CITIZENS FIRST CORP (Form: 10-Q, Received: 08/09/2018 15:29:09)

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 June 30, 2018


☐	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.

2,537,605 shares of Common Stock, no par value, were outstanding at August 9, 2018.

Table of Contents

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	25

ITEM 3	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	36

ITEM 4	CONTROLS AND PROCEDURES	37

PART II – OTHER INFORMATION

ITEM 6	EXHIBITS	38

SIGNATURES		39

Table of Contents

Part 1. Financial Information

Item 1. Financial Statements

Citizens First Corporation

Consolidated Balance Sheets


	(In Thousands, Except Share Data)
	June 30,		December 31,
	2018		2017
	Unaudited
Assets
Cash and due from financial institutions	$	6,546	$	6,444
Interest-bearing deposits in other financial institutions		30,166		13,532
Available-for-sale securities		46,432		48,616
Loans held for sale		147		427
Loans, net of allowance for loan losses of $4,750 and $4,724 at June 30, 2018 and December 31, 2017, respectively		378,539		369,515
Premises and equipment, net		8,988		9,140
Bank owned life insurance (BOLI)		8,615		8,528
Federal Home Loan Bank (FHLB) stock, at cost		2,065		2,053
Accrued interest receivable		1,549		1,681
Deferred income taxes		762		670
Goodwill and other intangible assets		4,185		4,221
Other assets		594		555
Total assets	$	488,588	$	465,382
Liabilities
Deposits
Noninterest bearing	$	53,119	$	53,259
Savings, NOW and money market		188,213		175,087
Time		147,286		143,968
Total deposits		388,618		372,314
FHLB advances and other borrowings		45,000		40,000
Subordinated debentures		5,000		5,000
Accrued interest payable		347		285
Other liabilities		1,946		1,949
Total liabilities		440,911		419,548
Stockholders’ equity
Common stock, no par value, authorized 5,000,000 shares; issued and outstanding 2,537,605 shares at June 30, 2018 and 2,526,377 shares at December 31, 2017, respectively		33,201		33,138
Retained earnings		15,359		13,142
Accumulated other comprehensive (loss)		(883)		(446)
Total stockholders’ equity		47,677		45,834
Total liabilities and stockholders’ equity	$	488,588	$	465,382

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)
	June 30, 2018		June 30, 2017
Interest and dividend income
Loans	$	4,796	$	4,257
Taxable securities		174		142
Non-taxable securities		97		127
Federal funds sold and other		95		67
Total interest and dividend income		5,162		4,593
Interest expense
Deposits		826		595
FHLB advances and other borrowings		188		96
Subordinated debentures		50		35
Total interest expense		1,064		726
Net interest income		4,098		3,867
Provision for loan losses		30		—
Net interest income after provision for loan losses		4,068		3,867
Non-interest income
Service charges on deposit accounts		309		327
Other service charges and fees		319		301
Gain on sale of mortgage loans		69		88
Non-deposit brokerage fees		101		91
Lease income		79		80
BOLI income		44		45
Total non-interest income		921		932
Non-interest expenses
Salaries and employee benefits		1,773		1,655
Net occupancy expense		432		446
Advertising and public relations		85		77
Professional fees		172		171
Data processing services		205		251
Franchise shares and deposit tax		120		132
FDIC insurance		43		49
Other		461		432
Total non-interest expenses		3,291		3,213
Income before income taxes		1,698		1,586
Income taxes		324		478
Net income		1,374		1,108
Dividends on preferred stock		—		119
Net income available for common stockholders	$	1,374	$	989
Basic earnings per common share	$	0.54	$	0.47
Diluted earnings per common share	$	0.54	$	0.43

See Notes to Unaudited Consolidated Financial Statements

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Citizens First Corporation

Unaudited Consolidated Statements of Income


	Six months ended
	(In Thousands, Except Per Share Data)
	June 30, 2018		June 30, 2017
Interest and dividend income
Loans	$	9,293	$	8,381
Taxable securities		342		291
Non-taxable securities		200		264
Federal funds sold and other		187		114
Total interest and dividend income		10,022		9,050
Interest expense
Deposits		1,555		1,142
FHLB advances and other borrowings		377		193
Subordinated debentures		92		68
Total interest expense		2,024		1,403
Net interest income		7,998		7,647
Provision for loan losses		60		30
Net interest income after provision for loan losses		7,938		7,617
Non-interest income
Service charges on deposit accounts		607		605
Other service charges and fees		600		565
Gain on sale of mortgage loans		119		156
Non-deposit brokerage fees		200		178
Lease income		131		132
BOLI income		87		88
Gain on sale of available-for-sale securities		—		23
Total non-interest income		1,744		1,747
Non-interest expenses
Salaries and employee benefits		3,619		3,389
Net occupancy expense		885		907
Advertising and public relations		166		148
Professional fees		336		301
Data processing services		399		504
Franchise shares and deposit tax		240		264
FDIC insurance		85		98
Other		920		893
Total non-interest expenses		6,650		6,504
Income before income taxes		3,032		2,860
Income taxes		574		845
Net income		2,458		2,015
Dividends on preferred stock		—		238
Net income available for common stockholders	$	2,458	$	1,777
Basic earnings per common share	$	0.97	$	0.86
Diluted earnings per common share	$	0.97	$	0.79

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)
	June 30, 2018		June 30, 2017
Comprehensive income, net of tax
Net income	$	1,374	$	1,108
Other comprehensive income (loss)
Reclassification adjustment for gains included in net income, net of taxes		—		—
Change in unrealized gain (loss) on available for sale securities, net of taxes		20		276
Total other comprehensive income (loss)		20		276
Comprehensive income	$	1,394	$	1,384


		Six months ended
	(In Thousands, Except Per Share Data)
	June 30, 2018		June 30, 2017
Comprehensive income, net of tax
Net income	$	2,458	$	2,015
Other comprehensive income
Reclassification adjustment for gains included in net income, net of taxes		—		(15)
Change in unrealized gain (loss) on available for sale securities, net of taxes		(349)		506
Total other comprehensive income (loss)		(349)		491
Comprehensive income	$	2,109	$	2,506

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		(Loss)		Total
Balance, January 1, 2018	$	—	$	33,138	$	13,142	$	(446)	$	45,834
Net income		—		—		2,458		—		2,458
Stock based compensation		—		63		—		—		63
Change in accumulated other comprehensive income		—		—		—		(349)		(349)
Dividend declared and paid on common stock ($.13 per share)		—		—		(329)		—		(329)
Reclassification of disproportionate tax effect		—		—		88		(88)		—
Balance, June 30, 2018	$	—	$	33,201	$	15,359	$	(883)	$	47,677


							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		—		—		2,015		—		2,015
Conversion of cumulative preferred		(7,077)		7,077		—		—		—
Redemption of cumulative preferred		(184)		(8)		—		—
Stock based compensation		—		61		—		—		61
Change in accumulated other comprehensive income		—		—		—		491		491
Dividend declared and paid on common stock ($.08 per share)		—		—		(162)		—		(162)
Dividend declared and paid on preferred stock		—		—		(238)		—		(238)
Balance, June 30, 2017	$	—	$	33,050	$	11,321	$	(32)	$	44,339

See Notes to Unaudited Consolidated Financial Statements

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Citizens First Corporation

Unaudited Consolidated Statements of Cash Flows


	(In Thousands)
	June 30, 2018		June 30, 2017
Operating Activities
Net income	$	2,458	$	2,015
Items not requiring (providing) cash:
Depreciation		197		234
Provision (credit) for loan losses		60		30
Amortization of premiums and discounts on securities		104		108
Amortization of core deposit intangible		35		35
Stock based compensation		63		61
BOLI Income		(87)		(88)
Proceeds from sale of mortgage loans held for sale		5,455		8,093
Origination of mortgage loans held for sale		(5,056)		(7,673)
Gains on sales of available-for-sale securities		—		(23)
Gains on sales of mortgage loans held for sale		(119)		(156)
Loss (gain) on sale of premises and equipment		(8)		(6)
Changes in:
Accrued interest receivable		132		187
Other assets		(37)		(128)
Accrued interest payable and other liabilities		59		(467)
Net cash provided by operating activities		3,256		2,222
Investing Activities
Loan originations and payments, net		(9,084)		(1,065)
Increase in interest-bearing deposits in other financial institutions		(16,634)		(13,333)
Purchase of premises and equipment		(45)		(57)
Proceeds from maturities of available-for-sale securities		4,778		3,836
Purchase of available-for-sale securities		(3,140)		(3,059)
Proceeds from sales of available-for-sale securities		—		4,870
Proceeds from sales of premises and equipment		8		7
Purchase of FHLB stock		(12)		(28)
Net cash used in investing activities		(24,129)		(8,829)
Financing Activities
Net change in demand deposits, money market, NOW and savings accounts		12,986		(138)
Net change in time deposits		3,318		564
Proceeds from FHLB advances		18,000		22,000
Repayment of FHLB advances		(13,000)		(17,000)
Redemption of preferred stock		—		(192)
Dividends paid on common stock		(329)		(162)
Dividends paid on preferred stock		—		(238)
Net cash provided by financing activities		20,975		4,834
Increase (Decrease) in Cash and Cash Equivalents		102		(1,773)
Cash and Cash Equivalents, Beginning of Year		6,444		8,542
Cash and Cash Equivalents, End of Year	$	6,546	$	6,769
Supplemental Cash Flows Information
Interest paid	$	1,962	$	1,394
Income taxes paid	$	465	$	815
Conversion of cumulative preferred stock	$	—	$	7,069

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 2017 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–

On January 1, 2018, the Company adopted ASU 2014-09 Revenue from Contracts with Customers and all subsequent amendments to the ASU (collectively, “ASC 606”), which (i) creates a single framework for recognizing revenue from contracts with customers that fall within its scope and (ii) revises when it is appropriate to recognize a gain (loss) from the transfer of nonfinancial assets, such as OREO. The majority of the Company’s revenues come from interest income related to loans, securities and other sources that are outside the scope of ASC 606. The Company’s services that fall within the scope of ASC 606 are presented within non-interest income and are recognized as revenue as the Company satisfies its obligation to the customer. Services within the scope of ASC 606 for the three months ended June 30, 2018 include service charges on deposit accounts of $309, debit card interchange income of $224, and non-deposit brokerage fees of $101. Services within the scope of ASC 606 for the six months ended June 30, 2018 include service charges on deposit accounts of $607, debit card interchange income of $421, and non-deposit brokerage fees of $200. We elected to implement using the modified retrospective application, with the cumulative effect recorded as an adjustment to opening retained earnings at January 1, 2018. Due to immateriality, we had no cumulative effect to record.

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. Adopting the provisions of ASU 2016-01 did not have a material impact on our consolidated financial statements. The Company currently does not have any equity investments.

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 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 June 30, 2018, we do not expect the new standard to have a material impact on our consolidated financial statements.

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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.

In February 2018, the FASB issued ASU No. 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The ASU permitted a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the newly enacted federal corporate income tax rate as a result of the Tax Cuts and Jobs Act. The amount of the reclassification is the difference between the historical corporate income tax rate and the newly enacted twenty-one percent corporate income tax rate. The Company adopted during the first quarter of 2018 and recorded an increase to retained earnings and an increase to accumulated other comprehensive loss of approximately $88,000.

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.

Note 3 - Available-For-Sale Securities

The following table summarizes the amortized cost and fair value of the available-for-sale securities portfolio at June 30, 2018 and December 31, 2017 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
June 30, 2018
U. S. government agencies and government sponsored entities	$	8,430	$	3	$	(193)	$	8,240
Agency mortgage-backed securities: residential		19,437		—		(508)		18,929
State and municipal		17,792		64		(253)		17,603
Trust preferred security		1,891		—		(231)		1,660
Total Available-for-Sale Securities	$	47,550	$	67	$	(1,185)	$	46,432

December 31, 2017
U. S. government agencies and government sponsored entities	$	1,998	$	—	$	(21)	$	1,977
Agency mortgage-backed securities: residential		26,024		14		(227)		25,811
State and municipal		19,381		143		(136)		19,388
Trust preferred security		1,889		—		(449)		1,440
Total Available-for-Sale Securities	$	49,292	$	157	$	(833)	$	48,616

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The amortized cost and fair value of investment securities at June 30, 2018 by contractual maturity were as follows. Securities not due at a single maturity date, primarily mortgage-backed securities, are shown separately.


	June 30, 2018
	(Dollars in Thousands)
	Available-For-Sale
	Amortized Cost		Fair Value
Due in one year or less	$	2,962	$	2,964
Due from one to five years		10,570		10,519
Due from five to ten years		10,644		10,393
Due after ten years		3,937		3,627
Agency mortgage-backed: residential		19,437		18,929
Total	$	47,550	$	46,432

The following table summarizes the investment securities with unrealized losses by portfolio segment at June 30, 2018 and December 31, 2017, 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
June 30, 2018:
U.S. government agencies and government sponsored entities	$	6,130	$	(128)	$	1,761	$	(65)	$	7,891	$	(193)
Agency mortgage-backed: residential		14,230		(350)		3,532		(158)		17,762		(508)
State and municipal		11,743		(221)		281		(32)		12,024		(253)
Trust preferred security		—		—		1,660		(231)		1,660		(231)
Total temporarily impaired	$	32,103	$	(699)	$	7,234	$	(486)	$	39,337	$	(1,185)


	(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, 2017:
U.S. government agencies and government sponsored entities	$	—	$	—	$	1,977	$	(21)	$	1,977	$	(21)
Agency mortgage-backed: residential		17,798		(113)		4,754		(114)		22,552		(227)
State and municipal		8,270		(116)		294		(20)		8,564		(136)
Trust preferred security		—		—		1,440		(449)		1,440		(449)
Total temporarily impaired	$	26,068	$	(229)	$	8,465	$	(604)	$	34,533	$	(833)

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.

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47.5% 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)
	June 30, 2018		December 31, 2017
Commercial	$	58,929	$	61,221
Commercial real estate:
Construction		48,797		44,391
Other		181,337		182,443
Residential real estate		90,120		82,230
Consumer:
Auto		1,034		1,184
Other		3,072		2,770
Total Loans		383,289		374,239
Less: Allowance for loan losses		(4,750)		(4,724)
Net loans	$	378,539	$	369,515

The following table sets forth an analysis of our allowance for loan losses for the three months ended June 30, 2018 and 2017.


	(Dollars in Thousands)
June 30, 2018	Commercial		Commercial Real Estate		Residential Real Estate		Consumer		Unallocated		Total

Allowance for loan losses:
Beginning balance	$	617	$	3,475	$	576	$	10	$	15	$	4,693
Provision (credit) for loan losses		6		24		(14)		7		7		30
Loans charged-off		—		—		—		(7)		—		(7)
Recoveries		3		—		31		—		—		34
Total ending allowance balance	$	626	$	3,499	$	593	$	10	$	22	$	4,750


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

Allowance for loan losses:
Beginning balance	$	665	$	3,640	$	537	$	13	$	51	$	4,906
Provision (credit) for loan losses		27		(18)		(23)		(2)		16		—
Loans charged-off		(17)		—		—		(1)		—		(18)
Recoveries		6		—		3		1		—		10
Total ending allowance balance	$	681	$	3,622	$	517	$	11	$	67	$	4,898

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The following table sets forth an analysis of our allowance for loan losses for the six months ended June 30, 2018 and 2017.


	(Dollars in Thousands)
June 30, 2018	Commercial		Commercial Real Estate		Residential Real Estate		Consumer		Unallocated		Total

Allowance for loan losses:
Beginning balance	$	633	$	3,515	$	554	$	10	$	12	$	4,724
Provision (credit) for loan losses		28		(16)		31		7		10		60
Loans charged-off		(38)		—		(27)		(8)		—		(73)
Recoveries		3		—		35		1		—		39
Total ending allowance balance	$	626	$	3,499	$	593	$	10	$	22	$	4,750


	(Dollars in Thousands)
June 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		57		(6)		(16)		(2)		(3)		30
Loans charged-off		(17)		—		—		(3)		—		(20)
Recoveries		25		—		6		2		—		33
Total ending allowance balance	$	681	$	3,622	$	517	$	11	$	67	$	4,898

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 June 30, 2018 and December 31, 2017, which includes net deferred loan fees. As of June 30, 2018 and December 31, 2017, accrued interest receivable of $1.3 million and $1.4 million, respectively, are not considered significant and therefore not included in the recorded investment in loans presented in the following tables.


	(Dollars in Thousands)
June 30, 2018	Commercial		Commercial Real Estate		Residential Real Estate		Consumer		Unallocated		Total

Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	—	$	397	$	9	$	—	$	—	$	406
Collectively evaluated		626		3,102		584		10		22		4,344
Total ending allowance balance	$	626	$	3,499	$	593	$	10	$	22	$	4,750

Loans:
Individually evaluated for impairment	$	—	$	2,039	$	172	$	4	$	—	$	2,215
Collectively evaluated		58,929		228,095		89,948		4,102		—		381,074
Total ending loans balance	$	58,929	$	230,134	$	90,120	$	4,106	$	—	$	383,289

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	(Dollars in Thousands)
December 31, 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	$	—	$	45	$	—	$	—	$	—	$	45
Collectively evaluated		633		3,470		554		10		12		4,679
Total ending allowance balance	$	633	$	3,515	$	554	$	10	$	12	$	4,724

Loans:
Individually evaluated for impairment	$	2	$	1,393	$	82	$	7	$	—	$	1,484
Collectively evaluated		61,219		225,441		82,148		3,947		—		372,755
Total ending loans balance	$	61,221	$	226,834	$	82,230	$	3,954	$	—	$	374,239

The following table presents information related to impaired loans by class of loans as of June 30, 2018 and December 31, 2017. 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)
	June 30, 2018						December 31, 2017
	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	$	—	$	—	$	—	$	2	$	2	$	—
Commercial real estate:
Other		1,269		1,269		—		1,317		1,317		—
Residential real estate		71		71		—		82		82		—
Consumer:
Other		4		4		—		7		7		—
Subtotal	$	1,344	$	1,344	$	—	$	1,408	$	1,408	$	—

With an allowance recorded:
Commercial	$	—	$	—	$	—	$	—	$	—	$	—
Commercial real estate:
Other		770		770		397		76		76		45
Residential real estate		101		101		9		—		—		—
Consumer:
Other		—		—		—		—		—		—
Subtotal	$	871	$	871	$	406	$	76	$	76	$	45
Total	$	2,215	$	2,215	$	406	$	1,484	$	1,484	$	45

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Information on impaired loans for the three months ended June 30, 2018 and 2017 is as follows:


	(Dollars in Thousands)						(Dollars in Thousands)
	June 30, 2018						June 30, 2017
	Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized		Average Recorded Investment		Interest Income Recognized		Cash B asis Interest Recognized
Commercial	$	—	$	—	$	—	$	105	$	—	$	—
Commercial real estate:
Construction		—		—		—		—		—		—
Other		2,050		26		1		3,324		42		12
Residential real estate		173		2		1		1,094		13		8
Consumer:
Auto		—		—		—		—		—		—
Other		4		—		—		21		—		—
Total	$	2,227	$	28	$	2	$	4,544	$	55	$	20

Information on impaired loans for the six months ended June 30, 2018 and 2017 is as follows:


	(Dollars in Thousands)						(Dollars in Thousands)
	June 30, 2018						June 30, 2017
	Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized
Commercial	$	—	$	—	$	—	$	106	$	2	$	2
Commercial real estate:
Construction		—		—		—		—		—		—
Other		2,067		52		2		3,328		56		24
Residential real estate		174		4		1		1,097		21		15
Consumer:
Auto		—		—		—		—		—		—
Other		5		—		—		21		1		1
Total	$	2,246	$	56	$	3	$	4,552	$	80	$	42

The recorded investment in nonaccrual and loans past due 90 days and over still on accrual by class of loans as of June 30, 2018 and December 31, 2017 are summarized below:


	(Dollars in Thousands)				(Dollars in Thousands)
	June 30, 2018				December 31, 2017
	Loans Past Due 90 Days and Over and Still Accruing		Nonaccrual		Loans Past Due 90 Days and Over and Still Accruing		Nonaccrual

Commercial real estate:
Other		—		1,967		—		1,317
Residential real estate		—		119		—		27
Total	$	—	$	2,086	$	—	$	1,344

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

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The following tables present the aging of the recorded investment in past due loans as of June 30, 2018 and December 31, 2017 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
June 30, 2018
Commercial	$	—	$	—	$	—	$	—	$	58,929	$	58,929
Commercial real estate:
Construction		129		—		—		129		48,668		48,797
Other		49		—		698		747		180,590		181,337
Residential real estate		110		—		119		229		89,891		90,120
Consumer:
Auto		—		—		—		—		1,034		1,034
Other		3		—		—		3		3,069		3,072
Subtotal	$	291	$	—	$	817	$	1,108	$	382,181	$	383,289


	(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, 2017
Commercial	$	9	$	—	$	—	$	9	$	61,212	$	61,221
Commercial real estate:
Construction		—		—		—		—		44,391		44,391
Other		—		—		—		—		182,443		182,443
Residential real estate		90		—		27		117		82,113		82,230
Consumer:
Auto		—		—		—		—		1,184		1,184
Other		3		—		—		3		2,767		2,770
Subtotal	$	102	$	—	$	27	$	129	$	374,110	$	374,239

Troubled Debt Restructurings:

The Company reported total troubled debt restructurings of $1.4 million and $1.5 million as of June 30, 2018 and December 31, 2017, 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 five troubled debt restructurings reported at quarter end, three loans totaling $130,000 were on accrual status and two loans totaling $1.3 million were on non-accrual status.

The following table presents loans by class modified as troubled debt restructurings that occurred during the three months ended June 30, 2018 and 2017.


		(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
	June 30, 2018					June 30, 2017
Troubled Debt Restructurings:
Commercial	—	$	—	$	—	1	$	5	$	5
Total	—	$	—	$	—	1	$	5	$	5

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The following table presents loans by class modified as troubled debt restructurings that occurred during the six months ended June 30, 2018 and 2017.


		(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
	June 30, 2018					June 30, 2017
Troubled Debt Restructurings:
Commercial	—	$	—	$	—	1	$	5	$	5
Total	—	$	—	$	—	1	$	5	$	5

Specific allocations of $47,000 and $191,000 were reported for troubled debt restructurings as of June 30, 2018 and June 30, 2017. For the three and six months ended June 30, 2018 no payment defaults or charge-offs were reported for troubled debt restructurings made during the prior 12 months, and for the three and six months ended June 30, 2017, 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 six months ended June 30, 2018 and 2017 that did not meet the definition of a troubled debt restructuring. These loans modified during the six months ended June 30, 2018 have a total recorded investment of $16.4 million as of June 30, 2018. The loans modified during the six months ended June 30, 2017 had a total recorded investment of $17.2 million as of June 30, 2017. 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.

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.

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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
June 30, 2018
Commercial	$	58,061	$	—	$	868	$	—	$	58,929
Commercial real estate:
Construction		48,797		—		—		—		48,797
Other		179,169		—		2,168		—		181,337
Residential real estate		90,018		—		102		—		90,120
Consumer:
Auto		1,034		—		—		—		1,034
Other		3,066		—		6		—		3,072
Total	$	380,145	$	—	$	3,144	$	—	$	383,289


	(Dollars in Thousands)
	Pass		Special Mention		Substandard		Doubtful		Total
December 31, 2017
Commercial	$	60,306	$	—	$	915	$	—	$	61,221
Commercial real estate:
Construction		44,391		—		—		—		44,391
Other		178,462		703		3,278		—		182,443
Residential real estate		82,148		55		27		—		82,230
Consumer:
Auto		1,184		—		—		—		1,184
Other		2,762		—		8		—		2,770
Total	$	369,253	$	758	$	4,228	$	—	$	374,239

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

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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.

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)
	June 30, 2018						December 31, 2017
	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		—	$	8,240		—		—	$	1,977		—
Agency mortgage-backed securities-residential		—		18,929		—		—		25,811		—
State and municipal		—		17,603		—		—		19,388		—
Trust preferred security		—		—		1,660		—		—		1,440
Corporate bonds		—		—		—		—		—		—
Total investment securities	$	—	$	44,772	$	1,660	$	—	$	47,176	$	1,440

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 six months ended June 30:


	Trust Preferred Security
	2018		2017

Balance of recurring Level 3 assets at January 1	$	1,440	$	1,240
Total gains or (losses) for the period included in other comprehensive income		220		140
Balance of recurring Level 3 assets at June 30	$	1,660	$	1,380

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As of June 30, 2018, there were impaired loans with a fair value totaling $440,000 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. There were no financial assets measured at fair value on a non-recurring basis as of December 31, 2017.

The following table presents quantitative and qualitative information about Level 3 fair value measurements for financial instruments measured on a non-recurring basis at June 30, 2018.

June 30, 2018

Valuation
Techniques

Unobservable Inputs (Dollars in thousands)

Range (Weighted Avg)

Impaired loans:

Commercial RE

348

Sales Comparison

Adjustments for limited use nature of certain properties, age of appraisal, location, and/or condition

(22.69)

Residential RE

Sales Comparison

Adjustments for limited use nature of certain properties, age of appraisal, location, and/or condition

15-20 (17.83)

Impaired loans, which are measured for impairment using the fair value of collateral for collateral dependent loans, had a principal balance of $799,000 at June 30, 2018 with a valuation allowance of $359,000, resulting in an additional provision for loan losses of $359,000 in the six months ending June 30, 2018. 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, 2017.

There was no other real estate owned to measure at fair value at June 30, 2018 or December 31, 2017. No writedowns of other real estate owned were taken in the six months ended June 30, 2018 or June 30, 2017.

The carrying amount and estimated fair values of financial instruments at June 30, 2018 and December 31, 2017 were as follows:


			Fair Value Measurements at
			June 30, 2018
	Carrying Amount		Level 1		Level 2		Level 3		Total
Financial Assets
Cash and cash equivalents	$	6,546	$	6,546	$	—	$	—	$	6,546
Interest-bearing deposits in other financial institutions		30,166		30,166		—		—		30,166
Available-for-sale-securities		46,044		—		44,772		1,660		46,432
Loans, net of allowance		378,539		—		—		370,721		370,721
Loans held for sale		147		—		150		—		150
Accrued interest receivable		1,549		16		230		1,303		1,549
Federal Home Loan Bank stock		2,065		—		—		—		N/A

Financial Liabilities
Demand and savings deposits	$	241,332	$	241,332	$	—	$	—	$	241,332
Time deposits		147,286		—		145,222		—		145,222
FHLB advances		45,000		—		44,665		—		44,665
Subordinated debentures		5,000		—		—		2,543		2,543
Accrued interest payable		347		13		282		52		347

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			Fair Value Measurements at
			December 31, 2017
	Carrying Amount		Level 1		Level 2		Level 3		Total
Financial Assets
Cash and cash equivalents	$	6,444	$	6,444	$	—	$	—	$	6,444
Interest-bearing deposits in other financial institutions		13,532		13,532		—		—		13,532
Available-for-sale-securities		48,616		—		47,176		1,440		48,616
Loans, net of allowance		369,515		—		—		367,159		367,159
Loans held for sale		427		—		435		—		435
Accrued interest receivable		1,681		18		234		1,429		1,681
Federal Home Loan Bank stock		2,053		—		—		—		N/A

Financial Liabilities
Demand and savings deposits	$	228,346	$	228,346	$	—	$	—	$	228,346
Time deposits		143,968		—		142,440		—		142,440
FHLB advances		40,000		—		39,776		—		39,776
Subordinated debentures		5,000		—		—		2,543		2,543
Accrued interest payable		285		14		232		39		285

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)

Loans, Net: At June 30, 2018, fair values of loans, excluding loans held for sale, are determined using an estimated exit price. Contractual cash flow estimates are projected using a loan's balance, interest rate, repricing characteristics, maturity and payment amounts. Loans are grouped into homogenous pools for valuation purposes based on type and credit risk metrics. Contractual cash flows are adjusted for potential prepayment estimates, as well as potential defaults over the expected life of each pool. A discount rate is determined based upon current financial conditions and the nature of the cash flow forecast. The resulting exit price for the portfolio is a Level 3 classification. Impaired loans are valued at the lower of cost or fair value as described previously.

At December 31, 2017, fair values of loans, excluding loans held for sale, was estimated as follows: For variable rate loans that reprice frequently and with no significant change in credit risk, fair values were based on carrying values resulting in a Level 3 classification. Fair values for other loans were estimated using discounted cash flow analyses, using interest rates 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 fair value as described previously. The methods utilized to estimate the fair value of loans did not necessarily represent an exit price.

(d)

Loans Held for Sale: The fair value of loans held for sale is estimated based upon binding contracts and quotes from third party investors resulting in a Level 2 classification.

(e)

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

(f)

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.

(g)

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

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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.

(h)

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 performance share units and convertible preferred stock, if dilutive. The following table reconciles the basic and diluted earnings per share computations for the three months and six months ended June 30, 2018 and 2017.


	2018					2017
	Quarter ended June 30, 2018					Quarter ended June 30, 2017
			Weighted	Per				Weighted	Per
			Average	Share				Average	Share
	Income		Shares	Amount		Income		Shares	Amount
Basic earnings per share:
Net income	$	1,374				$	1,108
Dividends on preferred stock during the year		—					(119)
Net income available to common shareholders	$	1,374	2,537,605	$	0.54	$	989	2,104,002	$	0.47

Effect of dilutive securities
Performance share units		—	8,254				—	10,246
Convertible preferred stock		—	—				119	435,875

Diluted earnings per share
Net income available to common stockholders and assumed conversions	$	1,374	2,545,859	$	0.54	$	1,108	2,550,123	$	0.43


		(Dollars in Thousands)
	Six months ended June 30, 2018					Six months ended June 30, 2017
			Weighted					Weighted
			Average	Per Share				Average	Per Share
	Income		Shares	Amount		Income		Shares	Amount
Basic earnings per share:
Net income	$	2,458				$	2,015
Dividends on preferred stock during the year		—					(238)
Net income available to common shareholders	$	2,458	2,533,077	$	0.97	$	1,777	2,058,318	$	0.86

Effect of dilutive securities:
Performance share units		—	8,152				—	10,021
Convertible preferred stock		—	—				238	481,634

Diluted earnings per share:
Net income available to common stockholders and assumed conversions	$	2,458	2,541,229	$	0.97	$	2,015	2,549,973	$	0.79

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

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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 June 30, 2018 and December 31, 2017, the Company and Citizens First 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.

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. 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 1.875% as of June 30, 2018. 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
June 30, 2018	Amount		Ratio		Amount		Ratio		Amount		Ratio
Total Capital (to Risk-Weighted Assets)
Consolidated	$	54,304	13.41	%	$	32,393	8.00	%		N/A	N/A
Citizens First Bank, Inc.		53,306	13.18	%		32,368	8.00	%	$	40,460	10.00	%

Tier I Capital (to Risk-Weighted Assets)
Consolidated		49,554	12.24	%		24,294	6.00	%		N/A	N/A
Citizens First Bank, Inc.		48,556	12.00	%		24,726	6.00	%		32,967	8.00	%

Common Equity Tier I Capital (to Risk-Weighted Assets)
Consolidated		49,554	11.00	%		18,221	4.50	%		N/A	N/A
Citizens First Bank, Inc.		48,556	12.00	%		18,207	4.50	%		26,299	6.50	%

Tier I Leverage Capital to average assets
Consolidated		49,554	10.50	%		18,882	4.00	%		N/A	N/A
Citizens First Bank, Inc.		48,556	10.23	%		18,985	4.00	%		23,732	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, 2017	Amount		Ratio		Amount		Ratio		Amount		Ratio
Total Capital (to Risk-Weighted Assets)
Consolidated	$	51,988	13.07	%	$	31,823	8.00	%		N/A	N/A
Citizens First Bank, Inc.		51,112	12.86	%		31,802	8.00	%	$	39,753	10.00	%

Tier I Capital (to Risk-Weighted Assets)
Consolidated		47,264	11.88	%		23,867	6.00	%		N/A	N/A
Citizens First Bank, Inc.		46,388	11.67	%		23,852	6.00	%		31,802	8.00	%

Common Equity Tier I Capital (to Risk-Weighted Assets)
Consolidated		42,502	10.68	%		17,900	4.50	%		N/A	N/A
Citizens First Bank, Inc.		46,388	11.67	%		17,889	4.50	%		25,839	6.50	%

Tier I Leverage Capital to average assets
Consolidated		47,264	10.31	%		18,343	4.00	%		N/A	N/A
Citizens First Bank, Inc.		46,388	10.14	%		18,301	4.00	%		22,876	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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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 2017 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 June 30, 2018, we reported net income of $1.37 million or $0.54 per diluted common share, compared to net income of $1.11 million, or $0.43 per diluted common share in the second quarter of 2017, an increase of $266,000. The increase in net income is attributable to an increase in net interest income of $231,000 and a decrease in income tax expense of $154,000.

For the six months ended June 30, 2018 we reported net income of $2.46 million or $0.97 per diluted common share, compared to net income of $2.02 million, or $0.79 per diluted common share in the previous year. This represents an increase of $443,000. The increase in net income is attributable to an increase in net interest income of $351,000 and a decrease in income tax expense of $271,000, partially offset by an increase in non-interest expense of $146,000 and an increase in provision expense of $30,000.

Our annualized return on average assets, defined as net income divided by average assets, was 1.15% for the quarter ended June 30, 2018, compared to 0.98% for the quarter ended June 30, 2017. The annualized return on average assets was 1.04% for the six months ended June 30, 2018, compared to 0.90% in June 30, 2017. Our annualized return on average equity, defined as net income divided by average equity, was 11.72% for the quarter ended June 30, 2018, compared to 10.09% for the quarter ended June 30, 2017. Our annualized return on average equity was 10.66% for the six months ended June 30, 2018, compared to 9.35% for the six months ended June 30, 2017.

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 June 30, 2018 increased $231,000, or 6.0%, compared to June 30, 2017. The increase in net interest income was a result of an increase in the yield on loans partially offset by an increase in the cost of funds. Additionally, during the second quarter of 2018, a loan of approximately $5.2 million was paid off prematurely which resulted in the collection of a prepayment penalty of approximately $105,000.

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Net interest income for the six months ended June 30, 2018 increased $351,000 or 4.6%, compared to June 30, 2017. The increase in net interest income was a result of an increase in the yield on loans partially offset by an increase in the cost of funds.

The Company’s net interest margin was 3.67% for the three months ended June 30, 2018, and 3.69% for the three months ended June 30, 2017, a decrease of 2 basis points. The Company’s net interest margin decreased primarily due to an increase in the cost of interest-bearing liabilities which exceeded the increase in the yield on earning assets. The net interest margin for the six months ended June 30, 2018 was 3.61%, compared to 3.68% in 2017. The decrease of 7 basis points is attributable to an increase in the cost of average interest-bearing liabilities.

The following tables set forth for the quarter and six months ended June 30, 2018 and 2017, 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)


	2018						2017
	Average		Income/		Average		Average		Income/		Average
Quarter ended June 30,	Balance		Expense		Rate		Balance		Expense		Rate
Earning assets:
Federal funds sold	$	—	$	—	—	%	$	—	$	—	—	%
Interest-bearing deposits in other financial institutions		13,879		66	1.91	%		15,260		44	1.16	%
Available-for-sale securities (1)
Taxable		29,372		175	2.39	%		27,644		142	2.06	%
Nontaxable		16,385		123	3.01	%		18,985		189	3.99	%
Federal Home Loan Bank stock		2,065		29	5.63	%		2,052		23	4.50	%
Loans receivable (2)		389,614		4,796	4.94	%		363,733		4,257	4.69	%
Total interest earning assets		451,315		5,189	4.61	%		427,674		4,655	4.37	%
Non-interest earning assets		27,521						26,850
Total Assets	$	478,836					$	454,524

Interest-bearing liabilities:
NOW Accounts	$	121,410	$	180	0.59	%	$	123,621	$	147	0.48	%
Money market Accounts		37,873		77	0.82	%		26,229		32	0.49	%
Savings accounts		21,771		9	0.17	%		21,974		10	0.18	%
Time deposits		147,877		561	1.52	%		148,059		406	1.10	%
Total interest-bearing deposits		328,931		827	1.01	%		319,883		595	0.75	%
Borrowings		41,758		188	1.81	%		34,769		96	1.11	%
Subordinated debentures		5,000		50	4.01	%		5,000		35	2.81	%
Total interest-bearing liabilities		375,689		1,065	1.14	%		359,652		726	0.81	%
Non-interest bearing deposits		54,212						48,861
Other liabilities		1,929						1,964
Total liabilities		431,830						410,477
Stockholders’ equity		47,006						44,047
Total Liabilities and Stockholders’ Equity	$	478,836					$	454,524
Net interest income			$	4,124					$	3,929

Net interest spread (1)					3.47	%					3.56	%
Net interest margin (1) (3)					3.67	%					3.69	%
Return on average assets ratio					1.15	%					0.98	%
Return on average equity ratio					11.72	%					10.09	%
Average equity to assets ratio					9.82	%					9.69	%

(1)

Income and yield stated at a tax equivalent basis for nontaxable securities using the marginal corporate Federal tax rate of 21.0% for 2018 and 34.0% for 2017.

(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)


	2018						2017
	Average		Income/		Average		Average		Income/		Average
Six months ended June 30,	Balance		Expense		Rate		Balance		Expense		Rate
Earning assets:
Federal funds sold	$	435	$	3	1.39	%	$	—	$	—	—	%
Interest-bearing deposits in other financial institutions		14,177		125	1.78	%		11,985		67	1.13	%
Available-for-sale securities (1)
Taxable		29,756		342	2.32	%		28,730		291	2.04	%
Nontaxable		16,748		254	3.06	%		19,489		392	4.06	%
Federal Home Loan Bank stock		2,060		59	5.78	%		2,039		47	4.65	%
Loans receivable (2)		386,913		9,293	4.84	%		363,778		8,381	4.65	%
Total interest earning assets		450,089		10,076	4.51	%		426,021		9,178	4.34	%
Non-interest earning assets		27,368						27,380
Total Assets	$	477,457					$	453,401

Interest-bearing liabilities:
NOW Accounts	$	121,011	$	351	0.58	%	$	123,068	$	280	0.46	%
Money market Accounts		36,393	$	140	0.78	%	$	26,345	$	63	0.48	%
Savings accounts		21,702		19	0.18	%		21,871		20	0.18	%
Time deposits		146,691		1,045	1.44	%		146,141		779	1.07	%
Total interest-bearing deposits		325,797		1,555	0.96	%		317,425		1,142	0.73	%
Borrowings		44,448		377	1.71	%		36,415		193	1.07	%
Subordinated debentures		5,000		92	3.71	%		5,000		68	2.74	%
Total interest-bearing liabilities		375,245		2,024	1.09	%		358,840		1,403	0.79	%
Non-interest bearing deposits		53,604						49,073
Other liabilities		2,091						2,047
Total liabilities		430,940						409,960
Stockholders’ equity		46,517						43,441
Total Liabilities and Stockholders’ Equity	$	477,457					$	453,401
Net interest income			$	8,052					$	7,775

Net interest spread (1)					3.43	%					3.56	%
Net interest margin (1) (3)					3.61	%					3.68	%
Return on average assets ratio					1.04	%					0.90	%
Return on average equity ratio					10.66	%					9.35	%
Average equity to assets ratio					9.74	%					9.58	%

(1)

Income and yield stated at a tax equivalent basis for nontaxable securities using the marginal corporate Federal tax rate of 21.0% for 2018 and 34.0% for 2017.

(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 six months ended June 30, 2018 and 2017. 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)
	Six Months Ended June 30, 2018
	Vs. 2017
	Increase (Decrease) Due to
	Rate	Volume	Net
Interest-earning assets:
Federal funds sold	3	—	3
Interest-bearing deposits in other financial institutions	46	12	58
Available-for-sale securities:
Taxable	41	10	51
Nontaxable (1)	(83)	(55)	(138)
Federal Home Loan Bank stock	12	—	12
Loans, net	379	533	912
Total Net Change in income on interest-earning assets	398	500	898

Interest-bearing liabilities:
NOW Accounts	76	(5)	71
Money market accounts	53	24	77
Savings accounts	(1)	(0)	(1)
Time deposits	263	3	266
FHLB and other borrowings	141	43	184
Subordinated debentures	24	—	24
Total Net Change in expense on interest-earning liabilities	556	65	621
Net change in net interest income	(158)	435	277
Percentage Change	-57.1%	157.1%	100.0%

(1)

Income stated at a fully tax equivalent basis using the marginal corporate Federal tax rate of 21% for 2018 and 34.0% for 2017.

Provision for Loan Losses

There was a provision for loan losses of $30,000 recorded for the second quarter of 2018, as compared to no provision expense for the second quarter of 2017. The allowance for loan losses to total loans was 1.24% of total loans at June 30, 2018 compared to 1.36% at June 30, 2017. Net charge-offs (recoveries) were ($27,000) for the second quarter of 2018 compared to $8,000 in the second quarter of 2017.

Provision expense for the six months ended June 30, 2018 increased $30,000, from $30,000 to $60,000. Net charge-offs (recoveries) were $34,000 for the six months ended June 30, 2018 compared to ($13,000) for the six months ended June 30, 2017.

Non-Interest Income

Non-interest income for the three months ended June 30, 2018 decreased $11,000, or 1.2%, compared to the three months ended June 30, 2017, primarily due to a decrease in service charges on deposit accounts of $18,000 and a decrease in gains on sale of mortgage loans of $19,000, offset by an increase in other service charges and fees of $18,000.

Non-interest income for the six months ended June 30, 2018 decreased $3,000, or 0.2%, compared to the six months ended June 30, 2017, primarily due to a reduction in gains on sale of mortgage loans of $37,000 and gains on the sale of securities of $23,000, offset by an increase in other service charges and fees of $35,000 and non-deposit brokerage fees of $22,000.

Non-Interest Expense

Non-interest expense for the three months ended June 30, 2018 increased $78,000, or 2.4%, compared to the three months ended June 30, 2017, primarily due to an increase in personnel expense of $118,000, offset by a decrease in data processing services of $46,000.

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Non-interest expense for the six months ended June 30, 2018 increased $146,000, or 2.2% compared to the six months ended June 30, 2017, primarily due to an increase of $230,000 in personnel expenses offset by a decrease of $105,000 in data processing services. Four full-time equivalent employees have been added in the retail branch network over the past year.

Income Taxes

Income tax expense was calculated using our expected effective rate for 2018 and 2017. 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 21.0% in 2018 and 34.0% in 2017. The effective tax rate for the second quarter of 2018 was 19.1% compared to a 30.2% effective tax rate for the second quarter of 2017. 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 June 30, 2018 were $488.6 million, a 5.0% increase from $465.4 million at December 31, 2017. Average assets during the second quarter were $478.8 million, an increase of 5.3%, or $24.3 million, from $454.5 million in the second quarter of 2017. Average interest earning assets increased 5.5%, or $23.6 million, from $427.7 million in the second quarter of 2017 to $451.3 million in the second quarter of 2018.

Loans

Loans increased $9.1 million, or 2.4%, from $374.2 million at December 31, 2017 to $ 383.3 million at June 30, 2018. Total loans averaged $389.6 million the second quarter of 2018, compared to $363.7 million the second quarter of 2017, an increase of $25.9 million, or 7.1%. We experienced increases in the commercial real estate and residential real estate portfolios during the first six months of the year compared to December 31, 2017. The following table presents a summary of the loan portfolio by category:


	(Dollars in Thousands)
	June 30, 2018				December 31, 2017
			% of Total				% of Total
			Loans				Loans
Commercial and agricultural	$	58,929	15.38	%	$	61,221	16.36	%
Commercial real estate		230,134	60.04	%		226,834	60.61	%
Residential real estate		90,120	23.51	%		82,230	21.97	%
Consumer		4,106	1.07	%		3,954	1.06	%
	$	383,289	100.00	%	$	374,239	100.00	%

The majority of our loans are to customers located in south central Kentucky and central Tennessee. As of June 30, 2018, our twenty largest credit relationships consisted of loans and loan commitments ranging from $4.5 million to $11.2 million. The aggregate amount of these credit relationships was $114.9 million, with total commitments of $127.0 million. As of December 31, 2017, our twenty largest credit relationships consisted of loans and loan commitments ranging from $4.3 million to $11.9 million. The aggregate amount of these credit relationships was $108.6 million, with total commitments of $124.7 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 June 30, 2018 and December 31, 2017.

As of June 30, 2018, we had $24.9 million of participations in loans purchased from, and $19.6 million of participations in loans sold to, other banks. As of December 31, 2017, we had $18.6 million of participations in loans purchased from, and $17.0 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 June 30, 2018. 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 June 30, 2018	Year		Years		Years		Total
Commercial and agricultural	$	19,443	$	31,004	$	8,482	$	58,929
Commercial real estate		56,154		116,706		57,274		230,134
Residential real estate		8,843		37,199		44,078		90,120
Consumer		912		3,160		34		4,106
Total	$	85,352	$	188,069	$	109,868	$	383,289

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)
	June 30, 2018				December 31, 2017
	Amount		% of Loans in Each Category to Total Loans		Amount		% of Loans in Each Category to Total Loans
Residential real estate loans	$	593	23.51	%	$	554	21.97	%
Consumer and other loans		10	1.07	%		10	1.06	%
Commercial and agricultural		626	15.38	%		633	16.36	%
Commercial real estate		3,499	60.04	%		3,515	60.61	%
Unallocated		22	0.00	%		12	—	%
Total allowance for loan losses	$	4,750	100.00	%	$	4,724	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 $22,000 at June 30, 2018 and $12,000 at December 31, 2017.

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


	(Dollars in Thousands)
	June 30, 2018			December 31, 2017
Non-accrual loans	$	817		$	27
Loans 90+ days past due/accruing		—			—
Restructured loans on non-accrual		1,269			1,317
Total non-performing loans		2,086			1,344
Other real estate owned		—			—
Total non-performing assets	$	2,086		$	1,344

Non-performing loans to total loans		0.54	%		0.36	%
Non-performing assets to total assets		0.43	%		0.29	%
Net charge-offs (recoveries) YTD	$	34		$	(20)
Net charge-offs (recoveries) YTD to average YTD total loans, annualized		0.02	%		(0.01)	%
Allowance for loan losses to non-performing loans		227.71	%		351.49	%
Allowance for loan losses to total loans		1.24	%		1.26	%

Non-performing assets totaled $2.1 million at June 30 2018, compared to $1.3 million at December 31, 2017, an increase of $742,000. Payoffs and paydowns of $75,000 in the six months ending June 30, 2018 included the charge off of a $27,000 residential real estate loan. Payoffs and paydowns of $23,000 in the six months ended June 30, 2017 were related to the payoff of two residential real estate loans; there were no charge offs related to non-preforming assets in the six months ending June 30, 2017. Increases in non-performing assets in the six months ended June 30, 2018 included the addition of $698,000 in commercial real estate loans, and three residential real estate loans totaling $119.000.

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

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collecting scheduled principal and interest payments when due. Loans for which the terms have been modified resulting in a concession, and for which the borrower is experiencing financial difficulties, are considered troubled debt restructurings and classified as impaired. 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

Our securities portfolio serves as a source of liquidity and earnings and contributes to the management of interest rate risk. Our portfolio also provides us with securities to pledge as required collateral for certain governmental deposits and

borrowed funds.

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 $46.5 million for the first six months of 2018, compared to $48.2 million for 2017.

The tables below present the maturities and yield characteristics of securities as of June 30, 2018 and December 31, 2017. 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
June 30, 2018	Less			Five Years			Ten Years			Years			Maturities			Fair Value
U.S. Government agencies	$	17		$	2,155		$	6,258		$	—		$	8,430		$	8,240
Agency mortgage-backed securities: (1)		—			19,437			—			—			19,437			18,929
Municipal securities		2,945			8,415			4,386			2,046			17,792			17,603
Trust preferred security		—			—			—			1,891			1,891			1,660
Total available-for-sale securities	$	2,962		$	30,007		$	10,644		$	3,937		$	47,550		$	46,432

Percent of total		6.23	%		63.11	%		22.38	%		8.28	%		100.00	%

Weighted average yield(2)		2.18	%		2.24	%		2.68	%		3.09	%		2.62	%

(1)

Agency mortgage‑backed securities (residential) are grouped into average lives based on June 2018 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, 2017	Less			Five Years			Ten Years			Years			Maturities			Fair Value
U.S. Government agencies	$	1,000		$	998		$	—		$	—		$	1,998		$	1,977
Agency mortgage-backed securities: (1)		12			18,981			7,031			—			26,024			25,811
Municipal securities		1,963			8,375			6,224			2,819			19,381			19,388
Trust preferred security		—			—			—			1,889			1,889			1,440
Total available-for-sale securities	$	2,975		$	28,354		$	13,255		$	4,708		$	49,292		$	48,616

Percent of total		6.04	%		57.52	%		26.89	%		9.55	%		100.00	%

Weighted average yield(2)		3.03	%		2.45	%		3.15	%		3.59	%		2.79	%

(1)

Agency mortgage‑backed securities (residential) are grouped into average lives based on December 2017 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. Deposits at June 30, 2018 were $388.6 million, an increase of $16.3 million, or 4.4%, compared to $372.3 million at December 31, 2017. Total deposits averaged $383.1 million the second quarter of 2018, an increase of $14.4 million, or 3.9%, compared to $368.7 million during the second quarter of 2017. Time deposits that meets or exceed the FDIC insurance limit of $250,000 were $11.0 million and $11.9 million at June 30, 2018 and December 31, 2017, respectively.

We utilize brokered certificates of deposit and will continue to utilize these sources for deposits when they can be cost-effective. There were $18.7 million in brokered deposits at June 30, 2018, compared to $18.1 million at December 31, 2017. We also utilize a deposit listing service to obtain additional deposits totaling $12.4 million at June 30, 2018, compared to $13.1 million at December 31, 2017.

The scheduled maturities or next repricing dates of time deposits as of June 30, 2018


	(Dollars in Thousands)
	June 30, 2018
Three months or less	$	22,576
Over three through twelve months		52,193
Over one year through three years		61,757
Over three years		10,760
Total	$	147,286

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 June 30, 2018 were $45.0 million compared to $40.0 million at December 31, 2017. Rates vary based on the term to repayment, and are summarized below as of June 30, 2018:


				(Dollars in Thousands
Type	Maturity	Rate		Amount
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	December 27, 2019	2.70	%		5,000
Fixed	January 17, 2020	2.28	%		5,000
Fixed	April 24, 2020	2.70	%		3,000
Fixed	July 17, 2020	2.34	%		5,000
Fixed	January 15, 2021	1.88	%		3,000
				$	45,000

With our available collateral and our current holding of FHLB stock, we are eligible to borrow an additional $30.3 million as of June 30, 2018, compared to $35.3 million at December 31, 2017.

Other Borrowings. At June 30, 2018, we had established Federal Funds lines of credit totaling $18.8 million with three

correspondent banks. No amounts were drawn as of June 30, 2018 or December 31, 2017.

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 June 30, 2018 was 3.96%. 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 $47.7 million at June 30, 2018 from $45.8 million at December 31, 2017. The book value per common share improved to $18.79 at June 30, 2018 compared to $18.14 at December 31, 2017. The Company

declared and paid a quarterly common dividend of $0.06 per share during the first quarter of 2018 and $0.07 during the second quarter of 2018. Subsequently, the Company declared a quarterly common dividend of $0.07 per share in July, 2018 to be paid in August, 2018.

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)

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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 June 30, 2018 is 1.875%. 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 June 30, 2018 and December 31, 2017, 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
June 30, 2018	Amount		Ratio		Amount		Ratio		Amount		Ratio
Total Capital (to Risk-Weighted Assets)
Consolidated	$	54,304	13.41	%	$	32,393	8.00	%		N/A	N/A
Citizens First Bank, Inc.		53,306	13.18	%		32,368	8.00	%	$	40,460	10.00	%

Tier I Capital (to Risk-Weighted Assets)
Consolidated		49,554	12.24	%		24,294	6.00	%		N/A	N/A
Citizens First Bank, Inc.		48,556	12.00	%		24,726	6.00	%		32,967	8.00	%

Common Equity Tier I Capital (to Risk-Weighted Assets)
Consolidated		49,554	11.00	%		18,221	4.50	%		N/A	N/A
Citizens First Bank, Inc.		48,556	12.00	%		18,207	4.50	%		26,299	6.50	%

Tier I Leverage Capital to average assets
Consolidated		49,554	10.50	%		18,882	4.00	%		N/A	N/A
Citizens First Bank, Inc.		48,556	10.23	%		18,985	4.00	%		23,732	5.0	%


	(Dollars in Thousands)
									To Be Well Capitalized
					For Capital Adequacy				Under Prompt Corrective
	Actual				Purposes (1)				Action Provisions
December 31, 2017	Amount		Ratio		Amount		Ratio		Amount		Ratio
Total Capital (to Risk-Weighted Assets)
Consolidated	$	51,988	13.07	%	$	31,823	8.00	%		N/A	N/A
Citizens First Bank, Inc.		51,112	12.86	%		31,802	8.00	%	$	39,753	10.00	%

Tier I Capital (to Risk-Weighted Assets)
Consolidated		47,264	11.88	%		23,867	6.00	%		N/A	N/A
Citizens First Bank, Inc.		46,388	11.67	%		23,852	6.00	%		31,802	8.00	%

Common Equity Tier I Capital (to Risk-Weighted Assets)
Consolidated		42,502	10.68	%		17,900	4.50	%		N/A	N/A
Citizens First Bank, Inc.		46,388	11.67	%		17,889	4.50	%		25,839	6.50	%

Tier I Leverage Capital to average assets
Consolidated		47,264	10.31	%		18,343	4.00	%		N/A	N/A
Citizens First Bank, Inc.		46,388	10.14	%		18,301	4.00	%		22,876	5.0	%

(1)

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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 June 30, 2018, the table below provides an assessment of the risk to net interest income over the next twelve months in the event of a sudden and sustained increase or decrease in prevailing interest rates. The projected changes in net interest income are indicated by the model for increases in rates up to 400 basis points and decreases in rates to 200 basis points (dollars in thousands).

Projections for: July 2018 - June 2019


Projected			Net Interest Income
Interest Rate			$ Change From		% Change From
Change	Estimated Value		Base		Base
+400	$	20,449	$	3,414	20.04	%
+300		19,814		2,780	16.32	%
+200		19,030		1,996	11.71	%
Base		17,034		—	—	%
-200		15,253		1,781	(10.46)	%

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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 June 30, 2018 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	Articles of Incorporation of Citizens First Corporation

3.2	Amended and Restated Bylaws of Citizens First Corporation (incorporated by reference to Exhibit 3.2 of the Registrant’s Current Report on Form 8-K filed March 21, 2018).

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).

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 June 30, 2018 and December 31, 2017, (ii) the Consolidated Statements of Income for the three and six months ended June 30, 2018 and June 30, 2017, (iii) the Consolidated Statement of Stockholders’ Equity for the six months ended June 30, 2018 and June 30, 2017, (iv) Consolidated Statements of Cash Flows for the six month periods ended June 30, 2018 and 2017 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: August 9, 2018	/s/M. Todd Kanipe
	M. Todd Kanipe
	President and Chief Executive Officer


Date: August 9, 2018	/s/ J. Steven Marcum
	J. Steven Marcum
	Executive Vice President and Chief Financial Officer

Exhibit 3.1

The following is a complete copy of the Articles of Incorporation of Citizens First Corporation, as restated to incorporate all amendments:

Articles of Incorporation

Citizens First Corporation

Article I

The name of the corporation is Citizens First Corporation.

Article II

The purpose for which the corporation is organized shall be to engage in the transaction of any and all activity within the purposes for which corporations may be organized, including the buying and selling of real estate and other property and the borrowing and lending of money under the Kentucky Business Corporation Act (the “Act”).

The corporation shall further have all powers and authorities as a bank holding company as defined in the Bank Holding Company Act of 1956 (12 USC §1841, et seq). In carrying out such powers, it shall be entitled to engage in the following general categories of activities:

(1) acquisition of bank shares or assets;

(2) banking;

(3) managing or controlling banks and authorized non-bank subsidiaries;

(4) furnishing services to or performing services for subsidiaries; and

(5) those activities as may be determined by the Board of Governors of the Federal Reserve System to be closely related to banking and such other activities as may be expressly permitted under the Bank Holding Company Act.

Article III

The total number of shares of stock authorized to be issued and the authorized class thereof shall be Five Million (5,000,000) shares of no par value common stock and Five Hundred (500) shares of preferred stock. The voting power of the common stock shall be one vote per share. The shareholders of common stock shall not have preemptive rights.

The preferred stock shall have the preferences, limitations and relative rights as may be established from time to time by the Board of Directors. The Board of Directors is hereby vested with the authority to amend the Articles of Incorporation for purposes of setting forth the preferences, limitations and relative rights of the holders of preferred stock prior to the issuance of same without submitting the amendment to the Articles of Incorporation to the shareholders.

Appendix A attached hereto and incorporated by reference herein sets out the general preferences, limitations and relative rights of 250 shares of undesignated preferred stock of the Corporation, no par value per share, as heretofore established by the Board of Directors.

Article IV

The original issue of shares as authorized under these Articles of Incorporation shall be without classification, restriction, limitation or distinction as to the rights of the owner.

Article V

The existence of this corporation is to be perpetual.

Article VI

All corporate powers shall be exercised by or under the authority of, and the business and affairs of the corporation managed under the direction of, its board of directors. The number of directors shall be fixed by resolution of the board of directors from time to time, subject to the applicable provisions of the Act and the corporation’s bylaws, and shall be at least seven (7) and not more than eighteen (18).

Commencing with the 2019 annual meeting of shareholders of the corporation, directors shall be elected for a term expiring at the next annual meeting of shareholders of the corporation and each director shall hold office until his or her successor is elected and qualified; provided, that any director elected for a longer term before the 2019 annual meeting of shareholders of the corporation shall hold office for the entire term for which he or she was originally elected.

Article VII

No director of the corporation shall be liable to the corporation or its shareholders for monetary damages for a breach of his duty as a director; provided, however, this provision shall not eliminate or limit the liability of any director for:

[1] any transaction in which the director’s personal financial interest is in conflict with the financial interests of the corporation or its shareholders;

[2] acts or omissions not in good faith or which involve intentional misconduct or are known to the director to be a violation of law;

[3] any vote for or assent to an unlawful distribution to shareholders as prohibited under KRS 271B.8-330; or

A- 2

[4] any transaction from which the director derived an improper personal benefit.

In no case shall this article be construed to expand the liability of any director as determined pursuant to KRS 271B.8-300.

61758642.1

A- 3

Appendix A

Statement of Designation of Cumulative Convertible Preferred Stock

1. Designation and Number . Two Hundred Fifty (250) shares of undesignated, authorized Preferred Stock of the Corporation are hereby constituted as a series of Preferred Stock designated as “Cumulative Convertible Preferred Stock,” having no par value per share. Each share of Cumulative Convertible Preferred Stock shall have the same relative rights and be identical in all respects with each other share of Cumulative Convertible Preferred Stock. Each share of Cumulative Convertible Preferred Stock shall have a stated value of $31,992 (the “ Stated Value ”).

2. Voting Rights . Except as otherwise expressly provided by law, shares of Cumulative Convertible Preferred Stock shall not be entitled to any vote on any matter or question submitted to a vote at a meeting of shareholders (or submitted for action pursuant to written consent in lieu of a meeting) or to any notice thereof (including without limitation notice of the taking of any action pursuant to written consent in lieu of a meeting), including without limitation the election of directors of the Corporation.

3. Dividends .

(a) The holder of each share of Cumulative Convertible Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors, out of any assets legally available therefor, cumulative quarterly dividends per share payable in cash on April 30, July 30, October 30 and January 30 in each year (each, a “ Dividend Payment Date ”), beginning on the first such date to occur after the issuance of such shares, at an annual rate equal to 6.50% of the Stated Value . Dividends shall accrue and cumulate on each share of Cumulative Convertible Preferred Stock from the date of issuance and shall accrue and cumulate from day to day, whether or not earned or declared. Unpaid accumulated dividends on the shares of Cumulative Convertible Preferred Stock shall not bear interest. Dividends will be payable to holders of record as they appear in the corporation’s stock records at the close of business on March 30, June 30, September 30 and December 30 of each year. Dividends payable on the Cumulative Convertible Preferred Stock for any period less than a full year shall be computed on the basis of the actual number of days elapsed and a 365-day year.

(b) No dividends or other distributions (other than those payable solely in Common Stock of the Corporation) shall be declared or paid on any shares of Common Stock of the Corporation (or any shares of any other series of Preferred Stock ranking as to dividends or liquidation junior to the Cumulative Convertible Preferred Stock) at any time and for so long as there shall not have been declared and paid or set apart for payment all amounts necessary to eliminate any arrearage in payment of the aforesaid dividends on the Cumulative Convertible Preferred Stock.

(c) To pay dividends on any Dividend Payment Date, the Corporation shall have funds legally available to make such payment. The Corporation will use its reasonable best

A- 4

efforts to provide notice to the holders of the Preferred Stock not later than fifteen (15) days prior to each Dividend Payment Date if the Corporation determines that it will not pay dividends on the Dividend Payment Date. If a development occurs less than fifteen (15) days prior to a Dividend Payment Date that will prevent the Corporation from paying dividends on that Dividend Payment Date, and the Corporation has not already provided notice, the Corporation will provide prompt notice to the holders.

4. Liquidation .

(a) In the event of any liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary, each holder of Cumulative Convertible Preferred Stock shall be entitled to receive, out of funds legally available therefor, prior and in preference to any distribution of any of the assets or surplus funds of the Corporation to the holders of Common Stock of the Corporation (or of any shares of any other series of Preferred Stock ranking as to dividends or liquidation junior to the Cumulative Convertible Preferred Stock) by reason of their ownership thereof, an amount equal to the Stated Value per share (as adjusted for any stock dividends, combinations or splits with respect to such shares), plus an amount equal to all accrued but unpaid dividends on each such share, including a pro rata dividend according to the number of days elapsed prior to the date of payment over an assumed year of 365 days (“ Accrued Dividends ”), for each share of Cumulative Convertible Preferred Stock then held by them. If, upon the occurrence of such event, the assets and funds thus distributed among the holders of the Cumulative Convertible Preferred Stock shall be insufficient to permit the payment to such holders of the full aforesaid preferential amounts, then the entire assets and funds of the Corporation legally available for distribution shall be distributed ratably among the holders of the Cumulative Convertible Preferred Stock in proportion to the preferential amount each such holder would otherwise have been entitled to receive if the preferential amounts payable in respect to the Cumulative Convertible Preferred Stock had been paid in full. Whenever the distribution provided for in this Section 4(a) shall be payable in securities or property other than cash, the value of such distribution shall be the fair market value of such securities or other property as determined in good faith by the Board of Directors.

(b) Neither the voluntary sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property or assets of the Corporation, nor the consolidation, merger or amalgamation of the Corporation with or into any other entity, or the consolidation, merger or amalgamation of any other entity with or into the Corporation shall be deemed to be a voluntary or involuntary liquidation, dissolution or winding up of the Corporation.

5. Redemption .

(a) At its option, on and at any time after three (3) years from the date of issuance of such shares, the Corporation may, at least to the extent that it may lawfully do so, redeem all or any portion of the outstanding shares of Cumulative Convertible Preferred Stock, by paying in cash therefor a sum equal to the Stated Value per share of Cumulative Convertible Preferred Stock (as adjusted for any stock dividends, combinations or splits with respect to such shares), plus all Accrued Dividends (the “ Redemption Price ”) thereon, to but excluding the date fixed for redemption. The Corporation shall give written notice of any such redemption to each holder of record (at the close of business on the business day next preceding the day on which

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notice is given) of the Cumulative Convertible Preferred Stock to be redeemed, which notice shall be mailed, first class postage prepaid, to each holder at the address last shown on the records of the Corporation for such holder, and shall specify a date not less than fifteen (15) nor more than sixty (60) days after the date of such notice as the date of such redemption (the “ Redemption Date ”). Notwithstanding the foregoing, the Corporation may pay the Redemption Price only if the Corporation has funds legally available for such payment and only if the Corporation has received the prior written consent of the Federal Reserve.

(b) The Redemption Notice shall be mailed as aforesaid at least fifteen (15) but no more than 60 days prior to the Redemption Date; provided, however, that no failure to give such Redemption Notice nor any deficiency therein shall affect the validity of the procedure for the redemption of any shares of the Cumulative Convertible Preferred Stock to be redeemed except as to the holder or holders to whom the Corporation has failed to give said Redemption Notice or except as to the holder or holders whose Redemption Notice was defective. All such Redemption Notices shall identify the Cumulative Convertible Preferred Stock to be redeemed and shall state:

the number of shares to be redeemed from such holder;

ii.

the Redemption Date;

iii.

the Redemption Price;

iv.

that on the Redemption Date, the Redemption Price will become due and payable upon each such share of Cumulative Convertible Preferred Stock to be redeemed and that dividends thereon will cease to accrue on and after said date; and

the place where such Cumulative Convertible Preferred Stock is to be surrendered for payment of the Redemption Price.

Except as provided in Section 5(c), on or after the Redemption Date, each holder of Cumulative Convertible Preferred Stock to be redeemed shall surrender to the Corporation the certificate or certificates representing such shares, in the manner and at the place designated in the Redemption Notice, and thereupon the Redemption Price of such shares shall be payable to the order of the person whose name appears on such certificate or certificates as the owner thereof and each surrendered certificate shall be cancelled.

(c) If less than all the outstanding shares of Cumulative Convertible Preferred Stock are to be redeemed, the Corporation shall select those shares to be redeemed from outstanding shares of Cumulative Convertible Preferred Stock not previously called for redemption by lot or pro rata (as nearly as may be) or by any other method determined by the Board of Directors to be equitable. In the event less than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares.

(d) From and after the Redemption Date, unless there shall have been a default in payment of the Redemption Price for the shares of Cumulative Convertible Preferred Stock to have been redeemed, all rights of the holders of Cumulative Convertible Preferred Stock designated for redemption in the Redemption Notice as holders of Cumulative Convertible

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Preferred Stock (except the right to receive the Redemption Price therefor without interest upon surrender of their certificate or certificates) shall cease with respect to such shares, and such shares shall not thereafter be transferred on the books of the Corporation or be deemed to be outstanding for any purpose whatsoever. If the funds of the Corporation legally available for redemption of the Cumulative Convertible Preferred Stock on any Redemption Date are insufficient to redeem the total number of shares of Cumulative Convertible Preferred Stock to be redeemed on such date, those funds which are legally available will be used to redeem the maximum possible number of such shares ratably among the holders of such shares to be redeemed based upon their holdings of Cumulative Convertible Preferred stock. The shares of Cumulative Convertible Preferred Stock not redeemed shall remain outstanding and entitled to all the rights and preferences provided herein. At any time thereafter when additional funds of the Corporation are legally available for the redemption of shares of Cumulative Convertible Preferred Stock, such funds will immediately be used to redeem the balance of the shares that the Corporation has become obligated to redeem on any Redemption Date, but which it has not redeemed, in accordance with a procedure substantially similar to that described above and approved by the Board of Directors.

(e) As one possible (though not exclusive) method of payment of the Redemption Price for the shares of Cumulative Convertible Preferred Stock to be redeemed, such method of payment to ultimately be determined and approved by the Board of Directors, on or prior to each Redemption Date, the Corporation may deposit the amount of the Redemption Price of all shares of Cumulative Convertible Preferred Stock designated for redemption in the Redemption Notice and not yet redeemed or converted, with a bank or trust company having aggregate capital and surplus in excess of Fifty Million Dollars ($50,000,000) as a trust fund for the benefit of the respective holders of the shares designated for redemption and not yet redeemed, with irrevocable instructions and authority to such bank or trust company to pay, on and after the Redemption Date or prior thereto, the Redemption Price for such shares to the respective holders thereof on or after the Redemption Date upon receipt of notification from the Corporation that such holder has surrendered his or her share certificate to the Corporation. Any monies deposited by the Corporation pursuant to this Section 5(e) for the redemption of shares which are thereafter converted into shares of Common Stock pursuant to Section 6 hereof no later than the close of business on the day prior to the Redemption Date shall be returned to the Corporation forthwith upon such conversion. The balance of any monies deposited by the Corporation pursuant to this Section 5(e) remaining unclaimed at the expiration of two (2) years following the Redemption Date shall thereafter be returned to the Corporation, provided that the stockholder to which such money would be payable hereunder shall be entitled, upon proof of its ownership of the shares of Cumulative Convertible Preferred Stock designated for redemption and payment of any bond requested by the Corporation, to receive such monies, but without interest from the Redemption Date.

6. Conversion . The holders of the Cumulative Convertible Preferred Stock shall have conversion rights as follows:

(a) Right to Convert . Subject to this Section 6, each share of Cumulative Convertible Preferred Stock shall be convertible, at the option of the holder thereof, into shares of the Corporation’s Common Stock (i) at any time on and after three (3) years from the date of issuance of such shares, and, with respect to shares of Cumulative Convertible Preferred Stock designated for redemption, on or prior to the close of business on the day prior to the Redemption

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Date, if any, as may be specified in the Redemption Notice with respect to such share, or, if earlier, (ii) at any time on and after a Change of Control, as hereinafter defined. Such shares of Cumulative Convertible Preferred Stock shall be convertible at the office of the Corporation or any transfer agent for such stock, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing the Stated Value (as adjusted for any stock dividends, combinations or splits with respect to such shares), by the Conversion Price applicable to such share, determined as hereafter provided, in effect on the date the certificate is surrendered for conversion. The initial Conversion Price per share shall be $15.50. Such initial Conversion Price shall be subject to adjustment as set forth in Section 6(c) below. When shares of Cumulative Convertible Preferred Stock are converted pursuant to this Section 6(a), all Accrued Dividends on the Cumulative Convertible Preferred Stock so converted to (and not including) the date of conversion shall be immediately due and payable in cash.

(b) Mechanics of Conversion . Before any holder of Cumulative Convertible Preferred Stock shall be entitled to convert the same into shares of Common Stock, he shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Corporation or of any transfer agent for such shares of Cumulative Convertible Preferred Stock, and shall give written notice to the Corporation at its principal corporate office, of the election to convert a specified whole number of shares and shall state therein the name or names in which the certificate or certificates for shares of Common Stock are to be issued. The Corporation shall, as soon as practicable thereafter, issue and deliver at such office to such holder of Cumulative Convertible Preferred Stock, or to the nominee or nominees of such holder, a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled as aforesaid. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of such series of Cumulative Convertible Preferred Stock to be converted and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock as of such date. If the conversion is in connection with a Change of Control, the conversion may, at the option of any holder tendering Cumulative Convertible Preferred Stock for conversion, be conditioned upon the closing of the Change of Control transaction, in which event the person(s) entitled to receive Common Stock upon conversion of Cumulative Convertible Preferred Stock shall be deemed to have converted Cumulative Convertible Preferred Stock immediately prior to the closing of such transaction.

(c) Conversion Price Adjustments . The Conversion Price of the Cumulative Convertible Preferred Stock shall be subject to adjustment from time to time as follows:

(i) In the event the Corporation should at any time or from time to time after the date hereof fix a record date for the effectuation of a split or subdivision of the outstanding shares of Common Stock or the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly, additional shares of Common Stock (hereinafter referred to as “ Common Stock Equivalents ”) without payment of any consideration by such holder for the additional shares of Common Stock or the Common Stock Equivalents, then, as of such record date (or the date of such dividend, distribution, split or subdivision if no record date is fixed), the Conversion Price of the Cumulative Convertible Preferred Stock shall be appropriately decreased so that the number of shares of Common Stock

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issuable on conversion of each share of Cumulative Convertible Preferred Stock shall be increased in proportion to such increase in the aggregate of shares of Common Stock outstanding and those issuable with respect to such Common Stock Equivalents.

(ii) If the number of shares of Common Stock outstanding at any time after the date hereof is decreased by a combination of the outstanding shares of Common Stock, then, following the record date of such combination, the Conversion Price for the Cumulative Convertible Preferred Stock shall be appropriately increased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be decreased in proportion to such decrease in outstanding shares.

(d) Other Distributions . In the event the Corporation shall declare a distribution payable in securities of other persons, evidences of indebtedness issued by the Corporation or other persons, assets (excluding cash dividends) or options or rights not referred to in Section 6(c)(i), then, in each such case for the purpose of this Subsection 6(d), the holders of shares of Cumulative Convertible Preferred Stock shall be entitled to a proportionate share of any such distribution as though they were the holders of the number of shares of Common Stock of the Corporation into which their shares of Cumulative Convertible Preferred Stock are convertible as of the record date fixed for the determination of the holders of Common Stock of the Corporation entitled to receive such distribution.

(e) Recapitalizations . In case of any capital reorganization or reclassification or other change of outstanding shares of Common Stock of the Corporation, whether by combination, merger, acquisition or otherwise (a " Transaction ") (other than a Transaction in which the Corporation is the resulting or surviving entity and which does not result in any reclassification or change of outstanding shares of Common Stock), each share of this Cumulative Convertible Preferred Stock then outstanding shall, without the consent of any holder of thereof, become convertible only into the kind and amount of shares of stock or other securities (of the Corporation or another issuer) or property or cash receivable upon such Transaction by a holder of the number of shares of Common Stock into which such share of Cumulative Convertible Preferred Stock could have been converted immediately prior to such Transaction. The provisions of this Section 6(e) similarly shall apply to successive Transactions. The provisions of this Section 6(e) shall be the sole right of holders of Cumulative Convertible Preferred Stock in connection with any Transaction and such holders shall have no separate vote thereon.

(f) The Corporation shall not be required to give effect to any adjustment in the Conversion Price unless and until the net effect of one or more adjustments (each of which shall be carried forward until counted toward adjustment), determined as above provided, shall have resulted in a change of the Conversion Price by at least 1%, and when the cumulative net effect of

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more than one adjustment so determined shall be to change the Conversion Price by at least 1%, such change in the Conversion Price shall thereupon be given effect.

(g) No Fractional Shares And Certificate as to Adjustments .

(i) No fractional shares shall be issued upon the conversion of any share or shares of Cumulative Convertible Preferred Stock, and the number of shares of Common Stock to be issued shall be rounded to the nearest whole share.

(ii) Upon the occurrence of each adjustment of the Conversion Price of Cumulative Convertible Preferred Stock pursuant to this Section 6, the Corporation, at its expense, shall promptly prepare and furnish to each holder of such Cumulative Convertible Preferred Stock a certificate setting forth such adjustment and describing the facts upon which such adjustment or readjustment is based. The Corporation shall, upon the written request at any time of any holder of Cumulative Convertible Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (A) such adjustment and readjustment, (B) the Conversion Price for such series of Cumulative Convertible Preferred Stock at the time in effect, and (C) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of a share of such series of Cumulative Convertible Preferred Stock.

(h) Notices of Record Date . In the event of any taking by the Corporation of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend) or other distribution, any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, the Corporation shall mail to each holder of Cumulative Convertible Preferred Stock, at least twenty (20) days prior to the date specified therein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution or right.

(i) Notice of Change of Control Transaction . The Corporation shall give each holder of record of Cumulative Convertible Preferred Stock written notice of an impending Change of Control transaction not later than twenty (20) days prior to the stockholders’ meeting called to approve such transaction, or twenty (20) days prior to the closing of such transaction, whichever is earlier, and shall also notify such holders in writing of the final approval of such transaction. The first of such notices shall describe the material terms and conditions of the impending transaction and the provisions of this Section 6, and the Corporation shall thereafter give such holders prompt notice of any material changes. The transaction shall in no event take place sooner than twenty (20) days after the Corporation has given the first notice provided for herein or sooner than ten (10) days after the Corporation has given notice of any material changes provided for herein; provided that such periods may be shortened upon consent of the holders of the Cumulative Convertible Preferred Stock that are entitled to such notice rights or similar notice rights that represent at least two-thirds of all then outstanding shares of the Cumulative Convertible Preferred Stock.

(j) Reservation of Stock Issuable Upon Conversion . The Corporation shall at all times after the Cumulative Convertible Preferred Stock first becomes convertible reserve and

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keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of shares of Cumulative Convertible Preferred Stock, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of Cumulative Convertible Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of Cumulative Convertible Preferred Stock, in addition to such other remedies as shall be available to the holder of such Cumulative Convertible Preferred Stock, the Corporation will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in best efforts to obtain the requisite stockholder approval of any necessary amendment to the Articles.

(k) Notices . Any notice required by the provisions of this Section 6 to be given to the holders of shares of Cumulative Convertible Preferred Stock shall be deemed given if deposited in the United States mail, postage prepaid, and addressed to each holder of record at such holder’s address appearing on the books of the Corporation.

(l) Change of Control . " Change of Control " means, for purposes of this Section 6, the occurrence of any of the following:

A. if any "person" or "group" (as such terms are used in Section 13(d) and Section 14(d) of the Securities Exchange Act of 1934 (the “ Exchange Act ”) or any successor provisions to either of the foregoing), including any group acting for the purpose of acquiring, holding, voting or disposing of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act, becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act, except that a person will be deemed to have "beneficial ownership" of all shares that any such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of 50% or more of the total voting power of the Common Stock of the Corporation; or

B. if the Corporation consolidates or merges with or into any other person, other than a consolidation or merger under a transaction in which the outstanding Common Stock of the Corporation remains outstanding or is changed into or exchanged for cash, securities or other property with the effect that the beneficial owners of the Corporation's outstanding Common Stock immediately before that transaction, beneficially own, directly or indirectly, more than 50% of the Common Stock, measured by voting power rather than number of shares, of the surviving corporation immediately following that transaction; or

C. upon the sale, transfer, assignment, lease, conveyance or other disposition, directly or indirectly, of all or substantially all the assets of the Corporation and its subsidiaries considered as a whole; or

D. if during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors (together with any new directors whose election or appointment by the Board of Directors or whose nomination for election by the Corporation's stockholders was approved by a vote of a majority of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was

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previously so approved) cease for any reason to constitute a majority of the Corporation's Board of Directors then in office.

7. Status of Redeemed or Converted Stock . All shares of Cumulative Convertible Preferred Stock redeemed, purchased, exchanged, converted or otherwise acquired by the Corporation shall be retired and canceled and, upon the taking of any action required by applicable law, shall be restored to the status of authorized but unissued shares of Preferred Stock of the Corporation without designation as to series, and may thereafter be reissued.

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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

August 9, 2018

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

August 9, 2018

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 June 30, 2018, 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)

August 9, 2018

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 June 30, 2018, 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)

August 9, 2018