Citizens First (CZFC) 10-Q 2015 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the Quarterly Period Ended March 31, 2015

Or

oTRANSITION 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  x  No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§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  x  No  o

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

Large accelerated filer   o	Accelerated filer   o
Non-accelerated filer  o	Smaller reporting company   x

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

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

1,968,777 shares of Common Stock, no par value, were outstanding at May 11, 2015.

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	30
ITEM 3	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	45
ITEM 4	CONTROLS AND PROCEDURES	46
PART II — OTHER INFORMATION
ITEM 6	EXHIBITS	47
SIGNATURES		49

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Part 1. Financial Information

Item 1. Financial Statements

Citizens First Corporation

Consolidated Balance Sheets

	(In Thousands, Except Share Data)
	March 31, 2015		December 31, 2014
	Unaudited
Assets
Cash and due from financial institutions	$	8,513	$	7,962
Federal funds sold	19,905		3,360
Cash and cash equivalents	28,418		11,322
Available-for-sale securities	58,913		58,986
Loans held for sale	310		—
Loans, net of allowance for loan losses of $4,947 and $4,885 at March 31, 2015 and December 31, 2014, respectively	314,685		313,592
Premises and equipment, net	10,776		10,758
Bank owned life insurance (BOLI)	8,039		7,993
Federal Home Loan Bank (FHLB) stock, at cost	2,025		2,025
Accrued interest receivable	1,443		1,527
Deferred income taxes	1,350		1,479
Goodwill	4,097		4,097
Core deposit intangible	318		336
Other real estate owned	267		198
Other assets	491		501
Total Assets	$	431,132	$	412,814
Liabilities
Deposits
Noninterest bearing	$	44,664	$	41,975
Savings, NOW and money market	153,781		148,935
Time	166,920		150,874
Total deposits	365,365		341,784
FHLB advances and other borrowings	19,500		25,500
Subordinated debentures	5,000		5,000
Accrued interest payable	242		231
Other liabilities	1,674		1,851
Total Liabilities	391,781		374,366
Stockholders’ Equity
6.5% cumulative convertible preferred stock; no par value, authorized 250 shares, aggregate liquidation preference of $7,998; issued and outstanding 250 shares at March 31, 2015 and December 31, 2014, respectively	7,659		7,659
Common stock, no par value, authorized 5,000,000 shares; issued and outstanding 1,968,777 shares at March 31, 2015 and December 31, 2014, respectively	27,072		27,072
Retained earnings	4,027		3,373
Accumulated other comprehensive income (loss)	593		344
Total stockholders’ equity	39,351		38,448
Total liabilities and stockholders’ equity	$	431,132	$	412,814

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)
	March 31, 2015		March 31, 2014
Interest and dividend income
Loans	$	3,949	$	3,844
Taxable securities	152		141
Non-taxable securities	176		164
Federal funds sold and other	29		32
Total interest and dividend income	4,306		4,181
Interest expense
Deposits	549		543
FHLB advances and other	71		117
Subordinated debentures	24		23
Total interest expense	644		683
Net interest income	3,662		3,498
Provision for loan losses	80		125
Net interest income after provision for loan losses	3,582		3,373
Non-interest income
Service charges on deposit accounts	317		261
Other service charges and fees	135		153
Gain on sale of mortgage loans	31		24
Non-deposit brokerage fees	92		69
Lease income	73		75
BOLI income	45		47
Total non-interest income	693		629
Non-interest expenses
Salaries and employee benefits	1,648		1,527
Net occupancy expense	528		482
Advertising and public relations	52		83
Professional fees	164		153
Data processing services	239		233
Franchise shares and deposit tax	146		146
FDIC insurance	59		77
Core deposit intangible amortization	18		84
Postage and office supplies	40		51
Other	309		226
Total non-interest expenses	3,203		3,062
Income before income taxes	1,072		940
Income taxes	290		249
Net income	782		691
Dividends on preferred stock	128		132
Net income available for common stockholders	$	654	$	559
Basic earnings per common share	$	0.33	$	0.28
Diluted earnings per common share	$	0.29	$	0.27

See Notes to Unaudited Consolidated Financial Statements

4

Citizens First Corporation

Unaudited Consolidated Statements of Comprehensive Income

In thousands, except share data

	Three months ended
	(In Thousands, Except Per Share Data)
	March 31, 2015		March 31, 2014
Comprehensive income (loss), net of tax
Net income	$	782	$	691
Other comprehensive income (loss)
Change in unrealized gain on available for sale securities, net of $129 taxes in 2015 and $141 in 2014	249		273
Total other comprehensive income	249		273
Comprehensive income	$	1,031	$	964

See Notes to Unaudited Consolidated Financial Statements

5

Citizens First Corporation

Unaudited Consolidated Statements of Changes in Stockholders’ Equity

In thousands, except share data

	Preferred Stock		Common Stock		Retained Earnings			Accumulated Other Comprehensive Income (Loss)		Total
Balance, January 1, 2015	$	7,659	$	27,072	$	3,373		$	344	$	38,448
Net income					782					782
Change in accumulated other comprehensive income								249		249
Dividend declared and paid on preferred stock					(128		)			(128		)
Balance, March 31, 2015	$	7,659	$	27,072	$	4,027		$	593	$	39,351

	Preferred Stock			Common Stock		Retained Earnings (Deficit)			Accumulated Other Comprehensive Income (Loss)			Total
Balance, January 1, 2014	$	10,925		$	27,072	$	653		$	(303	)	$	38,347
Net income						691						691
Redemption of Series A preferred stock	(3,266		)									(3,266		)
Change in accumulated other comprehensive loss									273			273
Dividend declared and paid on preferred stock						(132		)				(132		)
Balance, March 31, 2014	$	7,659		$	27,072	$	1,212		$	(30	)	$	35,913

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Citizens First Corporation

Unaudited Consolidated Statements of Cash Flows

	Three months ended
	(In Thousands)
	March 31, 2015			March 31, 2014
Operating Activities
Net income	$	782		$	691
Items not requiring (providing) cash:
Depreciation and amortization	137			144
Provision for loan losses	80			125
Amortization of premiums and discounts on securities	86			68
Amortization of core deposit intangible	18			84
Deferred income taxes	80			799
BOLI income	(45		)	(47		)
Proceeds from sale of mortgage loans	1,591			982
Origination of mortgage loans held for sale	(1,870		)	(1,044		)
Gains on sales of mortgage loans	(31		)	(24		)
Write-downs and losses on sale of other real estate owned	10			11
Gain on sale premises and equipment	(4		)	(7		)
Changes in:
Accrued interest receivable	84			110
Other assets	(70		)	(641		)
Accrued interest payable and other liabilities	(166		)	(158		)
Net cash provided by operating activities	682			1,093
Investing Activities
Loan originations and payments, net	(1,252		)	(6,485		)
Purchase of premises and equipment	(151		)	(72		)
Proceeds from maturities of available-for-sale securities	1,373			1,429
Proceeds from sales of other real estate owned	—			191
Purchase of available-for-sale securities	(1,009		)	(4,124		)
Proceeds from sales of premises and equipment	—			19
Net cash used in investing activities	(1,039		)	(9,042		)
Financing Activities
Net change in demand deposits, money market, NOW and savings accounts	7,535			4,214
Net change in time deposits	16,046			5,032
Repayment of FHLB advances	(6,000		)	—
Repayment of TARP preferred stock	—			(3,266		)
Proceeds from other borrowings	—			3,300
Dividends paid on preferred stock	(128		)	(132		)
Net cash provided by financing activities	17,453			9,148
Increase in Cash and Cash Equivalents	17,096			1,199
Cash and Cash Equivalents, Beginning of Year	11,322			37,062
Cash and Cash Equivalents, End of Quarter	$	28,418		$	38,261
Supplemental Cash Flows Information
Interest paid	$	633		$	685
Income taxes paid	$	210		$	—
Loans transferred to other real estate owned	$	80		$	—

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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 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 consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2014 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.  The consolidated balance sheet of the Company as of December 31, 2014 has been derived from the audited consolidated balance sheet of the Company as of that date.

Recent Accounting Pronouncements—In May 2014 the FASB amended existing guidance related to revenue from contracts with customers. This amendment supersedes and replaces nearly all existing revenue recognition guidance, including industry-specific guidance, establishes a new control-based revenue recognition model, changes the basis for deciding when revenue is recognized over time or at a point in time, provides new and more detailed guidance on specific topics and expands and improves disclosures about revenue. In addition, this amendment specifies the accounting for some costs to obtain or fulfill a contract with a customer. These amendments are effective for annual reporting periods beginning after December 15,

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2016, including interim periods within that reporting period. The FASB has proposed an amendment to delay the effective date of the amended guidance until 2017. The Bank is currently evaluating the impact of this new accounting standard on the consolidated financial statements.

Note 2 -  Reclassifications

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

Note 3 - Available-For-Sale Securities

The following table summarizes the amortized cost and fair value of the available-for sale securities portfolio at March 31, 2015 and December 31, 2014 and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income(loss):

	(Dollars in Thousands)
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
March 31, 2015
U. S. government agencies and government sponsored entities	$	2,999	$	8	$	(14	)	$	2,993
Agency mortgage-backed securities: residential	26,804		489		(17		)	27,276
State and municipal	25,334		889		(36		)	26,187
Trust preferred security	1,877		—		(427		)	1,450
Corporate bonds	1,000		7		—			1,007
Total Available-for-Sale Securities	$	58,014	$	1,393	$	(494	)	$	58,913
December 31, 2014
U. S. government agencies and government sponsored entities	$	2,999	$	—	$	(51	)	$	2,948
Agency mortgage-backed securities: residential	27,241		309		(31		)	27,519
State and municipal	25,350		793		(104		)	26,039
Trust preferred security	1,876		—		(396		)	1,480
Corporate bonds	1,000		—		—			1000
Total Available-for-Sale Securities	$	58,466	$	1,102	$	(582	)	$	58,986

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The amortized cost and fair value of investment securities at March 31, 2015 by contractual maturity were as follows.  Securities not due at a single maturity date, primarily mortgage-backed securities, are shown separately.

	March 31, 2015
	(Dollars in Thousands)
	Available-For-Sale
	Amortized Cost		Fair Value
Due in one year or less	$	535	$	536
Due from one to five years	11,545		11,752
Due from five to ten years	11,708		12,062
Due after ten years	7,422		7,287
Agency mortgage-backed: residential	26,804		27,276
Total	$	58,014	$	58,913

The following table summarizes the investment securities with unrealized losses by portfolio segment at March 31, 2015 and December 31, 2014, 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 Securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
March 31, 2015:
U.S. government agencies and government sponsored entities	$	—	$	—		$	1,985	$	(14	)	$	1,985	$	(14	)
Agency mortgage-backed: residential	—		—			1,637		(17		)	1,637		(17		)
State and municipal	2,562		(8		)	603		(28		)	3,165		(36		)
Trust preferred security	—		—			1,450		(427		)	1,450		(427		)
Total temporarily impaired	$	2,562	$	(8	)	$	5,675	$	(486	)	$	8,237	$	(494	)

10

	(Dollars in Thousands)
	Less than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
December 31, 2014:
U.S. government agencies and government sponsored entities	$	992	$	(8	)	$	1,955	$	(43	)	$	2,947	$	(51	)
Agency mortgage-backed: residential	1,134		(2		)	1,678		(29		)	2,812		(31		)
State and municipal	4,891		(24		)	2,530		(80		)	7,421		(104		)
Trust preferred security	—		—			1,480		(396		)	1,480		(396		)
Total temporarily impaired	$	7,017	$	(34	)	$	7,643	$	(548	)	$	14,660	$	(582	)

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.

Approximately 88% 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

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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)
	March 31, 2015			December 31, 2014
Commercial	$	42,680		$	43,439
Commercial real estate:
Construction	20,862			18,064
Other	173,860			174,032
Residential real estate	77,651			78,270
Consumer:
Auto	1,604			1,820
Other	2,975			2,852
Total Loans	319,632			318,477
Less Allowance for loan losses	(4,947		)	(4,885		)
Net loans	$	314,685		$	313,592

The following table sets forth an analysis of our allowance for loan losses for the three months ending March 31, 2015 and 2014.

	(Dollars in Thousands)
	Commercial			Commercial Real Estate			Residential Real Estate			Consumer			Unallocated		Total
March 31, 2015
Allowance for loan losses:
Beginning balance	$	1,029		$	3,088		$	582		$	45		$	141	$	4,885
Provision for loan losses	(15		)	135			(43		)	(2		)	5		80
Loans charged-off	—			(17		)	(24		)	(3		)	—		(44		)
Recoveries	21			—			4			1			—		26
Total ending allowance balance	$	1,035		$	3,206		$	519		$	41		$	146	$	4,947

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	(Dollars in Thousands)
March 31, 2014	Commercial			Commercial Real Estate		Residential Real Estate			Consumer			Unallocated			Total
Allowance for loan losses:
Beginning balance	$	1,420		$	2,079	$	703		$	86		$	365		$	4,653
Provision for loan losses	(500		)	887		9			(13		)	(258		)	125
Loans charged-off	—			—		(19		)	(3		)	—			(22		)
Recoveries	17			47		6			1			—			71
Total ending allowance balance	$	937		$	3,013	$	699		$	71		$	107		$	4,827

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 March 31, 2015 and December 31, 2014, which includes net deferred loan fees.  As of March 31, 2015 and December 31, 2014, accrued interest receivable of $1.1 million and $1.2 million, respectively, are not considered significant and therefore not included in the recorded investment in loans presented in the following tables.

	(Dollars in Thousands)
March 31, 2015	Commercial		Commercial Real Estate		Residential Real Estate		Consumer		Unallocated		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	388	$	203	$	4	$	6	$	—	$	601
Collectively evaluated	647		3,003		515		35		146		4,346
Total ending allowance balance	$	1,035	$	3,206	$	519	$	41	$	146	$	4,947
Loans:
Individually evaluated for impairment	$	2,536	$	1,187	$	1,018	$	17	$	—	$	4,758
Collectively evaluated	40,144		193,535		76,633		4,562		—		314,874
Total ending loans balance	$	42,680	$	194,722	$	77,651	$	4,579	$	—	$	319,632

13

	(Dollars in Thousands)
December 31, 2014	Commercial		Commercial Real Estate		Residential Real Estate		Consumer		Unallocated		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	342	$	220	$	7	$	10	$	—	$	579
Collectively evaluated	687		2,868		575		35		141		4,306
Total ending allowance balance	$	1,029	$	3,088	$	582	$	45	$	141	$	4,885
Loans:
Individually evaluated for impairment	$	2,696	$	1,057	$	1,098	$	22	$	—	$	4,873
Collectively evaluated	40,743		191,039		77,172		4,650		—		313,604
Total ending loans balance	$	43,439	$	192,096	$	78,270	$	4,672	$	—	$	318,477

The following table presents information related to impaired loans by class of loans as of March 31, 2015 and December 31, 2014. 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.

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	(Dollars in Thousands)						(Dollars in Thousands)
	March 31, 2015						December 31, 2014
	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	$	999	$	999	$	—	$	1,129	$	1,129	$	—
Commercial real estate:
Construction	—		—		—		—		—		—
Other	181		181		—		—		—		—
Residential real estate	949		949		—		1,026		1,026		—
Consumer:							—
Auto	—		—		—		—		—		—
Other	—		—		—		—		—		—
Subtotal	$	2,129	$	2,129	$	—	$	2,155	$	2,155	$	—
With an allowance recorded:
Commercial	$	1,537	$	1,537	$	388	$	1,567	$	1,567	$	342
Commercial real estate:
Construction	—		—		—		—		—		—
Other	1,006		1,006		203		1,057		1,057		220
Residential real estate	69		69		4		72		72		7
Consumer:
Auto	6		6		6		10		10		10
Other	11		11		—		12		12		—
Subtotal	$	2,629	$	2,629	$	601	$	2,718	$	2,718	$	579
Total	$	4,758	$	4,758	$	601	$	4,873	$	4,873	$	579

Information on impaired loans for the three months ending March 31, 2015 and 2014 is as follows:

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	(Dollars in Thousands)						(Dollars in Thousands)
	March 31, 2015						March 31, 2014
	Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized
Commercial	$	2,616	$	34	$	24	$	2,944	$	32	$	27
Commercial real estate:
Construction	—		—		—		—		—		—
Other	1,199		14		13		1,777		20		14
Residential real estate	1,023		12		8		1,366		18		10
Consumer:
Auto	7		—		—		20		—		—
Other	11		—		—		14		—		—
Total	$	4,856	$	60	$	45	$	6,121	$	70	$	51

The recorded investment in nonaccrual and loans past due over 90 days still on accrual by class of loans as of March 31, 2015 and December 31, 2014 are summarized below:

	(Dollars in Thousands)				(Dollars in Thousands)
	March 31, 2015				December 31, 2014
	Loans Past Due Over 90 Days and  Still Accruing		Nonaccrual		Loans Past Due Over 90 Days and Still Accruing		Nonaccrual
Commercial	$	—	$	734	$	—	$	748
Commercial real estate:
Construction	—		—		—		—
Other	—		181		—		45
Residential real estate	—		291		—		364
Consumer:
Auto	—		6		—		10
Other	—		—		—		—
Total	$	—	$	1,212	$	—	$	1,167

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

The following tables present the aging of the recorded investment in past due loans as of March 31, 2015 and December 31, 2014 by class of loans.  Non-accrual loans are included and have been categorized based on their payment status:

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	(Dollars in Thousands)
	30-59 Days Past Due		60-89 Days Past Due		Over 90 Days Past Due		Total Past Due		Current		Total
March 31, 2015
Commercial	$	35	$	—	$	644	$	679	$	42,001	$	42,680
Commercial real estate:
Construction	—		—		—		—		20,862		20,862
Other	—		949		27		976		172,884		173,860
Residential real estate	95		48		254		397		77,254		77,651
Consumer:
Auto	—		—		—		—		1,604		1,604
Other	43		—		—		43		2,932		2,975
Subtotal	$	173	$	997	$	925	$	2,095	$	317,537	$	319,632

	(Dollars in Thousands)
	30-59 Days Past Due		60-89 Days Past Due		Over 90 Days Past Due		Total Past Due		Current		Total
December 31, 2014
Commercial	$	—	$	—	$	645	$	645	$	42,794	$	43,439
Commercial real estate:
Construction	—		—		—		—		18,064		18,064
Other	—		—		45		45		173,987		174,032
Residential real estate	31		—		362		393		77,877		78,270
Consumer:
Auto	—		—		—		—		1,820		1,820
Other	—		—		—		—		2,852		2,852
Subtotal	$	31	$	—	$	1,052	$	1,083	$	317,394	$	318,477

Troubled Debt Restructurings:

The Company reported total troubled debt restructurings of $4.3 million and $4.4 million as of March 31, 2015 and December 31, 2014, 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 14 troubled debt restructurings reported at quarter end, 12 loans totaling $3.5 million were accruing and 2 loans totaling $715,000 were on nonaccrual status.

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The following table presents the pre-modification and post-modification outstanding recorded balances for loans by class modified as troubled debt restructurings that were reported at period end for March 31, 2015 and December 31, 2014:

		(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
	March 31, 2015					December 31, 2014
Troubled Debt Restructurings:
Commercial	7	$	3,970	$	3,970	7	$	3,970	$	3,970
Commercial real estate:
Other	2	1,017		1,017		2	1,017		1,017
Residential real estate	4	757		759		4	757		759
Consumer	1	16		15		1	16		15
Total	14	$	5,760	$	5,761	14	$	5,760	$	5,761

The following table presents loans by class modified as troubled debt restructurings that occurred during the quarter ending March 31, 2015 and 2014:

		(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
	March 31, 2015					March 31, 2014
Troubled Debt Restructurings:
Commercial	—	$	—	$	—	—	$	—	$	—
Commercial real estate:						—	—		—
Other	—	—		—		—	—		—
Residential real estate	—	—		—		1	15		15
Consumer	—	—		—		—	—		—
Total	—	$	—	$	—	1	$	15	$	15

Specific allocations of $591,000 and $547,000 were reported for troubled debt restructurings as of March 31, 2015 and December 31, 2014. Specific allocations of $362,000 were reported for the troubled debt restructurings as of March 31, 2014. No payment defaults were reported for troubled debt restructurings during the three months ending March 31, 2015 or March 31, 2014. No charge offs were taken on troubled debt restructurings during the three months ending March 31, 2015 or March 31, 2014.

The terms of certain other loans were modified during the three months ending March 31, 2015 and 2014 that did not meet the definition of a troubled debt restructuring.

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These loans modified during the three months ending March 31, 2015 have a total recorded investment of $9.5 million as of March 31, 2015.The loans modified during the three months ending March 31, 2014 have a total recorded investment of $3.7 million as of March 31, 2014. 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.

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:

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	Pass		Special Mention		Substandard		Doubtful		Total
March 31, 2015
Commercial	$	39,281	$	543	$	2,856	$	—	$	42,680
Commercial real estate:
Construction	20,862		—		—		—		20,862
Other	164,180		4,961		4,719		—		173,860
Residential real estate	76,265		709		677		—		77,651
Consumer:
Auto	1,604		—		—		—		1,604
Other	2,964		—		11		—		2,975
Total	$	305,156	$	6,213	$	8,263	$	—	$	319,632

	Pass		Special Mention		Substandard		Doubtful		Total
December 31, 2014
Commercial	$	39,926	$	547	$	2,966	$	—	$	43,439
Commercial real estate:
Construction	18,064		—		—		—		18,064
Other	166,969		2,875		4,188		—		174,032
Residential real estate	76,756		772		742		—		78,270
Consumer:
Auto	1,820		—		—		—		1,820
Other	2,842		—		10		—		2,852
Total	$	306,377	$	4,194	$	7,906	$	—	$	318,477

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.

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

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

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

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

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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 on a recurring basis:

	Fair Value Measurements at:
	(Dollars in Thousands)						(Dollars in Thousands)
	March 31, 2015						December 31, 2014
	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			$	2,993					$	2,948
Agency mortgage-backed securites-residential			27,276						27,519
State and municipal			26,187						26,039
Trust preferred security					1,450						1,480
Corporate bonds			1,007						1,000
Total investment securities	$	—	$	57,463	$	1,450	$	—	$	57,506	$	1,480

Assets measured on a non-recurring basis:

	Fair Value Measurement
	(Dollars in Thousands)
	March 31, 2015		December 31, 2014
	Significant Unobservable Inputs (Level 3)		Significant Unobservable Inputs (Level 3)
Impaired loans:
Commercial	$	366	$	423
Commercial RE	—		29
Residential	59		59
Other real estate owned:
Commercial RE	$	187	$	198
Residential	80		—

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Impaired loans which are measured for impairment using the fair value of collateral for collateral dependent loans, had a principal balance of $784,000 at March 31, 2015 with a valuation allowance of $359,000.  Impaired loans which were measured for impairment using the fair value of collateral for collateral-dependent loans had a principal balance of $841,000 at December 31, 2014, with a valuation allowance of $330,000.  An increase in the provision for loan losses of $28,000 and $64,000 was recognized for the three months ended March 31, 2015 and 2014, respectively, as a result of net changes in fair values on collateral dependent loans and other factors affecting the provision for loan losses.

Other real estate owned, which is measured at fair value less costs to sell, had a net carrying value of $267,000 at March 31, 2015 and $198,000 at December 31, 2014.  Total writedowns of other real estate owned were $10,000 and $17,000 in the quarters ending March 31, 2015 and 2014, respectively.

The following table presents quantitative and qualitative information about Level 3 fair value measurements for financial instruments measured on a non-recurring basis at March 31, 2015.

	March 31, 2015		Valuation Techniques	Unobservable Inputs (Dollars in thousands)	Range (Weighted Avg)
Impaired loans:
Commercial	$	366	Market Approach	Discounts to allow for market value of assets	50%-70%(66.86%)
Residential	59		Sales Comparison	Adjustments for limited use nature of certain properties, age of appraisal, location, and/or condition	(10.00%)
Other real estate owned:
Commercial RE	187		Sales Comparison	Adjustments for limited use nature of certain properties, age of appraisal, location, and/or condition	8%-55% (38.24%)
Residential RE	80		Sales Comparison	Adjustments for limited use nature of certain properties, age of appraisal, location, and/or condition	(61.54%)

The following table presents quantitative and qualitative information about Level 3 fair value measurements for financial instruments measured on a non-recurring basis at December 31, 2014.

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	December 31, 2014		Valuation Techniques	Unobservable Inputs (Dollars in thousands)	Range (Weighted Avg)
Impaired loans:
Commercial	$	423	Market Approach	Discounts to allow for market value of assets	50%-70% (67.35%)
Commercial RE	29		Sales Comparison	Adjustments for limited use nature of certain properties, age of appraisal, location, and/or condition	(20.00%)
Residential	59		Sales Comparison	Adjustments for limited use nature of certain properties, age of appraisal, location, and/or condition	(10.00%)
Other real estate owned:
Commercial RE	198		Sales Comparison	Adjustments for limited use nature of certain properties, age of appraisal, location, and/or condition	8%-55% (38.29%)

Carrying amount and estimated fair values of financial instruments, not previously presented, were as follows:

			Fair Value Measurements at
	Carrying		March 31, 2015
	Amount		Level 1		Level 2	Level 3	Total
Financial Assets
Cash and cash equivalents	$	28,418	$	28,418			$	28,418
Loans, net of allowance	314,260					316,637	316,637
Loans held for sale	310				316		316
Accrued interest receivable	1,443				311	1,132	1,443
Federal Home Loan Bank stock	2,025						N/A
Financial Liabilities
Demand and savings deposits	$	198,445	$	164,591			$	164,591
Time deposits	166,920				167,590		167,590
FHLB advances	18,000				17,904		17,904
Other borrowings	1,500				1,500		1,500
Subordinate debentures	5,000					2,836	2,836
Accrued interest payable	242		11		231		242

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			Fair Value Measurements at
	Carrying		December 31, 2014
	Amount		Level 1		Level 2	Level 3	Total
Financial Assets
Cash and cash equivalents	$	11,322	$	11,322			$	11,322
Loans, net of allowance	313,081					316,075	316,075
Accrued interest recievable	1,527				323	1,204	1,527
Federal Home Loan Bank stock	2,025						N/A
Financial Liabilities
Demand and savings deposits	$	190,910	$	156,790			$	156,790
Time deposits	150,874				151,504		151,504
FHLB advances	24,000				23,835		23,835
Other borrowings	1,500				1,500		1,500
Subordinate debentures	5,000					2,395	2,395
Accrued interest payable	231		9		222		231

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

(c)Loans: Fair values of loans, excluding loans held for sale, are estimated as follows: For variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values resulting in a Level 3 classification. Fair values for other loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality resulting in a Level 3 classification. Impaired loans are valued at the lower of cost or fair value as described previously. The methods utilized to estimate the fair value of loans do not necessarily represent an exit price. The fair value of loans held for sale is estimated based upon binding contracts and quotes from first party investors resulting in a Level 2 classification.

(d)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 money market accounts and 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

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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.

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

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

Note 6 - Earnings Per Share

Basic earnings per share have been computed by dividing net income available for common shareholders by the weighted-average number of common shares outstanding for the period.  Diluted earnings per share have been computed the same as basic earnings per share, and assumes the conversion of outstanding stock options, convertible preferred stock and warrants, if dilutive.  The following table reconciles the basic and diluted earnings per share computations for the quarters ending March 31, 2015 and 2014.

	Quarter ended March 31, 2015						Quarter ended March 31, 2014 (Restated)
				Weighted						Weighted
				Average	Per Share					Average	Per Share
	Income			Shares	Amount		Income			Shares	Amount
Basic earnings per share:
Net income	$	782					$	691
Less: Dividends on preferred stock during the quarter	(128		)				(132		)
Net income available to common shareholders	$	654		1,968,777	$	0.33	$	559		1,968,777	$	0.28
Effect of dilutive securities
Convertible preferred stock	128			568,890
Warrants				147,249						121,203
Diluted earnings per share
Net income available to common stockholders and assumed conversions	$	782		2,684,916	$	0.29	$	559		2,089,980	$	0.27

Stock options for 29,276 and 72,931 shares of common stock were not considered in computing diluted earnings per common share for March 31, 2015 and 2014,

26

respectively, because they are anti-dilutive.  Convertible preferred shares assuming full conversion totaled 568,890 shares as of March 31, 2015.  Common stock warrants totaled 254,218 as of March 31, 2015 and 2014.

Note 7 — Regulatory Capital Matters

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

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. For March 31, 2015 Interim Final Basel III rules require the Bank to maintain minimum amounts and ratios of common equity Tier I capital to risk-weighted assets. Additionally under Basel III rules, the decision was made to opt-out of including accumulated other comprehensive income in regulatory capital. For December 31, 2014, regulatory capital ratios were calculated under Basel I rules. We believe we met all capital adequacy requirements as of March 31, 2015 and December 31, 2014.  Our capital ratios, calculated in accordance with regulatory guidelines, were as follows:

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	(Dollars in Thousands)
	Actual				For Capital Adequacy Purposes				To Be Well Capitalized Under Prompt Corrective Action Provisions
March 31, 2015	Amount		Ratio		Amount		Ratio		Amount		Ratio
Total Capital (to Risk-Weighted Assets Consolidated	$	43,822	13.04	%	$	26,887	8.0	%	N/A		N/A
Citizens First Bank, Inc.	45,185		13.44	%	26,887		8.0	%	$	33,608	10.0	%
Tier I Capital (to Risk-Weighted Assets) Consolidated	39,612		11.79	%	20,165		6.0	%	N/A		N/A
Citizens First Bank, Inc.	40,975		12.19	%	20,165		6.0	%	26,887		8.0	%
Common Equity Tier I Capital (to Risk-Weighted Assets) Consolidated	26,953		8.02	%	15,124		4.5	%	N/A		N/A
Citizens First Bank, Inc.	40,975		12.19	%	15,124		4.5	%	21,845		6.5	%
Tier I Leverage Capital to average assets Consolidated	39,612		9.34	%	16,963		4.0	%	N/A		N/A
Citizens First Bank, Inc.	40,975		9.66	%	16,966		4.0	%	21,208		5.0	%

	(Dollars in Thousands)
	Actual				For Capital Adequacy Purposes				To Be Well Capitalized Under Prompt Corrective Action Provisions
December 31, 2014	Amount		Ratio		Amount		Ratio		Amount		Ratio
Total Capital (to Risk-Weighted Assets Consolidated	$	42,879	12.74	%	$	26,929	8.0	%	N/A		N/A
Citizens First Bank, Inc.	44,056		13.09	%	26,929		8.0	%	$	33,661	10.0	%
Tier I Capital (to Risk-Weighted Assets) Consolidated	38,671		11.49	%	13,465		4.0	%	N/A		N/A
Citizens First Bank, Inc.	39,837		11.83	%	13,465		4.0	%	20,197		6.0	%
Tier I Leverage Capital to average assets Consolidated	38,671		9.42	%	16,415		4.0	%	N/A		N/A
Citizens First Bank, Inc.	39,837		9.78	%	16,294		4.0	%	20,368		5.0	%

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Note 8 — Preferred Stock

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

Note 9 — Subsequent Event

On April 15, 2015, the Company repurchased the 254,218 warrants issued in 2008 to the US Treasury as part of its participation in the US Treasury’s Capital Purchase Program.  The repurchase price of the warrants was $1.7 million.

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Item 2. Management’s Discussion and Analysis 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 2014 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 March 31, 2015, we reported net income of $782,000 compared to net income of $691,000 in the first quarter of 2014, an increase of $91,000.  Net income available to common shareholders was $654,000 or, $0.31 per diluted common share this quarter, compared to net income available to common shareholders of $559,000 or, $0.27 per diluted common share for the first quarter of 2014.  The increase in net income is attributable to an improvement in net interest income of $164,000.

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Our annualized return on average assets, defined as net income divided by average assets, was 0.74% for the three months ended March 31, 2015, compared to 0.68% in March 31, 2014.  Our annualized return on average equity, defined as net income divided by average equity, was 8.13% for the three months ending March 31, 2015, compared to 7.74% for the three months ending March 31, 2014.

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 March 31, 2015 increased $164,000, or 4.7%, compared to March 31, 2014. The increase in net interest income was a result of an increase in the volume of average earning assets over the previous year.

The net interest margin for the three months ended March 31, 2015 was 3.82%, compared to 3.81% in 2014.  The increase of 1 basis point is attributable primarily to the decrease in the cost of average interest-bearing liabilities which exceeded the decline in the yield on average earning assets.

The following tables set forth for the quarter and three months ended March 31, 2015 and 2014, 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.

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Average Consolidated Balance Sheets and Net Interest Analysis (Dollars in thousands)      Quarter ended March 31,

	2015						2014
	Average Balance		Income/ Expense		Average Rate		Average Balance		Income/ Expense		Average Rate
Earning assets:
Federal funds sold	$	16,142	$	9	0.23	%	$	23,748	$	12	0.20	%
Available-for-sale securities (1)
Taxable	34,502		152		1.79	%	32,388		141		1.77	%
Nontaxable	24,222		266		4.45	%	19,886		249		5.08	%
Federal Home Loan Bank stock	2,025		20		4.01	%	2,025		20		4.01	%
Loans receivable (2)	321,028		3,949		4.99	%	303,438		3,844		5.14	%
Total interest earning assets	397,919		4,396		4.48	%	381,485		4,266		4.54	%
Non-interest earning assets	30,291						32,604
Total Assets	$	428,210					$	414,089
Interest-bearing liabilities:
NOW accounts	$	110,499	$	96	0.35	%	$	105,445	$	110	0.42	%
Money market accounts	24,573		22		0.36	%	23,910		21		0.36	%
Savings accounts	19,374		9		0.19	%	16,740		10		0.24	%
Time deposits	162,111		422		1.06	%	159,144		402		1.02	%
Total interest-bearing deposits	316,557		549		0.70	%	305,239		543		0.72	%
Borrowings	21,967		71		1.31	%	24,787		117		1.91	%
Subordinated debentures	5,000		24		1.95	%	5,000		23		1.87	%
Total interest-bearing liabilities	343,524		644		0.76	%	335,026		683		0.83	%
Non-interest bearing deposits	43,682						40,849
Other liabilities	1,975						2,001
Total liabilities	389,181						377,876
Stockholders’ equity	39,029						36,213
Total Liabilities and Stockholders’ Equity	$	428,210					$	414,089
Net interest income			$	3,752					$	3,583
Net interest spread (1)					3.72	%					3.71	%
Net interest margin (1) (3)					3.82	%					3.81	%
Return on average assets ratio					0.74	%					0.68	%
Return on average equity ratio					8.13	%					7.74	%
Average equity to assets ratio					9.11	%					8.75	%

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

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

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

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Rate/Volume Analysis

The following table sets forth the effects of changing rates and volumes on our net interest income for the three months ended March 31, 2015 and 2014.  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.

	(Dollars in Thousands)
	Three Months Ended March 31, 2015 Vs. 2014
	Increase (Decrease) Due to
	Rate		Volume		Net
Interest-earning assets:
Federal funds sold	1		(4	)	(3	)
Available-for-sale securities
Taxable	2		9		11
Nontaxable (1)	(37	)	54		17
Federal Home Loan Bank stock	—		—		—
Loans, net	(118	)	223		105
Total Net Change in income on interest-earning assets	(152	)	282		130
Interest-bearing liabilities:
NOW accounts	(19	)	5		(14	)
Money market accounts	—		1		1
Savings accounts	(3	)	2		(1	)
Time deposits	13		7		20
FHLB and other borrowings	(33	)	(13	)	(46	)
Subordinated debentures	1		—		1
Total Net Change in expense on interest-earning liabilities	(41	)	2		(39	)
Net change in net interest income	(111	)	280		169
Percentage change	-65.68	%	165.68	%	100.0	%

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

Provision for Loan Losses

A provision for loan losses of $80,000 was recorded for the first quarter of 2015, compared to $125,000 in the first quarter of 2014. The allowance for loan losses to total loans decreased from 1.60% of total loans at March 31, 2014 to 1.55% at March 31, 2015, primarily due to the growth in outstanding loans. Net charge-offs (recoveries)

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were $18,000 for the first quarter of 2015 compared to $(49,000) in the first quarter of 2014.

Non-Interest Income

Non-interest income for the three months ended March 31, 2015 increased $64,000, or 10.2%, compared to the three months ended March 31, 2014, primarily due to an increase in service charges on deposit accounts due to the introduction of a new consumer deposit transaction account.

Non-Interest Expense

Non-interest expense for the three months ended March 31, 2015 increased $141,000, or 4.6%, compared to the three months ended March 31, 2014, due to an increase in personnel expenses, primarily as a result of normal salary adjustments.

Income Taxes

Income tax expense was calculated using our expected effective rate for 2015 and 2014.  We have recognized deferred tax liabilities and assets to show the tax effects of differences between the financial statement and tax bases of assets and liabilities.  Our statutory federal tax rate was 34.0% in both 2015 and 2014. The effective tax rate for the first quarter of 2015 was 27.1% compared to a 26.5% effective tax rate for the first quarter of 2014. 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 March 31, 2015 were $431.1 million, an increase of $18.3 million, or 4.4%, from $412.8 million at December 31, 2014.  Average assets during the first quarter were $428.2 million, an increase of 3.4%, or $14.1 million, from $414.1 million in the first quarter of 2014.  Average interest earning assets increased 4.3%, or $16.4 million, from $381.5 million in the first quarter of 2014 to $397.9 million in the first quarter of 2015.

Loans

Loans increased $1.4 million, or 0.4%, from $318.5 million at December 31, 2014 to $319.6 million at March 31, 2015.  Total loans averaged $321.0 million the first quarter of 2015, compared to $303.4 million the first quarter of 2014, an increase of $17.6 million, or 5.8%.  We experienced an increase in commercial real estate loans during the first three months of the year compared to December 31, 2014.  The following table presents a summary of the loan portfolio by category:

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	(Dollars in Thousands)
	March 31, 2015				December 31, 2014
			% of Total Loans				% of Total Loans
Commercial and agricultural	$	42,680	13.35	%	$	43,439	13.64	%
Commercial real estate	194,722		60.92	%	192,096		60.32	%
Residential real estate	77,651		24.30	%	78,270		24.57	%
Consumer	4,579		1.43	%	4,672		1.47	%
	$	319,632	100	%	$	318,477	100	%

The majority of our loans are to customers located in south central Kentucky and central Tennessee.  As of March 31, 2015, our twenty largest credit relationships consisted of loans and loan commitments ranging from $3.7 million to $7.8 million.  The aggregate amount of these credit relationships was $94.1 million. As of December 31, 2014, our twenty largest credit relationships consisted of loans and loan commitments ranging from $3.9 million to $7.8 million.  The aggregate amount of these credit relationships was $95.4 million.

Our lending activities are subject to a variety of lending limits imposed by state and federal law.  Citizens First Bank’s secured legal lending limit to a single borrower was approximately $12.5 million at March 31, 2015 and December 31, 2014.

As of March 31, 2015, we had $19.4 million of participations in loans purchased from, and $19.8 million of participations in loans sold to, other banks. As of December 31, 2014, we had $18.1 million of participations in loans purchased from, and $19.9 million of participations in loans sold to, other banks.

The following table sets forth the maturity distribution of the loan portfolio as of March 31, 2015.  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)
Loan Maturities as of March 31, 2015	Within One Year		After One but Within Five Years		After Five Years		Total
Commercial and agricultural	$	18,624	$	16,930	$	7,126	$	42,680
Commercial real estate	37,170		104,155		53,397		194,722
Residential real estate	7,998		29,989		39,664		77,651
Consumer	1,253		3,286		40		4,579
Total	$	65,045	$	154,360	$	100,227	$	319,632

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

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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)
	March 31, 2015				December 31, 2014
	Amount		% of Loans in Each Category to Toal Loans		Amount		% of Loans in Each Category to Toal Loans
Residential real estate loans	$	519	24.30	%	$	582	24.57	%
Consumer and other loans	41		1.43	%	45		1.47	%
Commercial and agricultural	1,035		13.35	%	1,029		13.64	%
Commercial real estate	3,206		60.92	%	3,088		60.32	%
Unallocated	146		0.00	%	141		0.00	%
Total allowance for loan losses	$	4,947	100.00	%	$	4,885	100.00	%

We maintain a modest unallocated amount in the allowance to recognize unknown factors when estimating and measuring losses when evaluating allocations for individual loans or pools of loans.  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 increased from $141,000 at December 31, 2014 to $146,000 at March 31, 2015 due to changes in qualitative factors assigned to specific pools of loans based on the unique risk factors of these pools.

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

	(Dollars in Thousands)
	March 31,			December 31,
	2015			2014
Non-accrual loans	$	497		$	446
Loans 90+ days past due/accruing	—			—
Restructured loans on non-accrual	715			721
Total non-performing loans	1,212			1,167
Other real estate owned	267			198
Total non-performing assets	$	1,479		$	1,365
Non-performing loans to total loans	0.38		%	0.37		%
Non-performing assets to total assets	0.34		%	0.33		%
Net-charge-offs YTD	18			43
Net charge-offs YTD to average YTD total loans, annualized	0.02		%	0.01		%
Allowance for loan losses to non-performing loans	408.13		%	418.60		%
Allowance for loan losses to total loans	1.55		%	1.53		%

Non-performing assets totaled $1.5 million at March 31, 2015, compared to $1.4 million at December 31, 2014, an increase of $115,000. Payoffs and paydowns of $76,000 included the charge off of $32,000 in principal, with decreases offset by the addition of $154,000 in commercial real estate loans and $37,000 in residential real estate loans.

Non-performing loans consist of non-accrual loans and loans 90 days or more 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 or more 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.

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

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

The following table presents impaired loans and the related allowance for loan losses attributable to loans evaluated for impairment by portfolio segment for the periods indicated:

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	(Dollars in Thousands)
	March 31, 2015				December 31, 2014
	Loans		Allowance for Loan Losses		Loans		Allowance for Loan Losses
Residential real estate loans	$	1,018	$	4	$	1,098	$	7
Consumer and other loans	17		6		22		10
Commercial and agricultural	2,536		388		2,696		342
Commercial real estate	1,187		203		1,057		220
Impaired loans	4,758		601		4,873		579
Loans collectively evaluated for impairment	314,874		4,346		313,604		4,306
Total	$	319,632	$	4,947	$	318,477	$	4,885

The $115,000 decrease in impaired loans during the three months ending March 31, 2015 is primarily attributed to the regular pay downs and payoffs of the loans evaluated for impairment, combined with the transfer of $80,000 from a residential real estate loan to OREO and subsequent charge off of a $15,000 deficiency balance on the loan, that were offset by the addition of a $154,000 commercial real estate loan and a $37,000 residential real estate loan that were evaluated for impairment as of March 31, 2015.The allowance for loan losses was impacted by the changes in the composition of the loans individually evaluated for impairment, the changes in the underlying collateral values and current values of future cash flows used in the evaluation of these loans. The overall growth of the loan portfolio and an assessment of the qualitative factors inherent in the loan portfolio, particularly an increase in commercial real estate loans, resulted in a $40,000 increase in the allowance attributable to loans collectively evaluated for impairment from December 31, 2014 to March 31, 2015.

Securities

The investment securities portfolio is comprised of U.S. Government agency and government sponsored entity securities, agency mortgage-backed securities, tax-exempt securities of states and political subdivisions, a taxable municipal security, a corporate bond 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 $58.7 million for the first three months of 2015, compared to $52.3 million for 2014.

The tables below presents the maturities and yield characteristics of securities as of March 31, 2015 and December 31, 2014.  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.

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	(Dollars in Thousands)
				Over			Over
				One Year			Five Years
	One Year or			Through			Through			Over Ten			Total
March 31, 2015	Less			Five Years			Ten Years			Years			Maturities			Fair Value
U.S. Government agencies	$	—		$	2,999		—			$	—		$	2,999		$	2,993
Agency mortgage-backed securities: (1)	115			22,760			3,929			—			26,804			27,276
Municipal securities	535			8,546			10,708			5,545			25,334			26,187
Trust preferred security	—			—			—			1,877			1,877			1,450
Corporate bond	—			—			1,000			—			1,000			1,007
Total available-for-sale securities	$	650		$	34,305		$	15,637		$	7,422		$	58,014		$	58,913
Percent of total	1.12		%	59.13		%	26.95		%	12.79		%	100.00		%
Weighted average yield(2)	5.01		%	2.39		%	3.55		%	4.32		%	2.98		%

(1)Agency mortgage-backed securities (residential) are grouped into average lives based on March 2015 prepayment projections.

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

	(Dollars in Thousands)
				Over			Over
				One Year			Five Years
	One Year or			Through			Through			Over Ten			Total
December 31, 2014	Less			Five Years			Ten Years			Years			Maturities			Fair Value
U.S. Government agencies	$	—		$	1,999		$	1,000		$	—		$	2,999		$	2,948
Agency mortgage-backed securities: (1)	4			24,231			3,006			—			27,241			27,519
Municipal securities	535			7,802			11,466			5,547			25,350			26,039
Trust preferred security	—			—			—			1,876			1,876			1,480
Corporate bond	—			—			1,000			—			1,000			1,000
Total available-for-sale securities	$	539		$	34,032		$	16,472		$	7,423		$	58,466		$	58,986
Percent of total	0.92		%	58.21		%	28.17		%	12.70		%	100.00		%
Weighted average yield(2)	5.27		%	2.40		%	3.44		%	4.31		%	2.96		%

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

Deposits

Our primary funding source for lending and investment activities results from customer deposits and a deposit listing service.  Deposits at March 31, 2015 were $365.4 million,

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an increase of $23.6 million, or 6.9%, compared to $341.8 million at December 31, 2014.  Total deposits averaged $360.2 million the first quarter of 2015, an increase of $14.1 million, or 4.1%, compared to $346.1 million during the first quarter of 2014.  Average deposits increased during the year, but the cost of funds declined as higher cost deposits matured and were renewed at lower rates.

Time deposits that meet or exceed the FDIC insurance limit of $250,000 were $10.2 million and $8.1 million at March 31, 2015 and December 31, 2014, respectively. Time deposits of $100,000 or more totaled $79.5 million at March 31, 2015, compared to $63.4 million at December 31, 2014.  Interest expense on time deposits of $100,000 or more was $197,000 for the three months ended March 31, 2015, compared to $159,000 for the three months ended March 31, 2014.  Our cost has decreased as these certificates of deposit matured and were renewed at lower current market rates.  The following table shows the maturities of time deposits as of March 31, 2015.

	(Dollars in Thousands)
	March 31, 2015
Three months or less	$	16,287
Over three through six months	20,697
Over six through twelve months	61,878
Over one year through three years	59,223
Over three years through five years	8,831
Over five years	4
Total	$	166,920

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 and eligible commercial real estate. Total advances as of March 31, 2015 were $18.0 million compared to $24.0 million at December 31, 2014. Rates vary based on the term to repayment, and are summarized below as of March 31, 2015:

				(Dollars in Thousands)
Type	Maturity	Rate		Amount
Fixed	April 27,2015	0.24	%	2,000
Fixed	May 22, 2015	0.73	%	3,000
Fixed	December 2, 2015	1.14	%	5,000
Fixed	May 25, 2016	0.99	%	3,000
Fixed	June 3, 2016	0.68	%	2,000
Fixed	May 24, 2019	1.72	%	3,000
				$	18,000

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At March 31, 2015, we had available collateral to borrow an additional $49.2 million from the FHLB compared to $40.6 million at December 31, 2014.

Other Borrowings.  In 2014, we renewed a credit agreement with a community bank to be used for operating capital and general corporate purposes.  The line has a total availability of $3.0 million, matures November 1, 2015, and bears interest at the prime rate as published in the Money Rates section of The Wall Street Journal, plus 0.25%, with interest payable monthly. The line has a floor rate of 4.5%. The line is secured by the Bank’s common stock.  As of March 31, 2015 and December 31, 2014, the line had a balance of $1.5 million.

At March 31, 2015, we had established Federal Funds lines of credit totaling $18.8 million with three correspondent banks.  No amounts were drawn as of March 31, 2015 or December 31, 2014.

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 as of March 31, 2015 was 1.91%.  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 $903,000, or 2.3%, from December 31, 2014 to March 31, 2015.  No common dividends have been paid during 2015.

We are subject to various regulatory capital requirements administered by the federal

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

In July 2013, the Federal Reserve Board and the FDIC approved final rules that substantially amend the regulatory capital rules applicable to the Company and the Bank. The final rules implement the regulatory capital reforms of the Basel Committee on Banking Supervision, commonly called Basel III, and changes required by the Dodd-Frank Act.

Under these rules, the leverage and risk-based capital ratios of bank holding companies may not be lower than the leverage and risk-based capital ratios for insured depository institutions. The final rules implementing the Basel III regulatory capital reforms became effective as to the Company and the Bank on January 1, 2015, and include new minimum risk-based capital and leverage ratios. Moreover, these rules refine the definition of what constitutes “capital” for purposes of calculating those ratios, including the definitions of Tier 1 capital and Tier 2 capital. The new minimum capital level requirements applicable to bank holding companies and banks subject to the rules are: (i) a new common equity Tier 1 capital ratio of 4.5%; (ii) a Tier 1 risk-based capital ratio of 6% (increased from 4%); (iii) a total risk-based capital ratio of 8% (unchanged from current rules); (iv) a Tier 1 leverage ratio of 4% for all institutions. The rules also establish a “capital conservation buffer” of 2.5% (to be phased in over three years) above the new regulatory minimum risk-based capital ratios, and result in the following minimum ratios once the capital conservation buffer is fully phased in: (i) a common equity Tier 1 risk-based capital ratio of 7%, (ii) a Tier 1 risk-based capital ratio of 8.5%, and (iii) a total risk-based capital ratio of 10.5%. The capital conservation buffer requirement is to be phased in beginning in January 2016 at 0.625% of risk-weighted assets and would increase each year until fully implemented in January 2019. An institution will be subject to limitations on paying dividends, engaging in share repurchases and paying discretionary bonuses if capital levels fall below minimum plus the buffer amounts.

As a component of new BASEL III capital regulations, Citizens First Bank chose to “opt-out” of including accumulated other comprehensive income (AOCI) in regulatory capital with the filing of the March 31, 2015 Call Report.

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

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	(Dollars in Thousands)
	Actual				For Capital Adequacy Purposes				To Be Well Capitalized Under Prompt Corrective Action Provisions
March 31, 2015	Amount		Ratio		Amount		Ratio		Amount		Ratio
Total Capital (to Risk-Weighted Assets
Consolidated	$	43,822	13.04	%	$	26,887	8.0	%	N/A		N/A
Citizens First Bank, Inc.	45,185		13.44	%	26,887		8.0	%	$	33,608	10.0	%
Tier I Capital (to Risk-Weighted Assets)
Consolidated	39,612		11.79	%	20,165		6.0	%	N/A		N/A
Citizens First Bank, Inc.	40,975		12.19	%	20,165		6.0	%	26,887		8.0	%
Common Equity Tier I Capital (to Risk-Weighted Assets)
Consolidated	26,953		8.02	%	15,124		4.5	%	N/A		N/A
Citizens First Bank, Inc.	40,975		12.19	%	15,124		4.5	%	21,845		6.5	%
Tier I Leverage Capital to average assets
Consolidated	39,612		9.34	%	16,963		4.0	%	N/A		N/A
Citizens First Bank, Inc.	40,975		9.66	%	16,966		4.0	%	21,208		5.0	%

	(Dollars in Thousands)
	Actual				For Capital Adequacy Purposes				To Be Well Capitalized Under Prompt Corrective Action Provisions
December 31, 2014	Amount		Ratio		Amount		Ratio		Amount		Ratio
Total Capital (to Risk-Weighted Assets
Consolidated	$	42,879	12.74	%	$	26,929	8.0	%	N/A		N/A
Citizens First Bank, Inc.	44,056		13.09	%	26,929		8.0	%	$	33,661	10.0	%
Tier I Capital (to Risk-Weighted Assets)
Consolidated	38,671		11.49	%	13,465		4.0	%	N/A		N/A
Citizens First Bank, Inc.	39,837		11.83	%	13,465		4.0	%	20,197		6.0	%
Tier I Leverage Capital to average assets
Consolidated	38,671		9.42	%	16,415		4.0	%	N/A		N/A
Citizens First Bank, Inc.	39,837		9.78	%	16,294		4.0	%	20,368		5.0	%

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ITEM 3.  Quantitative and Qualitative Disclosures 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 March 31, 2015, the model indicated that if rates were to increase by 200 basis points during the remainder of the calendar year, then net interest income would increase 10.43% over the next twelve months.  The model indicated that if rates were to decrease by 200 basis points over the same period, then net interest income would decrease 1.64%.  The table below notes the projected changes in net interest income as indicated by the model for increases in rates up to 400 basis points and decreases in rates to 200 basis points.

Projections for: April 2015 - March 2016

Projected Interest Rate Change	Estimated Value	Net Interest Income $ Change From Base	% Change From Base
+400	18,632,697	3,606,224	24.01	%
+300	17,604,778	2,587,305	17.23	%
+200	16,584,214	1,566,741	10.43	%
Base	15,017,473	0	0.00	%
-200	14,771,921	-245,552	-1.64	%

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Item 4.  Controls and Procedures

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 relevant period that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting, subsequent to the date of the Chief Executive Officer’s and Chief Financial Officer’s evaluation, nor were there any material weaknesses in the controls which required corrective action.

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PART II-OTHER INFORMATION

Item 6. Exhibits

EXHIBIT INDEX

3.1Restated Articles of Incorporation of Citizens First Corporation, as amended (incorporated by reference to Exhibit 3.1 of the Company’s Registration Statement on Form SB-2 (No. 333-103238)).

3.2Articles of Amendment to Amended and Restated Articles of Incorporation of Citizens First Corporation (incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K dated June 5, 2007).

3.3Articles of Amendment to Amended and Restated Articles of Incorporation of Citizens First Corporation (incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K filed December 23, 2008).

3.4Amended and Restated Bylaws of Citizens First Corporation (incorporated by reference to Exhibit 3 of the Registrant’s Current Report on Form 8-K filed April 17, 2014).

4.1Restated Articles of Incorporation of Citizens First Corporation, as amended (see Exhibit 3.1).

4.2Articles of Amendment to Amended and Restated Articles of Incorporation of Citizens First Corporation (see Exhibits 3.2 and 3.3).

4.3Amended and Restated Bylaws of Citizens First Corporation (see Exhibit 3.4).

4.4Copy 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 March 31, 2007).

4.5Warrant to Purchase Common Stock (incorporated by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K filed December 23, 2008).

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

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

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

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

101Interactive data files: (i) Consolidated Balance Sheets at March 31, 2015 and December 31, 2014, (ii) the Consolidated Statements of Income for the three months ended March 31, 2015 and March 31, 2014, (iii) the Consolidated Statement of Stockholders’ Equity for the three months ended March 31, 2015 and March 31, 2014, (iv) Consolidated Statements of Cash Flows for the three month periods ended March 31, 2015 and 2014, and (v) Notes to Consolidated Financial Statements.**

**Pursuant to Rule 406T of Regulation S-T, the interactive data files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under these sections.

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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: May 11, 2015	/s/M. Todd Kanipe
	M. Todd Kanipe
	President and Chief Executive Officer
Date: May 11, 2015	/s/ J. Steven Marcum
	J. Steven Marcum
	Executive Vice President and Chief Financial Officer

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