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EX-32.1 - EXHIBIT 32.1 - CONSUMERS BANCORP INC /OH/ex_104965.htm
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EX-31.1 - EXHIBIT 31.1 - CONSUMERS BANCORP INC /OH/ex_104963.htm
 


 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

[X]

Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934

 

For the quarterly period ended December 31, 2017

 

Commission File No. 033-79130

 

CONSUMERS BANCORP, INC.

(Exact name of registrant as specified in its charter)

 

OHIO 

34-1771400

(State or other jurisdiction

(I.R.S. Employer Identification No.)

of incorporation or organization)

 

 

614 East Lincoln Way, P.O. Box 256, Minerva, Ohio  

44657

(Address of principal executive offices)  

(Zip Code)

 

(330) 868-7701

(Registrant’s telephone number)

 

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No

 

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

 

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

 

Large accelerated filer    

Accelerated filer   

Non-accelerated filer   (Do not check if smaller reporting company)  

Smaller reporting company 

Emerging growth company

 

         

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

 

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

 

There were 2,729,644 shares of Registrant’s common stock, no par value, outstanding as of February 9, 2018.

 



 

 

 

 

CONSUMERS BANCORP, INC.

FORM 10-Q

QUARTER ENDED December 31, 2017

 

Table of Contents

 

 

Page

Number (s)

Part I – Financial Information

 

 

Item 1 – Financial Statements (Unaudited)

 

Consolidated Balance Sheets at December 31, 2017 and June 30, 2017

1

 

 

Consolidated Statements of Income for the three and six months ended December 31, 2017 and 2016

2

 

 

Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended December 31, 2017 and 2016

3

 

 

Condensed Consolidated Statements of Changes in Shareholders’ Equity for the three and six months ended December 31, 2017 and 2016

4

 

 

Condensed Consolidated Statements of Cash Flows for the six months ended December 31, 2017 and 2016

5

 

 

Notes to the Consolidated Financial Statements

6-26

 

 

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations

27-35

 

 

Item 3 – Not Applicable for Smaller Reporting Companies

 

 

 

Item 4 – Controls and Procedures

36

Part II – Other Information

Item 1 – Legal Proceedings

37

 

 

Item 1A – Not Applicable for Smaller Reporting Companies

37

 

 

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds

37

 

 

Item 3 – Defaults Upon Senior Securities

37

 

 

Item 4 – Mine Safety Disclosure

37

 

 

Item 5 – Other Information

37

 

 

Item 6 – Exhibits

37

 

 

Signatures

38

 

 

 

 

PART I – FINANCIAL INFORMATION

Item 1 – Financial Statements

 

 

CONSUMERS BANCORP, INC.

CONSOLIDATED BALANCE SHEETS (Unaudited)

 

 

(Dollars in thousands, except per share data)

 

December 31,

2017

   

June 30,

2017

 

ASSETS

               

Cash on hand and noninterest-bearing deposits in financial institutions

  $ 8,910     $ 9,439  

Federal funds sold and interest-bearing deposits in financial institutions

    231       473  

Total cash and cash equivalents

    9,141       9,912  

Certificates of deposit in other financial institutions

    3,921       3,921  

Securities, available-for-sale

    135,738       142,086  

Securities, held-to-maturity (fair value of $4,083 at December 31, 2017 and $4,329 at June 30, 2017)

    4,061       4,259  

Federal bank and other restricted stocks, at cost

    1,425       1,425  

Loans held for sale

    814       1,252  

Total loans

    293,594       272,867  

Less allowance for loan losses

    (3,225

)

    (3,086

)

Net loans

    290,369       269,781  

Cash surrender value of life insurance

    9,201       9,065  

Premises and equipment, net

    13,137       13,398  

Other real estate owned

    57       71  

Accrued interest receivable and other assets

    2,418       2,713  

Total assets

  $ 470,282     $ 457,883  
                 

LIABILITIES

               

Deposits

               

Non-interest bearing demand

  $ 108,503     $ 102,683  

Interest bearing demand

    55,056       54,123  

Savings

    152,659       151,154  

Time

    66,771       66,511  

Total deposits

    382,989       374,471  
                 

Short-term borrowings

    22,507       23,986  

Federal Home Loan Bank advances

    17,188       12,320  

Accrued interest and other liabilities

    3,427       3,571  

Total liabilities

    426,111       414,348  

Commitments and contingent liabilities

               
                 

SHAREHOLDERS’ EQUITY

               

Preferred stock (no par value, 350,000 shares authorized, none outstanding)

           

Common stock (no par value, 3,500,000 shares authorized; 2,854,133 shares issued as of December 31, 2017 and June 30, 2017)

    14,630       14,630  

Retained earnings

    31,044       30,122  

Treasury stock, at cost (124,489 and 130,606 common shares as of December 31, 2017 and June 30, 2017, respectively)

    (1,576

)

    (1,662

)

Accumulated other comprehensive income

    73       445  

Total shareholders’ equity

    44,171       43,535  

Total liabilities and shareholders’ equity

  $ 470,282     $ 457,883  

 

See accompanying notes to consolidated financial statements

 

1

 

 

 

CONSUMERS BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

 

   

Three Months ended

December 31,

   

Six Months ended

December 31,

 

(Dollars in thousands, except per share amounts)

 

2017

   

2016

   

2017

   

2016

 
                                 

Interest income

                               

Loans, including fees

  $ 3,437     $ 3,022     $ 6,665     $ 6,206  

Securities, taxable

    459       377       970       779  

Securities, tax-exempt

    367       357       734       708  

Federal funds sold and other interest bearing deposits

    28       30       65       60  

Total interest income

    4,291       3,786       8,434       7,753  

Interest expense

                               

Deposits

    253       183       501       353  

Short-term borrowings

    57       11       112       23  

Federal Home Loan Bank advances

    54       56       108       114  

Total interest expense

    364       250       721       490  

Net interest income

    3,927       3,536       7,713       7,263  

Provision for loan losses

    60       140       150       276  

Net interest income after provision for loan losses

    3,867       3,396       7,563       6,987  
                                 

Non-interest income

                               

Service charges on deposit accounts

    301       314       609       644  

Debit card interchange income

    325       285       648       536  

Bank owned life insurance income

    68       63       136       112  

Securities gains, net

          22       38       125  

Loss on disposition of other real estate owned

          (3

)

    -       (3

)

Other

    145       116       280       231  

Total non-interest income

    839       797       1,711       1,645  
                                 

Non-interest expenses

                               

Salaries and employee benefits

    1,966       1,790       3,776       3,528  

Occupancy and equipment

    465       478       920       930  

Data processing expenses

    147       145       295       290  

Debit card processing expenses

    188       149       368       282  

Professional and director fees

    122       146       239       278  

FDIC assessments

    46       46       92       101  

Franchise taxes

    84       84       168       168  

Marketing and advertising

    61       65       139       144  

Telephone and network communications

    75       76       157       157  

Other

    406       347       799       734  

Total non-interest expenses

    3,560       3,326       6,953       6,612  

Income before income taxes

    1,146       867       2,321       2,020  

Income tax expense

    489       145       735       397  

Net income

  $ 657     $ 722     $ 1,586     $ 1,623  
                                 

Basic and diluted earnings per share

  $ 0.24     $ 0.27     $ 0.58     $ 0.60  

 

See accompanying notes to consolidated financial statements

 

2

 

 

 

CONSUMERS BANCORP, INC.

Consolidated statements of comprehensive income (Loss)

(Unaudited)

 

(Dollars in thousands)

   

Three Months ended

December 31

   

Six Months ended

December 31,

 
   

2017

   

2016

   

2017

   

2016

 
                                 

Net income

  $ 657     $ 722     $ 1,586     $ 1,623  
                                 

Other comprehensive income (loss), net of tax:

                               

Net change in unrealized gains (losses) on securities available-for-sale:

                               

Unrealized losses arising during the period

    (631

)

    (3,319

)

    (527

)

    (3,742

)

Reclassification adjustment for gains included in income

          (22

)

    (38

)

    (125

)

Net unrealized losses

    (631

)

    (3,341

)

    (565

)

    (3,867

)

Income tax effect

    215       1,136       193       1,315  

Other comprehensive loss

    (416

)

    (2,205

)

    (372

)

    (2,552

)

                                 

Total comprehensive income (loss)

  $ 241     $ (1,483

)

  $ 1,214     $ (929

)

 

See accompanying notes to consolidated financial statements.

 

3

 

 

 

 

CONSUMERS BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)

 

(Dollars in thousands, except per share data)

                               
   

Three Months ended

December 31,

   

Six Months ended

December 31,

 
   

2017

   

2016

   

2017

   

2016

 
                                 

Balance at beginning of period

  $ 44,271     $ 44,020     $ 43,535     $ 43,793  
                                 

Net income

    657       722       1,586       1,623  

Other comprehensive loss

    (416

)

    (2,205

)

    (372

)

    (2,552

)

6,321 shares issued associated with stock awards during the six months ended December 31, 2017

                90        

204 and 231 Dividend reinvestment plan shares associated with forfeited and expired restricted stock awards retired to treasury stock during the six months ended December 31, 2017 and 2016, respectively

                       

Common cash dividends

    (341

)

    (327

)

    (668

)

    (654

)

                                 

Balance at the end of the period

  $ 44,171     $ 42,210     $ 44,171     $ 42,210  
                                 

Common cash dividends per share

  $ 0.125     $ 0.12     $ 0.245     $ 0.24  

 

See accompanying notes to consolidated financial statements.

 

4

 

 

 

CONSUMERS BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

(Dollars in thousands)

 

Six Months Ended

December 31,

 
   

2017

   

2016

 

Cash flows from operating activities

               

Net cash from operating activities

  $ 3,484     $ 2,152  
                 

Cash flow from investing activities

               

Securities available-for-sale

               

Purchases

    (5,101

)

    (17,368

)

Maturities, calls and principal pay downs

    8,848       11,753  

Proceeds from sales

    1,586       3,383  

Securities held-to-maturity

               

Purchases

          (1,000

)

Principal pay downs

    198       198  

Net decrease in certificates of deposits in other financial institutions

          990  

Net increase in loans

    (20,967

)

    (9,255

)

Purchase of Bank owned life insurance

          (2,000

)

Acquisition of premises and equipment

    (129

)

    (252

)

Sale of other real estate owned

    71       7  

Net cash from investing activities

    (15,494

)

    (13,544

)

                 

Cash flow from financing activities

               

Net increase in deposit accounts

    8,518       8,797  

Net change in short-term borrowings

    (1,479

)

    223  

Proceeds from Federal Home Loan Bank advances

    5,400       18,325  

Repayments of Federal Home Loan Bank advances

    (532

)

    (14,630

)

Dividends paid

    (668

)

    (654

)

Net cash from financing activities

    11,239       12,061  
                 

Increase (decrease) in cash or cash equivalents

    (771

)

    669  
                 

Cash and cash equivalents, beginning of period

    9,912       10,181  

Cash and cash equivalents, end of period

  $ 9,141     $ 10,850  
                 

Supplemental disclosure of cash flow information:

               

Cash paid during the period:

               

Interest

  $ 709     $ 484  

Federal income taxes

    405       150  

Non-cash items:

               

Transfer from loans to other real estate owned

    57       10  

Transfer from loans held for sale to portfolio

    172        

Issuance of treasury stock for stock awards

    90        

Expired and forfeited dividend reinvestment plan shares associated with restricted stock awards that were retired to treasury stock

    4       4  

 

See accompanying notes to consolidated financial statements.

 

5

 

 

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited)

 

(Dollars in thousands, except per share amounts)

 

 

Note 1 – Summary of Significant Accounting Policies:

 

Nature of Operations: Consumers Bancorp, Inc. (the Corporation) is a bank holding company headquartered in Minerva, Ohio that provides, through its banking subsidiary, Consumers National Bank (the Bank), a broad array of products and services throughout its primary market area of Carroll, Columbiana, Jefferson, Stark, Summit, Wayne and contiguous counties in Ohio. The Bank’s business involves attracting deposits from businesses and individual customers and using such deposits to originate commercial, mortgage and consumer loans in its primary market area.

 

Basis of Presentation: The consolidated financial statements for interim periods are unaudited and reflect all adjustments (consisting of only normal recurring adjustments), which, in the opinion of management, are necessary to present fairly the financial position and results of operations and cash flows for the periods presented. The unaudited financial statements are presented in accordance with the requirements of Form 10-Q and do not include all disclosures normally required by accounting principles generally accepted in the United States of America. The financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Corporation’s Form 10-K for the year ended June 30, 2017. The results of operations for the interim period disclosed herein are not necessarily indicative of the results that may be expected for a full year.

 

The consolidated financial statements include the accounts of the Corporation and the Bank. All significant inter-company transactions and accounts have been eliminated in consolidation.

 

Segment Information: The Corporation is a bank holding company engaged in the business of commercial and retail banking, which accounts for substantially all of the revenues, operating income, and assets. Accordingly, all of its operations are recorded in one segment, banking.

 

Reclassifications: Certain items in prior financial statements have been reclassified to conform to the current presentation. Any reclassifications had no impact on prior year net income or shareholders’ equity.

 

Recently Issued Accounting Pronouncements Not Yet Effective: In May 2014, FASB issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606). The ASU creates a new topic, Topic 606, to provide guidance on revenue recognition for entities that enter into contracts with customers to transfer goods or services or enter into contracts for the transfer of nonfinancial assets. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additional disclosures are required to provide quantitative and qualitative information regarding the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The new guidance is effective for annual reporting periods, and interim reporting periods within those annual periods, beginning after December 15, 2017. Most of the Corporation’s revenue is derived from loans and financial instruments, which is not part of the scope of this ASU. The adoption of ASU 2014-09 as it relates to non-interest income, such as service charges and debit card interchange income, is not expected to have a material effect on the Corporation’s financial statements.

 

In January 2016, the FASB issued ASU 2016-01, Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. The main provisions of ASU 2016-01 address the valuation and impairment of certain equity investments along with simplified disclosures about those investments. Equity securities with readily determinable fair values will be treated in the same manner as other financial instruments. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The adoption of ASU 2016-01 is not expected to have a material impact on the Corporation's financial statements.

 

6

 

 

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

 

(Dollars in thousands, except per share amounts)

 

In June 2016, FASB Issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU adds a new Topic 326 to the codification and removes the thresholds that companies apply to measure credit losses on financial instruments measured at amortized cost, such as loans, receivables, and held-to-maturity debt securities. Under current U.S. GAAP, companies generally recognize credit losses when it is probable that the loss has been incurred. The revised guidance will remove all current loss recognition thresholds and will require companies to recognize an allowance for credit losses for the difference between the amortized cost basis of a financial instrument and the amount of amortized cost that the corporation expects to collect over the instrument’s contractual life. ASU 2016-13 also amends the credit loss measurement guidance for available-for-sale debt securities and beneficial interests in securitized financial assets. The guidance in ASU 2016-13 is effective for “public business entities,” as defined, that are SEC filers for fiscal years and for interim periods with those fiscal years beginning after December 15, 2019. Early adoption of the guidance is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Management is currently evaluating the impact of the adoption of this guidance on the Corporation’s consolidated financial statements, and are in the midst of gathering critical data to evaluate the impact. However, it is too early to estimate the impact.

 

In February 2016, the FASB issued ASU 2016-02 - Leases (Topic 842). The ASU will require all organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. Additional qualitative and quantitative disclosures will be required so that users can understand more about the nature of an entity’s leasing activities. The new guidance is effective for annual reporting periods and interim reporting periods within those annual periods, beginning after December 15, 2018. Early adoption is permitted. Management is currently evaluating the impact of the adoption of this guidance on the Corporation’s consolidated financial statements and expects to recognize an increase in other assets and other liabilities for the rights and obligations created by leasing of branch offices. Management also expects minimal impact in the income statement with respect to occupancy expense related to leases.

 

7

 

 

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

 

(Dollars in thousands, except per share amounts)

 

 

Note 2 – Securities

 

Available –for-Sale

 

 

Amortized
Cost

   

Gross
Unrealized
Gains

   

Gross
Unrealized
Losses

   

Fair
Value

 

December 31, 2017

                               

Obligations of U.S. government-sponsored entities and agencies

  $ 13,752     $ 30     $ (146

)

  $ 13,636  

Obligations of state and political subdivisions

    56,718       746       (283

)

    57,181  

Mortgage-backed securities – residential

    58,051       98       (631

)

    57,518  

Mortgage-backed securities– commercial

    1,446             (10

)

    1,436  

Collateralized mortgage obligations– residential

    5,483             (137

)

    5,346  

Pooled trust preferred security

    178       443             621  

Total available-for-sale securities

  $ 135,628     $ 1,317     $ (1,207

)

  $ 135,738  

 

Held-to-Maturity

 

 

Amortized
Cost

   

Gross
Unrecognized
Gains

   

Gross
Unrecognized Losses

   

Fair
Value

 

December 31, 2017

                               

Obligations of state and political subdivisions

  $ 4,061     $ 22     $     $ 4,083  

 

Available–for-Sale

 

Amortized
Cost

   

Gross
Unrealized
Gains

   

Gross
Unrealized
Losses

   

Fair
Value

 

June 30, 2017

                               

Obligations of U.S. government-sponsored entities and agencies

  $ 12,571     $ 90     $ (74

)

  $ 12,587  

Obligations of state and political subdivisions

    56,824       890       (254

)

    57,460  

Mortgage-backed securities – residential

    64,092       184       (438

)

    63,838  

Mortgage-backed securities – commercial

    1,459             (1

)

    1,458  

Collateralized mortgage obligations - residential

    6,310       1       (100

)

    6,211  

Pooled trust preferred security

    155       377             532  

Total available-for-sale securities

  $ 141,411     $ 1,542     $ (867

)

  $ 142,086  

 

Held-to-Maturity

 

Amortized
Cost

   

Gross
Unrecognized
Gains

   

Gross
Unrecognized
Losses

   

Fair
Value

 

June 30, 2017

                               

Obligations of state and political subdivisions

  $ 4,259     $ 73     $ (3

)

  $ 4,329  

 

8

 

 

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

 

(Dollars in thousands, except per share amounts)

 

Proceeds from the sale of available-for-sale securities were as follows:

 

   

Three Months Ended

December 31

   

Six Months Ended

December 31,

 
   

2017

   

2016

   

2017

   

2016

 

Proceeds from sales

  $     $ 1,594     $ 1,586     $ 3,383  

Gross realized gains

          24       39       127  

Gross realized losses

          2       1       2  

 

The income tax provision related to these net realized gains and losses amounted to $13 for the six months ended December 31, 2017 and $8 and $43 for the three and six months ended December 31, 2016.

 

The amortized cost and fair values of debt securities at December 31, 2017, by expected maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date, primarily mortgage-backed securities, collateralized mortgage obligations and the pooled trust preferred security are shown separately.

 

 

Available-for-Sale

 

Amortized

Cost

   

Estimated Fair

Value

 

Due in one year or less

  $ 2,170     $ 2,192  

Due after one year through five years

    18,053       18,167  

Due after five years through ten years

    28,838       28,992  

Due after ten years

    21,409       21,466  

Total

    70,470       70,817  
                 

U.S. Government-sponsored mortgage-backed and related securities

    64,980       64,300  

Pooled trust preferred security

    178       621  

Total available-for-sale securities

  $ 135,628     $ 135,738  
                 

Held-to-Maturity

               
                 

Due after five years through ten years

    564       579  

Due after ten years

    3,497       3,504  

Total held-to-maturity securities

  $ 4,061     $ 4,083  

 

9

 

 

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

 

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

 

(Dollars in thousands, except per share amounts)

 

   

Less than 12 Months

   

12 Months or more

   

Total

 

Available-for-sale

 

Fair
Value

   

Unrealized
Loss

   

Fair
Value

   

Unrealized
Loss

   

Fair
Value

   

Unrealized
Loss

 

December 31, 2017

                                               

Obligations of US government-sponsored entities and agencies

  $ 9,901     $ (146

)

  $     $     $ 9,901     $ (146

)

Obligations of states and political subdivisions

    11,862       (93

)

    8,179       (190

)

    20,041       (283

)

Mortgage-backed securities - residential

    27,316       (243

)

    22,415       (388

)

    49,731       (631

)

Mortgage-backed securities - commercial

    1,435       (10

)

                1,435       (10

)

Collateralized mortgage obligations – residential

                5,346       (137

)

    5,346       (137

)

Total temporarily impaired

  $ 50,514     $ (492

)

  $ 35,940     $ (715

)

  $ 86,454     $ (1,207

)

 

   

Less than 12 Months

   

12 Months or more

   

Total

 

Available-for-sale

 

Fair
Value

   

Unrealized
Loss

   

Fair
Value

   

Unrealized
Loss

   

Fair
Value

   

Unrealized
Loss

 

June 30, 2017

                                               

Obligations of US government-sponsored entities and agencies

  $ 4,336     $ (74

)

  $     $     $ 4,336     $ (74

)

Obligations of states and political subdivisions

    13,881       (241

)

    834       (13

)

    14,715       (254

)

Mortgage-backed securities - residential

    42,071       (391

)

    2,805       (47

)

    44,876       (438

)

Mortgage-backed securities - commercial

    1,458       (1

)

                1,458       (1

)

Collateral mortgage obligation - residential

    5,417       (88

)

    654       (12

)

    6,071       (100

)

Total temporarily impaired

  $ 67,163     $ (795

)

  $ 4,293     $ (72

)

  $ 71,456     $ (867

)

 

Management evaluates securities for other-than-temporary impairment (OTTI) on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. The securities portfolio is evaluated for OTTI by segregating the portfolio into two general segments and applying the appropriate OTTI model. Investment securities are generally evaluated for OTTI under FASB ASC Topic 320, Accounting for Certain Investments in 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.

 

10

 

 

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

 

(Dollars in thousands, except per share amounts)

 

The unrealized losses within the securities portfolio as of December 31, 2017 have not been recognized into income because the decline in fair value is not attributed to credit quality, management does not intend to sell and it is not likely that management will be required to sell the securities prior to their anticipated recovery. The decline in fair value within the securities portfolio is largely due to changes in interest rates and the fair value is expected to recover as the securities approach maturity. The mortgage-backed securities and collateralized mortgage obligations were primarily issued by Fannie Mae, Freddie Mac and Ginnie Mae, institutions which the government has affirmed its commitment to support. The Corporation does not own any private label mortgage-backed securities.

 

 

Note 3 – Loans

Major classifications of loans were as follows:

 

   

December 31,

2017

   

June 30,

2017

 

Commercial

  $ 49,561     $ 46,336  

Commercial real estate:

               

Construction

    5,936       5,588  

Other

    169,692       157,861  

1 – 4 Family residential real estate:

               

Owner occupied

    45,351       41,581  

Non-owner occupied

    16,163       14,377  

Construction

    1,931       1,993  

Consumer

    4,960       5,131  

Subtotal

    293,594       272,867  

Allowance for loan losses

    (3,225

)

    (3,086

)

Net Loans

  $ 290,369     $ 269,781  

 

Loans presented above are net of deferred loan fees and costs of $313 and $294 for December 31, 2017 and June 30, 2017, respectively.

 

11

 

 

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

 

(Dollars in thousands, except per share amounts)

 

The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended December 31, 2017:

 

                   

1-4 Family

                 
           

Commercial

   

Residential

                 
           

Real

   

Real

                 
   

Commercial

   

Estate

   

Estate

   

Consumer

   

Total

 
                                         

Allowance for loan losses:

                                       

Beginning balance

  $ 572     $ 2,081     $ 473     $ 68     $ 3,194  

Provision for loan losses

    (17

)

    57       20             60  

Loans charged-off

                (33

)

    (5

)

    (38

)

Recoveries

          6       1       2       9  

Total ending allowance balance

  $ 555     $ 2,144     $ 461     $ 65     $ 3,225  

 

The following table presents the activity in the allowance for loan losses by portfolio segment for the six months ended December 31, 2017:

 

                   

1-4 Family

                 
           

Commercial

   

Residential

                 
           

Real

   

Real

                 
   

Commercial

   

Estate

   

Estate

   

Consumer

   

Total

 

Allowance for loan losses:

                                       

Beginning balance

  $ 518     $ 2,038     $ 473     $ 57     $ 3,086  

Provision for loan losses

    35       82       20       13       150  

Loans charged-off

                (33

)

    (8

)

    (41

)

Recoveries

    2       24       1       3       30  

Total ending allowance balance

  $ 555     $ 2,144     $ 461     $ 65     $ 3,225  

 

The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended December 31, 2016:

 

                   

1-4 Family

                 
           

Commercial

   

Residential

                 
           

Real

   

Real

                 
   

Commercial

   

Estate

   

Estate

   

Consumer

   

Total

 
                                         

Allowance for loan losses:

                                       

Beginning balance

  $ 510     $ 2,643     $ 411     $ 120     $ 3,684  

Provision for loan losses

    (14

)

    157       51       (54

)

    140  

Loans charged-off

          (700

)

    (23

)

    (8

)

    (731

)

Recoveries

    1             26       3       30  

Total ending allowance balance

  $ 497     $ 2,100     $ 465     $ 61     $ 3,123  

 

12

 

 

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

 

(Dollars in thousands, except per share amounts)

 

The following table presents the activity in the allowance for loan losses by portfolio segment for the six months ended December 31, 2016:

 

                   

1-4 Family

                 
           

Commercial

   

Residential

                 
           

Real

   

Real

                 
   

Commercial

   

Estate

   

Estate

   

Consumer

   

Total

 

Allowance for loan losses:

                                       

Beginning balance

  $ 505     $ 2,518     $ 402     $ 141     $ 3,566  

Provision for loan losses

    (9

)

    282       78       (75

)

    276  

Loans charged-off

          (700

)

    (44

)

    (12

)

    (756

)

Recoveries

    1             29       7       37  

Total ending allowance balance

  $ 497     $ 2,100     $ 465     $ 61     $ 3,123  

 

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of December 31, 2017. Included in the recorded investment in loans is $695 of accrued interest receivable.

 

                   

1-4 Family

                 
           

Commercial

   

Residential

                 
           

Real

   

Real

                 
   

Commercial

   

Estate

   

Estate

   

Consumer

   

Total

 

Allowance for loan losses:

                                       

Ending allowance balance attributable to loans:

                                       

Individually evaluated for impairment

  $     $ 30     $     $     $ 30  

Collectively evaluated for impairment

    555       2,114       461       65       3,195  

Total ending allowance balance

  $ 555     $ 2,144     $ 461     $ 65     $ 3,225  
                                         

Recorded investment in loans:

                                       

Loans individually evaluated for impairment

  $ 122     $ 1,303     $ 340     $     $ 1,765  

Loans collectively evaluated for impairment

    49,553       174,707       63,293       4,971       292,524  

Total ending loans balance

  $ 49,675     $ 176,010     $ 63,633     $ 4,971     $ 294,289  

 

13

 

 

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

 

(Dollars in thousands, except per share amounts)

 

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of June 30, 2017. Included in the recorded investment in loans is $581 of accrued interest receivable.

 

                   

1-4 Family

                 
           

Commercial

   

Residential

                 
           

Real

   

Real

                 
   

Commercial

   

Estate

   

Estate

   

Consumer

   

Total

 

Allowance for loan losses:

                                       

Ending allowance balance attributable to loans:

                                       

Individually evaluated for impairment

  $     $ 42     $ 2     $     $ 44  

Collectively evaluated for impairment

    518       1,996       471       57       3,042  

Total ending allowance balance

  $ 518     $ 2,038     $ 473     $ 57     $ 3,086  
                                         

Recorded investment in loans:

                                       

Loans individually evaluated for impairment

  $ 444     $ 1,587     $ 203     $     $ 2,234  

Loans collectively evaluated for impairment

    45,993       162,176       57,901       5,144       271,214  

Total ending loans balance

  $ 46,437     $ 163,763     $ 58,104     $ 5,144     $ 273,448  

 

The following table presents information related to unpaid principal balance, recorded investment and interest income associated with loans individually evaluated for impairment by class of loans as of December 31, 2017 and for the six months ended December 31, 2017:

 

   

As of December 31, 2017

   

Six Months ended December 31, 2017

 
   

Unpaid

           

Allowance

for Loan

   

Average

   

Interest

   

Cash Basis

 
   

Principal

   

Recorded

   

Losses

   

Recorded

   

Income

   

Interest

 
   

Balance

   

Investment

   

Allocated

   

Investment

   

Recognized

   

Recognized

 

With no related allowance recorded:

                                               

Commercial

  $ 122     $ 122     $     $ 117     $ 3     $ 3  

Commercial real estate:

                                               

Other

    973       976             1,057       16       16  

1-4 Family residential real estate:

                                               

Owner occupied

    25       25             80              

Non-owner occupied

    315       315             322              

With an allowance recorded:

                                               

Commercial real estate:

                                               

Other

    327       327       30       337       5       5  

Total

  $ 1,762     $ 1,765     $ 30     $ 1,913     $ 24     $ 24  

 

14

 

 

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

 

(Dollars in thousands, except per share amounts)

 

The following table presents information related to average recorded investment and interest income associated with loans individually evaluated for impairment by class of loans for the three months ended December 31, 2017:

 

   

Average

   

Interest

   

Cash Basis

 
   

Recorded

   

Income

   

Interest

 
   

Investment

   

Recognized

   

Recognized

 

With no related allowance recorded:

                       

Commercial

  $ 120     $ 1     $ 1  

Commercial real estate:

                       

Other

    1,061       6       6  

1-4 Family residential real estate:

                       

Owner occupied

    318              

Non-owner occupied

    58              

With an allowance recorded:

                       

Commercial real estate:

                       

Other

    330       5       5  

Total

  $ 1,887     $ 12     $ 12  

 

The following table presents information related to unpaid principal balance, recorded investment and interest income associated with loans individually evaluated for impairment by class of loans as of June 30, 2017 and for the six months ended December 31, 2016:

 

   

As of June 30, 2017

   

Six Months ended December 31, 2016

 
   

Unpaid

           

Allowance

for Loan

   

Average

   

Interest

   

Cash Basis

 
   

Principal

   

Recorded

   

Losses

   

Recorded

   

Income

   

Interest

 
   

Balance

   

Investment

   

Allocated

   

Investment

   

Recognized

   

Recognized

 

With no related allowance recorded:

                                               

Commercial

  $ 482     $ 444     $     $ 330     $ 80     $ 80  

Commercial real estate:

                                               

Construction

                      170       6       6  

Other

    1,928       1,039             1,081       105       105  

1-4 Family residential real estate:

                                               

Owner occupied

    104       103             127              

Non-owner occupied

                      205              

With an allowance recorded:

                                               

Commercial

                      7              

Commercial real estate:

                                               

Other

    548       548       42       2,030       15       15  

1-4 Family residential real estate:

                                               

Owner occupied

    99       100       2       139       3       3  

Total

  $ 3,161     $ 2,234     $ 44     $ 4,089     $ 209     $ 209  

 

15

 

 

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

 

(Dollars in thousands, except per share amounts)

The following table presents information related to average recorded investment and interest income associated with loans individually evaluated for impairment by class of loans for the three months ended December 31, 2016:

 

   

Average

   

Interest

   

Cash Basis

 
   

Recorded

   

Income

   

Interest

 
   

Investment

   

Recognized

   

Recognized

 

With no related allowance recorded:

                       

Commercial real estate:

                       

Construction

  $ 10     $     $  

Other

    607              

1-4 Family residential real estate:

                       

Owner occupied

    127              

Non-owner occupied

    202              

With an allowance recorded:

                       

Commercial

    14              

Commercial real estate:

                       

Other

    1,612       7       7  

1-4 Family residential real estate:

                       

Owner occupied

    101       1       1  

Total

  $ 2,673     $ 8     $ 8  

 

The following table presents the recorded investment in non-accrual and loans past due over 90 days still on accrual by class of loans as of December 31, 2017 and June 30, 2017:

 

   

December 31, 2017

   

June 30, 2017

 
           

Loans Past Due

           

Loans Past Due

 
           

Over 90 Days

           

Over 90 Days

 
           

Still

           

Still

 
   

Non-accrual

   

Accruing

   

Non-accrual

   

Accruing

 

Commercial

  $     $     $ 368     $  

Commercial real estate:

                               

Other

    537