—		177
Proceeds from sales of premises and equipment		12		197
Purchase of FHLB stock		(28)		—
Net cash used in investing activities		(914)		(19,977)
Financing Activities
Net change in demand deposits, money market, NOW and savings accounts		(2,458)		(11,506)
Net change in time deposits		(5,384)		(5,053)
Proceeds from FHLB advances		39,000		30,000
Repayment of FHLB advances		(34,000)		(5,000)
Repayment of other borrowings		—		(2,000)
Redemption of preferred stock		(192)		—
Exercise of stock options		—		32
Dividends paid on common stock		(162)		(160)
Dividends paid on preferred stock		(238)		(371)
Net cash provided(used by) financing activities		(3,434)		5,942
Decrease in Cash and Cash Equivalents		(1,090)		(9,902)
Cash and Cash Equivalents, Beginning of Year		8,542		15,255
Cash and Cash Equivalents, End of Year	$	7,452	$	5,353
Supplemental Cash Flows Information
Interest paid	$	2,146	$	1,870
Income taxes paid	$	1,295	$	900
Conversion of cumulative preferred stock	$	7,077	$	398
Loans transferred to other real estate owned	$	—	$	66

See Notes to Unaudited Consolidated Financial Statements

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Citizens First Corporation

Notes to Unaudited Consolidated Financial Statements

Note 1 - Nature of Operations and Summary of Significant Accounting Policies

The accounting and reporting policies of Citizens First Corporation (the “Company”) and its wholly owned subsidiary, Citizens First Bank, Inc. (the “Bank”), conform to U.S. generally accepted accounting principles and general practices within the banking industry. The consolidated financial statements include the accounts of the Company and the Bank. All significant intercompany transactions and accounts have been eliminated in consolidation.

Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2016 Annual Report on Form 10-K filed with the Securities and Exchange Commission.

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates used in the preparation of the financial statements are based on various factors including the current interest rate environment and the general strength of the local economy. Changes in the overall interest rate environment can significantly affect the Company’s net interest income and the value of its recorded assets and liabilities. Actual results could differ from those estimates used in the preparation of the financial statements.

In the opinion of management, all adjustments considered necessary for a fair presentation have been reflected in the accompanying unaudited financial statements. Those adjustments consist only of normal recurring adjustments. Results of interim periods are not necessarily indicative of results to be expected for the full year.

Recent Accounting Pronouncements– In May 2014 the FASB amended existing guidance related to revenue from contracts with customers. This amendment supersedes and replaces nearly all existing revenue recognition guidance, including industry-specific guidance, establishes a new control-based revenue recognition model, changes the basis for deciding when revenue is recognized over time or at a point in time, provides new and more detailed guidance on specific topics and expands and improves disclosures about revenue. The FASB subsequently issued additional ASUs to defer the effective date and provide additional clarifications. The amendments are effective for annual periods and interim periods within those annual periods beginning after December 15, 2017.

Most of the Company’s revenues come from financial instruments, such as loans, investment securities and other financial instruments which are not included in the scope of this ASU. The Company’s revenue recognition pattern for revenue streams within the scope of the ASU, include but are not limited to service charges on deposit accounts and gains/losses on the sale of OREO, Revenue recognition is not expected to change significantly from current practice. The standard permits the use of either the full retrospective or modified retrospective transition method. The Company is currently planning to use the modified retrospective transition method which requires application of the ASU to uncompleted contracts at the date of adoption. Periods prior to the date of adoption are not retrospectively revised, but a cumulative effect of adoption is recognized for the impact of the ASU on uncompleted contracts at the date of adoption. Management has evaluated the standard and has determined the adoption of this ASU will not have a material impact on the Company’s consolidated financial statements.

In January 2016 the FASB issued ASU 2016-01 which amends existing guidance on the classification and measurement of financial instruments. This new standard revises an entity’s accounting related to the classification and measurement of investments in equity securities and the presentation of certain fair value changes for financial liabilities measured at fair value. The new standard is effective for reporting periods beginning after December 15, 2017. The Company does not expect that adopting the provisions of ASU 2016-01 will have a material impact on our consolidated financial statements.

In February 2016 the FASB issued ASU 2016-02 which establishes the principles to report information about the assets and liabilities that arise from leases. This new standard changes the way operating leases are accounted for and reflected on the lessee’s balance sheet. The new standard is intended to increase transparency and comparability by requiring lessees to recognize the financial obligation and right-of-use asset associated with operating leases that have a lease term of more

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than 12 months on the balance sheet. The new standard is effective for reporting periods beginning after December 15, 2018. The Company is currently evaluating the impact of this new accounting standard on the consolidated financial statements. Based on the leases outstanding at September 30, 2017, we do not expect the new standard to have a material impact on our consolidated financial statements.

In March 2016 the FASB issued ASU 2016-09 which provides guidance on share-based payment accounting. The new standard includes multiple provisions intended to simplify various aspects of the accounting for share-based payments. The new standard became effective January 1, 2017 and did not have a material impact on the consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”, which introduces the current expected credit loss (CECL) model and replaces the incurred loss model. The most significant impact for financial institutions will be to the allowance for loan and lease losses (ALLL). The standard allows for various expected credit loss estimation methods and is scalable. This standard is effective for public companies for reporting periods beginning after December 15, 2019. We have attended training sessions and are assessing our data and system needs and evaluating the impact of adopting this new accounting standard. The Company expects to recognize a one-time increase to the allowance for loan losses as of the beginning of the first reporting period in which the new standard is effective, but cannot yet determine the magnitude of any such one-time adjustment or the overall impact of this standard on the consolidated financial statements.

In March 2017, the FASB issued ASU No. 2017-08, Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization of Purchased Callable Debt Securities. The final standard will shorten the amortization period for premiums on callable debt securities by requiring that premiums be amortized to the first (or earliest) call date instead of as an adjustment to the yield over the contractual life. The standard is effective for public companies for fiscal years beginning after December 15, 2018. Early adoption is permitted. This new accounting standard is not expected to have a material impact on the consolidated financial statements.

Note 2 - Reclassifications

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

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Note 3 - Available-For-Sale Securities

The following table summarizes the amortized cost and fair value of the available-for-sale securities portfolio at September 30, 2017 and December 31, 2016 and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income:


	(Dollars in Thousands)
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
September 30, 2017
U. S. government agencies and government sponsored entities	$	1,999	$	—	$	(9)	$	1,990
Agency mortgage-backed securities: residential		22,392		110		(56)		22,446
State and municipal		18,891		324		(7)		19,208
Trust preferred security		1,888		—		(488)		1,400
Total Available-for-Sale Securities	$	45,170	$	434	$	(560)	$	45,044

December 31, 2016
U. S. government agencies and government sponsored entities	$	1,998	$	—	$	(41)	$	1,957
Agency mortgage-backed securities: residential		28,148		99		(290)		27,957
State and municipal		21,310		216		(146)		21,380
Trust preferred security		1,884		—		(644)		1,240
Corporate bonds		1,000		13		—		1,013
Total Available-for-Sale Securities	$	54,340	$	328	$	(1,121)	$	53,547

The amortized cost and fair value of investment securities at September 30, 2017 by contractual maturity were as follows. Securities not due at a single maturity date, primarily mortgage-backed securities, are shown separately.


	September 30, 2017
	(Dollars in Thousands)
	Available-For-Sale
	Amortized Cost		Fair Value
Due in one year or less	$	1,535	$	1,535
Due from one to five years		10,314		10,422
Due from five to ten years		6,335		6,509
Due after ten years		4,594		4,132
Agency mortgage-backed: residential		22,392		22,446
Total	$	45,170	$	45,044

The following table summarizes the investment securities with unrealized losses by portfolio segment at September 30, 2017 and December 31, 2016, aggregated by investment category and length of time that individual securities have been in continuous unrealized loss position:


	(Dollars in Thousands)
	Less than 12 Months				12 Months or More				Total
Description of			Unrealized				Unrealized				Unrealized
Securities	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
September 30, 2017:
U.S. government agencies and government sponsored entities	$	991	$	(8)	$	999	$	(1)	$	1,990	$	(9)
Agency mortgage-backed: residential		5,793		(45)		901		(11)		6,694		(56)
State and municipal		789		(1)		731		(6)		1,520		(7)
Trust preferred security		—		—		1,400		(488)		1,400		(488)
Total temporarily impaired	$	7,573	$	(54)	$	4,031	$	(506)	$	11,604	$	(560)

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	(Dollars in Thousands)
	Less than 12 Months				12 Months or More				Total
Description of			Unrealized				Unrealized				Unrealized
Securities	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
December 31, 2016:
U.S. government agencies and government sponsored entities	$	1,957	$	(41)	$	—	$	—	$	1,957	$	(41)
Agency mortgage-backed: residential		16,722		(290)		—		—		16,722		(290)
State and municipal		9,399		(142)		293		(4)		9,692		(146)
Trust preferred security		—		—		1,240		(644)		1,240		(644)
Total temporarily impaired	$	28,078	$	(473)	$	1,533	$	(648)	$	29,611	$	(1,121)

Other-Than-Temporary-Impairment

Management evaluates securities for other-than-temporary impairment (“OTTI”) at least on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. Investment securities classified as available-for-sale are generally evaluated for OTTI under ASC Topic 320, “Investments - Debt and Equity Securities.”

In determining OTTI under the ASC Topic 320 model, management considers many factors, including: (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) whether the market decline was affected by macroeconomic conditions, and (4) whether the entity has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery. The assessment of whether an other-than-temporary decline exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time.

All rated securities are investment grade. For those that are not rated, the financial condition has been evaluated and no adverse conditions were identified related to repayment. Declines in fair value are a function of rate differences in the market and market illiquidity. The Company does not intend or is not expected to be required to sell these securities before recovery of their amortized cost basis.

96.4% of the Company’s unrealized losses 12 months or more relate to its investment in a single trust preferred security. The security is a single-issuer trust preferred that is not rated. No impairment charge is being taken as no loss of principal or interest is anticipated. All principal and interest payments are being received as scheduled. On a quarterly basis, we evaluate the creditworthiness of the issuer, a bank holding company with operations in the state of Kentucky. Based on the issuer’s continued profitability and well-capitalized position, we do not deem that there is credit loss. The decline in fair value is primarily attributable to illiquidity affecting these markets and not the expected cash flows of the individual securities. We have evaluated the financial condition and near term prospects of the issuer and expect to fully recover our cost basis. This security continues to pay interest as agreed and future payments are expected to be made as agreed. This security is not considered to be other-than-temporarily impaired.

Note 4 - Loans and Allowance for Loan Losses

Categories of loans include:


	(Dollars in Thousands)
	September 30, 2017		December 31, 2016
Commercial	$	54,851	$	60,388
Commercial real estate:
Construction		52,247		38,168
Other		168,826		178,343
Residential real estate		82,222		78,422
Consumer:
Auto		1,210		1,195
Other		2,852		2,875
Total Loans		362,208		359,391
Less: Allowance for loan losses		(4,852)		(4,854)
Net loans	$	357,356	$	354,537

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The following table sets forth an analysis of our allowance for loan losses for the three months ended September 30, 2017 and 2016.


	(Dollars in Thousands)
September 30, 2017	Commercial		Commercial Real Estate		Residential Real Estate		Consumer		Unallocated		Total

Allowance for loan losses:
Beginning balance	$	681	$	3,622	$	517	$	11	$	67	$	4,898
Provision (credit) for loan losses		(105)		(8)		45		29		9		(30)
Loans charged-off		—		—		—		(23)		—		(23)
Recoveries		3		—		4		—		—		7
Total ending allowance balance	$	579	$	3,614	$	566	$	17	$	76	$	4,852


	(Dollars in Thousands)
September 30, 2016	Commercial		Commercial Real Estate		Residential Real Estate		Consumer		Unallocated		Total

Allowance for loan losses:
Beginning balance	$	464	$	3,815	$	600	$	22	$	48	$	4,949
Provision (credit) for loan losses		80		(64)		(41)		1		24		—
Loans charged-off		(5)		—		—		—		—		(5)
Recoveries		9		1		6		1		—		17
Total ending allowance balance	$	548	$	3,752	$	565	$	24	$	72	$	4,961

The following table sets forth an analysis of our allowance for loan losses for the nine months ended September 30, September 30, 2017 and 2016.


	(Dollars in Thousands)
September 30, 2017	Commercial		Commercial Real Estate		Residential Real Estate		Consumer		Unallocated		Total

Allowance for loan losses:
Beginning balance	$	615	$	3,628	$	527	$	14	$	70	$	4,854
Provision (credit) for loan losses		(47)		(15)		29		27		6		—
Loans charged-off		(17)		—		—		(26)		—		(43)
Recoveries		28		1		10		2		—		41
Total ending allowance balance	$	579	$	3,614	$	566	$	17	$	76	$	4,852


	(Dollars in Thousands)
September 30, 2016	Commercial		Commercial Real Estate		Residential Real Estate		Consumer		Unallocated		Total

Allowance for loan losses:
Beginning balance	$	812	$	3,431	$	524	$	28	$	121	$	4,916
Provision (credit) for loan losses		(395)		322		45		(8)		(49)		(85)
Loans charged-off		(10)		(52)		(23)		(1)		—		(86)
Recoveries		141		51		19		5		—		216
Total ending allowance balance	$	548	$	3,752	$	565	$	24	$	72	$	4,961

The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on the impairment method as of September 30, 2017 and December 31, 2016, which includes net deferred loan fees. As of September 30, 2017 and December 31, 2016, accrued interest receivable of $1.3 million and $1.3

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million, respectively, are not considered significant and therefore not included in the recorded investment in loans presented in the following tables.


	(Dollars in Thousands)
September 30, 2017	Commercial		Commercial Real Estate		Residential Real Estate		Consumer		Unallocated		Total

Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	—	$	187	$	13	$	—	$	—	$	200
Collectively evaluated		579		3,427		553		17		76		4,652
Total ending allowance balance	$	579	$	3,614	$	566	$	17	$	76	$	4,852

Loans:
Individually evaluated for impairment	$	103	$	3,301	$	219	$	8	$	—	$	3,631
Collectively evaluated		54,748		217,772		82,003		4,054		—		358,577
Total ending loans balance	$	54,851	$	221,073	$	82,222	$	4,062	$	—	$	362,208


	(Dollars in Thousands)
December 31, 2016	Commercial		Commercial Real Estate		Residential Real Estate		Consumer		Unallocated		Total

Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	5	$	192	$	—	$	1	$	—	$	198
Collectively evaluated		610		3,436		527		13		70		4,656
Total ending allowance balance	$	615	$	3,628	$	527	$	14	$	70	$	4,854

Loans:
Individually evaluated for impairment	$	60	$	1,533	$	837	$	23	$	—	$	2,453
Collectively evaluated		60,328		214,978		77,585		4,047		—		356,938
Total ending loans balance	$	60,388	$	216,511	$	78,422	$	4,070	$	—	$	359,391

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The following table presents information related to impaired loans by class of loans as of September 30, 2017 and December 31, 2016. In this table presentation the unpaid principal balance of the loans has not been reduced by partial net charge-offs and the recorded investment of the loans was reduced by partial net charge-offs.


	(Dollars in Thousands)						(Dollars in Thousands)
	September 30, 2017						December 31, 2016
	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With no related allowance recorded:
Commercial	$	103	$	103	$	—	$	53	$	53	$	—
Commercial real estate:
Construction		—		—		—		—		—		—
Other		2,370		2,370		—		579		579		—
Residential real estate		149		149		—		837		837		—
Consumer:
Auto		—		—		—		—		—		—
Other		8		8		—		5		5		—
Subtotal	$	2,630	$	2,630	$	—	$	1,474	$	1,474	$	—

With an allowance recorded:
Commercial	$	—	$	—	$	—	$	7	$	7	$	5
Commercial real estate:
Construction		—		—		—		—		—		—
Other		931		931		187		954		954		192
Residential real estate		70		70		13		—		—		—
Consumer:
Auto		—		—		—		—		—		—
Other		—		—		—		18		18		1
Subtotal	$	1,001	$	1,001	$	200	$	979	$	979	$	198
Total	$	3,631	$	3,631	$	200	$	2,453	$	2,453	$	198

Information on impaired loans for the three months ended September 30, 2017 and 2016 is as follows:


	(Dollars in Thousands)						(Dollars in Thousands)
	September 30, 2017						September 30, 2016
	Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized		Average Recorded Investment		Interest Income Recognized		Cash B asis Interest Recognized
Commercial	$	104	$	2	$	—	$	229	$	3	$	3
Commercial real estate:
Construction		—		—		—		—		—		—
Other		3,310		31		24		1,560		21		21
Residential real estate		220		2		1		751		9		8
Consumer:
Auto		—		—		—		—		—		—
Other		9		—		—		26		—		—
Total	$	3,643	$	35	$	25	$	2,566	$	33	$	32

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Information on impaired loans for the nine months ended September 30, 2017 and 2016 is as follows:


	(Dollars in Thousands)						(Dollars in Thousands)
	September 30, 2017						September 30, 2016
	Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized
Commercial	$	105	$	3	$	2	$	235	$	8	$	8
Commercial real estate:
Construction		—		—		—		—		—		—
Other		3,318		88		48		1,584		62		62
Residential real estate		222		6		4		757		25		24
Consumer:
Auto		—		—		—		—		—		—
Other		10		1		1		17		1		1
Total	$	3,655	$	98	$	55	$	2,593	$	96	$	95

The recorded investment in nonaccrual and loans past due 90 days and over still on accrual by class of loans as of September 30, 2017 and December 31, 2016 are summarized below:


	(Dollars in Thousands)				(Dollars in Thousands)
	September 30, 2017				December 31, 2016
	Loans Past Due 90 Days and Over and Still Accruing		Nonaccrual		Loans Past Due 90 Days and Over and Still Accruing		Nonaccrual

Commercial	$	—	$	100	$	—	$	—
Commercial real estate:
Other		—		2,370		—		—
Residential real estate		—		162		—		23
Total	$	—	$	2,632	$	—	$	23

Nonaccrual loans and loans past due 90 days and over still on accrual include individually classified impaired loans.

The following tables present the aging of the recorded investment in past due loans as of September 30, 2017 and December 31, 2016 by class of loans. Non-accrual loans are included and have been categorized based on their payment status:


	(Dollars in Thousands)
	30-59 Days Past Due		60-89 Days Past Due		90 and Over Days Past Due		Total Past Due		Current		Total
September 30, 2017
Commercial	$	—	$	—	$	100	$	100	$	54,751	$	54,851
Commercial real estate:
Construction		—		—		—		—		52,247		52,247
Other		—		—		2,370		2,370		166,456		168,826
Residential real estate		97		—		162		259		81,963		82,222
Consumer:
Auto		—		—		—		—		1,210		1,210
Other		2		—		—		2		2,850		2,852
Subtotal	$	99	$	—	$	2,632	$	2,731	$	359,477	$	362,208

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	(Dollars in Thousands)
	30-59 Days Past Due		60-89 Days Past Due		90 and Over Days Past Due		Total Past Due		Current		Total
December 31, 2016
Commercial	$	—	$	—	$	—	$	—	$	60,388	$	60,388
Commercial real estate:
Construction		—		—		—		—		38,168		38,168
Other		—		—		—		—		178,343		178,343
Residential real estate		166		29		23		218		78,204		78,422
Consumer:
Auto		1		—		—		1		1,194		1,195
Other		—		—		—		—		2,875		2,875
Subtotal	$	167	$	29	$	23	$	219	$	359,172	$	359,391

Troubled Debt Restructurings:

The Company reported total troubled debt restructurings of $1.6 million and $2.3 million as of September 30, 2017 and December 31, 2016, respectively. The Company has no commitments to lend additional amounts to customers with outstanding loans that are classified as troubled debt restructurings. Troubled debt restructurings are included in impaired loans. The modifications of the terms of these loans included reducing the interest rate, granting an interest only payment period, or extending the terms of the debt for customers experiencing financial difficulties. Of the eight troubled debt restructurings reported at quarter end, seven loans totaling $999,000 were on accrual status and one $574,000 loan was on non-accrual status.

There were no troubled debt restructurings that occurred during the three months ended September 30, 2017 and 2016.

The following table presents loans by class modified as troubled debt restructurings that occurred during the nine months ended September 30, 2017 and 2016.


		(Dollars in Thousands)					(Dollars in Thousands)
	Number of Loans	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Number of Loans	Pre- Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
	September 30, 2017					September 30, 2016
Troubled Debt Restructurings:
Commercial	1	$	5	$	5	—	$	—	$	—
Consumer	—		—		—	2		21		21
Total	1	$	5	$	5	2	$	21	$	21

Specific allocations of $188,000 and $228,000 were reported for troubled debt restructurings as of September 30, 2017 and September 30, 2016. For the three and nine months ended September 30, 2017, no payment defaults or charge-offs were reported for troubled debt restructurings made during the prior 12 months, and for the three and nine months ended September 30, 2016, no payment defaults or charge-offs were reported for the troubled debt restructurings made during the prior 12 months.

The terms of certain other loans were modified during the nine months ended September 30, 2017 and 2016 that did not meet the definition of a troubled debt restructuring. These loans modified during the nine months ended September 30, 2017 have a total recorded investment of $19.8 million as of September 30, 2017. These loans modified during the nine months ended September 30, 2016 had a total recorded investment of $25.6 million as of September 30, 2016. The modification of these loans involved either a modification of the terms of a loan to borrowers who were not experiencing financial difficulties or a delay in a payment that was considered to be insignificant.

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In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the Company’s internal underwriting policy.

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 loans individually by classifying the loans as to credit risk. This analysis includes commercial and commercial real estate loans with an outstanding balance greater than $25 thousand and is reviewed on a monthly basis. For residential real estate and consumer loans the analysis primarily involves monitoring the past due status of these loans and at such time that these loans are past due, the Company evaluates the loans 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. All loans in all loan categories are assigned risk ratings. Based on the most recent analyses performed, the risk category of loans by class of loans is as follows:


	(Dollars in Thousands)
	Pass		Special Mention		Substandard		Doubtful		Total
September 30, 2017
Commercial	$	53,722	$	—	$	1,129	$	—	$	54,851
Commercial real estate:
Construction		52,247		—		—		—		52,247
Other		163,055		1,411		4,360		—		168,826
Residential real estate		82,004		56		162		—		82,222
Consumer:
Auto		1,210		—		—		—		1,210
Other		2,842		—		10		—		2,852
Total	$	355,080	$	1,467	$	5,661	$	—	$	362,208

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	(Dollars in Thousands)
	Pass		Special Mention		Substandard		Doubtful		Total
December 31, 2016
Commercial	$	59,990	$	—	$	398	$	—	$	60,388
Commercial real estate:
Construction		38,168		—		—		—		38,168
Other		174,507		741		3,095		—		178,343
Residential real estate		77,982		—		440		—		78,422
Consumer:
Auto		1,195		—		—		—		1,195
Other		2,867		—		8		—		2,875
Total	$	354,709	$	741	$	3,941	$	—	$	359,391

Note 5 - Fair Value Measurements

Fair value is the exchange price that would be received to sell an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair values:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

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, and other inputs that are observable or can be corroborated by observable market data.

Level 3 – Significant unobservable inputs that are supported by little or no market activity, reflect a company’s own assumptions about market participant assumptions of fair value, and are significant to the fair value of the assets or liabilities.

In determining the appropriate levels, the Company used the following methods and significant assumptions to estimate the fair value of each type of financial instrument:

Investment Securities: The fair value of securities available-for-sale are determined by obtaining quoted prices on nationally recognized securities exchanges (level 1 inputs) or matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (level 2 inputs). The Company does not have any Level 1 securities. Level 2 securities include certain U.S. agency bonds, collateralized mortgage and debt obligations, and certain municipal securities. The Company also has one Level 3 security. The value of this single issue trust preferred security is obtained on a quarterly basis directly from the originating broker.

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 independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.

Other Real Estate Owned: Commercial and residential real estate properties classified as other real estate owned (OREO) are measured at fair value, less costs to sell. Fair values are based on recent real estate appraisals. These appraisals may use 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 independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.

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Appraisals for collateral-dependent impaired loans and real estate properties classified as other real estate owned are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by Bank management. The appraisal values for collateral-dependent impaired loans are discounted to allow for selling expenses and fees, the limited use nature of various properties, the age of the most recent appraisal, and additional discretionary discounts for location, condition, etc. The Bank annually obtains an updated current appraisal value for each OREO property to certify that the fair value has not declined. For each parcel of OREO that has declined in value, the Bank records the decline in value by a direct writedown of the asset.

Assets measured at fair value on a recurring basis:


	Fair Value Measurements at:
	(Dollars in Thousands)						(Dollars in Thousands)
	September 30, 2017						December 31, 2016
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Securities available-for-sale
U. S. government agencies and government sponsored entities		—	$	1,990		—		—	$	1,957		—
Agency mortgage-backed securities-residential		—		22,446		—		—		27,957		—
State and municipal		—		19,208		—		—		21,380		—
Trust preferred security		—		—		1,400		—		—		1,240
Corporate bonds		—		—		—		—		1,013		—
Total investment securities	$	—	$	43,644	$	1,400	$	—	$	52,307	$	1,240

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 nine months ended September 30:


	Trust Preferred Security
	2017		2016

Balance of recurring Level 3 assets at January 1	$	1,240	$	1,340
Total gains (losses) for the period included in other comprehensive income		160		(100)
Balance of recurring Level 3 assets at September 30	$	1,400	$	1,240

As of September 30, 2017, there were impaired residential real estate loans with a fair value of $57,000 measured using significant unobservable inputs (level 3). These loans had adjustments using sales comparison valuation techniques for limited used nature of certain properties, age of appraisal, location, and/or condition. These unobservable inputs resulted in adjustments of 15% (weighted average). There were no financial assets measured at fair value on a non-recurring basis as of December 31, 2016.

Impaired loans, which are measured for impairment using the fair value of collateral for collateral dependent loans, had a principal balance of $70,000 at September 30, 2017 with a valuation allowance of $13,000, resulting in an additional provision for loan losses of $13,000 in the nine months ending September 30, 2017. There were no loans measured for impairment using the fair value of collateral dependent loans, no valuation allowance, and no resulting provision for loan losses as of December 31, 2016.

There was no other real estate owned to measure at fair value at September 30, 2017 or December 31, 2016. No writedowns of other real estate owned were taken in the three and nine months ended September 30, 2017 or September 30, 2016.

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The carrying amount and estimated fair values of financial instruments at September 30, 2017 and December 31, 2016 were as follows:


			Fair Value Measurements at
			September 30, 2017
	Carrying Amount		Level 1		Level 2		Level 3		Total
Financial Assets
Cash and cash equivalents	$	7,452	$	7,452	$	—	$	—	$	7,452
Interest-bearing deposits in other financial institutions		18,086		18,086		—		—		18,086
Available-for-sale-securities		45,044		—		43,644		1,400		45,044
Loans, net of allowance		357,356		—		—		357,117		357,117
Loans held for sale		341		—		347		—		347
Accrued interest receivable		1,505		10		226		1,269		1,505
Federal Home Loan Bank stock		2,053		—		—		—		N/A

Financial Liabilities
Demand and savings deposits	$	223,484	$	223,484	$	—	$	—	$	223,484
Time deposits		139,113		—		138,922		—		138,922
FHLB advances		40,000		—		39,896		—		39,896
Subordinated debentures		5,000		—		—		2,495		2,495
Accrued interest payable		254		15		200		39		254


			Fair Value Measurements at
			December 31, 2016
	Carrying Amount		Level 1		Level 2		Level 3		Total
Financial Assets
Cash and cash equivalents	$	8,542	$	8,542	$	—	$	—	$	8,542
Interest-bearing deposits in other financial institutions		11,018		11,018		—		—		11,018
Available-for-sale-securities		53,547		—		52,307		1,240		53,547
Loans, net of allowance		354,537		—		—		354,300		354,300
Loans held for sale		264		—		266		—		266
Accrued interest receivable		1,622		16		268		1,338		1,622
Federal Home Loan Bank stock		2,025		—		—		—		N/A

Financial Liabilities
Demand and savings deposits	$	225,942	$	225,942	$	—	$	—	$	225,942
Time deposits		144,497		—		144,558		—		144,558
FHLB advances		35,000		—		34,897		—		34,897
Subordinated debentures		5,000		—		—		2,495		2,495
Accrued interest payable		220		12		175		33		220

The methods and assumptions used to estimate fair value are described as follows:

(a)

Cash and Cash Equivalents: The carrying amounts of cash and short-term instruments approximate fair values and are classified as Level 1.

(b)

Interest Bearing Deposits in Other Financial Institutions: Fair values are based on quoted market prices.

(c)

FHLB Stock: It is not practical to determine the fair value of FHLB stock due to restrictions placed on its transferability.

(d)

Loans: Fair values of loans, excluding loans held for sale, are estimated as follows: For variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values resulting in a Level 3 classification. Fair values for other loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality resulting in a Level 3 classification. Impaired loans are valued at the lower of cost or fair value as described previously.

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The methods utilized to estimate the fair value of loans do not necessarily represent an exit price. The fair value of loans held for sale is estimated based upon binding contracts and quotes from first party investors resulting in a Level 2 classification.

(e)

Deposits: The fair values disclosed for demand deposits (e.g., interest and non-interest checking, passbook savings, and certain types of money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amount) resulting in a Level 1 classification. The carrying amounts of variable rate certificates of deposit approximate their fair values at the reporting date resulting in a Level 2 classification. Fair values for fixed rate certificates of deposit are estimated using a discounted cash flows calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits resulting in a Level 2 classification.

(f)

FHLB Advances and Other Borrowings/Subordinated Debentures: The fair values of the Company’s long-term borrowings are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 2 classification. The fair values of the Company’s Subordinated Debentures are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 3 classification.

(g)

Accrued Interest Receivable/Payable: The carrying amounts of accrued interest approximate fair value resulting in a Level 1 or Level 2 classification consistent with the asset/liability they are associated with.

Note 6 - Earnings Per Share

Basic earnings per share have been computed by dividing net income available for common shareholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per share have been computed the same as basic earnings per share, and assumes the conversion of outstanding stock options, and convertible preferred stock. The following table reconciles the basic and diluted earnings per share computations for the three months and nine months ended September 30, 2017 and 2016.

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	2017					2016
	Quarter ended September 30, 2017					Quarter ended September 30, 2016
			Weighted	Per				Weighted	Per
			Average	Share				Average	Share
	Income		Shares	Amount		Income		Shares	Amount
Basic earnings per share:
Net income	$	1,122				$	1,135
Dividends on preferred stock during the year		—					(124)
Net income available to common shareholders	$	1,122	2,526,377	$	0.44	$	1,011	2,000,148	$	0.50

Effect of dilutive securities
Stock options		—	—				—	78
Performance share units		—	12,524				—	2,313
Convertible preferred stock		—	—				124	539,175

Diluted earnings per share
Net income available to common stockholders and assumed conversions	$	1,122	2,538,901	$	0.44	$	1,135	2,541,714	$	0.45


	Nine months ended September 30, 2017					Nine months ended September 30, 2016
			Weighted					Weighted
			Average	Per Share				Average	Per Share
	Income		Shares	Amount		Income		Shares	Amount
Basic earnings per share:
Net income	$	3,137				$	3,114
Dividends on preferred stock during the year		(238)					(371)
Net income available to common shareholders	$	2,899	2,216,052	$	1.30	$	2,743	1,997,577	$	1.37

Effect of dilutive securities:
Stock options		—	—				—	104
Performance share units		—	12,031				—	4,235
Convertible preferred stock		238	319,325				371	540,761

Diluted earnings per share:
Net income available to common stockholders and assumed conversions	$	3,137	2,547,408	$	1.23	$	3,114	2,542,677	$	1.23

Note 7 - Regulatory Capital Matters

Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action. Management believes as of September 30, 2017 and December 31, 2016, the Company and the Bank met all capital adequacy requirements to which they are subject.

Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. The most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the institution’s category.

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Under quantitative measures established by regulation to ensure capital adequacy, we are required to maintain minimum amounts and ratios of total Tier 1 capital to risk-weighted assets and to total assets. Beginning in 2016, interim Final Basel III rules require the Bank to maintain minimum amounts and ratios of common equity Tier I capital to risk-weighted assets. Under Basel III rules, the decision was made to opt-out of including accumulated other comprehensive income in computing regulatory capital. The rules also established a "capital conservation buffer" of 2.5%, to be phased in through January 1, 2019, above the new regulatory minimum risk-based capital ratios. The buffer is 1.25% as of September 30, 2017. The buffer could limit the payment of dividends and discretionary bonuses to officers if a bank fails to maintain required capital levels.

The Company’s and Citizens First Bank, Inc.’s actual capital amounts and ratios are also presented in the following table.


	(Dollars in Thousands)
									To Be Well Capitalized
					For Capital Adequacy				Under Prompt Corrective
	Actual				Purposes (1)				Action Provisions
September 30, 2017	Amount		Ratio		Amount		Ratio		Amount		Ratio
Total Capital (to Risk-Weighted Assets)
Consolidated	$	51,307	12.99	%	$	31,586	8.00	%		N/A	N/A
Citizens First Bank, Inc.		50,596	12.82	%		31,564	8.00	%	$	39,454	10.00	%

Tier I Capital (to Risk-Weighted Assets)
Consolidated		46,455	11.77	%		23,689	6.00	%		N/A	N/A
Citizens First Bank, Inc.		45,744	11.59	%		23,673	6.00	%		31,564	8.00	%

Common Equity Tier I Capital (to Risk-Weighted Assets)
Consolidated		41,446	10.50	%		17,767	4.50	%		N/A	N/A
Citizens First Bank, Inc.		45,744	11.59	%		17,754	4.50	%		25,645	6.50	%

Tier I Leverage Capital to average assets
Consolidated		46,455	10.42	%		17,826	4.00	%		N/A	N/A
Citizens First Bank, Inc.		45,744	10.24	%		17,873	4.00	%		22,341	5.0	%


	(Dollars in Thousands)
									To Be Well Capitalized
					For Capital Adequacy				Under Prompt Corrective
	Actual				Purposes (1)				Action Provisions
December 31, 2016	Amount		Ratio		Amount		Ratio		Amount		Ratio
Total Capital (to Risk-Weighted Assets)
Consolidated	$	48,671	12.62	%	$	30,848	8.00	%		N/A	N/A
Citizens First Bank, Inc.		48,316	12.53	%		30,843	8.00	%	$	38,554	10.00	%

Tier I Capital (to Risk-Weighted Assets)
Consolidated		43,852	11.37	%		23,136	6.00	%		N/A	N/A
Citizens First Bank, Inc.		43,497	11.28	%		23,132	6.00	%		30,843	8.00	%

Common Equity Tier I Capital (to Risk-Weighted Assets)
Consolidated		31,585	8.19	%		17,352	4.50	%		N/A	N/A
Citizens First Bank, Inc.		43,497	11.28	%		17,349	4.50	%		25,060	6.50	%

Tier I Leverage Capital to average assets
Consolidated		43,852	9.97	%		17,600	4.00	%		N/A	N/A
Citizens First Bank, Inc.		43,497	9.89	%		17,600	4.00	%		22,000	5.0	%

(1)

When fully phased-in on January 1, 2019, Basel III Capital Rules will require banking organizations to maintain: a minimum ratio of common equity Tier 1 to risk-weighted assets of at least 4.5%, plus a 2.5% “capital conservation buffer”; a minimum ratio of Tier 1 capital to risk-weighted assets of at least 6.0%, plus the 2.5% capital conservation buffer; a minimum ratio of total capital to risk-weighted assets of at least 8.0%, plus the 2.5% capital conservation buffer; and a minimum ratio of Tier 1 capital to adjusted average consolidated assets of at least 4.0%.

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Note 8 - Preferred Stock

In 2004, the Company issued 250 shares of Cumulative Convertible Preferred Stock (“Preferred Shares”), stated value $31,992 per share (Cumulative Preferred Stock), for an aggregate purchase price of $7,998,000. The preferred shares were sold for $31,992 per share, entitled to quarterly cumulative dividends at an annual fixed rate of 6.5% and convertible into shares of common stock of the Company at an initial conversion price per share of $15.50 (currently $14.06, adjusted for stock dividends) on and after three years after the date of issuance.

On May 15, 2017, the Board of Directors of the Company authorized the redemption of all 229 outstanding shares of the Preferred Shares as of June 30, 2017 (the “Redemption Date”) at the redemption price of $31,992 per share (the Stated Value of the Preferred Shares), plus accrued and unpaid dividends. The Preferred Shares were convertible at the option of the holder, until the day prior to the Redemption Date, into a number of shares of common stock determined by dividing the Stated Value of the Preferred Shares ($31,992) by $14.06, the conversion price.

From May 15, 2017 to the Redemption Date, the Company issued an aggregate of 507,325 shares of common stock upon conversion of 223 Preferred Shares. Six preferred shares with an aggregate redemption price of $191,952 were redeemed. As a result of the conversion of Preferred Shares, the outstanding shares of the Company’s common stock increased from 2,019,052 to 2,526,377.

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

Management’s discussion and analysis of Citizens First Corporation (the “Company”) is included to provide the shareholders with an expanded narrative of our results of operations, changes in financial condition, liquidity and capital adequacy. This narrative should be reviewed in conjunction with our consolidated financial statements and notes thereto included in our 2016 Annual Report on Form 10-K filed with the Securities and Exchange Commission.

Forward-Looking Statements

We may from time to time make written or oral statements, including statements contained in this report, which may constitute forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). The words “may”, “expect”, “anticipate”, “intend”, “consider”, “plan”, “believe”, “seek”, “should”, “estimate”, and similar expressions are intended to identify such forward-looking statements, but other statements may constitute forward-looking statements. These statements should be considered subject to various risks and uncertainties. Such forward-looking statements are made based upon management’s belief as well as assumptions made by, and information currently available to, management pursuant to “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Our actual results may differ materially from the results anticipated in forward-looking statements due to a variety of factors. Among the risks and uncertainties that could cause actual results to differ materially are current and future economic conditions generally and in our market areas, changes in the interest rate environment, overall loan demand, increased competition in the financial services industry which could negatively impact our ability to increase total earning assets, and retention of key personnel. Actions by the Department of the Treasury and federal and state bank regulators in response to changing economic conditions, changes in interest rates, loan prepayments by and the financial health of our borrowers, and other factors described in the reports filed by us with the Securities and Exchange Commission could also impact current expectations.

Results of Operations

For the quarter ended September 30, 2017, we reported net income of $1.12 million or $0.44 per diluted common share, compared to net income of $1.14 million, or $0.45 per diluted common share in the third quarter of 2016, a decrease of $13,000. The decrease in net income is attributable to a decrease in net interest income of $55,000 offset by a reduction in non-interest expenses of $29,000

For the nine months ended September 30, 2017 we reported net income of $3.14 million or $1.23 per diluted common share, compared to net income of $3.11 million, or $1.23 per diluted common share in the previous year. This represents an increase of $23,000. The increase in net income is attributable to a decrease in non-interest expenses of $369,000, offset by a decrease in net interest income of $183,000 and an increase in provision expense of $85,000.

Our annualized return on average assets, defined as net income divided by average assets, was 0.99% for the quarter ended September 30, 2017, compared to 1.02% for the quarter ended September 30, 2016. The annualized return on average assets was 0.93% for the nine months ended September 30, 2017, compared to 0.95% in September 30, 2016. Our annualized return on average equity, defined as net income divided by average equity, was 9.91% for the quarter ended September 30, 2017, compared to 10.75% for the quarter ended September 30, 2016. Our annualized return on average equity was 9.55% for the nine months ended September 30, 2017, compared to 10.14% for the nine months ended September 30, 2016.

Net Interest Income

Net interest income, our principal source of earnings, is the difference between the interest income generated by earning assets, such as loans and securities, and the total interest cost of the deposits and borrowings obtained to fund these assets. Factors that influence the level of net interest income include the volume of earning assets and interest bearing liabilities, yields earned and rates paid, the level of non-performing loans and non-earning assets, and the amount of non-interest bearing deposits supporting earning assets.

Net interest income for the quarter ended September 30, 2017 decreased $55,000, or 1.4%, compared to September 30, 2016. The decrease in net interest income was a result of a decrease in the yield on loans and an increase in the cost of funds.

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Net interest income for the nine months ended September 30, 2017 decreased $183,000 or 1.6%, compared to September 30, 2016. The decrease in net interest income was a result of a decrease in the yield on loans and an increase in the cost of funds.

The Company’s net interest margin was 3.68% for the three months ended September 30, 2017, and 3.83% for the three months ended September 30, 2016, a decrease of 15 basis points. The net interest margin decreased due to a decline in the yield on loans and an increase in the cost of interest bearing liabilities. The net interest margin for the nine months ended September 30, 2017 was 3.68%, compared to 3.89% in 2016. The decrease of 21 basis points is attributable to both an increase in the cost of average interest-bearing liabilities and a decrease in the yield on earning assets.

The following tables set forth for the quarter and nine months ended September 30, 2017 and 2016, information regarding average balances of assets and liabilities as well as the total dollar amounts of interest income from average interest-earning assets and interest expense on average interest-bearing liabilities and average yields and costs. Such yields and costs for the periods indicated are derived by dividing income or expense by the average balances of assets or liabilities, respectively, for the periods presented.

Average Consolidated Balance Sheets and Net Interest Analysis (Dollars in thousands)


	2017						2016
	Average		Income/		Average		Average		Income/		Average
Quarter ended September 30,	Balance		Expense		Rate		Balance		Expense		Rate
Earning assets:
Federal funds sold	$	—	$	—	—	%	$	843	$	1	0.47	%
Interest-bearing deposits in other financial institutions		11,398		40	1.39	%		11,015		21	0.76	%
Available-for-sale securities (1)
Taxable		28,899		142	1.95	%		34,671		156	1.79	%
Nontaxable		17,565		171	3.86	%		21,282		218	4.08	%
Federal Home Loan Bank stock		2,052		27	5.22	%		2,025		20	3.93	%
Loans receivable (2)		362,343		4,316	4.73	%		344,733		4,213	4.86	%
Total interest earning assets		422,257		4,696	4.41	%		414,569		4,629	4.44	%
Non-interest earning assets		27,513						27,473
Total Assets	$	449,770					$	442,042

Interest-bearing liabilities:
NOW Accounts	$	116,589	$	150	0.51	%	$	115,788	$	117	0.40	%
Money market Accounts		33,817		64	0.75	%		21,103		16	0.30	%
Savings accounts		22,091		10	0.18	%		21,613		10	0.18	%
Time deposits		140,170		404	1.14	%		145,968		377	1.03	%
Total interest-bearing deposits		312,667		628	0.80	%		304,472		520	0.68	%
Borrowings		32,696		112	1.36	%		37,490		89	0.94	%
Subordinated debentures		5,000		37	2.94	%		5,000		30	2.39	%
Total interest-bearing liabilities		350,363		777	0.88	%		346,962		639	0.73	%
Non-interest bearing deposits		52,130						50,480
Other liabilities		2,361						2,598
Total liabilities		404,854						400,040
Stockholders’ equity		44,916						42,002
Total Liabilities and Stockholders’ Equity	$	449,770					$	442,042
Net interest income			$	3,919					$	3,990

Net interest spread (1)					3.53	%					3.71	%
Net interest margin (1) (3)					3.68	%					3.83	%
Return on average assets ratio					0.99	%					1.02	%
Return on average equity ratio					9.91	%					10.75	%
Average equity to assets ratio					9.99	%					9.50	%

(1)

Income and yield stated at a tax equivalent basis for nontaxable securities using the marginal corporate Federal tax rate of 34.0%

(2)

Average loans include non-performing loans. Interest income includes interest and fees on loans, but does not include interest on loans on non-accrual.

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(3)

Net interest income as a percentage of average interest-earning assets.

Average Consolidated Balance Sheets and Net Interest Analysis (Dollars in thousands)


	2017						2016
	Average		Income/		Average		Average		Income/		Average
Nine months ended September 30,	Balance		Expense		Rate		Balance		Expense		Rate
Earning assets:
Federal funds sold	$	—	$	—	—	%	$	3,723	$	14	0.50	%
Interest-bearing deposits in other financial institutions		11,788		107	1.21	%		5,510		43	1.04	%
Available-for-sale securities (1)
Taxable		28,787		433	2.01	%		36,619		510	1.86	%
Nontaxable		18,840		564	4.00	%		22,369		696	4.16	%
Federal Home Loan Bank stock		2,044		74	4.84	%		2,025		61	4.02	%
Loans receivable (2)		363,294		12,697	4.67	%		338,751		12,478	4.92	%
Total interest earning assets		424,753		13,875	4.37	%		408,997		13,802	4.51	%
Non-interest earning assets		27,424						29,106
Total Assets	$	452,177					$	438,103

Interest-bearing liabilities:
NOW Accounts	$	120,884	$	430	0.48	%	$	123,437	$	365	0.39	%
Money market Accounts		28,863	$	127	0.59	%	$	23,543	$	63	0.36	%
Savings accounts		21,945		30	0.18	%		21,186		29	0.18	%
Time deposits		144,129		1,183	1.10	%		143,779		1,105	1.03	%
Total interest-bearing deposits		315,821		1,770	0.75	%		311,945		1,562	0.67	%
Borrowings		35,161		305	1.16	%		28,949		228	1.05	%
Subordinated debentures		5,000		106	2.83	%		5,000		86	2.30	%
Total interest-bearing liabilities		355,982		2,181	0.82	%		345,894		1,876	0.72	%
Non-interest bearing deposits		50,103						48,886
Other liabilities		2,154						2,296
Total liabilities		408,239						397,076
Stockholders’ equity		43,938						41,027
Total Liabilities and Stockholders’ Equity	$	452,177					$	438,103
Net interest income			$	11,694					$	11,926

Net interest spread (1)					3.55	%					3.78	%
Net interest margin (1) (3)					3.68	%					3.89	%
Return on average assets ratio					0.93	%					0.95	%
Return on average equity ratio					9.55	%					10.14	%
Average equity to assets ratio					9.72	%					9.36	%

(1)

Income and yield stated at a tax equivalent basis for nontaxable securities using the marginal corporate Federal tax rate of 34.0%

(2)

Average loans include non-performing loans. Interest income includes interest and fees on loans, but does not include interest on loans on non-accrual.

(3)

Net interest income as a percentage of average interest-earning assets.

Rate/Volume Analysis

The following table sets forth the effects of changing rates and volumes on our net interest income for the nine months ended September 30, 2017 and 2016. Information is provided with respect to (1) effects on interest income attributable to changes in volume (changes in volume multiplied by prior rate) and (2) effects on interest income attributable to changes in rate (changes in rate multiplied by prior volume). Changes attributable to the combined input of volume and rate have been allocated proportionately to the changes due to volume and the changes due to rate.

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	(Dollars in Thousands)
	Nine Months Ended September 30, 2017
	Vs. 2016
	Increase (Decrease) Due to
	Rate	Volume	Net
Interest-earning assets:
Federal funds sold	—	(14)	(14)
Interest-bearing deposits in other financial institutions	15	49	64
Available-for-sale securities:
Taxable	32	(109)	(77)
Nontaxable (1)	(22)	(110)	(132)
Federal Home Loan Bank stock	12	1	13
Loans, net	(685)	904	219
Total Net Change in income on interest-earning assets	(648)	721	73

Interest-bearing liabilities:
NOW Accounts	73	(8)	65
Money market accounts	50	14	64
Savings accounts	(0)	1	1
Time deposits	75	3	78
FHLB and other borrowings	28	49	77
Subordinated debentures	20	—	20
Total Net Change in expense on interest-earning liabilities	246	59	305
Net change in net interest income	(893)	661	(232)
Percentage Change	385.1%	-285.1%	100.0%

(1)

Income stated at a fully tax equivalent basis using the marginal corporate Federal tax rate of 34.0%.

Provision for Loan Losses

There was a (credit) provision for loan losses of ($30,000) recorded for the third quarter of 2017. The allowance for loan losses to total loans was 1.34% of total loans at September 30, 2017 compared to 1.45% at September 30, 2016. Net charge-offs (recoveries) were $15,000 for the third quarter of 2017 compared to ($12,000) in the third quarter of 2016.

(Credit) provision expense for the nine months ended September 30, 2017 increased $85,000, from ($85,000) to $0. Net charge-offs (recoveries) were $2,000 for the nine months ended September 30, 2017 compared to ($130,000) for the nine months ended September 30, 2016.

Non-Interest Income

Non-interest income for the three months ended September 30, 2017 decreased $17,000, or 1.8%, compared to the three months ended September 30, 2016, primarily due to a decrease in service charges on deposit accounts and gain on sale of mortgage loans, partially offset by an increase in other service charges and fees.

Non-interest income for the nine months ended September 30, 2017 decreased $57,000, or 2.1%, compared to the nine months ended September 30, 2016, primarily due to a decrease in gains on sale of securities and a decrease in service charges on deposits, offset by an increase in other service charges and fees and non-deposit brokerage fees.

Non-Interest Expense

Non-interest expense for the three months ended September 30, 2017 decreased $29,000, or .9%, compared to the three months ended September 30, 2016, primarily due to a decrease in data processing and other expenses offset by an increase in professional fees.

Non-interest expense for the nine months ended September 30, 2017 decreased $369,000, or 3.7%, compared to the nine months ended September 30, 2016, primarily due to reduction in most categories of expenses, including other, personnel, and occupancy expenses.

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Income Taxes

Income tax expense was calculated using our expected effective rate for 2017 and 2016. We have recognized deferred tax liabilities and assets to show the tax effects of differences between the financial statement and tax bases of assets and liabilities. Our statutory federal tax rate was 34.0% in both 2017 and 2016. The effective tax rate for the third quarter of 2017 was 30.4% compared to a 30.2% effective tax rate for the third quarter of 2016. The difference between the statutory and effective rates are impacted by such factors as income from tax-exempt loans, tax-exempt income on state and municipal securities, and income on bank owned life insurance.

Balance Sheet Review

Overview

Total assets at September 30, 2017 were $455.4 million, no change, from $455.4 million at December 31, 2016. Average assets during the third quarter were $449.8 million, an increase of 1.8%, or $7.8 million, from $442.0 million in the third quarter of 2016. Average interest earning assets increased 1.9%, or $7.7 million, from $414.6 million in the third quarter of 2016 to $422.3 million in the third quarter of 2017.

Loans

Loans increased $2.8 million, or 0.8%, from $359.4 million at December 31, 2016 to $ 362.2 million at September 30, 2017. Total loans averaged $362.3 million the third quarter of 2017, compared to $344.7 million the third quarter of 2016, an increase of $17.6 million, or 5.11%. We experienced an increase in the commercial real estate and residential real estate portfolios during the first nine months of the year compared to December 31, 2016. The following table presents a summary of the loan portfolio by category:


	(Dollars in Thousands)
	September 30, 2017				December 31, 2016
			% of Total				% of Total
			Loans				Loans
Commercial and agricultural	$	54,851	15.14	%	$	60,388	16.80	%
Commercial real estate		221,073	61.04	%		216,511	60.25	%
Residential real estate		82,222	22.70	%		78,422	21.82	%
Consumer		4,062	1.12	%		4,070	1.13	%
	$	362,208	100.00	%	$	359,391	100.00	%

The majority of our loans are to customers located in south central Kentucky and central Tennessee. As of September 30, 2017, our twenty largest credit relationships consisted of loans and loan commitments ranging from $4.4 million to $11.5 million. The aggregate amount of these credit relationships was $106.9 million, with total commitments of $127.9 million. As of December 31, 2016, our twenty largest credit relationships consisted of loans and loan commitments ranging from $4.1 million to $11.2 million. The aggregate amount of these credit relationships was $105.9 million, with total commitments of $119.1 million.

Our lending activities are subject to a variety of lending limits imposed by state and federal law. The Bank’s secured legal lending limit to a single borrower was approximately $12.5 million at September 30, 2017 and December 31, 2016.

As of September 30, 2017, we had $19.1 million of participations in loans purchased from, and $21.6 million of participations in loans sold to, other banks. As of December 31, 2016, we had $17.7 million of participations in loans purchased from, and $24.7 million of participations in loans sold to, other banks.

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The following table sets forth the maturity distribution of the loan portfolio as of September 30, 2017. Maturities are based on contractual terms. Our policy is to specifically review and approve all loans renewed; loans are not automatically rolled over.


	(Dollars in Thousands)
			After One but
Loan Maturities	Within One		Within Five		After Five
as of September 30, 2017	Year		Years		Years		Total
Commercial and agricultural	$	15,862	$	29,817	$	9,172	$	54,851
Commercial real estate		50,013		97,164		73,896		221,073
Residential real estate		10,605		37,637		33,980		82,222
Consumer		1,321		2,689		52		4,062
Total	$	77,801	$	167,307	$	117,100	$	362,208

Credit Quality and the Allowance for Loan Losses

The allowance for loan losses represents management's estimate of probable credit losses incurred in the loan portfolio. Determining the amount of the allowance for loan losses is considered a critical accounting estimate because it requires significant judgment and the use of estimates related to the amount and timing of expected future cash flows on impaired loans, estimated losses on loans based on historical loss experience, and consideration of current economic trends and conditions, all of which may be susceptible to significant change.

The following table sets forth the breakdown of the allowance for loan losses by loan category at the dates indicated. This allocation is not intended to suggest how actual losses may occur.


	(Dollars in Thousands)
	September 30, 2017				December 31, 2016
	Amount		% of Loans in Each Category to Total Loans		Amount		% of Loans in Each Category to Total Loans
Residential real estate loans	$	566	22.70	%	$	527	21.82	%
Consumer and other loans		17	1.12	%		14	1.13	%
Commercial and agricultural		579	15.14	%		615	16.80	%
Commercial real estate		3,614	61.04	%		3,628	60.25	%
Unallocated		76	0.00	%		70	0.00	%
Total allowance for loan losses	$	4,852	100.00	%	$	4,854	100.00	%

We maintain a modest unallocated amount in the allowance to assist in mitigating inherent risk that cannot be quantitatively or qualitatively determined, including, but not limited to, new loan products and new markets for which insufficient history exists for a robust analysis. Allocations on individual loans and historical loss rates are reviewed quarterly and adjusted as necessary based on changing borrower and/or collateral conditions and actual collection and charge-off experience. The unallocated portion of the allowance was $76,000 at September 30, 2017 and $70,000 at December 31, 2016.

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The following table sets forth selected asset quality measurements and ratios for the periods indicated:


	(Dollars in Thousands)
	September 30, 2017			December 31, 2016
Non-accrual loans	$	2,058		$	23
Loans 90+ days past due/accruing		—			—
Restructured loans on non-accrual		574			—
Total non-performing loans		2,632			23
Other real estate owned		—			—
Total non-performing assets	$	2,632		$	23

Non-performing loans to total loans		0.73	%		0.01	%
Non-performing assets to total assets		0.58	%		0.01	%
Net charge-offs (recoveries) YTD	$	2		$	(23)
Net charge-offs (recoveries) YTD to average YTD total loans		—	%		(0.01)	%
Allowance for loan losses to non-performing loans		184.35	%		21,104.35	%
Allowance for loan losses to total loans		1.34	%		1.35	%

Non-performing assets totaled $2.63 million at September 30, 2017, compared to $23,000 at December 31, 2016, an increase of $2.61 million. Payoffs and paydowns of $23,000 were related to the payoff of two residential real estate loans; there were no charge offs related to non-performing assets in the nine months ended September 30, 2017. Increases in non-performing assets included the addition of $2.4 million in commercial real estate loans, $162,000 in residential real estate loans, and $100,000 in commercial loans.

Non-performing loans consist of non-accrual loans and loans 90 days and over past due and still accruing interest. Non-performing assets are defined as non-performing loans, other real estate owned, and repossessed assets. Management classifies commercial and commercial real estate loans as non-accrual when principal or interest is past due 90 days and over and the loan is not adequately collateralized, or earlier when, in the opinion of management, principal or interest is not likely to be paid in accordance with the terms of the obligation. We charge off consumer loans after 120 days of delinquency unless they are adequately secured and in the process of collection. Non-accrual loans are not reclassified as accruing until principal and interest payments are brought current and future payments appear reasonably certain.

Troubled debt restructurings (TDRs) are modified loans in which a concession is provided to a borrower experiencing financial difficulties. Loan modifications are considered TDRs when the concession provided is not available to the borrower through either normal channels or other sources. However, not all loan modifications are TDRs. Our standards relating to loan modifications consider, among other factors, minimum verified income requirements, cash flow analysis, and collateral valuations. However, each potential loan modification is reviewed individually and the terms of the loan are modified to meet a borrower’s specific circumstances at a point in time. TDRs can be classified as either accrual or nonaccrual loans. Non-accrual TDRs are included in non-accrual loans whereas accruing TDRs are excluded because the borrower remains contractually current.

Loans that exhibit probable or observed credit weaknesses are subject to individual review. Where appropriate, allocations for individual loans are included in the allowance calculation based on management’s estimate of the borrower’s ability to repay the loan given the availability of collateral, other sources of cash flow and legal options available to us. Included in the review of individual loans are those that are impaired as provided in ASC Topic 310 “Receivables”. We evaluate the collectability of both principal and interest when assessing the need for a loss accrual. Historical loss rates are applied to other loans not subject to individual allocations. These historical loss rates may be adjusted for significant factors that, in management’s judgment, reflect the impact of any current conditions on loss recognition. Factors which management considers in the analysis include the effects of the national and local economies, trends in the nature and volume of loans (delinquencies, charge-offs and non-accrual loans), changes in mix, asset quality trends, risk management and loan administration, changes in internal lending policies and credit standards, and examination results from bank regulatory agencies and our internal credit examiners.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status and the probability of collecting scheduled principal and interest payments when due. Loans for which the terms have been modified resulting

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in a concession, and for which the borrower is experiencing financial difficulties, are considered troubled debt restructurings and classified as impaired. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis for all loan classes by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price or the fair value of the collateral if the loan is collateral dependent.

Securities

The investment securities portfolio is comprised of U.S. Government agency and government sponsored entity securities, agency mortgage-backed securities, tax-exempt securities of states and political subdivisions, taxable municipal securities, and a trust preferred security. The purchase of nontaxable obligations of states and political subdivisions is a part of managing our effective tax rate. Securities are all classified as available-for-sale, and averaged $47.6 million for the first nine months of 2017, compared to $59.0 million for 2016.

The tables below present the maturities and yield characteristics of securities as of September 30, 2017 and December 31, 2016. 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.


	(Dollars in Thousands)
				Over			Over
				One Year			Five Years
	One Year or			Through			Through			Over Ten			Total
September 30, 2017	Less			Five Years			Ten Years			Years			Maturities			Fair Value
U.S. Government agencies	$	1,000		$	999		$	—		$	—		$	1,999		$	1,990
Agency mortgage-backed securities: (1)		4			17,818			4,570			—			22,392			22,446
Municipal securities		535			9,315			6,335			2,706			18,891			19,208
Trust preferred security		—			—			—			1,888			1,888			1,400
Total available-for-sale securities	$	1,539		$	28,132		$	10,905		$	4,594		$	45,170		$	45,044

Percent of total		3.41	%		62.28	%		24.14	%		10.17	%		100.00	%

Weighted average yield(2)		2.05	%		2.41	%		3.49	%		3.85	%		2.81	%

(1)

Agency mortgage‑backed securities (residential) are grouped into average lives based on September 2017 prepayment projections.

(2)

The weighted average yields are based on amortized cost and municipal securities are calculated on a full tax- equivalent basis.

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	(Dollars in Thousands)
				Over			Over
				One Year			Five Years
	One Year or			Through			Through			Over Ten			Total
December 31, 2016	Less			Five Years			Ten Years			Years			Maturities			Fair Value
U.S. Government agencies	$	—		$	1,998		$	—		$	—		$	1,998		$	1,957
Agency mortgage-backed securities: (1)		85			21,700			6,363			—			28,148			27,957
Municipal securities		1,264			9,924			7,606			2,516			21,310			21,380
Trust preferred security		—			—			—			1,884			1,884			1,240
Corporate bond		—			—			1,000			—			1,000			1,013
Total available-for-sale securities	$	1,349		$	33,622		$	14,969		$	4,400		$	54,340		$	53,547

Percent of total		2.48	%		61.87	%		27.55	%		8.10	%		100.00	%

Weighted average yield(2)		3.06	%		2.47	%		3.31	%		4.14	%		2.85	%

(1)

Agency mortgage‑backed securities (residential) are grouped into average lives based on December 2016 prepayment projections.

(2) The weighted average yields are based on amortized cost and municipal securities are calculated on a full tax- equivalent basis.

The trust preferred security category consists of one single issue trust preferred security which has experienced a decline in fair value due to inactivity in the market. No impairment charge is being taken as no loss of principal is anticipated and all principal and interest payments are being received as scheduled. The Company does not intend to sell this security and does not believe it will be required to sell this security before recovery. All rated securities are investment grade. For those that are not rated, the financial condition has been evaluated and no adverse conditions were identified related to repayment. Declines in fair value are a function of rate changes in the market and market illiquidity.

Deposits

Our primary funding source for lending and investment activities results from customer deposits and a deposit listing service. Deposits at September 30, 2017 were $362.6 million, an decrease of $7.8 million, or 2.1%, compared to $370.4 million at December 31, 2016. Total deposits averaged $364.8 million the third quarter of 2017, an increase of $11 million, or 3.1%, compared to $353.8 million during the third quarter of 2016. Time deposits that meets or exceed the FDIC insurance limit of $250,000 were $18.6 million and $11.5 million at September 30, 2017 and December 31, 2016, respectively.

We utilize brokered certificates of deposit and will continue to utilize these sources for deposits when they can be cost-effective. There were $10.7 million in brokered deposits at September 30, 2017, compared to $1.9 million at December 31, 2016. We also utilize a deposit listing service to obtain additional deposits totaling $14.0 million at September 30, 2017, compared to $25.1 million at December 31, 2016.

The scheduled maturities or next repricing dates of time deposits as of September 30, 2017


	(Dollars in Thousands)
	September 30, 2017
Three months or less	$	25,097
Over three through twelve months		63,965
Over one year through three years		38,973
Over three years		11,078
Total	$	139,113

Borrowings

FHLB Advances. We obtain advances from the Federal Home Bank of Cincinnati (FHLB) for funding and liability management. These advances are collateralized by a blanket agreement of eligible 1-4 family residential mortgage loans

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and eligible commercial real estate. Total advances as of September 30, 2017 were $40.0 million compared to $35.0 million at December 31, 2016. Rates vary based on the term to repayment, and are summarized below as of September 30, 2017:


				(Dollars in Thousands
Type	Maturity	Rate		Amount
Fixed	March 07, 2018	1.26	%		3,000
Fixed	April 20, 2018	1.05	%		5,000
Fixed	April 27, 2018	1.38	%		5,000
Fixed	August 23, 2018	1.42	%		5,000
Fixed	September 26, 2018	1.51	%		3,000
Fixed	September 28, 2018	1.49	%		4,000
Fixed	December 28, 2018	1.52	%		5,000
Fixed	May 24, 2019	1.72	%		3,000
Fixed	September 11, 2019	1.57	%		4,000
Fixed	January 15, 2021	1.88	%		3,000
				$	40,000

With our available collateral and our current holding of FHLB stock, we are eligible to borrow an additional $35.3 million as of September 30, 2017, compared to $40.3 million at December 31, 2016.

Other Borrowings. We have a credit agreement with a community bank to be used for operating capital and general corporate purposes. The line has a total availability of $3.0 million, matures November 21, 2017, and bears interest at the prime rate as published in the Money Rates section of The Wall Street Journal , plus 0.25%, with interest payable monthly. The line has a floor rate of 4.5%. The line is secured by the Bank’s common stock. There was no balance on the line as of September 30, 2017 and December 31, 2016.

At September 30, 2017, we had established Federal Funds lines of credit totaling $18.8 million with three correspondent banks. No amounts were drawn as of September 30, 2017 or December 31, 2016.

We issued $5.0 million in subordinated debentures in October, 2006. These trust preferred securities bear an interest rate, which reprices each calendar quarter, of 165 basis points over 3-month LIBOR (London Inter Bank Offering Rate). Our rate for interest payable as of September 30, 2017 was 2.95%. The subordinated debentures may be included with tier 1 capital (with certain limitations) under current regulatory guidelines.

Liquidity

Our objective for liquidity management is to ensure that we have funds available to meet deposit withdrawals and credit demands without unduly penalizing profitability. In order to maintain a proper level of liquidity, the Bank has several sources of funds available on a daily basis that can be used for liquidity purposes. Those sources of funds include the Bank’s core deposits, cash flow generated by repayment of principal and interest on loans and investment securities; FHLB borrowings; and federal funds purchased. While maturities and scheduled amortization of loans and investment securities are generally a predictable source of funds, deposit outflows and mortgage prepayments are influenced significantly by general interest rates, economic conditions, and competition in our local markets.

Our asset and liability management committee meets monthly and monitors the composition of the balance sheet to ensure comprehensive management of interest rate risk and liquidity. We prepare a monthly cash flow report which forecasts funding needs and availability for the coming months, based on forecasts of loan closings and payoffs, potentially callable securities, and other factors.

Capital

Stockholders’ equity increased to $45.4 million at September 30, 2017 from $42.4 million at December 31, 2016. The book value per common share was $17.99 at September 30, 2017 compared to $17.54 at December 31, 2016. The Company has paid $0.08 per share in common dividends year-to-date in 2017.

The Company previously issued 250 shares of Cumulative Convertible Preferred Stock, (Preferred Stock), for an aggregate purchase price of $8.0 million. The Preferred Stock was sold for $31,992 per share, was entitled to quarterly cumulative

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dividends at an annual fixed rate of 6.5% and was convertible into shares of common stock of the Company at an initial conversion price per share of $15.50 ($14.06 at the date of conversion, adjusted for stock dividends).

On May 15, 2017, the Board of Directors of the Company authorized the redemption of all 229 outstanding shares of the Company’s Cumulative Convertible Preferred Stock (“Preferred Shares”) as of June 30, 2017 (the “Redemption Date”) at the redemption price of $31,992 per share (the Stated Value of the Preferred Shares), plus accrued and unpaid dividends. The Preferred Shares were convertible at the option of the holder, until the day prior to the Redemption Date, into a number of shares of common stock determined by dividing the Stated Value of the Preferred Shares ($31,992) by $14.06, the conversion price.

We are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off‑balance‑sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action. The final rules implementing Basel Committee on Banking Supervision’s capital guidelines for U.S. banks, (Basel III rules) became effective for the Bank on January 1, 2015 with full compliance with all of the requirements being phased in over a multi-year schedule, and fully phased in by January 1, 2019. The rules also established a "capital conservation buffer" of 2.5%, to be phased in over three years, above the new regulatory minimum risk-based capital ratios. The buffer as of September 30, 2017 is 1.25%. The buffer could limit the payment of dividends and discretionary bonuses to officers if a bank fails to maintain required capital levels. The net unrealized gain or loss on available-for-sale securities is not included in computing regulatory capital. We believe as of September 30, 2017 and December 31, 2016, the Company and the Bank met all capital adequacy requirements to which it is subject.

Our capital ratios, calculated in accordance with regulatory guidelines, were as follows:


	(Dollars in Thousands)
									To Be Well Capitalized
					For Capital Adequacy				Under Prompt Corrective
	Actual				Purposes (1)				Action Provisions
September 30, 2017	Amount		Ratio		Amount		Ratio		Amount		Ratio
Total Capital (to Risk-Weighted Assets)
Consolidated	$	51,307	12.99	%	$	31,586	8.00	%		N/A	N/A
Citizens First Bank, Inc.		50,596	12.82	%		31,564	8.00	%	$	39,454	10.00	%

Tier I Capital (to Risk-Weighted Assets)
Consolidated		46,455	11.77	%		23,689	6.00	%		N/A	N/A
Citizens First Bank, Inc.		45,744	11.59	%		23,673	6.00	%		31,564	8.00	%

Common Equity Tier I Capital (to Risk-Weighted Assets)
Consolidated		41,446	10.50	%		17,767	4.50	%		N/A	N/A
Citizens First Bank, Inc.		45,744	11.59	%		17,754	4.50	%		25,645	6.50	%

Tier I Leverage Capital to average assets
Consolidated		46,455	10.42	%		17,826	4.00	%		N/A	N/A
Citizens First Bank, Inc.		45,744	10.24	%		17,873	4.00	%		22,341	5.0	%

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	(Dollars in Thousands)
									To Be Well Capitalized
					For Capital Adequacy				Under Prompt Corrective
	Actual				Purposes (1)				Action Provisions
December 31, 2016	Amount		Ratio		Amount		Ratio		Amount		Ratio
Total Capital (to Risk-Weighted Assets)
Consolidated	$	48,671	12.62	%	$	30,848	8.00	%		N/A	N/A
Citizens First Bank, Inc.		48,316	12.53	%		30,843	8.00	%	$	38,554	10.00	%

Tier I Capital (to Risk-Weighted Assets)
Consolidated		43,852	11.37	%		23,136	6.00	%		N/A	N/A
Citizens First Bank, Inc.		43,497	11.28	%		23,132	6.00	%		30,843	8.00	%

Common Equity Tier I Capital (to Risk-Weighted Assets)
Consolidated		31,585	8.19	%		17,352	4.50	%		N/A	N/A
Citizens First Bank, Inc.		43,497	11.28	%		17,349	4.50	%		25,060	6.50	%

Tier I Leverage Capital to average assets
Consolidated		43,852	9.97	%		17,600	4.00	%		N/A	N/A
Citizens First Bank, Inc.		43,497	9.89	%		17,600	4.00	%		22,000	5.0	%

(1)

Item 3. Quantitative and Qualitative Disclosure s about Market Risk

We use a simulation model as a tool to monitor and evaluate interest rate risk exposure. The model is designed to measure the sensitivity of net interest income and net income to changing interest rates over future time periods. Forecasting net interest income and its sensitivity to changes in interest rates requires us to make assumptions about the volume and characteristics of many attributes, including assumptions relating to the replacement of maturing earning assets and liabilities. Other assumptions include, but are not limited to, projected prepayments, projected new volume, and the predicted relationship between changes in market interest rates and changes in customer account balances. These effects are combined with our estimate of the most likely rate environment to produce a forecast of net interest income and net income. The forecasted results are then adjusted for the effect of a gradual increase and decrease in market interest rates on our net interest income and net income. Because assumptions are inherently uncertain, the model cannot precisely estimate net interest income or net income or the effect of interest rate changes on net interest income and net income. Actual results could differ significantly from simulated results.

At September 30, 2017, the model indicated that if rates were to increase by 200 basis points during the remainder of the calendar year, then net interest income would increase 11.50% over the next twelve months. The model indicated that if rates were to decrease by 200 basis points over the same period, then net interest income would decrease 2.44%. The table below notes the projected changes in net interest income as indicated by the model for increases in rates up to 400 basis points and decreases in rates to 200 basis points.

Projections for: October 2017 - September 2018


Projected			Net Interest Income
Interest Rate			$ Change From		% Change From
Change	Estimated Value		Base		Base
+400	$	18,689,066	$	3,441,998	22.57	%
+300		17,858,171		2,611,103	17.13	%
+200		17,001,114		1,754,046	11.50	%
Base		15,247,068			—	%
-200		14,874,327		(372,741)	(2.44)	%

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Item 4. Controls and Procedure s

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

There was no change in our internal controls over financial reporting that occurred during the quarter ending September 30, 2017 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting, nor were there any material weaknesses in the controls which required corrective action.

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PART II-OTHER INFORMATIO N

Item 6. Exhibits

EXHIBIT INDEX


3.1	Second Amended and Restated Articles of Incorporation of Citizens First Corporation, (incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K filed November 24, 2015).

3.2	Amended and Restated Bylaws of Citizens First Corporation (incorporated by reference to Exhibit 3 of the Registrant’s Current Report on Form 8-K filed March 22, 2017).

4.1	Second Amended and Restated Articles of Incorporation of Citizens First Corporation, (see Exhibit 3.1).

4.2	Amended and Restated Bylaws of Citizens First Corporation (see Exhibit 3.2).

4.3	Copy of Registrants’ Agreement Pursuant to Item 601(b) (4) (iii) (A) of Regulation S-K dated March 30, 2007 with respect to certain debt instruments (incorporated by reference to Exhibit 4.4 of the Registrant’s Form 10K-SB dated June 30, 2007; file number 001-33126).

10.1	Employment Agreement with Citizens First Corporation and M. Todd Kanipe.

10.2	Employment Agreement with Citizens First Corporation and J. Steven Marcum.

10.3	Employment Agreement with Citizens First Corporation and Marc Lively.

31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act.

31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act.

32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350.

32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.

101	Interactive data files: (i) Consolidated Balance Sheets at September 30, 2017 and December 31, 2016, (ii) the Consolidated Statements of Income for the three and nine months ended September 30, 2017 and September 30, 2016, (iii) the Consolidated Statement of Stockholders’ Equity for the nine months ended September 30, 2017 and September 30, 2016, (iv) Consolidated Statements of Cash Flows for the nine month periods ended September 30, 2017 and 2016 and (v) Notes to Consolidated Financial Statements.

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	CITIZENS FIRST CORPORATION


Date: November 9, 2017	/s/M. Todd Kanipe
	M. Todd Kanipe
	President and Chief Executive Officer


Date: November 9, 2017	/s/ J. Steven Marcum
	J. Steven Marcum
	Executive Vice President and Chief Financial Officer

Exhibit 10.1

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT (“ Agreement ”) made and effective as of October 19, 2017, by and between CITIZENS FIRST CORPORATION, a Kentucky corporation (“ Employer ”), and MATTHEW TODD KANIPE, an individual (“ Kanipe ”).

WHEREAS, the parties hereto entered into that certain Employment Agreement dated as of August 1, 2014 (the “ Prior Agreement ”), wherein Kanipe was employed by Employer as the President and Chief Executive Officer of Employer and Citizens First Bank, Inc., Employer’s wholly-owned subsidiary (the “ Bank ”); and

WHEREAS, the parties desire to enter into this Agreement which shall supersede the Prior Agreement in its entirety.

NOW, THEREFORE, for and in consideration of the mutual terms, conditions and benefits to be obtained by the parties to this Agreement, the receipt and sufficiency of which the parties hereby acknowledge, Employer and Kanipe agree as follows:

1. Employment . Employer hereby employs Kanipe, and Kanipe hereby accepts employment with Employer, as the President and Chief Executive Officer of Employer and of the Bank. Such positions are hereinafter collectively referred to as the “ Position .”

2. Term of Employment . This Agreement shall commence on and be effective as of October 19, 2017 and continue through October 18, 2020, subject to renewal and to termination in accordance with the terms of this Agreement. This Agreement shall automatically renew at the end of the initial term and each subsequent term thereafter for a one year period, unless either Employer or Kanipe shall elect to terminate this Agreement by written notice to the other party hereto at least sixty (60) days prior to the end of the respective term. However, if a Change in Control (as hereinafter defined) occurs during the term of this Agreement, including any renewal term, this Agreement’s then current term shall automatically extend for a period of one year. Kanipe’s initial term of employment and any subsequent renewal thereof shall hereinafter be referred to as the “ Term ”. If this Agreement is not renewed as specified herein, all of Kanipe’s rights to compensation and fringe benefits shall terminate at the end of the Term.

3. Responsibilities in Position . During his employment, except for illness and reasonable periods of paid time off as hereinafter provided and reasonable involvement in civic affairs and in organizations which benefit, promote or complement the interests of Employer and the Bank, and except as otherwise provided in this Agreement, or as approved by the Board of Directors of Employer, Kanipe shall devote substantially all of his time, attention, skill and efforts to the faithful performance of his duties hereunder and in the Position, and shall use his best efforts, skill and experience to promote the business, interests and welfare of Employer and the Bank. Kanipe shall not, without the consent of the Board of Directors of Employer, be engaged in any

other business activity, whether or not such activity is pursued for gain, profit or pecuniary advantage.

4. Specific Description of Authority . Kanipe shall have, exercise and carry out the authorities, powers, duties and responsibilities conferred upon persons occupying each of the capacities contained in the Position by the Bylaws of Employer, as such Bylaws are from time to time in effect, and shall observe such directions and restrictions as the Board of Directors of Employer may from time to time confer or impose upon him. In the absence of specific directions, Kanipe shall have the following duties, responsibilities and authorities with respect to Employer and the Bank:

A. He shall have complete charge of the day-to-day management, operation and supervision of the business of Employer and the Bank;

B. He shall discharge all of those duties and responsibilities customarily discharged by a President and Chief Executive Officer of a financial institution and shall have all of the powers and authorities customarily conferred upon an individual holding such offices, including, without limitation, the authority to formulate policies and administer its business, including the business of any financial institution which it might organize, subject to the policies and directions from time to time adopted or given by its Board of Directors;

C. He shall have the general management and control of its business activity;

D. He and those working under his supervision, acting with his authority, shall have the responsibility and authority to hire, appoint, discipline and dismiss all of its employees and shall have the general supervision of all of its employees and officers including those employees and officers associated with any financial institution that it might organize;

E. He shall be responsible for carrying out such other acts and duties, not otherwise specified herein, as shall be necessary for the management of its business, as its Board of Directors shall from time to time direct.

5. Compensation . Kanipe’s salary (“ Base Salary ”) shall be $258,410 annually and shall be paid in equal bi-weekly installments. The Compensation Committee of Employer’s Board of Directors and Kanipe may mutually agree to further adjust the Base Salary of Kanipe during the Term of this Agreement.

6. Reimbursement . Employer will reimburse Kanipe for all reasonable and necessary expenses incurred by him in carrying out his duties under this Agreement; provided that such expenses shall be incurred by him only pursuant to the policies and procedures of Employer, from time to time in effect, and that all such expenses must be reasonable and necessary expenses incurred by him solely for the purpose of carrying out his duties under this Agreement. Kanipe shall present to Employer an itemized account of such expenses in accordance with Employer’s expense reimbursement policies.

7. Paid Time Off. Kanipe shall be entitled to paid time off (“ PTO ”) annually .pursuant to the PTO policies of Employer from time to time in effect as specified in Employer’s employee handbook. Kanipe shall be responsible for arranging to have other officers of Employer

discharge his duties and responsibilities during any period of PTO. Unless Kanipe is incapacitated by illness or injury from performing his duties, PTO shall be taken only at such times as to cause a minimum of disruption in the business of Employer. Unused PTO may be accrued and carried over from year to year as specified in Employer’s employee handbook.

8. Employee Benefits. Kanipe shall be entitled to participate in all employee benefit programs as are conferred by Employer, from time to time, upon its other executive officers, including the following:

A. The right to participate in any health insurance program established by Employer;

B. The right to participate in any profit sharing plan, pension plan, or other incentive program, retirement benefit plan or similar program established by Employer; provided, that Kanipe must be a “qualified participant,” as defined in the legal documentation establishing such plans;

C. The right to participate in any life insurance plan, short-term disability plan, or long-term disability plan established by Employer;

D. The right to participate in an annual incentive bonus program (“Incentive Payment”) based upon the achievement of certain objectives to be determined by the Compensation Committee from time to time; and

E. The right to receive annual equity awards under Employer’s 2015 Incentive Compensation Plan or any other stock or long-term incentive plans that Employer may adopt from time to time on terms and conditions no less favorable than those provided to other senior executives of the Company.

9. Annual Evaluation . At least annually, Employer shall devote a portion of one meeting of Employer’s Board of Directors or Compensation Committee to an evaluation of Kanipe’s performance as measured against specific goals and objectives as established by Employer or such committee. If Kanipe is a member of the Board of Directors or such committee, he shall not be permitted to attend that part of any meeting at which his evaluation is being considered without invitation by a majority of the other Board members.

10. Termination .

A. Termination by Kanipe . Kanipe may terminate his employment in the Position, and this Agreement, at any time during the Term, upon not less than sixty (60) days’ prior written notice to Employer; provided that Employer may, in its discretion, elect to accelerate the effective date of any resignation, and the effective date of the termination of this Agreement, upon receipt of any such notice of termination.

B. Termination by Employer . Employer may terminate Kanipe’s employment (i) immediately upon notice to Kanipe, with Cause (as hereinafter defined), or (ii) with no less than thirty (30) days’ prior written notice to Kanipe, without Cause. For purposes of

this Section 10, “Cause” means that Employer’s Board of Directors has determined in good faith that Kanipe has engaged in the following conduct:

[1] Kanipe has appropriated to his personal use funds, rights or property of Employer or of any of the customers of Employer;

[2] Kanipe has misrepresented or engaged in any other act of substantial dishonesty in the performance of his duties or responsibilities;

[3] Kanipe has, in any substantial respect, failed to discharge his duties and responsibilities in the Position, and fails or refuses to correct such failings within thirty (30) days of receipt of written notice to him from Employer of the failings, which such notice shall specifically describe Kanipe’s failings and the steps required to remedy same;

[4] Kanipe is engaging in competition with Employer in any manner or in activities harmful to the business of Employer;

[5] Kanipe is using alcohol, drugs or similar substances in an illegal manner;

[6] Kanipe has become “disabled” (as hereinafter defined);

[7] Kanipe is convicted of a felony, or of a substantial misdemeanor involving moral turpitude;

[8] For any reason, Employer or the Bank is unable to procure upon Kanipe a substantial fidelity bond, or a bonding company refuses to issue a bond to Employer or the Bank if Kanipe is employed in the Position;

[9] Kanipe is guilty of gross professional misconduct, or of a gross breach of this Agreement of such a serious nature as would reasonably render his service entirely unacceptable; or

[10] The issuance by any state or federal regulatory agency of a request or demand for removal of Kanipe from employment with Employer or the Bank or from any office which Kanipe then holds with Employer or the Bank.

C. Benefits Upon Termination . Except with respect to a termination by Employer or Kanipe in connection with a Change in Control, which termination shall be governed by Section 10.D and Section 10.E of this Agreement, if Kanipe’s employment by Employer is terminated during the Term for any reason by Employer or by Kanipe (in any case, the date that Kanipe’s employment by Employer terminates is referred to as the “ Severance Date ”), Employer shall have no further obligation to make or provide to Kanipe, and Kanipe shall have no further right to receive or obtain from Employer, any payments or benefits except as follows:

[1] Employer shall pay Kanipe any Accrued Obligations (as hereinafter defined);

[2] If, during the Term, Kanipe’s employment with Employer terminates as a result of termination by Employer without Cause, Employer shall (i) pay Kanipe (in addition to the Accrued Obligations), subject to tax withholding and other authorized deductions, an amount equal to Kanipe’s Base Salary at the annualized rate in effect on the Severance Date (the “ Severance Amount ”), and (ii) pay the premiums required to maintain coverage for Kanipe and his eligible dependents under the health insurance plan of Employer or the Bank in which Kanipe is a participant immediately prior to the Severance Date in accordance with COBRA until the earliest of (A) the first anniversary of the Severance Date or (B) the date on which Kanipe is included in another employer’s benefit plans as a full-time employee. The Severance Amount and the payment of premiums payable under Section 10.C[2](i) and (ii) are referred to as the “ Severance Benefit ”.

[3] Subject to Section 12, Employer shall pay the Severance Amount to Kanipe, at Kanipe’s election, (i) in a lump-sum payment on or before thirty (30) days of the Severance Date, or (ii) in equal installments in accordance with Employer’s standard payroll practices over a period of six (6) consecutive months, with the first installment payable in the month following the month in which Kanipe’s Separation from Service (as defined in Section 10.G) occurs.

[4] For any avoidance of doubt and for purposes of clarity, except as set forth in Sections 10.D and E, the termination of Kanipe’s employment for any reason other than by Employer without Cause shall only entitle Kanipe to the payment of the Accrued Obligations and shall not give rise to the payment of any Severance Benefits pursuant to Section 10.C[2].

[5] Notwithstanding the foregoing provisions of this Section 10.C, if Kanipe materially breaches his obligations under Section 23 or Section 24 of this Agreement at any time, from and after the date of such breach and not in any way in limitation of any right or remedy otherwise available to Employer, Kanipe will no longer be entitled to, and Employer will no longer be obligated to pay, any remaining unpaid portion of the Severance Benefit. In such event, the first installment of the Severance Benefit contemplated by Section 10.C[2] shall, in and of itself, constitute good and sufficient consideration for Kanipe’s release contemplated by Section 10.F.

[6] The foregoing provisions of this Section 10.C shall not affect: (i) Kanipe’s receipt of benefits otherwise due terminated employees under group insurance coverage consistent with the terms of the applicable Employer welfare benefit plan; (ii) Kanipe’s rights under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“ COBRA ”); or (iii) Kanipe’s receipt of benefits otherwise due in accordance with the terms of Employer’s 401(k) plan (if any).

D. Termination by Employer in Connection with a Change of Control . Notwithstanding Section 10.C of this Agreement, in the event that the employment of Kanipe is terminated by Employer, or its successors or assigns, during the Term, for any reason other than Cause, within six (6) months prior to a Change of Control, or on or within one year after a Change of Control, then the following shall occur:

[1] Employer shall pay to Kanipe or to his beneficiaries, dependents or estate, within thirty (30) days of the Severance Date, an amount equal to the product of (i) two (2) and (ii) the sum of (x) the amount of Kanipe’s Base Salary as most recently set prior to the occurrence of the Change of Control and (y) the amount equal to the “target” annual incentive under any outstanding award agreement between the Employer and Kanipe under the Employer’s 2014 Management Incentive Plan for the year in which the Severance Date occurs;

[2] One hundred percent (100%) of Kanipe’s then unvested outstanding stock options, stock appreciation rights, performance shares, performance share units, restricted stock units and other Employer equity compensation awards (the “ Equity Compensation Awards ”) that vest based on time shall immediately vest. With respect to Equity Compensation Awards that vest wholly or in part based on factors other than time, such as performance (whether individual or based on external measures such as Employer performance, stock price, etc.), (i) any portion for which the measurement or performance period or performance measures have been completed and the resulting quantities have been determined or calculated, shall immediately vest (and any rights of repurchase by the Employer or restriction on sale shall lapse) and (ii) the remaining portions shall immediately vest (and any rights of repurchase by the Employer or restriction on sale shall lapse) in an amount equal to the number that would be calculated if the performance measures were achieved at the target level; provided however, that if there is no “target” number, then the number that vests shall be 100% of the amounts that could vest with respect to that measurement period; and

[3] Employer shall pay the premiums required to maintain coverage for Kanipe and his eligible dependents under the health insurance plan of Employer or the Bank in which Kanipe is a participant immediately prior to the Change of Control in accordance with COBRA until the earliest of (A) the first anniversary of the Severance Date or (B) the date on which Kanipe is included in another employer’s benefit plans as a full-time employee.

Kanipe shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise, nor shall any amounts received from other employment or otherwise by Kanipe offset in any manner the obligations of Employer hereunder, except as specifically stated in Section 10.D[3].

E. Termination by Kanipe in Connection with a Change of Control . Notwithstanding any other provision of this Agreement, Kanipe may voluntarily terminate his employment pursuant to this Agreement on or within one year after a Change of Control and shall be entitled to compensation as set forth in Section 10.D of this Agreement in the event that:

[1] the present capacity or circumstances in which Kanipe is employed immediately prior to the completion of the Change of Control are changed, in the reasonable opinion of Kanipe (including, without limitation, a reduction in responsibilities or authority or a reduction in salary);

[2] Kanipe is required to move his personal residence, or perform his principal executive functions, more than thirty-five (35) miles from his primary office as of the date of the commencement of the Term of this Agreement; or

[3] Employer otherwise breaches this Agreement in any material respect.

F. Release; Exclusive Remedy .

[1] This Section 10.F shall apply notwithstanding anything else contained in this Agreement or any stock option or other equity-based award agreement to the contrary. As a condition precedent to any Employer obligation to Kanipe pursuant to this Section 10, Kanipe shall, upon or promptly following (and in all events, within twenty-one (21) days of, unless a longer period of time is required by applicable law) his last day of employment with Employer, provide Employer with a valid, executed general release agreement in the form attached hereto as Exhibit A , and such release agreement shall have not been revoked by Kanipe pursuant to any revocation rights afforded by applicable law. Kanipe agrees to resign, on the Severance Date, as an officer and director of Employer and any Affiliate of Employer, as applicable, and as a fiduciary of any benefit plan of Employer or any Affiliate of Employer, as applicable, and to promptly execute and provide to Employer any further documentation, as requested by Employer, to confirm such resignation.

[2] Kanipe agrees that the payments and benefits contemplated by this Section 10 shall constitute the exclusive and sole remedy for any termination of his employment and Kanipe covenants not to assert or pursue any other remedies, at law or in equity, with respect to any termination of employment.

[3] Kanipe agrees that during and after his employment with or engagement by Employer or any of its Affiliates, Kanipe shall not make any false, defamatory or disparaging statements about Employer or its Affiliates or the officers or directors of Employer or its Affiliates. During and after Kanipe's employment with or engagement by Employer or any of its Affiliates, Employer agrees on behalf of itself and its Affiliates to use its commercially reasonable efforts so that neither the officers nor the directors of Employer or its Affiliates shall make any false, defamatory or disparaging statements about Kanipe.

G. Certain Defined Terms.

[1] As used herein, “ Accrued Obligations ” means:

[A] any Base Salary that had accrued but had not been paid (including accrued and unpaid vacation time) on or before the Severance Date;

[B] any annual Incentive Payment earned by Kanipe for a prior completed fiscal year to the extent not theretofore paid, with such Incentive Payment to be paid no later than the date on which Employer otherwise makes cash incentive payments to other executive officers for such completed fiscal year; and

[C] any reimbursement due to Kanipe pursuant to Section 6 for expenses incurred by Kanipe on or before the Severance Date.

[2] As used herein, “ Affiliate ” shall refer to any person that directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with Employer. As used in this definition, the term “control,” including the correlative terms “controlling,” “controlled by” and “under common control with,” means the possession, directly or indirectly, of the power to direct or cause the direction of management or policies (whether through ownership of securities or any partnership or other ownership interest, by contract or otherwise) of a person.

[3] As used herein, a “ Separation from Service ” occurs when Kanipe dies, retires, or otherwise has a termination of employment with Employer that constitutes a “separation from service” within the meaning of Treasury Regulation Section 1.409A-1(h)(1), without regard to the optional alternative definitions available thereunder.

[4] As used herein, a “ Change of Control ” shall mean any one of the following events:

[A] the acquisition by any person or persons acting in concert of the then outstanding voting securities of either the Bank or Employer, if, after the transaction, the acquiring person (or persons) owns, controls or holds with power to vote forty percent (40%) or more of any class of voting securities of either the Bank or the Employer, as the case may be;

[B] within any twelve-month period (beginning on or after the Effective Date) the persons who were directors of either the Bank or the Employer immediately before the beginning of such twelve-month period (the “Incumbent Directors”) shall cease to constitute at least a majority of such board of directors; provided that any director who was not a director as of the Effective Date shall be deemed to be an Incumbent Director if that director were elected to such board of directors by, or on the recommendation of or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors; and provided further that no director whose initial assumption of office is in connection with an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Securities Exchange Act of 1934) relating to the election of directors shall be deemed to be an Incumbent Director;

[C] a reorganization, merger or consolidation, with respect to which persons who were the stockholders of the Bank or the Employer, as the case may be, immediately prior to such reorganization, merger or consolidation do not, immediately thereafter, own more than fifty percent (50%) of the combined voting power entitled to vote in the election of directors of the reorganized, merged or consolidated company’s then outstanding voting securities; or

[D] the sale, transfer or assignment of all or substantially all of the assets of the Employer and its subsidiaries to any third party.

H. Notice of Termination. Any termination of Kanipe's employment under this Agreement shall be communicated by written notice of termination from the

terminating party to the other party. This notice of termination must be delivered in accordance with Section 26 and must indicate the specific provision(s) of this Agreement relied upon in effecting the termination.

I. “Golden Parachute” Provision .

[1] Any payments made to Kanipe pursuant to this Agreement or otherwise are subject to and conditioned upon their compliance with 12 U.S.C. §1828(k) and any regulations promulgated thereunder.

[2] It is the intention of the parties that none of the payments to which Kanipe is entitled under this Agreement will constitute a “golden parachute payment” within the meaning of 12 USC Section 1828(k)(3) or implementing regulations of the FDIC or the Board of Governors of the Federal Reserve System, the payment of which is prohibited. Any payments made by Employer or the Bank to or for the benefit of Kanipe pursuant to this Agreement, or otherwise, are subject to and conditioned upon their compliance with 12 USC Section 1828(k) and any regulations promulgated thereunder including the receipt of all required approvals thereof by the FDIC. In addition, Employer and its successors retain the legal right to demand the return of any payment made hereunder which constitutes a “golden parachute payment” within the meaning of 12 USC Section 1828(k)(3) or implementing regulations of the FDIC should Employer or the Bank later obtain information indicating that Kanipe committed, is substantially responsible for, or has violated, the respective acts or omissions, conditions, or offenses outlined under 12 C.F.R. 359.4(a)(4).

11. Section 280G Matters. Notwithstanding that the payments or benefits provided or to be provided by Employer to Kanipe or for his benefit pursuant to the terms of this Agreement or otherwise constitute parachute payments within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the " Code ") and will be subject to the excise tax imposed under Section 4999 of the Code (or any successor provision thereto) and interest or penalties with respect to such excise tax (collectively, the " Excise Tax "), Employer shall not pay to Kanipe any additional amounts to compensate Kanipe for such Excise Tax, or any other federal, state, local or foreign income, employment and excise taxes, payable by Kanipe.

12. Section 409A Matters. It is intended that (i) each payment provided under this Agreement is a separate “payment” for purposes of Code Section 409A and (ii) that the payments satisfy, to the greatest extent possible, the exemptions from the application of Code Section 409A, including those provided under Treasury Regulations 1.409A-1(b)(4) (regarding short-term deferrals), 1.409A-1(b)(9)(iii) (regarding the two-times, two year exception), and 1.409A-1(b)(9)(v) (regarding reimbursements and other separation pay). Notwithstanding anything to the contrary in this Agreement, if Employer determines (i) that on the date of Kanipe’s Separation from Service or at such other time that Employer determines to be relevant, Kanipe is a “specified employee” (as such term is defined under Treasury Regulation 1.409A-1(i)(1)) of Employer and (ii) that any payments to be provided to Kanipe pursuant to this Agreement are or may become subject to the additional tax under Code Section 409A(a)(1)(B) or any other taxes or penalties imposed under Code Section 409A (“ Section 409A Taxes ”) if provided at the time otherwise required under this Agreement, then such payments shall be delayed until the date that is six (6) months after the date of Kanipe’s Separation from Service with Employer, or such shorter period

that, as determined by Employer, is sufficient to avoid the imposition of Section 409A Taxes. Any payments delayed pursuant to this Section 12 shall be made in a lump sum on the first day of the seventh month following Kanipe’s Separation from Service, or such earlier date that, as determined by Employer, is sufficient to avoid the imposition of any Section 409A Taxes.

13. Disability. Kanipe shall be deemed to be “disabled” or shall be deemed to be suffering from a “disability” under the provisions of this Agreement if a competent physician, acceptable to Kanipe and Employer, states in writing that it is such physician’s opinion that Kanipe will be permanently (or for a continuous period of four (4) calendar months) unable to perform a substantial number of the usual and customary duties of Kanipe’s employment. In the event Kanipe and Employer are unable to agree upon such a suitable physician for the purposes of making such a determination, then Kanipe and Employer shall each select a physician, and such two physicians as selected by Employer and Kanipe shall select a third physician who shall make the determination, and the determination made by such third physician shall be binding upon Kanipe and Employer. It is further agreed that if a guardian is appointed for Kanipe’s person, or a conservator or curator is appointed for Kanipe’s estate, or he is adjudicated “incompetent” or is suffering or operating under a mental “disability” by a court of appropriate jurisdiction, then Kanipe shall be deemed to be “disabled” for all purposes under this Agreement. In the event Kanipe becomes “disabled,” then his employment and all rights to compensation and fringe benefits, except for Accrued Obligations, shall terminate effective as of the date of such disability determination.

14. Death of Kanipe . Kanipe’s death shall terminate the Term and Kanipe’s employment and shall terminate all of Kanipe’s rights to all salary, compensation and fringe benefits, except for Accrued Obligations, effective as of the date of such death.

15. Duties Upon Termination . Upon the termination of Kanipe’s employment hereunder for any reason whatsoever (including but not limited to the failure of the parties to renew this Agreement pursuant to Section 2 hereof), Kanipe shall promptly return to Employer any property of Employer or its subsidiaries then in Kanipe’s possession or control, including without limitation, any technical data, performance information and reports, sales or marketing plans, documents or other records, computer programs, discs and any other physical representations of any other information relating to Employer or its subsidiaries. Kanipe hereby acknowledges that any and all of such documents, items, and information are and shall remain at all times the exclusive property of Employer.

16. Faithfulness. Kanipe shall diligently employ himself in the Position and in the business of Employer and shall be faithful to Employer in all transactions relating to it and its business and shall give, whenever required, a true account to Employer’s Board of Directors of all business transactions arising out of or connected with Employer and its business. Kanipe shall keep Employer’s Board of Directors fully informed of all work for and transactions on behalf of Employer. He shall not, except in accordance with regular policies of the Board of Directors from time to time in effect, borrow money in the name of Employer, use collateral owned by Employer as security for loans or lease or dispose of or in any way deal with any of the property, assets or interests of Employer other than in connection with the proper conduct of the business of Employer.

17. Nonassignability. Neither this Agreement, nor any rights or interests hereunder, shall be assignable by Employer, or by Kanipe, his beneficiaries or legal representatives, without the prior written consent of the other party. All services to be performed hereunder by Kanipe must be personally performed by him.

18. Consolidation, Merger or Sale of Assets. Nothing in this Agreement shall preclude Employer from consolidating or merging into or with, or transferring all or substantially all of its assets to, another bank or corporation. Upon such a consolidation, merger or transfer of assets, the successor to Employer or to all or substantially all of Employer’s business and/or assets shall be obligated to assume the obligations of Employer under this Agreement and the term “Employer,” as used herein, shall mean such other bank or corporation, as the case may be, and this Agreement shall continue in full force and effect .

19. Binding Effect. This Agreement shall be binding upon, and shall inure to the benefit of Employer and its successors and assigns, and Kanipe and his heirs, executors, administrators and personal representatives.

20. Amendment of Agreement. This Agreement may not be amended or modified except by an instrument in writing signed by the parties hereto.

21. Waiver. No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel against the enforcement of any provision of this Agreement, except by written instrument of the party charged with such waiver or estoppel. No such written waiver shall be deemed to be a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived, and shall not constitute a waiver of such term or condition in the future or as to any act other than that specifically waived.

22. Severability. If for any reason any provision of this Agreement is held invalid, such invalidity shall not affect any other provision of this Agreement not held invalid, and each such other provision shall, to the full extent consistent with law, continue in full force and effect. If any provisions of this Agreement shall be invalid in part, such partial invalidity shall in no way affect the rest of such provision not held invalid, and the rest of such provision, together with all other provisions of this Agreement, shall, to the extent consistent with law, continue in full force and effect.

23. Trade Secrets. Kanipe shall not, at any time or in any manner, either directly or indirectly, divulge, disclose or communicate to any person, firm or corporation, in any manner whatsoever, any information concerning any matters affecting or relating to Employer or the Bank, including, without limiting the generality of the foregoing, any information concerning any of its customers, its manner of operation, its plans, process or other data, without regard to whether all or any part of the foregoing matters will be deemed confidential, material or important, as the parties hereto stipulate that as between them, the same are important, material and confidential and gravely affect the effective and successful conduct of the business and goodwill of Employer and the Bank, and that any breach of the terms of this Section shall be a substantial and material breach of this Agreement. All terms of this Section shall remain in full force and effect after the termination of Kanipe’s employment and of this Agreement. Kanipe acknowledges that it is necessary and proper that Employer preserve and protect its proprietary rights and unique,

confidential and special information and goodwill, and the confidential nature of its business and of the affairs of its and the Bank’s customers, and that it is therefore appropriate that Employer prevent Kanipe from engaging in any breach of the provisions of this Section. Kanipe, therefore, agrees that a violation by Kanipe of the terms of this Section would result in irreparable and continuing injury to Employer, for which there might well be no adequate remedy at law. Therefore, in the event Kanipe shall fail to comply with the provisions of this Section, Employer shall be entitled to such injunctive and other relief as may be necessary or appropriate to cause Kanipe to comply with the provisions of this Section, and to recover, in addition to such relief, its reasonable costs and attorney’s fees incurred in obtaining same. Such right to injunctive relief shall be in addition to, and not in lieu of, such rights to damages or other remedies as Employer shall be entitled to receive.

24. Covenant Not to Compete . Should this Agreement be terminated for any reason during the Term, Kanipe covenants and agrees that he will not, for a period of twelve (12) months following the date of termination of the Agreement: (i) directly or indirectly engage or participate in the operation of a financial institution or enter the employ of, or render any personal services to, or receive remuneration in the form of salary, commissions or otherwise, from any depository or other financial institution, including without limitation a branch or loan production office, located within fifty (50) miles of any office of Employer or Bank; (ii) offer employment to, hire, solicit, divert or appropriate to himself or any other person, any business or services of any person who was an employee or an agent of Employer or the Bank at any time during the last twelve (12) months of Kanipe’s employment hereunder; or (iii) contact or communicate by any means either or himself or on behalf of any other person, any existing or prospective customer of Employer or the Bank on the date of Kanipe’s termination for the purpose of soliciting, offering or doing any type of business or services similar in nature to the business of Employer or the Bank. Kanipe acknowledges that his breach of any covenant contained in this Section 24 will result in irreparable injury to Employer and its Affiliates and that the remedy at law of such parties for such a breach will be inadequate. Accordingly, Kanipe agrees and consents that Employer and its Affiliates shall be entitled to seek both preliminary and permanent injunctions to prevent and/or halt a breach or threatened breach by Kanipe of any covenant contained in this Section 24. If any provision of this Section 24 is invalid in part or in whole, it shall be deemed to have been amended, whether as to time, area covered or otherwise, as and to the extent required for its validity under applicable law and, as so amended, shall be enforceable.

25. Withholding . Employer shall have the right to withhold from the compensation payable to Kanipe hereunder any amounts required by law to be withheld.

26. Notices. Any notice provided for in this Agreement must be in writing and must be either personally delivered, mailed by first class mail (postage prepaid and return receipt requested) or sent by reputable overnight courier service (charges prepaid) to the recipient at the address below indicated or at such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party. Notices will

be deemed to have been given hereunder and received when delivered personally, five days after deposit in the U.S. mail and one day after deposit with a reputable overnight courier service.

if to Employer:

1065 Ashley Street, Suite 150

Bowling Green, Kentucky 42103

if to Kanipe:

to the address most recently on file in the payroll records of Employer.

27. Entire Agreement. This Agreement contains the entire agreement between the parties with respect to Kanipe’s employment by Employer and the Bank and supersedes the Prior Agreement in its entirety. Each of the parties acknowledges that the other party has made no agreements or representations with respect to the subject matter of this Agreement other than those hereinabove specifically set forth in this Agreement.

28. Governing Law. This Agreement is executed and delivered in, and shall be governed by, enforced and interpreted in accordance with the laws of, the Commonwealth of Kentucky.

IN WITNESS WHEREOF , the parties hereto have executed this Agreement as of the day and year first above written.

/s/ M. Todd Kanipe

MATTHEW TODD KANIPE

CITIZENS FIRST CORPORATION

BY: /s/ Bob Hilliard

TITLE: Chairman, Compensation Committee

Exhibit A

FORM OF RELEASE AGREEMENT

This Release Agreement (this “ Release Agreement ”) is entered into this ____ day of 20____, by and between ______________________, an individual (“ Executive ”), and Citizens First Corporation, a Kentucky corporation (the “ Company ”).

WHEREAS, Executive has been employed by Employer or one of its affiliates; and

WHEREAS, Executive's employment by Employer or one of its affiliates has terminated and, in connection with the Employment Agreement dated as of __________, 20____, by and between the Executive and the Company (the “ Employment Agreement ”), the Company and Executive desire to enter into this Release Agreement upon the terms set forth herein;

NOW, THEREFORE, in consideration of the covenants undertaken and the releases contained in this Release Agreement, and in consideration of the obligations of the Company (or one of its subsidiaries) to pay severance benefits (conditioned upon this Release Agreement) under and pursuant to the Employment Agreement, Executive and the Company agree as follows:

1. Termination of Employment. Executive's employment with the Company terminated on [___________________________] (the “ Separation Date ”). Executive waives any right or claim to reinstatement as an employee of the Company and each of its affiliates. Executive hereby confirms that Executive does not hold any position as an officer, director, employee, member, manager and in any other capacity with the Company and each of its parents, subsidiaries and other affiliates. Executive acknowledges and agrees that Executive has received all amounts owed for Executive's regular and usual salary (including, but not limited to, any severance (other than any benefits due pursuant to the Employment Agreement), overtime, bonus, accrued vacation, commissions, or other wages), reimbursement of expenses, and usual benefits, and that all payments due to Executive from the Company have been received.

2. Release . Executive, for himself, and his heirs, personal representatives, executors, administrators, insurers, attorneys, successors and assigns, does hereby waive, release and forever discharge Company, all present and former subsidiaries, parents, affiliates, and related entities, their successors, assigns, present and former agents, representatives, managers, employees, officers, shareholders, principals, partners, investors, insurers, attorneys, directors and trustees (hereinafter, the “ Released Parties ”) from any and all claims, demands, rights, damages, costs, losses, suits, actions, causes of action, judgments, attorney’s fees, and expenses of any nature whatsoever, in law or equity, known or unknown (“ Claims ”) arising at any time prior to and through the date of the execution of this Agreement that might have been asserted against them by Executive, or on his behalf, including, but not limited to, any Claims that may have been asserted

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by or on behalf of Executive relating to his employment by Company or his separation from employment, including without limitation lost wages, reinstatement, back or front pay, bonuses, profit sharing plans, retirement plans or any benefits plans of any type or nature, all Claims for discrimination, harassment, or retaliation of any type under any federal, state or local law, ordinance or regulation, all Claims under federal, state or local whistleblower or employment laws or occupational, safety and health laws, including, but not limited to claims under the Age Discrimination in Employment Act of 1967, the Americans with Disabilities Act or the Americans with Disabilities Act Amendments Act, the Federal Rehabilitation Act of 1973, the Equal Pay Act, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Genetic Information and Nondiscrimination Act, the Family and Medical Leave Act, the Occupational Safety and Health Act, as amended, and all whistleblower statutes administered by the U.S. Occupational Safety & Health Administration, including but not limited to the Consumer Product Safety Improvement Act and the Sarbanes Oxley Act, the False Claims Act, the Executive Retirement Income Security Act of 1974, to the extent that claims under that statute may be waived, the National Labor Relations Act, the Labor Management Relations Act, Sections 1981 through 1988 of Title 42 of the United States Code, the Immigration Reform Control Act, as amended, the Fair Labor Standards Act, as amended, to the extent that such claims may be waived, KRS Chapter 337, the Worker Adjustment and Retraining Notification Act of 1988, the Consolidated Omnibus Budget Reconciliation Act, as amended, the Uniformed Services Employment and Reemployment Rights Act, as amended, and the Kentucky Civil Rights Act, KRS Chapter 344, the Kentucky Equal Opportunity Act, KRS 207.130 to KRS 207.240, or any other state or local law, regulation, ordinance, or other enactment, as well as any Claims for intentional or negligent infliction of emotional distress, defamation, invasion of privacy, tortious interference with contractual relations, wrongful discharge, constructive discharge, outrage, loss of consortium, promissory estoppel, public policy, and any contract, tort or other common law Claims for damages or equitable Claims, except for any Claims arising under this Agreement.

Executive understands and agrees that certain facts in respect of which this Agreement is made may be hereafter known to be other than or different from the facts now known or believed to be true. Executive acknowledges that he has had the opportunity to discover and acquire any and all facts with respect to this Agreement, if any, and Executive expressly accepts and assumes the risk that the facts may be different than he understands or believes them to be, and he hereby agrees that all terms, without limitation or exception, of this Agreement shall in all respects be effective, binding, and not subject to termination or rescission because of any such difference in facts, without regard to the nature of such facts or the reason or reasons why such facts were not discovered until after the execution of this Agreement.

Executive retains the right to initiate or cooperate in any Equal Employment Opportunity Commission or other administrative charge or investigation which cannot be legally waived, but Executive gives up the right to recover any monetary damages from any Released Party as a result of such a charge. Company agrees that Executive is not releasing any claim that the law does not permit Executive to release.

3. Covenant Not to Sue. Executive agrees not to file a lawsuit asserting any claims that are released in this Agreement, and he waives the right to recover in any suit or other proceeding brought on his behalf. Should Executive breach this Agreement by filing a lawsuit against any of the Released Parties based on claims he has released, except for any challenge of

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Executive’s release of his claim under the Age Discrimination in Employment Act, Executive hereby agrees to pay for all costs incurred by the Released Parties in defending against such claim(s), including reasonable attorney’s fees.

4. ADEA Waiver. Executive expressly acknowledges and agrees that by entering into this Release Agreement, Executive is waiving any and all rights or Claims that he may have arising under the Age Discrimination in Employment Act of 1967, as amended (the “ ADEA ”), which have arisen on or before the date of execution of this Release Agreement. Executive further expressly acknowledges and agrees that:

[A] In return for this Release Agreement, Executive will receive consideration beyond that which Executive was already entitled to receive before entering into this Release Agreement;

[B] Executive is hereby advised in writing by this Release Agreement to consult with an attorney before signing this Release Agreement;

[C] Executive has voluntarily chosen to enter into this Release Agreement and has not been forced or pressured in any way to sign it;

[D] Executive was given a copy of this Release Agreement on _______, 20___ and informed that he had twenty one (21) days within which to consider this Release Agreement and that if he wished to execute this Release Agreement prior to expiration of such 21-day period, he should execute the Endorsement attached hereto;

[E] Executive was informed that he had seven (7) days following the date of execution of this Release Agreement in which to revoke this Release Agreement, and this Release Agreement will become null and void if Executive elects revocation during that time. Any revocation must be in writing and must be received by the Company during the seven-day revocation period. In the event that Executive exercises his right of revocation, neither the Company nor Executive will have any obligations under this Release Agreement;

[F] Nothing in this Release Agreement prevents or precludes Executive from challenging or seeking a determination in good faith of the validity of this waiver under the ADEA, nor does it impose any condition precedent, penalties or costs from doing so, unless specifically authorized by federal law.

5. No Transferred Claims. Executive warrants and represents that Executive has not heretofore assigned or transferred to any person not a party to this Release Agreement any

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released matter or any part or portion thereof and he shall defend, indemnify and hold the Company and each of its affiliates harmless from and against any claim (including the payment of attorneys' fees and costs actually incurred whether or not litigation is commenced) based on or in collection with or arising out of any such assignment or transfer made, purported or claimed.

6. Severability. It is the desire and intent of the parties hereto that the provisions of this Release Agreement be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any particular provision of this Release Agreement shall be adjudicated by a court of competent jurisdiction to be invalid, prohibited or unenforceable under any present or future law, and if the rights and obligations of any party under this Release Agreement will not be materially and adversely affected thereby, such provision, as to such jurisdiction, shall be ineffective, without invalidating the remaining provisions of this Release Agreement or affecting the validity or enforceability of such provision in any other jurisdiction, and to this end the provisions of this Release Agreement are declared to be severable; furthermore, in lieu of such invalid or unenforceable provision there will be added automatically as a part of this Release Agreement, a legal, valid and enforceable provision as similar in terms to such invalid or unenforceable provision as may be possible. Notwithstanding the foregoing, if such provision could be more narrowly drawn (as to geographic scope, period of duration or otherwise) so as not to be invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without invalidating the remaining provisions of this Release Agreement or affecting the validity or enforceability of such provision in any other jurisdiction.

7. Counterparts. This Release Agreement may be executed in any number of counterparts, each of which shall be deemed an original as against any party whose signature appears thereon, and all of which together shall constitute one and the same instrument. This Release Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories. Photographic copies of such signed counterparts may be used in lieu of the originals for any purpose.

8. Successors. This Release Agreement is personal to Executive and shall not, without the prior written consent of the Company, be assignable by Executive. This Release Agreement shall inure to the benefit of and be binding upon the Company and its respective successors and assigns and any such successor or assignee shall be deemed substituted for the Company under the terms of this Release Agreement for all purposes. As used herein, “successor” and “assignee” shall include any person, firm, corporation or other business entity which at any time, whether by purchase, merger, acquisition of assets, or otherwise, directly or indirectly acquires the ownership of the Company, acquires all or substantially all of the Company's assets, or to which the Company assigns this Release Agreement by operation of law or otherwise.

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COMMONWEALTH OF KENTUCKY ANY OTHER JURISDICTION) THAT WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN THE COMMONWEALTH OF KENTUCKY TO BE APPLIED. IN FURTHERANCE OF THE FOREGOING, THE INTERNAL LAW OF THE COMMONWEALTH OF KENTUCKY WILL CONTROL THE INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT, EVEN IF UNDER SUCH JURISDICTION'S CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS, THE SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY APPLY.

10. Modifications. This Release Agreement may not be amended, modified or changed (in whole or in part), except by a formal, definitive written agreement expressly referring to this Release Agreement, which agreement is executed by both of the parties hereto.

11. Waiver . Neither the failure nor any delay on the part of a party to exercise any right, remedy, power or privilege under this Release Agreement shall operate as a waiver thereof. nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver.

12. Section Headings . The section headings of, and titles of paragraphs and subparagraphs contained in, this Release Agreement are for the purpose of convenience only, and they neither form a part of this Release Agreement nor are they to be used in the construction or interpretation thereof.

13. Construction . Where specific language is used to clarify by example a general statement contained herein, such specific language shall not be deemed to modify, limit or restrict in any manner the construction of the general statement to which it relates. The language used in this Release Agreement shall be deemed to be the language chosen by the parties to express their mutual intent, and no rule of strict construction shall be applied against any party.

14. Waiver of Jury Trial . EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT.

15. Number and Gender; Examples. Where the context requires, the singular shall include the plural, the plural shall include the singular, and any gender shall include all other genders. Where specific language is used to clarify by example a general statement contained herein, such specific language shall not be deemed to modify, limit or restrict in any manner the construction of the general statement to which it relates.

16. No Wrongdoing . This Release Agreement does not constitute an adjudication or finding on the merits and it is not, and shall not be construed as, an admission

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or acknowledgement by any party of any violation of any policy, procedure, state or federal law or regulation, or any unlawful or improper act or conduct, all of which is expressly denied. Moreover, neither this Release Agreement nor anything in this Release Agreement shall be construed to be, or shall be, admissible in any proceeding as evidence of or an admission by any party of any violation of any policy, procedure, state or federal law or regulation, or any unlawful or improper act or conduct. This Release Agreement may be introduced, however, in any proceeding to enforce this Release Agreement or the Employment Agreement.

17. Legal Counsel; Mutual Drafting. Each party recognizes that this is a legally binding contract and acknowledges and agrees that they have had the opportunity to consult with legal counsel of their choice. Each party has cooperated in the drafting, negotiation and preparation of this Release Agreement. Hence, in any construction to be made of this Release Agreement, the same shall not be construed against either party on the basis of that party being the drafter of such language. Executive agrees and acknowledges that he has read and understands this Release Agreement, is entering into it freely and voluntarily, and has been advised to seek counsel prior to entering into this Release Agreement and has had ample opportunity to do so.

[Remainder of page intentionally left blank]

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The undersigned have read and understand the consequences of this Release Agreement and voluntarily sign it. The undersigned declare under penalty of perjury under the laws of the State of [ ______________________] that the foregoing is true and correct.

EXECUTED this _____ day of ______________, 20___ at [_____________________].

“Executive”

________________________________________

Print Name:

CITIZENS FIRST CORPORATION,

a Kentucky corporation

By:______________________________________

Name:___________________________________

Title: ____________________________________

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ENDORSEMENT

I, __________________________, hereby acknowledge that I was given 21 days to consider the foregoing Release Agreement and voluntarily chose to sign the Release Agreement prior to the expiration of the 21-day period.

I declare under penalty of perjury under the laws of the United States and the Commonwealth of Kentucky that the foregoing is true and correct.

Executed this [_______] day of [_________________], 20_____ at [_______________________].

____________________________________

Print Name

61648200.4

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Exhibit 10.2

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT (“ Agreement ”) made and effective as of October 19, 2017, by and between CITIZENS FIRST CORPORATION, a Kentucky corporation (“ Employer ”), and JOHN STEVEN MARCUM, an individual (“ Marcum ”).

WHEREAS, the parties hereto entered into that certain Employment Agreement dated as of August 1, 2014 (the “ Prior Agreement ”), wherein Marcum was employed by Employer as the Executive Vice President and Chief Financial Officer of Employer and Citizens First Bank, Inc., Employer’s wholly-owned subsidiary (the “ Bank ”); and

WHEREAS, the parties desire to enter into this Agreement which shall supersede the Prior Agreement in its entirety.

1. Employment . Employer hereby employs Marcum, and Marcum hereby accepts employment with Employer, as the Executive Vice President and Chief Financial Officer of Employer and of the Bank. Such positions are hereinafter collectively referred to as the “ Position .”

2. Term of Employment . This Agreement shall commence on and be effective as of October 19, 2017 and continue through October 18, 2020, subject to renewal and to termination in accordance with the terms of this Agreement. This Agreement shall automatically renew at the end of the initial term and each subsequent term thereafter for a one year period, unless either Employer or Marcum shall elect to terminate this Agreement by written notice to the other party hereto at least sixty (60) days prior to the end of the respective term. However, if a Change in Control (as hereinafter defined) occurs during the term of this Agreement, including any renewal term, this Agreement’s then current term shall automatically extend for a period of one year. Marcum’s initial term of employment and any subsequent renewal thereof shall hereinafter be referred to as the “ Term ”. If this Agreement is not renewed as specified herein, all of Marcum’s rights to compensation and fringe benefits shall terminate at the end of the Term.

3. Responsibilities in Position . During his employment, except for illness and reasonable periods of paid time off as hereinafter provided and reasonable involvement in civic affairs and in organizations which benefit, promote or complement the interests of Employer and the Bank, and except as otherwise provided in this Agreement, or as approved by the Board of Directors of Employer, Marcum shall devote substantially all of his time, attention, skill and efforts to the faithful performance of his duties hereunder and in the Position, and shall use his best efforts, skill and experience to promote the business, interests and welfare of Employer and the Bank. Marcum shall not, without the consent of the Board of Directors of Employer, be engaged in any other business activity, whether or not such activity is pursued for gain, profit or pecuniary advantage.

4. Specific Description of Authority . Marcum shall have, exercise and carry out the authorities, powers, duties and responsibilities conferred upon persons occupying each of the capacities contained in the Position by the Bylaws of Employer, as such Bylaws are from time to time in effect, and shall observe such directions and restrictions as the Board of Directors of Employer may from time to time confer or impose upon him. In the absence of specific directions, Marcum shall discharge all of those duties and responsibilities customarily discharged by an Executive Vice President and Chief Financial Officer of a financial institution and shall have all of the powers and authorities customarily conferred upon an individual holding such offices.

5. Compensation . Marcum’s salary (“ Base Salary ”) shall be $212,226 annually and shall be paid in equal bi-weekly installments. The Compensation Committee of Employer’s Board of Directors and Marcum may mutually agree to further adjust the Base Salary of Marcum during the Term of this Agreement.

6. Reimbursement . Employer will reimburse Marcum for all reasonable and necessary expenses incurred by him in carrying out his duties under this Agreement; provided that such expenses shall be incurred by him only pursuant to the policies and procedures of Employer, from time to time in effect, and that all such expenses must be reasonable and necessary expenses incurred by him solely for the purpose of carrying out his duties under this Agreement. Marcum shall present to Employer an itemized account of such expenses in accordance with Employer’s expense reimbursement policies.

7. Paid Time Off. Marcum shall be entitled to paid time off (“ PTO ”) annually pursuant to the PTO policies of Employer from time to time in effect as specified in Employer’s employee handbook. Marcum shall be responsible for arranging to have other officers of Employer discharge his duties and responsibilities during any period of PTO. Unless Marcum is incapacitated by illness or injury from performing his duties, PTO shall be taken only at such times as to cause a minimum of disruption in the business of Employer. Unused PTO may be accrued and carried over from year to year as specified in Employer’s employee handbook.

8. Employee Benefits. Marcum shall be entitled to participate in all employee benefit programs as are conferred by Employer, from time to time, upon its other executive officers, including the following:

A. The right to participate in any health insurance program established by Employer;

B. The right to participate in any profit sharing plan, pension plan, or other incentive program, retirement benefit plan or similar program established by Employer; provided, that Marcum must be a “qualified participant,” as defined in the legal documentation establishing such plans;

C. The right to participate in any life insurance plan, short-term disability plan, or long-term disability plan established by Employer;

D. The right to participate in an annual incentive bonus program (“ Incentive Payment ”) based upon the achievement of certain objectives to be determined by the Compensation Committee from time to time; and

9. Annual Evaluation . At least annually, Employer shall devote a portion of one meeting of Employer’s Board of Directors or Compensation Committee to an evaluation of Marcum’s performance as measured against specific goals and objectives as established by Employer or such committee. If Marcum is a member of the Board of Directors or such committee, he shall not be permitted to attend that part of any meeting at which his evaluation is being considered without invitation by a majority of the other Board members.

10. Termination .

A. Termination by Marcum . Marcum may terminate his employment in the Position, and this Agreement, at any time during the Term, upon not less than sixty (60) days’ prior written notice to Employer; provided that Employer may, in its discretion, elect to accelerate the effective date of any resignation, and the effective date of the termination of this Agreement, upon receipt of any such notice of termination.

B. Termination by Employer . Employer may terminate Marcum’s employment (i) immediately upon notice to Marcum, with Cause (as hereinafter defined), or (ii) with no less than thirty (30) days’ prior written notice to Marcum, without Cause. For purposes of this Section 10, “Cause” means that Employer’s Board of Directors has determined in good faith that Marcum has engaged in the following conduct:

[1] Marcum has appropriated to his personal use funds, rights or property of Employer or of any of the customers of Employer;

[2] Marcum has misrepresented or engaged in any other act of substantial dishonesty in the performance of his duties or responsibilities;

[3] Marcum has, in any substantial respect, failed to discharge his duties and responsibilities in the Position, and fails or refuses to correct such failings within thirty (30) days of receipt of written notice to him from Employer of the failings, which such notice shall specifically describe Marcum’s failings and the steps required to remedy same;

[4] Marcum is engaging in competition with Employer in any manner or in activities harmful to the business of Employer;

[5] Marcum is using alcohol, drugs or similar substances in an illegal manner;

[6] Marcum has become “disabled” (as hereinafter defined);

[7] Marcum is convicted of a felony, or of a substantial misdemeanor involving moral turpitude;

[8] For any reason, Employer or the Bank is unable to procure upon Marcum a substantial fidelity bond, or a bonding company refuses to issue a bond to Employer or the Bank if Marcum is employed in the Position;

[9] Marcum is guilty of gross professional misconduct, or of a gross breach of this Agreement of such a serious nature as would reasonably render his service entirely unacceptable; or

[10] The issuance by any state or federal regulatory agency of a request or demand for removal of Marcum from employment with Employer or the Bank or from any office which Marcum then holds with Employer or the Bank.

C. Benefits Upon Termination . Except with respect to a termination by Employer or Marcum in connection with a Change in Control, which termination shall be governed by Section 10.D and Section 10.E of this Agreement, if Marcum’s employment by Employer is terminated during the Term for any reason by Employer or by Marcum (in any case, the date that Marcum’s employment by Employer terminates is referred to as the “ Severance Date ”), Employer shall have no further obligation to make or provide to Marcum, and Marcum shall have no further right to receive or obtain from Employer, any payments or benefits except as follows:

[1] Employer shall pay Marcum any Accrued Obligations (as hereinafter defined);

[2] If, during the Term, Marcum’s employment with Employer terminates as a result of termination by Employer without Cause, Employer shall (i) pay Marcum (in addition to the Accrued Obligations), subject to tax withholding and other authorized deductions, an amount equal to Marcum’s Base Salary at the annualized rate in effect on the Severance Date (the “ Severance Amount ”), and (ii) pay the premiums required to maintain coverage for Marcum and his eligible dependents under the health insurance plan of Employer or the Bank in which Marcum is a participant immediately prior to the Severance Date in accordance with COBRA until the earliest of (A) the first anniversary of the Severance Date or (B) the date on which Marcum is included in another employer’s benefit plans as a full-time employee. The Severance Amount and the payment of premiums payable under Section 10.C[2](i) and (ii) are referred to as the “ Severance Benefit ”.

[3] Subject to Section 12, Employer shall pay the Severance Amount to Marcum, at Marcum’s election, (i) in a lump-sum payment on or before thirty (30) days of the Severance Date, or (ii) in equal installments in accordance with Employer’s standard payroll practices over a period of six (6) consecutive months, with the first installment payable in the month following the month in which Marcum’s Separation from Service (as defined in Section 10.G) occurs.

[4] For any avoidance of doubt and for purposes of clarity, except as set forth in Sections 10.D and E, the termination of Marcum’s employment for any reason other than

by Employer without Cause shall only entitle Marcum to the payment of the Accrued Obligations and shall not give rise to the payment of any Severance Benefits pursuant to Section 10.C[2].

[5] Notwithstanding the foregoing provisions of this Section 10.C, if Marcum materially breaches his obligations under Section 23 or Section 24 of this Agreement at any time, from and after the date of such breach and not in any way in limitation of any right or remedy otherwise available to Employer, Marcum will no longer be entitled to, and Employer will no longer be obligated to pay, any remaining unpaid portion of the Severance Benefit. In such event, the first installment of the Severance Benefit contemplated by Section 10.C[2] shall, in and of itself, constitute good and sufficient consideration for Marcum’s release contemplated by Section 10.F.

[6] The foregoing provisions of this Section 10.C shall not affect: (i) Marcum’s receipt of benefits otherwise due terminated employees under group insurance coverage consistent with the terms of the applicable Employer welfare benefit plan; (ii) Marcum’s rights under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“ COBRA ”); or (iii) Marcum’s receipt of benefits otherwise due in accordance with the terms of Employer’s 401(k) plan (if any).

D. Termination by Employer in Connection with a Change of Control . Notwithstanding Section 10.C of this Agreement, in the event that the employment of Marcum is terminated by Employer, or its successors or assigns, during the Term, for any reason other than Cause, within six (6) months prior to a Change of Control, or on or within one year after a Change of Control, then the following shall occur:

[1] Employer shall pay to Marcum or to his beneficiaries, dependents or estate, within thirty (30) days of the Severance Date, an amount equal to the product of (i) two (2) and (ii) the sum of (x) the amount of Marcum’s Base Salary as most recently set prior to the occurrence of the Change of Control and (y) the amount equal to the “target” annual incentive under any outstanding award agreement between the Employer and Marcum under the Employer’s 2014 Management Incentive Plan for the year in which the Severance Date occurs;

[2] One hundred percent (100%) of Marcum’s then unvested outstanding stock options, stock appreciation rights, performance shares, performance share units, restricted stock units and other Employer equity compensation awards (the “ Equity Compensation Awards ”) that vest based on time shall immediately vest. With respect to Equity Compensation Awards that vest wholly or in part based on factors other than time, such as performance (whether individual or based on external measures such as Employer performance, stock price, etc.), (i) any portion for which the measurement or performance period or performance measures have been completed and the resulting quantities have been determined or calculated, shall immediately vest (and any rights of repurchase by the Employer or restriction on sale shall lapse) and (ii) the remaining portions shall immediately vest (and any rights of repurchase by the Employer or restriction on sale shall lapse) in an amount equal to the number that would be calculated if the performance measures were achieved at the target level; provided however, that if there is no “target” number, then the number that vests shall be 100% of the amounts that could vest with respect to that measurement period; and

[3] Employer shall pay the premiums required to maintain coverage for Marcum and his eligible dependents under the health insurance plan of Employer or the Bank in which Marcum is a participant immediately prior to the Change of Control in accordance with COBRA until the earliest of (A) the first anniversary of the Severance Date or (B) the date on which Marcum is included in another employer’s benefit plans as a full-time employee.

Marcum shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise, nor shall any amounts received from other employment or otherwise by Marcum offset in any manner the obligations of Employer hereunder, except as specifically stated in Section 10.D[3].

E. Termination by Marcum in Connection with a Change of Control . Notwithstanding any other provision of this Agreement, Marcum may voluntarily terminate his employment pursuant to this Agreement on or within one year after a Change of Control and shall be entitled to compensation as set forth in Section 10.D of this Agreement in the event that:

[1] the present capacity or circumstances in which Marcum is employed immediately prior to the completion of the Change of Control are changed, in the reasonable opinion of Marcum (including, without limitation, a reduction in responsibilities or authority or a reduction in salary);

[2] Marcum is required to move his personal residence, or perform his principal executive functions, more than thirty-five (35) miles from his primary office as of the date of the commencement of the Term of this Agreement; or

[3] Employer otherwise breaches this Agreement in any material respect.

F. Release; Exclusive Remedy .

[1] This Section 10.F shall apply notwithstanding anything else contained in this Agreement or any stock option or other equity-based award agreement to the contrary. As a condition precedent to any Employer obligation to Marcum pursuant to this Section 10, Marcum shall, upon or promptly following (and in all events, within twenty-one (21) days of, unless a longer period of time is required by applicable law) his last day of employment with Employer, provide Employer with a valid, executed general release agreement in the form attached hereto as Exhibit A , and such release agreement shall have not been revoked by Marcum pursuant to any revocation rights afforded by applicable law. Marcum agrees to resign, on the Severance Date, as an officer and director of Employer and any Affiliate of Employer, as applicable, and as a fiduciary of any benefit plan of Employer or any Affiliate of Employer, as applicable, and to promptly execute and provide to Employer any further documentation, as requested by Employer, to confirm such resignation.

[2] Marcum agrees that the payments and benefits contemplated by this Section 10 shall constitute the exclusive and sole remedy for any termination of his employment and Marcum covenants not to assert or pursue any other remedies, at law or in equity, with respect to any termination of employment.

[3] Marcum agrees that during and after his employment with or engagement by Employer or any of its Affiliates, Marcum shall not make any false, defamatory or disparaging statements about Employer or its Affiliates or the officers or directors of Employer or its Affiliates. During and after Marcum's employment with or engagement by Employer or any of its Affiliates, Employer agrees on behalf of itself and its Affiliates to use its commercially reasonable efforts so that neither the officers nor the directors of Employer or its Affiliates shall make any false, defamatory or disparaging statements about Marcum.

G. Certain Defined Terms.

[1] As used herein, “ Accrued Obligations ” means:

[A] any Base Salary that had accrued but had not been paid (including accrued and unpaid vacation time) on or before the Severance Date;

[B] any annual Incentive Payment earned by Marcum for a prior completed fiscal year to the extent not theretofore paid, with such Incentive Payment to be paid no later than the date on which Employer otherwise makes cash incentive payments to other executive officers for such completed fiscal year; and

[C] any reimbursement due to Marcum pursuant to Section 6 for expenses incurred by Marcum on or before the Severance Date.

[3] As used herein, a “ Separation from Service ” occurs when Marcum dies, retires, or otherwise has a termination of employment with Employer that constitutes a “separation from service” within the meaning of Treasury Regulation Section 1.409A-1(h)(1), without regard to the optional alternative definitions available thereunder.

[4] As used herein, a “ Change of Control ” shall mean any one of the following events:

director as of the Effective Date shall be deemed to be an Incumbent Director if that director were elected to such board of directors by, or on the recommendation of or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors; and provided further that no director whose initial assumption of office is in connection with an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Securities Exchange Act of 1934) relating to the election of directors shall be deemed to be an Incumbent Director;

[D] the sale, transfer or assignment of all or substantially all of the assets of the Employer and its subsidiaries to any third party.

H. Notice of Termination. Any termination of Marcum's employment under this Agreement shall be communicated by written notice of termination from the terminating party to the other party. This notice of termination must be delivered in accordance with Section 26 and must indicate the specific provision(s) of this Agreement relied upon in effecting the termination.

I. “Golden Parachute” Provision .

[1] Any payments made to Marcum pursuant to this Agreement or otherwise are subject to and conditioned upon their compliance with 12 U.S.C. §1828(k) and any regulations promulgated thereunder.

[2] It is the intention of the parties that none of the payments to which Marcum is entitled under this Agreement will constitute a “golden parachute payment” within the meaning of 12 USC Section 1828(k)(3) or implementing regulations of the FDIC or the Board of Governors of the Federal Reserve System, the payment of which is prohibited. Any payments made by Employer or the Bank to or for the benefit of Marcum pursuant to this Agreement, or otherwise, are subject to and conditioned upon their compliance with 12 USC Section 1828(k) and any regulations promulgated thereunder including the receipt of all required approvals thereof by the FDIC. In addition, Employer and its successors retain the legal right to demand the return of any payment made hereunder which constitutes a “golden parachute payment” within the meaning of 12 USC Section 1828(k)(3) or implementing regulations of the FDIC should Employer or the Bank later obtain information indicating that Marcum committed, is substantially responsible for, or has violated, the respective acts or omissions, conditions, or offenses outlined under 12 C.F.R. 359.4(a)(4).

11. Section 280G Matters. Notwithstanding that the payments or benefits provided or to be provided by Employer to Marcum or for his benefit pursuant to the terms of this Agreement or otherwise constitute parachute payments within the meaning of Section 280G of the

Internal Revenue Code of 1986, as amended (the " Code ") and will be subject to the excise tax imposed under Section 4999 of the Code (or any successor provision thereto) and interest or penalties with respect to such excise tax (collectively, the " Excise Tax "), Employer shall not pay to Marcum any additional amounts to compensate Marcum for such Excise Tax, or any other federal, state, local or foreign income, employment and excise taxes, payable by Marcum.

12. Section 409A Matters. It is intended that (i) each payment provided under this Agreement is a separate “payment” for purposes of Code Section 409A and (ii) that the payments satisfy, to the greatest extent possible, the exemptions from the application of Code Section 409A, including those provided under Treasury Regulations 1.409A-1(b)(4) (regarding short-term deferrals), 1.409A-1(b)(9)(iii) (regarding the two-times, two year exception), and 1.409A-1(b)(9)(v) (regarding reimbursements and other separation pay). Notwithstanding anything to the contrary in this Agreement, if Employer determines (i) that on the date of Marcum’s Separation from Service or at such other time that Employer determines to be relevant, Marcum is a “specified employee” (as such term is defined under Treasury Regulation 1.409A-1(i)(1)) of Employer and (ii) that any payments to be provided to Marcum pursuant to this Agreement are or may become subject to the additional tax under Code Section 409A(a)(1)(B) or any other taxes or penalties imposed under Code Section 409A (“ Section 409A Taxes ”) if provided at the time otherwise required under this Agreement, then such payments shall be delayed until the date that is six (6) months after the date of Marcum’s Separation from Service with Employer, or such shorter period that, as determined by Employer, is sufficient to avoid the imposition of Section 409A Taxes. Any payments delayed pursuant to this Section 12 shall be made in a lump sum on the first day of the seventh month following Marcum’s Separation from Service, or such earlier date that, as determined by Employer, is sufficient to avoid the imposition of any Section 409A Taxes.

13. Disability. Marcum shall be deemed to be “disabled” or shall be deemed to be suffering from a “disability” under the provisions of this Agreement if a competent physician, acceptable to Marcum and Employer, states in writing that it is such physician’s opinion that Marcum will be permanently (or for a continuous period of four (4) calendar months) unable to perform a substantial number of the usual and customary duties of Marcum’s employment. In the event Marcum and Employer are unable to agree upon such a suitable physician for the purposes of making such a determination, then Marcum and Employer shall each select a physician, and such two physicians as selected by Employer and Marcum shall select a third physician who shall make the determination, and the determination made by such third physician shall be binding upon Marcum and Employer. It is further agreed that if a guardian is appointed for Marcum’s person, or a conservator or curator is appointed for Marcum’s estate, or he is adjudicated “incompetent” or is suffering or operating under a mental “disability” by a court of appropriate jurisdiction, then Marcum shall be deemed to be “disabled” for all purposes under this Agreement. In the event Marcum becomes “disabled,” then his employment and all rights to compensation and fringe benefits, except for Accrued Obligations, shall terminate effective as of the date of such disability determination.

14. Death of Marcum . Marcum’s death shall terminate the Term and Marcum’s employment and shall terminate all of Marcum’s rights to all salary, compensation and fringe benefits, except for Accrued Obligations, effective as of the date of such death.

15. Duties Upon Termination . Upon the termination of Marcum’s employment hereunder for any reason whatsoever (including but not limited to the failure of the parties to renew this Agreement pursuant to Section 2 hereof), Marcum shall promptly return to Employer any property of Employer or its subsidiaries then in Marcum’s possession or control, including without limitation, any technical data, performance information and reports, sales or marketing plans, documents or other records, computer programs, discs and any other physical representations of any other information relating to Employer or its subsidiaries. Marcum hereby acknowledges that any and all of such documents, items, and information are and shall remain at all times the exclusive property of Employer.

16. Faithfulness. Marcum shall diligently employ himself in the Position and in the business of Employer and shall be faithful to Employer in all transactions relating to it and its business and shall give, whenever required, a true account to Employer’s Board of Directors of all business transactions arising out of or connected with Employer and its business. Marcum shall keep Employer’s Board of Directors fully informed of all work for and transactions on behalf of Employer. He shall not, except in accordance with regular policies of the Board of Directors from time to time in effect, borrow money in the name of Employer, use collateral owned by Employer as security for loans or lease or dispose of or in any way deal with any of the property, assets or interests of Employer other than in connection with the proper conduct of the business of Employer.

17. Nonassignability. Neither this Agreement, nor any rights or interests hereunder, shall be assignable by Employer, or by Marcum, his beneficiaries or legal representatives, without the prior written consent of the other party. All services to be performed hereunder by Marcum must be personally performed by him.

19. Binding Effect. This Agreement shall be binding upon, and shall inure to the benefit of Employer and its successors and assigns, and Marcum and his heirs, executors, administrators and personal representatives.

20. Amendment of Agreement. This Agreement may not be amended or modified except by an instrument in writing signed by the parties hereto.

waiver shall operate only as to the specific term or condition waived, and shall not constitute a waiver of such term or condition in the future or as to any act other than that specifically waived.

23. Trade Secrets. Marcum shall not, at any time or in any manner, either directly or indirectly, divulge, disclose or communicate to any person, firm or corporation, in any manner whatsoever, any information concerning any matters affecting or relating to Employer or the Bank, including, without limiting the generality of the foregoing, any information concerning any of its customers, its manner of operation, its plans, process or other data, without regard to whether all or any part of the foregoing matters will be deemed confidential, material or important, as the parties hereto stipulate that as between them, the same are important, material and confidential and gravely affect the effective and successful conduct of the business and goodwill of Employer and the Bank, and that any breach of the terms of this Section shall be a substantial and material breach of this Agreement. All terms of this Section shall remain in full force and effect after the termination of Marcum’s employment and of this Agreement. Marcum acknowledges that it is necessary and proper that Employer preserve and protect its proprietary rights and unique, confidential and special information and goodwill, and the confidential nature of its business and of the affairs of its and the Bank’s customers, and that it is therefore appropriate that Employer prevent Marcum from engaging in any breach of the provisions of this Section. Marcum, therefore, agrees that a violation by Marcum of the terms of this Section would result in irreparable and continuing injury to Employer, for which there might well be no adequate remedy at law. Therefore, in the event Marcum shall fail to comply with the provisions of this Section, Employer shall be entitled to such injunctive and other relief as may be necessary or appropriate to cause Marcum to comply with the provisions of this Section, and to recover, in addition to such relief, its reasonable costs and attorney’s fees incurred in obtaining same. Such right to injunctive relief shall be in addition to, and not in lieu of, such rights to damages or other remedies as Employer shall be entitled to receive.

24. Covenant Not to Compete . Should this Agreement be terminated for any reason during the Term, Marcum covenants and agrees that he will not, for a period of twelve (12) months following the date of termination of the Agreement: (i) directly or indirectly engage or participate in the operation of a financial institution or enter the employ of, or render any personal services to, or receive remuneration in the form of salary, commissions or otherwise, from any depository or other financial institution, including without limitation a branch or loan production office, located within fifty (50) miles of any office of Employer or Bank; (ii) offer employment to, hire, solicit, divert or appropriate to himself or any other person, any business or services of any person who was an employee or an agent of Employer or the Bank at any time during the last twelve (12) months of Marcum’s employment hereunder; or (iii) contact or communicate by any means either or himself or on behalf of any other person, any existing or prospective customer of Employer or the Bank on the date of Marcum’s termination for the purpose of soliciting, offering or doing any

type of business or services similar in nature to the business of Employer or the Bank. Marcum acknowledges that his breach of any covenant contained in this Section 24 will result in irreparable injury to Employer and its Affiliates and that the remedy at law of such parties for such a breach will be inadequate. Accordingly, Marcum agrees and consents that Employer and its Affiliates shall be entitled to seek both preliminary and permanent injunctions to prevent and/or halt a breach or threatened breach by Marcum of any covenant contained in this Section 24. If any provision of this Section 24 is invalid in part or in whole, it shall be deemed to have been amended, whether as to time, area covered or otherwise, as and to the extent required for its validity under applicable law and, as so amended, shall be enforceable.

25. Withholding . Employer shall have the right to withhold from the compensation payable to Marcum hereunder any amounts required by law to be withheld.

if to Employer:

1065 Ashley Street, Suite 150

Bowling Green, Kentucky 42103

if to Marcum:

to the address most recently on file in the payroll records of Employer.

27. Entire Agreement. This Agreement contains the entire agreement between the parties with respect to Marcum’s employment by Employer and the Bank and supersedes the Prior Agreement in its entirety. Each of the parties acknowledges that the other party has made no agreements or representations with respect to the subject matter of this Agreement other than those hereinabove specifically set forth in this Agreement.

28. Governing Law. This Agreement is executed and delivered in, and shall be governed by, enforced and interpreted in accordance with the laws of, the Commonwealth of Kentucky.

IN WITNESS WHEREOF , the parties hereto have executed this Agreement as of the day and year first above written.

/s/ J. Steven Marcum

JOHN STEVEN MARCUM

CITIZENS FIRST CORPORATION

BY: /s/ Bob Hilliard

TITLE: Chairman, Compensation Committee

Exhibit A

FORM OF RELEASE AGREEMENT

WHEREAS, Executive has been employed by Employer or one of its affiliates; and

A-1

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4. ADEA Waiver . Executive expressly acknowledges and agrees that by entering into this Release Agreement, Executive is waiving any and all rights or Claims that he may have arising under the Age Discrimination in Employment Act of 1967, as amended (the “ ADEA ”), which have arisen on or before the date of execution of this Release Agreement. Executive further expressly acknowledges and agrees that:

[A] In return for this Release Agreement, Executive will receive consideration beyond that which Executive was already entitled to receive before entering into this Release Agreement;

[B] Executive is hereby advised in writing by this Release Agreement to consult with an attorney before signing this Release Agreement;

[C] Executive has voluntarily chosen to enter into this Release Agreement and has not been forced or pressured in any way to sign it;

5. No Transferred Claims. Executive warrants and represents that Executive has not heretofore assigned or transferred to any person not a party to this Release Agreement any released matter or any part or portion thereof and he shall defend, indemnify and hold the Company and each of its affiliates harmless from and against any claim (including the payment of attorneys' fees

A-3

and costs actually incurred whether or not litigation is commenced) based on or in collection with or arising out of any such assignment or transfer made, purported or claimed.

7. Counterparts . This Release Agreement may be executed in any number of counterparts, each of which shall be deemed an original as against any party whose signature appears thereon, and all of which together shall constitute one and the same instrument. This Release Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories. Photographic copies of such signed counterparts may be used in lieu of the originals for any purpose.

8. Successors . This Release Agreement is personal to Executive and shall not, without the prior written consent of the Company, be assignable by Executive. This Release Agreement shall inure to the benefit of and be binding upon the Company and its respective successors and assigns and any such successor or assignee shall be deemed substituted for the Company under the terms of this Release Agreement for all purposes. As used herein, “successor” and “assignee” shall include any person, firm, corporation or other business entity which at any time, whether by purchase, merger, acquisition of assets, or otherwise, directly or indirectly acquires the ownership of the Company, acquires all or substantially all of the Company's assets, or to which the Company assigns this Release Agreement by operation of law or otherwise.

9. Governing Law . THIS RELEASE AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF KENTUCKY, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICTING PROVISION OR RULE (WHETHER OF THE COMMONWEALTH OF KENTUCKY ANY OTHER JURISDICTION) THAT WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN THE COMMONWEALTH OF KENTUCKY TO BE APPLIED. IN FURTHERANCE OF THE FOREGOING, THE INTERNAL LAW OF THE COMMONWEALTH OF KENTUCKY WILL CONTROL THE INTERPRETATION AND

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CONSTRUCTION OF THIS AGREEMENT, EVEN IF UNDER SUCH JURISDICTION'S CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS, THE SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY APPLY.

14. Waiver of Jury Trial . EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT.

16. No Wrongdoing . This Release Agreement does not constitute an adjudication or finding on the merits and it is not, and shall not be construed as, an admission or acknowledgement by any party of any violation of any policy, procedure, state or federal law or regulation, or any unlawful or improper act or conduct, all of which is expressly denied. Moreover, neither this Release Agreement nor anything in this Release Agreement shall be construed to be, or shall be, admissible in any proceeding as evidence of or an admission by any party of any violation of any policy, procedure, state or federal law or regulation, or any unlawful or improper act or conduct.

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This Release Agreement may be introduced, however, in any proceeding to enforce this Release Agreement or the Employment Agreement.

[Remainder of page intentionally left blank]

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The undersigned have read and understand the consequences of this Release Agreement and voluntarily sign it. The undersigned declare under penalty of perjury under the laws of the State of [______________________] that the foregoing is true and correct.

EXECUTED this _____ day of ______________, 20___ at [_____________________].

“Executive”

________________________________________

Print Name:

CITIZENS FIRST CORPORATION,

a Kentucky corporation

By:______________________________________

Name:___________________________________

Title: ____________________________________

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ENDORSEMENT

I declare under penalty of perjury under the laws of the United States and the Commonwealth of Kentucky that the foregoing is true and correct.

Executed this [_______] day of [_________________], 20_____ at [_______________________].

____________________________________

Print Name

61653538.3

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Exhibit 10.3

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT (“ Agreement ”) made and effective as of October 19, 2017, by and between CITIZENS FIRST CORPORATION, a Kentucky corporation (“ Employer ”), and MARC LIVELY, an individual (“ Lively ”).

WHEREAS, the parties hereto entered into that certain Employment Agreement dated as of August 1, 2014 (the “ Prior Agreement ”), wherein Lively was employed by Employer as the Executive Vice President and Chief Credit Officer of Employer and Citizens First Bank, Inc., Employer’s wholly-owned subsidiary (the “ Bank ”); and

WHEREAS, the parties desire to enter into this Agreement which shall supersede the Prior Agreement in its entirety.

1. Employment . Employer hereby employs Lively, and Lively hereby accepts employment with Employer, as the Executive Vice President and Chief Credit Officer of Employer and of the Bank. Such positions are hereinafter collectively referred to as the “ Position .”

2. Term of Employment . This Agreement shall commence on and be effective as of October 19, 2017 and continue through October 18, 2020, subject to renewal and to termination in accordance with the terms of this Agreement. This Agreement shall automatically renew at the end of the initial term and each subsequent term thereafter for a one year period, unless either Employer or Lively shall elect to terminate this Agreement by written notice to the other party hereto at least sixty (60) days prior to the end of the respective term. However, if a Change in Control (as hereinafter defined) occurs during the term of this Agreement, including any renewal term, this Agreement’s then current term shall automatically extend for a period of one year. Lively’s initial term of employment and any subsequent renewal thereof shall hereinafter be referred to as the “ Term ”. If this Agreement is not renewed as specified herein, all of Lively’s rights to compensation and fringe benefits shall terminate at the end of the Term.

3. Responsibilities in Position . During his employment, except for illness and reasonable periods of paid time off as hereinafter provided and reasonable involvement in civic affairs and in organizations which benefit, promote or complement the interests of Employer and the Bank, and except as otherwise provided in this Agreement, or as approved by the Board of Directors of Employer, Lively shall devote substantially all of his time, attention, skill and efforts to the faithful performance of his duties hereunder and in the Position, and shall use his best efforts, skill and experience to promote the business, interests and welfare of Employer and the Bank. Lively shall not, without the consent of the Board of Directors of Employer, be engaged in any other business activity, whether or not such activity is pursued for gain, profit or pecuniary advantage.

4. Specific Description of Authority . Lively shall have, exercise and carry out the authorities, powers, duties and responsibilities conferred upon persons occupying each of the capacities contained in the Position by the Bylaws of Employer, as such Bylaws are from time to time in effect, and shall observe such directions and restrictions as the Board of Directors of Employer may from time to time confer or impose upon him. In the absence of specific directions, Lively shall discharge all of those duties and responsibilities customarily discharged by an Executive Vice President and Chief Credit Officer of a financial institution and shall have all of the powers and authorities customarily conferred upon an individual holding such offices.

5. Compensation . Lively’s salary (“ Base Salary ”) shall be $200,334 annually and shall be paid in equal bi-weekly installments. The Compensation Committee of Employer’s Board of Directors and Lively may mutually agree to further adjust the Base Salary of Lively during the Term of this Agreement.

6. Reimbursement . Employer will reimburse Lively for all reasonable and necessary expenses incurred by him in carrying out his duties under this Agreement; provided that such expenses shall be incurred by him only pursuant to the policies and procedures of Employer, from time to time in effect, and that all such expenses must be reasonable and necessary expenses incurred by him solely for the purpose of carrying out his duties under this Agreement. Lively shall present to Employer an itemized account of such expenses in accordance with Employer’s expense reimbursement policies.

7. Paid Time Off. Lively shall be entitled to paid time off (“ PTO ”) annually pursuant to the PTO policies of Employer from time to time in effect as specified in Employer’s employee handbook. Lively shall be responsible for arranging to have other officers of Employer discharge his duties and responsibilities during any period of PTO. Unless Lively is incapacitated by illness or injury from performing his duties, PTO shall be taken only at such times as to cause a minimum of disruption in the business of Employer. Unused PTO may be accrued and carried over from year to year as specified in Employer’s employee handbook.

8. Employee Benefits. Lively shall be entitled to participate in all employee benefit programs as are conferred by Employer, from time to time, upon its other executive officers, including the following:

A. The right to participate in any health insurance program established by Employer;

B. The right to participate in any profit sharing plan, pension plan, or other incentive program, retirement benefit plan or similar program established by Employer; provided, that Lively must be a “qualified participant,” as defined in the legal documentation establishing such plans;

C. The right to participate in any life insurance plan, short-term disability plan, or long-term disability plan established by Employer;

D. The right to participate in an annual incentive bonus program (“ Incentive Payment ”) based upon the achievement of certain objectives to be determined by the Compensation Committee from time to time; and

9. Annual Evaluation . At least annually, Employer shall devote a portion of one meeting of Employer’s Board of Directors or Compensation Committee to an evaluation of Lively’s performance as measured against specific goals and objectives as established by Employer or such committee. If Lively is a member of the Board of Directors or such committee, he shall not be permitted to attend that part of any meeting at which his evaluation is being considered without invitation by a majority of the other Board members.

10. Termination .

A. Termination by Lively . Lively may terminate his employment in the Position, and this Agreement, at any time during the Term, upon not less than sixty (60) days’ prior written notice to Employer; provided that Employer may, in its discretion, elect to accelerate the effective date of any resignation, and the effective date of the termination of this Agreement, upon receipt of any such notice of termination.

B. Termination by Employer . Employer may terminate Lively’s employment (i) immediately upon notice to Lively, with Cause (as hereinafter defined), or (ii) with no less than thirty (30) days’ prior written notice to Lively, without Cause. For purposes of this Section 10, “Cause” means that Employer’s Board of Directors has determined in good faith that Lively has engaged in the following conduct:

[1] Lively has appropriated to his personal use funds, rights or property of Employer or of any of the customers of Employer;

[2] Lively has misrepresented or engaged in any other act of substantial dishonesty in the performance of his duties or responsibilities;

[3] Lively has, in any substantial respect, failed to discharge his duties and responsibilities in the Position, and fails or refuses to correct such failings within thirty (30) days of receipt of written notice to him from Employer of the failings, which such notice shall specifically describe Lively’s failings and the steps required to remedy same;

[4] Lively is engaging in competition with Employer in any manner or in activities harmful to the business of Employer;

[5] Lively is using alcohol, drugs or similar substances in an illegal manner;

[6] Lively has become “disabled” (as hereinafter defined);

[7] Lively is convicted of a felony, or of a substantial misdemeanor involving moral turpitude;

[8] For any reason, Employer or the Bank is unable to procure upon Lively a substantial fidelity bond, or a bonding company refuses to issue a bond to Employer or the Bank if Lively is employed in the Position;

[9] Lively is guilty of gross professional misconduct, or of a gross breach of this Agreement of such a serious nature as would reasonably render his service entirely unacceptable; or

[10] The issuance by any state or federal regulatory agency of a request or demand for removal of Lively from employment with Employer or the Bank or from any office which Lively then holds with Employer or the Bank.

C. Benefits Upon Termination . Except with respect to a termination by Employer or Lively in connection with a Change in Control, which termination shall be governed by Section 10.D and Section 10.E of this Agreement, if Lively’s employment by Employer is terminated during the Term for any reason by Employer or by Lively (in any case, the date that Lively’s employment by Employer terminates is referred to as the “ Severance Date ”), Employer shall have no further obligation to make or provide to Lively, and Lively shall have no further right to receive or obtain from Employer, any payments or benefits except as follows:

[1] Employer shall pay Lively any Accrued Obligations (as hereinafter defined);

[2] If, during the Term, Lively’s employment with Employer terminates as a result of termination by Employer without Cause, Employer shall (i) pay Lively (in addition to the Accrued Obligations), subject to tax withholding and other authorized deductions, an amount equal to Lively’s Base Salary at the annualized rate in effect on the Severance Date (the “ Severance Amount ”), and (ii) pay the premiums required to maintain coverage for Lively and his eligible dependents under the health insurance plan of Employer or the Bank in which Lively is a participant immediately prior to the Severance Date in accordance with COBRA until the earliest of (A) the first anniversary of the Severance Date or (B) the date on which Lively is included in another employer’s benefit plans as a full-time employee. The Severance Amount and the payment of premiums payable under Section 10.C[2](i) and (ii) are referred to as the “ Severance Benefit ”.

[3] Subject to Section 12, Employer shall pay the Severance Amount to Lively, at Lively’s election, (i) in a lump-sum payment on or before thirty (30) days of the Severance Date, or (ii) in equal installments in accordance with Employer’s standard payroll practices over a period of six (6) consecutive months, with the first installment payable in the month following the month in which Lively’s Separation from Service (as defined in Section 10.G) occurs.

[4] For any avoidance of doubt and for purposes of clarity, except as set forth in Sections 10.D and E, the termination of Lively’s employment for any reason other than by Employer without Cause shall only entitle Lively to the payment of the Accrued Obligations and shall not give rise to the payment of any Severance Benefits pursuant to Section 10.C[2].

[5] Notwithstanding the foregoing provisions of this Section 10.C, if Lively materially breaches his obligations under Section 23 or Section 24 of this Agreement at any time, from and after the date of such breach and not in any way in limitation of any right or remedy otherwise available to Employer, Lively will no longer be entitled to, and Employer will no longer be obligated to pay, any remaining unpaid portion of the Severance Benefit. In such event, the first installment of the Severance Benefit contemplated by Section 10.C[2] shall, in and of itself, constitute good and sufficient consideration for Lively’s release contemplated by Section 10.F.

[6] The foregoing provisions of this Section 10.C shall not affect: (i) Lively’s receipt of benefits otherwise due terminated employees under group insurance coverage consistent with the terms of the applicable Employer welfare benefit plan; (ii) Lively’s rights under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“ COBRA ”); or (iii) Lively’s receipt of benefits otherwise due in accordance with the terms of Employer’s 401(k) plan (if any).

D. Termination by Employer in Connection with a Change of Control . Notwithstanding Section 10.C of this Agreement, in the event that the employment of Lively is terminated by Employer, or its successors or assigns, during the Term, for any reason other than Cause, within six (6) months prior to a Change of Control, or on or within one year after a Change of Control, then the following shall occur:

[1] Employer shall pay to Lively or to his beneficiaries, dependents or estate, within thirty (30) days of the Severance Date, an amount equal to the product of (i) two (2) and (ii) the sum of (x) the amount of Lively’s Base Salary as most recently set prior to the occurrence of the Change of Control and (y) the amount equal to the “target” annual incentive under any outstanding award agreement between the Employer and Lively under the Employer’s 2014 Management Incentive Plan for the year in which the Severance Date occurs;

[2] One hundred percent (100%) of Lively’s then unvested outstanding stock options, stock appreciation rights, performance shares, performance share units, restricted stock units and other Employer equity compensation awards (the “ Equity Compensation Awards ”) that vest based on time shall immediately vest. With respect to Equity Compensation Awards that vest wholly or in part based on factors other than time, such as performance (whether individual or based on external measures such as Employer performance, stock price, etc.), (i) any portion for which the measurement or performance period or performance measures have been completed and the resulting quantities have been determined or calculated, shall immediately vest (and any rights of repurchase by the Employer or restriction on sale shall lapse) and (ii) the remaining portions shall immediately vest (and any rights of repurchase by the Employer or restriction on sale shall lapse) in an amount equal to the number that would be calculated if the performance measures were achieved at the target level; provided however, that if there is no “target” number, then the number that vests shall be 100% of the amounts that could vest with respect to that measurement period; and

[3] Employer shall pay the premiums required to maintain coverage for Lively and his eligible dependents under the health insurance plan of Employer or the Bank in which Lively is a participant immediately prior to the Change of Control in accordance with

COBRA until the earliest of (A) the first anniversary of the Severance Date or (B) the date on which Lively is included in another employer’s benefit plans as a full-time employee.

Lively shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise, nor shall any amounts received from other employment or otherwise by Lively offset in any manner the obligations of Employer hereunder, except as specifically stated in Section 10.D[3].

E. Termination by Lively in Connection with a Change of Control . Notwithstanding any other provision of this Agreement, Lively may voluntarily terminate his employment pursuant to this Agreement on or within one year after a Change of Control and shall be entitled to compensation as set forth in Section 10.D of this Agreement in the event that:

[1] the present capacity or circumstances in which Lively is employed immediately prior to the completion of the Change of Control are changed, in the reasonable opinion of Lively (including, without limitation, a reduction in responsibilities or authority or a reduction in salary);

[2] Lively is required to move his personal residence, or perform his principal executive functions, more than thirty-five (35) miles from his primary office as of the date of the commencement of the Term of this Agreement; or

[3] Employer otherwise breaches this Agreement in any material respect.

F. Release; Exclusive Remedy .

[1] This Section 10.F shall apply notwithstanding anything else contained in this Agreement or any stock option or other equity-based award agreement to the contrary. As a condition precedent to any Employer obligation to Lively pursuant to this Section 10, Lively shall, upon or promptly following (and in all events, within twenty-one (21) days of, unless a longer period of time is required by applicable law) his last day of employment with Employer, provide Employer with a valid, executed general release agreement in the form attached hereto as Exhibit A , and such release agreement shall have not been revoked by Lively pursuant to any revocation rights afforded by applicable law. Lively agrees to resign, on the Severance Date, as an officer and director of Employer and any Affiliate of Employer, as applicable, and as a fiduciary of any benefit plan of Employer or any Affiliate of Employer, as applicable, and to promptly execute and provide to Employer any further documentation, as requested by Employer, to confirm such resignation.

[2] Lively agrees that the payments and benefits contemplated by this Section 10 shall constitute the exclusive and sole remedy for any termination of his employment and Lively covenants not to assert or pursue any other remedies, at law or in equity, with respect to any termination of employment.

[3] Lively agrees that during and after his employment with or engagement by Employer or any of its Affiliates, Lively shall not make any false, defamatory or

disparaging statements about Employer or its Affiliates or the officers or directors of Employer or its Affiliates. During and after Lively's employment with or engagement by Employer or any of its Affiliates, Employer agrees on behalf of itself and its Affiliates to use its commercially reasonable efforts so that neither the officers nor the directors of Employer or its Affiliates shall make any false, defamatory or disparaging statements about Lively.

G. Certain Defined Terms.

[1] As used herein, “ Accrued Obligations ” means:

[A] any Base Salary that had accrued but had not been paid (including accrued and unpaid vacation time) on or before the Severance Date;

[B] any annual Incentive Payment earned by Lively for a prior completed fiscal year to the extent not theretofore paid, with such Incentive Payment to be paid no later than the date on which Employer otherwise makes cash incentive payments to other executive officers for such completed fiscal year; and

[C] any reimbursement due to Lively pursuant to Section 6 for expenses incurred by Lively on or before the Severance Date.

[3] As used herein, a “ Separation from Service ” occurs when Lively dies, retires, or otherwise has a termination of employment with Employer that constitutes a “separation from service” within the meaning of Treasury Regulation Section 1.409A-1(h)(1), without regard to the optional alternative definitions available thereunder.

[4] As used herein, a “ Change of Control ” shall mean any one of the following events:

two-thirds of the directors who then qualified as Incumbent Directors; and provided further that no director whose initial assumption of office is in connection with an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Securities Exchange Act of 1934) relating to the election of directors shall be deemed to be an Incumbent Director;

[D] the sale, transfer or assignment of all or substantially all of the assets of the Employer and its subsidiaries to any third party.

H. Notice of Termination. Any termination of Lively's employment under this Agreement shall be communicated by written notice of termination from the terminating party to the other party. This notice of termination must be delivered in accordance with Section 26 and must indicate the specific provision(s) of this Agreement relied upon in effecting the termination.

I. “Golden Parachute” Provision .

[1] Any payments made to Lively pursuant to this Agreement or otherwise are subject to and conditioned upon their compliance with 12 U.S.C. §1828(k) and any regulations promulgated thereunder.

[2] It is the intention of the parties that none of the payments to which Lively is entitled under this Agreement will constitute a “golden parachute payment” within the meaning of 12 USC Section 1828(k)(3) or implementing regulations of the FDIC or the Board of Governors of the Federal Reserve System, the payment of which is prohibited. Any payments made by Employer or the Bank to or for the benefit of Lively pursuant to this Agreement, or otherwise, are subject to and conditioned upon their compliance with 12 USC Section 1828(k) and any regulations promulgated thereunder including the receipt of all required approvals thereof by the FDIC. In addition, Employer and its successors retain the legal right to demand the return of any payment made hereunder which constitutes a “golden parachute payment” within the meaning of 12 USC Section 1828(k)(3) or implementing regulations of the FDIC should Employer or the Bank later obtain information indicating that Lively committed, is substantially responsible for, or has violated, the respective acts or omissions, conditions, or offenses outlined under 12 C.F.R. 359.4(a)(4).

11. Section 280G Matters. Notwithstanding that the payments or benefits provided or to be provided by Employer to Lively or for his benefit pursuant to the terms of this Agreement or otherwise constitute parachute payments within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the " Code ") and will be subject to the excise tax imposed under Section 4999 of the Code (or any successor provision thereto) and interest or

penalties with respect to such excise tax (collectively, the " Excise Tax "), Employer shall not pay to Lively any additional amounts to compensate Lively for such Excise Tax, or any other federal, state, local or foreign income, employment and excise taxes, payable by Lively.

12. Section 409A Matters. It is intended that (i) each payment provided under this Agreement is a separate “payment” for purposes of Code Section 409A and (ii) that the payments satisfy, to the greatest extent possible, the exemptions from the application of Code Section 409A, including those provided under Treasury Regulations 1.409A-1(b)(4) (regarding short-term deferrals), 1.409A-1(b)(9)(iii) (regarding the two-times, two year exception), and 1.409A-1(b)(9)(v) (regarding reimbursements and other separation pay). Notwithstanding anything to the contrary in this Agreement, if Employer determines (i) that on the date of Lively’s Separation from Service or at such other time that Employer determines to be relevant, Lively is a “specified employee” (as such term is defined under Treasury Regulation 1.409A-1(i)(1)) of Employer and (ii) that any payments to be provided to Lively pursuant to this Agreement are or may become subject to the additional tax under Code Section 409A(a)(1)(B) or any other taxes or penalties imposed under Code Section 409A (“ Section 409A Taxes ”) if provided at the time otherwise required under this Agreement, then such payments shall be delayed until the date that is six (6) months after the date of Lively’s Separation from Service with Employer, or such shorter period that, as determined by Employer, is sufficient to avoid the imposition of Section 409A Taxes. Any payments delayed pursuant to this Section 12 shall be made in a lump sum on the first day of the seventh month following Lively’s Separation from Service, or such earlier date that, as determined by Employer, is sufficient to avoid the imposition of any Section 409A Taxes.

13. Disability. Lively shall be deemed to be “disabled” or shall be deemed to be suffering from a “disability” under the provisions of this Agreement if a competent physician, acceptable to Lively and Employer, states in writing that it is such physician’s opinion that Lively will be permanently (or for a continuous period of four (4) calendar months) unable to perform a substantial number of the usual and customary duties of Lively’s employment. In the event Lively and Employer are unable to agree upon such a suitable physician for the purposes of making such a determination, then Lively and Employer shall each select a physician, and such two physicians as selected by Employer and Lively shall select a third physician who shall make the determination, and the determination made by such third physician shall be binding upon Lively and Employer. It is further agreed that if a guardian is appointed for Lively’s person, or a conservator or curator is appointed for Lively’s estate, or he is adjudicated “incompetent” or is suffering or operating under a mental “disability” by a court of appropriate jurisdiction, then Lively shall be deemed to be “disabled” for all purposes under this Agreement. In the event Lively becomes “disabled,” then his employment and all rights to compensation and fringe benefits, except for Accrued Obligations, shall terminate effective as of the date of such disability determination.

14. Death of Lively . Lively’s death shall terminate the Term and Lively’s employment and shall terminate all of Lively’s rights to all salary, compensation and fringe benefits, except for Accrued Obligations, effective as of the date of such death.

15. Duties Upon Termination . Upon the termination of Lively’s employment hereunder for any reason whatsoever (including but not limited to the failure of the parties to renew this Agreement pursuant to Section 2 hereof), Lively shall promptly return to Employer any property of Employer or its subsidiaries then in Lively’s possession or control, including without

limitation, any technical data, performance information and reports, sales or marketing plans, documents or other records, computer programs, discs and any other physical representations of any other information relating to Employer or its subsidiaries. Lively hereby acknowledges that any and all of such documents, items, and information are and shall remain at all times the exclusive property of Employer.

16. Faithfulness. Lively shall diligently employ himself in the Position and in the business of Employer and shall be faithful to Employer in all transactions relating to it and its business and shall give, whenever required, a true account to Employer’s Board of Directors of all business transactions arising out of or connected with Employer and its business. Lively shall keep Employer’s Board of Directors fully informed of all work for and transactions on behalf of Employer. He shall not, except in accordance with regular policies of the Board of Directors from time to time in effect, borrow money in the name of Employer, use collateral owned by Employer as security for loans or lease or dispose of or in any way deal with any of the property, assets or interests of Employer other than in connection with the proper conduct of the business of Employer.

17. Nonassignability. Neither this Agreement, nor any rights or interests hereunder, shall be assignable by Employer, or by Lively, his beneficiaries or legal representatives, without the prior written consent of the other party. All services to be performed hereunder by Lively must be personally performed by him.

19. Binding Effect. This Agreement shall be binding upon, and shall inure to the benefit of Employer and its successors and assigns, and Lively and his heirs, executors, administrators and personal representatives.

20. Amendment of Agreement. This Agreement may not be amended or modified except by an instrument in writing signed by the parties hereto.

If any provisions of this Agreement shall be invalid in part, such partial invalidity shall in no way affect the rest of such provision not held invalid, and the rest of such provision, together with all other provisions of this Agreement, shall, to the extent consistent with law, continue in full force and effect.

23. Trade Secrets. Lively shall not, at any time or in any manner, either directly or indirectly, divulge, disclose or communicate to any person, firm or corporation, in any manner whatsoever, any information concerning any matters affecting or relating to Employer or the Bank, including, without limiting the generality of the foregoing, any information concerning any of its customers, its manner of operation, its plans, process or other data, without regard to whether all or any part of the foregoing matters will be deemed confidential, material or important, as the parties hereto stipulate that as between them, the same are important, material and confidential and gravely affect the effective and successful conduct of the business and goodwill of Employer and the Bank, and that any breach of the terms of this Section shall be a substantial and material breach of this Agreement. All terms of this Section shall remain in full force and effect after the termination of Lively’s employment and of this Agreement. Lively acknowledges that it is necessary and proper that Employer preserve and protect its proprietary rights and unique, confidential and special information and goodwill, and the confidential nature of its business and of the affairs of its and the Bank’s customers, and that it is therefore appropriate that Employer prevent Lively from engaging in any breach of the provisions of this Section. Lively, therefore, agrees that a violation by Lively of the terms of this Section would result in irreparable and continuing injury to Employer, for which there might well be no adequate remedy at law. Therefore, in the event Lively shall fail to comply with the provisions of this Section, Employer shall be entitled to such injunctive and other relief as may be necessary or appropriate to cause Lively to comply with the provisions of this Section, and to recover, in addition to such relief, its reasonable costs and attorney’s fees incurred in obtaining same. Such right to injunctive relief shall be in addition to, and not in lieu of, such rights to damages or other remedies as Employer shall be entitled to receive.

24. Covenant Not to Compete . Should this Agreement be terminated for any reason during the Term, Lively covenants and agrees that he will not, for a period of twelve (12) months following the date of termination of the Agreement: (i) directly or indirectly engage or participate in the operation of a financial institution or enter the employ of, or render any personal services to, or receive remuneration in the form of salary, commissions or otherwise, from any depository or other financial institution, including without limitation a branch or loan production office, located within fifty (50) miles of any office of Employer or Bank; (ii) offer employment to, hire, solicit, divert or appropriate to himself or any other person, any business or services of any person who was an employee or an agent of Employer or the Bank at any time during the last twelve (12) months of Lively’s employment hereunder; or (iii) contact or communicate by any means either or himself or on behalf of any other person, any existing or prospective customer of Employer or the Bank on the date of Lively’s termination for the purpose of soliciting, offering or doing any type of business or services similar in nature to the business of Employer or the Bank. Lively acknowledges that his breach of any covenant contained in this Section 24 will result in irreparable injury to Employer and its Affiliates and that the remedy at law of such parties for such a breach will be inadequate. Accordingly, Lively agrees and consents that Employer and its Affiliates shall be entitled to seek both preliminary and permanent injunctions to prevent and/or halt a breach or threatened breach by Lively of any covenant contained in this Section 24. If any provision of this

Section 24 is invalid in part or in whole, it shall be deemed to have been amended, whether as to time, area covered or otherwise, as and to the extent required for its validity under applicable law and, as so amended, shall be enforceable.

25. Withholding . Employer shall have the right to withhold from the compensation payable to Lively hereunder any amounts required by law to be withheld.

if to Employer:

1065 Ashley Street, Suite 150

Bowling Green, Kentucky 42103

if to Lively:

to the address most recently on file in the payroll records of Employer.

27. Entire Agreement. This Agreement contains the entire agreement between the parties with respect to Lively’s employment by Employer and the Bank and supersedes the Prior Agreement in its entirety. Each of the parties acknowledges that the other party has made no agreements or representations with respect to the subject matter of this Agreement other than those hereinabove specifically set forth in this Agreement.

28. Governing Law. This Agreement is executed and delivered in, and shall be governed by, enforced and interpreted in accordance with the laws of, the Commonwealth of Kentucky.

IN WITNESS WHEREOF , the parties hereto have executed this Agreement as of the day and year first above written.

/s/ Marc Lively

MARC LIVELY

CITIZENS FIRST CORPORATION

BY: /s/ Bob Hilliard

TITLE: Chairman, Compensation Committee

Exhibit A

FORM OF RELEASE AGREEMENT

WHEREAS, Executive has been employed by Employer or one of its affiliates; and

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A-2

4. ADEA Waiver . Executive expressly acknowledges and agrees that by entering into this Release Agreement, Executive is waiving any and all rights or Claims that he may have arising under the Age Discrimination in Employment Act of 1967, as amended (the “ ADEA ”), which have arisen on or before the date of execution of this Release Agreement. Executive further expressly acknowledges and agrees that:

[A] In return for this Release Agreement, Executive will receive consideration beyond that which Executive was already entitled to receive before entering into this Release Agreement;

[B] Executive is hereby advised in writing by this Release Agreement to consult with an attorney before signing this Release Agreement;

[C] Executive has voluntarily chosen to enter into this Release Agreement and has not been forced or pressured in any way to sign it;

A-3

and costs actually incurred whether or not litigation is commenced) based on or in collection with or arising out of any such assignment or transfer made, purported or claimed.

7. Counterparts . This Release Agreement may be executed in any number of counterparts, each of which shall be deemed an original as against any party whose signature appears thereon, and all of which together shall constitute one and the same instrument. This Release Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories. Photographic copies of such signed counterparts may be used in lieu of the originals for any purpose.

8. Successors . This Release Agreement is personal to Executive and shall not, without the prior written consent of the Company, be assignable by Executive. This Release Agreement shall inure to the benefit of and be binding upon the Company and its respective successors and assigns and any such successor or assignee shall be deemed substituted for the Company under the terms of this Release Agreement for all purposes. As used herein, “successor” and “assignee” shall include any person, firm, corporation or other business entity which at any time, whether by purchase, merger, acquisition of assets, or otherwise, directly or indirectly acquires the ownership of the Company, acquires all or substantially all of the Company's assets, or to which the Company assigns this Release Agreement by operation of law or otherwise.

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CONSTRUCTION OF THIS AGREEMENT, EVEN IF UNDER SUCH JURISDICTION'S CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS, THE SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY APPLY.

14. Waiver of Jury Trial . EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT.

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This Release Agreement may be introduced, however, in any proceeding to enforce this Release Agreement or the Employment Agreement.

[Remainder of page intentionally left blank]

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The undersigned have read and understand the consequences of this Release Agreement and voluntarily sign it. The undersigned declare under penalty of perjury under the laws of the State of [______________________] that the foregoing is true and correct.

EXECUTED this _____ day of ______________, 20___ at [_____________________].

“Executive”

________________________________________

Print Name:

CITIZENS FIRST CORPORATION,

a Kentucky corporation

By:______________________________________

Name:___________________________________

Title: ____________________________________

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ENDORSEMENT

I declare under penalty of perjury under the laws of the United States and the Commonwealth of Kentucky that the foregoing is true and correct.

Executed this [_______] day of [_________________], 20_____ at [_______________________].

____________________________________

Print Name

61653635.3

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Exhibit 31.1

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act

I, M Todd Kanipe certify that:

1. I have reviewed this Form 10-Q of Citizens First Corporation;

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

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

4. The registrant's other certifying officer(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)) 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 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 small business issuer’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 small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer’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 .

/s/M. Todd Kanipe

M. Todd Kanipe

President and Chief Executive Officer

November 9, 2017

Exhibit 31.2

Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act

I, J. Steven Marcum certify that:

1. I have reviewed this Form 10-Q of Citizens First Corporation;

(b) Evaluated the effectiveness of the small business issuer’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

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

/s/J. Steven Marcum
J. Steven Marcum
Executive Vice President and Chief Financial Officer

November 9, 2017

Exhibit 32.1

Section 1350 Certification

In connection with the Quarterly Report of Citizens First Corporation (the "Company") on Form 10-Q for the period ended September 30, 2017, as filed with the Securities and Exchange Commission on the date hereof (the "Report") I, M. Todd Kanipe, President and Chief Executive Officer 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 the best of my knowledge:

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

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

By:	/s/M. Todd Kanipe
	M. Todd Kanipe
	President and Chief Executive Officer
	(Principal Executive Officer)

November 9, 2017

This certification is being furnished as required by Rule 13a-14(b) under the Securities Exchange Act of 1934 (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code, and shall not be deemed ‘filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section. This certification shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act or otherwise subject to the liability of that section.

Exhibit 32.2

Section 1350 Certification

In connection with the Quarterly Report of Citizens First Corporation (the "Company") on Form 10-Q for the period ended September 30, 2017, as filed with the Securities and Exchange Commission on the date hereof (the "Report") I, J. Steven Marcum, Executive Vice President, Finance and Chief Financial Officer, 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 the best of my knowledge:

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

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

By:	/s/ J. Steven Marcum
	J. Steven Marcum
	Executive Vice President and Chief Financial Officer
	(Principal Financial Officer)

November 9, 2017