The management of Consumers
Bancorp, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control
over financial reporting is defined in Rule 13a-15(1) promulgated under the Securities Exchange Act of 1934 as a process designed
by, or under the supervision of, our principal executive and principal financial officers and effected by the board of directors,
management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with U.S. generally accepted accounting principles and includes those
policies and procedures that:
Because of its inherent
limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may deteriorate.
Management assessed
the effectiveness of our internal control over financial reporting as of June 30, 2013. In making this assessment, management used
the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in 1992 Internal
Control-Integrated Framework. Based on that assessment, we have concluded that, as of June 30, 2013, our internal control over
financial reporting is effective based on those criteria.
This annual report
does not include an attestation report of the Corporation’s registered public accounting firm regarding internal control
over financial reporting. Management’s report was not subject to attestation by the Corporation’s registered public
accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Corporation to provide only management’s
report in this annual report.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2013 and 2012
(Dollar amounts in thousands, except per
share data)
NOTE 1—SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Unless otherwise indicated,
dollar amounts are in thousands, except per share data.
Principles of Consolidation:
The consolidated financial statements include the accounts of Consumers Bancorp, Inc. (Corporation) and its wholly owned subsidiary,
Consumers National Bank (Bank), together referred to as the Corporation. All significant intercompany transactions have been eliminated
in the consolidation.
Nature
of Operations:
Consumers Bancorp, Inc. is a bank holding company headquartered in Minerva, Ohio that provides, through its
banking subsidiary, a broad array of products and services throughout its
primary market area of Stark, Columbiana, Carroll
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.
Business Segment
Information:
Consumers Bancorp, Inc. is a bank holding company engaged in the business of commercial and retail banking, which
accounts for substantially all of its revenues, operating income, and assets. Accordingly, all of its operations are reported in
one segment, banking.
Use of Estimates:
To prepare financial statements in conformity with U.S. generally accepted accounting principles, management makes estimates and
assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements
and the disclosures provided, and actual results could differ. The allowance for loan losses, fair values of financial instruments,
and determination of other-than-temporary impairment of securities are particularly subject to change.
Cash Flows:
Cash
and cash equivalents include cash, deposits with other financial institutions with original maturities of less than 90 days and
federal funds sold. Net cash flows are reported for customer loan and deposit transactions, interest bearing deposits
in other financial institutions and short-term borrowings.
Interest–Bearing
Deposits in Other Financial Institutions
: Interest-bearing deposits in other financial institutions mature within one year
and are carried at cost.
Cash Reserves:
The Bank is required to maintain cash on hand and non-interest bearing balances on deposit with the Federal Reserve Bank to meet
regulatory reserve and clearing requirements. The required reserve balance at June 30, 2013 and 2012 was $4,291 and $3,991, respectively.
Securities:
Securities are generally classified into either held-to-maturity or available-for-sale categories. Held-to-maturity securities
are carried at amortized cost and are those that the Corporation has the positive intent and ability to hold to maturity. Available-for-sale
securities are those that the Corporation may decide to sell before maturity if needed for liquidity, asset-liability management,
or other reasons. Available-for-sale securities are reported at fair value, with unrealized gains or losses included in other comprehensive
income (loss) as a separate component of equity, net of tax.
Interest income includes
amortization of purchase premiums and accretion of discounts. Premiums and discounts on securities are amortized on the level-yield
method without anticipating prepayments, except for mortgage-backed securities where prepayments are anticipated. Gains and losses
on sales are recorded on the trade date and determined using the specific identification method.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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. For securities in an unrealized loss position, management considers the extent and duration
of the unrealized loss, and the financial condition and near-term prospects of the issuer. Management also assesses whether it
intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before
recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference
between amortized cost and fair value is recognized as impairment through earnings. For debt securities that do not meet the aforementioned
criteria, the amount of impairment is split into two components as follows: 1) OTTI related to credit loss, which must be recognized
in the income statement and 2) OTTI related to other factors, which is recognized in other comprehensive income. The credit loss
is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis.
For equity securities, the entire amount of impairment is recognized through earnings.
Federal Bank and
Other Restricted Stocks:
The Bank is a member of the Federal Home Loan Bank (FHLB) system. Members are required to own a certain
amount of stock based on the level of borrowings and other factors, and may invest in additional amounts. FHLB stock, included
with Federal bank and other restricted stocks on the Consolidated Balance Sheet, is carried at cost, classified as a restricted
security and periodically evaluated for impairment based on ultimate recovery of par value. Federal Reserve Bank stock is also
carried at cost. Since these stocks are viewed as a long-term investment, impairment is based on ultimate recovery of par value.
Both cash and stock dividends are reported as income.
Loans Held for
Sale
: Mortgage loans originated and intended for sale in the secondary market are carried at the lower of aggregate cost or
fair value, as determined by outstanding commitments from investors. Mortgage loans held for sale are generally sold with servicing
rights released. Net unrealized losses, if any, are recorded as a valuation allowance and charged to earnings. Gains and losses
on sales of mortgage loans are based on the difference between the selling price and the carrying value of the related loan sold.
Loans:
Loans
that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at the principal
balance outstanding, net of deferred loan fees and costs, and an allowance for loan losses. Interest income is accrued on the unpaid
principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income
using the level-yield method without anticipating prepayments. The recorded investment in loans includes accrued interest receivable.
Interest income on
commercial, commercial real estate and 1-4 family residential loans is discontinued at the time the loan is 90 days delinquent
unless the loan is well-secured and in the process of collection. Consumer loans are typically charged off no later than 120 days
past due. Past due status is determined by the contractual terms of the loan. In all cases, loans are placed on non-accrual or
charged-off at an earlier date if collection of principal or interest is considered doubtful.
All interest accrued
but not received on loans placed on non-accrual is reversed against interest income. Interest received on such loans is accounted
for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when
the customer has exhibited the ability to repay and demonstrated this ability over at least a consecutive six month period and
future payments are reasonably assured.
Loan Commitments
and Related Financial Instruments:
Financial instruments include off-balance sheet credit instruments, such as commitments
to make loans and commercial letters of credit, issued to meet customer financing needs. The face amount for these items represents
the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded when
funded.
Concentrations
of Credit Risk:
The Bank grants consumer, real estate and commercial loans primarily to borrowers in Stark, Columbiana and
Carroll counties. Therefore, the Corporation’s exposure to credit risk is significantly affected by changes in the economy
in this tri-county area. Automobiles and other consumer assets, business assets and residential and commercial real estate secure
most loans.
Allowance for Loan
Losses:
The allowance for loan losses is a valuation allowance for probable incurred credit losses. Loan losses are charged
against the allowance when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any,
are credited to the allowance. Management estimates the allowance balance required based on past loan loss experience, the nature
and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions
and other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan
that, in management’s judgment, should be charged-off.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The allowance consists
of specific and general components. The specific component relates to loans that are individually classified as impaired. The general
component covers non-classified loans and is based on historical loss experience adjusted for current factors.
A loan is considered
impaired when, based on current information and events, it is probable that the Corporation will be unable to collect all amounts
due according to the contractual terms of the loan agreement. Loans, for which the terms have been modified resulting in a concession,
and for which the borrower is experiencing financial difficulties, are considered trouble debt restructurings and classified as
impaired. Factors considered by management in determining impairment include payment status, collateral value, and the probability
of collecting scheduled principal and interest payments when due. 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 evaluated
in total for smaller-balance loans of similar nature such as residential mortgage, consumer loans and on an individual loan basis
for other loans. If a loan is impaired, a portion of the allowance is allocated so the loan is reported, net, at the present value
of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected
from the collateral. Loans are evaluated for impairment when payments are delayed, typically 90 days or more, or when it is probable
that not all principal and interest amounts will be collected according to the original terms of the loan. Troubled debt restructurings
are separately identified for impairment disclosures and are measured at the present value of estimated future cash flows using
the loan’s effective interest rate at inception. If a troubled debt restructuring is considered to be a collateral dependent
loan, the loan is reported, net, at the fair value of the collateral. For troubled debt restructurings that subsequently default,
the Corporation determines the amount of reserve in accordance with the accounting policy for the allowance for loan losses.
The general component
covers non-impaired loans and is based on historical loss experience adjusted for current factors. The historical loss experience
is determined by portfolio segment and is based on the actual loss history experienced by the Corporation over the most recent
three year period. This actual loss experience is supplemented with other economic factors based on the risks present for each
portfolio segment. These economic factors include consideration of the following: levels of and trends in volume and terms of loans;
effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedures and practices;
experience, ability and depth of lending management and other relevant staff; national and local economic trends and conditions;
industry conditions; and effects of changes in credit concentrations. The following portfolio segments have been identified:
Commercial
Loans:
Commercial loans are made for a wide variety of general business purposes, including financing for equipment, inventories
and accounts receivable. The term of each commercial loan varies by its purpose.
Commercial loans are underwritten after
evaluating and understanding the borrower’s ability to operate profitably and prudently expand its business. Current and
projected cash flows are evaluated to determine the ability of the borrower to repay their obligations as agreed. Commercial loans
are primarily made based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by
the borrower. The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate
in value. Most commercial loans are secured by the assets being financed or other business assets such as accounts receivable or
inventory and usually
incorporate a personal guarantee; however, some short-term loans may be made on
an unsecured basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans
may be substantially dependent on the ability of the borrower to collect amounts due from its customers. The commercial loan portfolio
includes loans to a wide variety of corporations and businesses across many industrial classifications in the areas where the Bank
operates.
Commercial Real
Estate:
Commercial real estate loans include mortgage loans to farmers, multi-family investment properties, developers and
owners of commercial real estate. Commercial real estate lending typically involves higher loan principal amounts and the repayment
of these loans is generally largely dependent on the successful operation of the property securing the loan or the business conducted
on the property securing the loan. Commercial real estate loans may be more adversely affected by conditions in the real estate
markets or in the general economy. The properties securing the Corporation’s commercial real estate portfolio are diverse
in terms of type and geographic location. This diversity helps reduce the Corporation’s exposure to adverse economic events
that affect any single market or industry. Management monitors and evaluates commercial real estate loans based on collateral,
geography and risk grade criteria. In addition, management tracks the level of owner-occupied commercial real estate loans versus
non-owner occupied loans.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Residential real
estate
: Residential real estate loans
are secured by one to four family residential properties and include both owner
occupied, non-owner occupied and home equity loans. Credit approval for residential real estate loans requires demonstration of
sufficient income to repay the principal and interest and the real estate taxes and insurance, stability of employment, an established
credit record and an appropriately appraised value of the real estate securing the loan that generally requires that the residential
real estate loan amount be no more than 80% of the purchase price or the appraised value of the real estate securing the loan.
Underwriting standards for home equity loans are heavily influenced by statutory requirements, which include, but are not limited
to, a maximum loan-to-value percentage of 80%, collection remedies, the number of such loans a borrower can have at one time and
documentation requirements.
Consumer Loans
:
The Corporation originates direct and indirect consumer loans, primarily automobile loans, personal lines of credit, and unsecured
consumer loans in its primary market areas. Credit approval for consumer loans requires income sufficient to repay principal and
interest due, stability of employment, an established credit record and sufficient collateral for secured loans. Consumer loans
typically have shorter terms and lower balances with higher yields as compared to real estate mortgage loans, but generally carry
higher risks of default. Consumer loan collections are dependent on the borrower’s continuing financial stability, and thus
are more likely to be affected by adverse personal circumstances.
Other Real Estate
Owned:
Real estate properties acquired through, or in lieu of, loan foreclosure are initially recorded at fair value less
costs to sell at the date of acquisition, establishing a new cost basis. Any reduction to fair value from the carrying value of
the related loan at the time of acquisition is accounted for as a loan loss. These assets are subsequently accounted for at lower
of cost or fair value less estimated costs to sell. If the fair value declines after acquisition, a valuation allowance is recorded
as a charge to income. Operating costs after acquisition are expensed. Gains and losses on disposition are reported as a charge
to income.
Premises and Equipment:
Land is carried at cost. Premises and equipment are stated at cost less accumulated depreciation. Depreciation is computed
primarily using the straight-line method over the estimated useful life of the owned asset and, for leasehold improvements, generally
over the lesser of the remaining term of the lease facility or the estimated economic life of the improvement. Useful lives range
from three years for software to thirty-nine and one-half years for buildings.
Cash Surrender
Value of Life Insurance:
The Bank has purchased single-premium life insurance policies to insure the lives of current and
former participants in the salary continuation plan. As of June 30, 2013, the Bank had policies with total death benefits
of $12,103 and total cash surrender values of $5,789. As of June 30, 2012, the Bank had policies with total death benefits
of $12,044 and total cash surrender values of $5,605. Bank owned life insurance is recorded at the amount that can be realized
under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other changes or other
amounts due that are probable at settlement. Tax-exempt income is recognized from the periodic increases in cash surrender value
of these policies.
Long-term Assets:
Premises, equipment and other long-term assets are reviewed for impairment when events indicate their carrying amount may
not be recoverable from future undiscounted cash flows. If impaired, the assets are recorded at fair value.
Repurchase Agreements:
Substantially all repurchase agreement liabilities, which are classified as short-term borrowings, represent amounts advanced
by various customers. Securities are pledged to cover these liabilities, which are not covered by federal deposit insurance.
Retirement Plan:
The Bank maintains a 401(k) savings and retirement plan covering all eligible employees. Matching contributions are made and
expensed annually.
Income Taxes:
The Corporation files a consolidated federal income tax return. Income tax expense is the sum of the current-year income tax
due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected
future tax consequences of temporary differences between the carrying amounts and tax basis of assets and liabilities, computed
using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized.
The Corporation applies a more likely than not recognition threshold for all tax uncertainties in accordance with U.S. generally
accepted accounting principles. A tax position is recognized as a benefit only if it is more likely than not the position would
be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount
of tax benefit greater than 50% likely of being realized on examination. The Corporation recognizes interest and/or penalties
related to income tax matters in income tax expense.
Earnings per Common
Share:
Basic earnings per common share is net income divided by the weighted average number of common shares outstanding during
the period.
Diluted earnings per common share includes the dilutive effect of additional potential
common shares issuable upon the vesting of restricted stock awards.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Stock-Based Compensation:
Compensation cost is recognized for restricted stock awards issued to employees over the required service period, generally
defined as the vesting period. The fair value of restricted stock awards is estimated by using the market price of the Corporation’s
common stock at the date of grant. For awards with graded vesting, compensation cost is recognized on a straight-line basis over
the requisite service period for the entire award.
Comprehensive
Income (Loss):
Comprehensive income (loss) consists of net income and other comprehensive income (loss). Other comprehensive
income (loss) includes unrealized gains and losses on securities available-for-sale, which are also recognized as a separate component
of equity, net of tax.
Loss Contingencies:
Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities
when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe
there are such matters that will have a material effect on the financial statements.
Fair Value
of Financial Instruments:
Fair values of financial instruments are estimated using relevant market information and other assumptions,
as more fully disclosed in a separate note. Fair value estimates involve uncertainties and matters of significant judgment regarding
interest rates, credit risk, discounted cash flows, prepayments, and other factors, especially in the absence of broad markets
for particular items. Changes in assumptions or in market conditions could significantly affect the estimates.
Dividend
Restrictions:
Banking regulations require maintaining certain capital levels and may limit the dividends paid by the Bank
to the holding company or by the holding company to shareholders. As of June 30, 2013 the Bank could, without prior approval,
declare a dividend of approximately $4,494.
Reclassifications:
Certain reclassifications have been made to the June 30, 2012 financial statements to be comparable to the June 30,
2013 presentation. The reclassifications had no impact on prior year net income or shareholders’ equity.
Adoption of New
Accounting Standards:
In February 2013, the Financial Accounting Standards Board issued Accounting
Standards Update (ASU) 2013-02, Comprehensive Income: Reporting of Amounts Classified out of Accumulated Other Comprehensive Income,
with the primary objective of improving the reporting of reclassifications out of accumulated other comprehensive income. This
ASU requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by
component. In addition, an entity is required to present, either on the face of the statement where net income is presented or
in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net
income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the
same reporting period. The amendments are effective prospectively for fiscal years, and interim periods within those years, beginning
after December 15, 2012. The Corporation early adopted the ASU as of March 31, 2013. The amendments did not have a material impact
on Corporation’s Consolidated Financial Statements. See Note 15 for the additional disclosure.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2—SECURITIES
The following table
summarizes the amortized cost and fair value of securities available-for-sale and securities held-to-maturity at June 30, 2013
and 2012 and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income
(loss) and gross unrecognized gains and losses:
Available-for-sale
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Fair
Value
|
|
June 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of U.S. government-sponsored entities and agencies
|
|
$
|
4,700
|
|
|
$
|
6
|
|
|
$
|
(48
|
)
|
|
$
|
4,658
|
|
Obligations of state and political subdivisions
|
|
|
39,777
|
|
|
|
805
|
|
|
|
(770
|
)
|
|
|
39,812
|
|
Mortgage-backed securities - residential
|
|
|
46,834
|
|
|
|
552
|
|
|
|
(497
|
)
|
|
|
46,889
|
|
Collateralized mortgage obligations
|
|
|
5,740
|
|
|
|
11
|
|
|
|
(43
|
)
|
|
|
5,708
|
|
Trust preferred security
|
|
|
202
|
|
|
|
—
|
|
|
|
(40
|
)
|
|
|
162
|
|
Total available-for-sale securities
|
|
$
|
97,253
|
|
|
$
|
1,374
|
|
|
$
|
(1,398
|
)
|
|
$
|
97,229
|
|
Held-to-maturity
|
|
Amortized
Cost
|
|
|
Gross
Unrecognized
Gains
|
|
|
Gross
Unrecognized
Losses
|
|
|
Fair
Value
|
|
June 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of state and political subdivisions
|
|
$
|
3,000
|
|
|
$
|
—
|
|
|
$
|
(74
|
)
|
|
$
|
2,926
|
|
Total held-to-maturity securities
|
|
$
|
3,000
|
|
|
$
|
—
|
|
|
$
|
(74
|
)
|
|
$
|
2,926
|
|
Available-for-sale
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Fair
Value
|
|
June 30, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of U.S. government sponsored entities and agencies
|
|
$
|
8,487
|
|
|
$
|
80
|
|
|
$
|
—
|
|
|
$
|
8,567
|
|
Obligations of state and political subdivisions
|
|
|
33,808
|
|
|
|
1,577
|
|
|
|
(109
|
)
|
|
|
35,276
|
|
Mortgage-backed securities - residential
|
|
|
48,255
|
|
|
|
1,108
|
|
|
|
(32
|
)
|
|
|
49,331
|
|
Collateralized mortgage obligations
|
|
|
12,154
|
|
|
|
25
|
|
|
|
(82
|
)
|
|
|
12,097
|
|
Trust preferred security
|
|
|
202
|
|
|
|
—
|
|
|
|
(138
|
)
|
|
|
64
|
|
Total available-for-sale securities
|
|
$
|
102,906
|
|
|
$
|
2,790
|
|
|
$
|
(361
|
)
|
|
$
|
105,335
|
|
Proceeds from sales
of debt securities during 2013 and 2012 were as follows:
|
|
2013
|
|
|
2012
|
|
Proceeds from sales
|
|
$
|
7,798
|
|
|
$
|
14,568
|
|
Gross realized gains
|
|
|
181
|
|
|
|
204
|
|
Gross realized losses
|
|
|
24
|
|
|
|
60
|
|
The amortized cost
and fair values of debt securities at June 30, 2013 by contractual maturity are shown below. Expected maturities will differ
from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment
penalties. Securities not due at a single maturity date, primarily mortgage-backed securities, collateralized mortgage obligations
and the trust preferred security are shown separately.
Available-for-sale
|
|
Amortized
Cost
|
|
|
Fair Value
|
|
Due after one year through five years
|
|
$
|
4,969
|
|
|
$
|
5,084
|
|
Due after five years through ten years
|
|
|
15,420
|
|
|
|
15,484
|
|
Due after ten years
|
|
|
24,088
|
|
|
|
23,902
|
|
Total
|
|
|
44,477
|
|
|
|
44,470
|
|
Mortgage-backed securities – residential
|
|
|
46,834
|
|
|
|
46,889
|
|
Collateralized mortgage obligations
|
|
|
5,740
|
|
|
|
5,708
|
|
Trust preferred security
|
|
|
202
|
|
|
|
162
|
|
Total
|
|
$
|
97,253
|
|
|
$
|
97,229
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Held-to-maturity
|
|
Amortized
Cost
|
|
|
Fair Value
|
|
Due after ten years
|
|
$
|
3,000
|
|
|
$
|
2,926
|
|
Total
|
|
$
|
3,000
|
|
|
$
|
2,926
|
|
Securities with a
carrying value of approximately $27,781 and $35,411 were pledged at June 30, 2013 and 2012, respectively, to secure public deposits
and commitments as required or permitted by law. At June 30, 2013 and 2012, there were no holdings of securities of any one issuer,
other than the U.S. government and its agencies, with an aggregate book value greater than 10% of shareholders’ equity.
The following table
summarizes the securities with unrealized and unrecognized losses at June 30, 2013 and 2012, aggregated by investment category
and length of time the individual securities have been in a continuous unrealized or unrecognized loss position:
|
|
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, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of US government-sponsored entities and agencies
|
|
$
|
4,418
|
|
|
$
|
(48
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,418
|
|
|
$
|
(48
|
)
|
Obligations of states and political subdivisions
|
|
|
17,826
|
|
|
|
(766
|
)
|
|
|
107
|
|
|
|
(4
|
)
|
|
|
17,933
|
|
|
|
(770
|
)
|
Mortgage-backed securities - residential
|
|
|
28,836
|
|
|
|
(497
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
28,836
|
|
|
|
(497
|
)
|
Collateralized mortgage obligations
|
|
|
4,696
|
|
|
|
(43
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
4,696
|
|
|
|
(43
|
)
|
Trust preferred security
|
|
|
—
|
|
|
|
—
|
|
|
|
162
|
|
|
|
(40
|
)
|
|
|
162
|
|
|
|
(40
|
)
|
Total temporarily impaired
|
|
$
|
55,776
|
|
|
$
|
(1,354
|
)
|
|
$
|
269
|
|
|
$
|
(44
|
)
|
|
$
|
56,045
|
|
|
$
|
(1,398
|
)
|
|
|
Less than 12 Months
|
|
|
12 Months or more
|
|
|
Total
|
|
Held-to-maturity
|
|
Fair
Value
|
|
|
Unrecognized
Loss
|
|
|
Fair
Value
|
|
|
Unrecognized
Loss
|
|
|
Fair
Value
|
|
|
Unrecognized
Loss
|
|
June 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of states and political subdivisions
|
|
$
|
3,000
|
|
|
$
|
(74
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,926
|
|
|
$
|
(74
|
)
|
Total temporarily impaired
|
|
$
|
3,000
|
|
|
$
|
(74
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,926
|
|
|
$
|
(74
|
)
|
|
|
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, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of U.S. government-sponsored entities
|
|
$
|
6,002
|
|
|
$
|
(109
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6,002
|
|
|
$
|
(109
|
)
|
Obligations of states and political subdivisions
|
|
|
11,135
|
|
|
|
(32
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
11,135
|
|
|
|
(32
|
)
|
Collateralized mortgage obligations
|
|
|
6,411
|
|
|
|
(62
|
)
|
|
|
2,314
|
|
|
|
(20
|
)
|
|
|
8,725
|
|
|
|
(82
|
)
|
Trust preferred security
|
|
|
—
|
|
|
|
—
|
|
|
|
64
|
|
|
|
(138
|
)
|
|
|
64
|
|
|
|
(138
|
)
|
Total temporarily impaired
|
|
$
|
23,548
|
|
|
$
|
(203
|
)
|
|
$
|
2,378
|
|
|
$
|
(158
|
)
|
|
$
|
25,926
|
|
|
$
|
(361
|
)
|
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
. However, the trust preferred security is evaluated using the model
outlined in FASB ASC Topic 325,
Recognition of Interest Income and Impairment on Purchased Beneficial Interests and Beneficial
Interests that Continue to be Held by a Transfer in Securitized Financial Assets.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
Under the ASC Topic
325 model, the present value of the remaining cash flows as estimated at the preceding evaluation date are compared to the current
expected remaining cash flows. An OTTI is deemed to have occurred if there has been an adverse change in the remaining expected
future cash flows. The analysis of the trust preferred security falls within the scope of ASC Topic 325.
As of June 30, 2013,
the Corporation’s securities portfolio consisted of $97,229 available-for-sale securities, of which $56,045 were in an unrealized
loss position and a $3,000 held-to-maturity security with a $74 unrecognized loss. The majority of the unrealized losses are related
to the Corporation’s obligations of states and political subdivisions and residential mortgage-backed securities, as discussed
below:
Obligations
of States and Political Subdivisions:
At June 30, 2013, approximately 95.7% of the obligations of states and political subdivisions
classified as available-for-sale were general obligation bonds and 4.3% were revenue bonds. The $3,000 security held-to-maturity
is a revenue bond made to a local municipality. The unrealized and unrecognized losses were mainly attributable to the spreads
for these types of securities being wider at June 30, 2013 than when these securities were purchased and changes in interest rates.
Management monitors the financial data of the individual municipalities to ensure they meet minimum credit standards. Since
the Corporation does not intend to sell these securities and it is not likely the Corporation will be required to sell these securities
at an unrealized loss position prior to any anticipated recovery in fair value
, which may be maturity,
management does not believe there is any other-than-temporary impairment related to these securities at June 30, 2013.
Mortgage-Backed
Securities and Collateralized Mortgage Obligations:
At June 30, 2013, all of the mortgage-backed securities and collateralized
mortgage obligations held by the Corporation were issued by U.S. government-sponsored entities and agencies, primarily Fannie
Mae, Freddie Mac and Ginnie Mae, institutions which the government has affirmed its commitment to support. Because the decline
in fair value is attributable to higher interest rates and higher than projected prepayment speeds increasing the premium amortization,
and not credit quality, and because the Corporation does not have the intent to sell nor is it likely that it will be required
to sell the securities before their anticipated recovery, the Corporation does not consider these securities to be other-than-temporarily
impaired.
Trust
Preferred Security:
The Corporation owns a trust preferred security, which represents
collateralized
debt obligations (CDOs)
issued by other banks, bank holding companies and insurance companies.
The
security is part of a pool of issuers that support a more senior tranche of securities. The cash interest payments for the trust
preferred security are being deferred as a result of an increase in principal and/or interest deferrals by the issuers of the
underlying securities during the period of 2008 through 2011. The accumulated other-than-temporary impairment loss recognized
in earnings in periods prior to 2012 was $780. According to the June 30, 2013 cash flow analysis, the expected cash flows were
above the recorded amortized cost of the trust preferred security and the Corporation has received pricing indications that are
very near the securities adjusted amortized cost of $202. Therefore, management does not believe there is any additional other-than-temporary
impairment related to this security at June 30, 2013.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3—LOANS
Major classifications
of loans were as follows as of June 30:
|
|
2013
|
|
|
2012
|
|
Commercial
|
|
$
|
26,678
|
|
|
$
|
23,041
|
|
Commercial real estate:
|
|
|
|
|
|
|
|
|
Construction
|
|
|
2,096
|
|
|
|
1,546
|
|
Other
|
|
|
125,630
|
|
|
|
110,775
|
|
1 – 4 Family residential real estate:
|
|
|
|
|
|
|
|
|
Owner occupied
|
|
|
32,755
|
|
|
|
34,000
|
|
Non-owner occupied
|
|
|
17,941
|
|
|
|
18,794
|
|
Construction
|
|
|
377
|
|
|
|
187
|
|
Consumer
|
|
|
11,866
|
|
|
|
9,407
|
|
Subtotal
|
|
|
217,343
|
|
|
|
197,750
|
|
Less: Deferred loan fees and costs
|
|
|
(303
|
)
|
|
|
(320
|
)
|
Allowance for loan losses
|
|
|
(2,496
|
)
|
|
|
(2,335
|
)
|
Net loans
|
|
$
|
214,544
|
|
|
$
|
195,095
|
|
The following table presents the activity in the allowance
for loan losses by portfolio segment for the year ending June 30, 2013:
|
|
|
|
|
|
|
|
1-4 Family
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
Residential
|
|
|
|
|
|
|
|
|
|
|
|
|
Real
|
|
|
Real
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
Estate
|
|
|
Estate
|
|
|
Consumer
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
143
|
|
|
$
|
1,283
|
|
|
$
|
712
|
|
|
$
|
197
|
|
|
$
|
2,335
|
|
Provision for loan losses
|
|
|
53
|
|
|
|
212
|
|
|
|
(35
|
)
|
|
|
107
|
|
|
|
337
|
|
Loans charged-off
|
|
|
(35
|
)
|
|
|
(24
|
)
|
|
|
(64
|
)
|
|
|
(115
|
)
|
|
|
(238
|
)
|
Recoveries
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
|
61
|
|
|
|
62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total ending allowance balance
|
|
$
|
161
|
|
|
$
|
1,471
|
|
|
$
|
614
|
|
|
$
|
250
|
|
|
$
|
2,496
|
|
The following table presents the activity in the allowance
for loan losses by portfolio segment for the year ending June 30, 2012:
|
|
|
|
|
|
|
|
1-4 Family
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
Residential
|
|
|
|
|
|
|
|
|
|
|
|
|
Real
|
|
|
Real
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
Estate
|
|
|
Estate
|
|
|
Consumer
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
179
|
|
|
$
|
882
|
|
|
$
|
947
|
|
|
$
|
93
|
|
|
$
|
2,101
|
|
Provision for loan losses
|
|
|
(36
|
)
|
|
|
336
|
|
|
|
(171
|
)
|
|
|
186
|
|
|
|
315
|
|
Loans charged-off
|
|
|
—
|
|
|
|
—
|
|
|
|
(69
|
)
|
|
|
(158
|
)
|
|
|
(227
|
)
|
Recoveries
|
|
|
—
|
|
|
|
65
|
|
|
|
5
|
|
|
|
76
|
|
|
|
146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total ending allowance balance
|
|
$
|
143
|
|
|
$
|
1,283
|
|
|
$
|
712
|
|
|
$
|
197
|
|
|
$
|
2,335
|
|
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
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, 2013. Included in the recorded investment in loans is $546 of accrued interest receivable net of deferred loans fees
of $303.
|
|
|
|
|
|
|
|
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
|
|
$
|
3
|
|
|
$
|
89
|
|
|
$
|
243
|
|
|
$
|
—
|
|
|
$
|
335
|
|
Collectively evaluated for impairment
|
|
|
158
|
|
|
|
1,382
|
|
|
|
371
|
|
|
|
250
|
|
|
|
2,161
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total ending allowance balance
|
|
$
|
161
|
|
|
$
|
1,471
|
|
|
$
|
614
|
|
|
$
|
250
|
|
|
$
|
2,496
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded investment in loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment
|
|
$
|
51
|
|
|
$
|
865
|
|
|
$
|
1,396
|
|
|
$
|
—
|
|
|
$
|
2,312
|
|
Loans collectively evaluated for impairment
|
|
|
26,683
|
|
|
|
126,881
|
|
|
|
49,780
|
|
|
|
11,930
|
|
|
|
215,274
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total ending loans balance
|
|
$
|
26,734
|
|
|
$
|
127,746
|
|
|
$
|
51,176
|
|
|
$
|
11,930
|
|
|
$
|
217,586
|
|
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, 2012. Included in the recorded investment in loans is $494 of accrued interest receivable net of deferred loans fees
of $320.
|
|
|
|
|
|
|
|
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
|
|
$
|
50
|
|
|
$
|
82
|
|
|
$
|
258
|
|
|
$
|
—
|
|
|
$
|
390
|
|
Collectively evaluated for impairment
|
|
|
93
|
|
|
|
1,201
|
|
|
|
454
|
|
|
|
197
|
|
|
|
1,945
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total ending allowance balance
|
|
$
|
143
|
|
|
$
|
1,283
|
|
|
$
|
712
|
|
|
$
|
197
|
|
|
$
|
2,335
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded investment in loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment
|
|
$
|
148
|
|
|
$
|
996
|
|
|
$
|
1,417
|
|
|
$
|
—
|
|
|
$
|
2,561
|
|
Loans collectively evaluated for impairment
|
|
|
22,940
|
|
|
|
111,352
|
|
|
|
51,683
|
|
|
|
9,388
|
|
|
|
195,363
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total ending loans balance
|
|
$
|
23,088
|
|
|
$
|
112,348
|
|
|
$
|
53,100
|
|
|
$
|
9,388
|
|
|
$
|
197,924
|
|
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
The following table presents information related to loans individually
evaluated for impairment by class of loans as of and for the year ended June 30, 2013:
|
|
Unpaid
|
|
|
|
|
|
Allowance for
|
|
|
Average
|
|
|
Interest
|
|
|
Cash Basis
|
|
|
|
Principal
|
|
|
Recorded
|
|
|
Loan Losses
|
|
|
Recorded
|
|
|
Income
|
|
|
Interest
|
|
|
|
Balance
|
|
|
Investment
|
|
|
Allocated
|
|
|
Investment
|
|
|
Recognized
|
|
|
Recognized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
$
|
65
|
|
|
$
|
65
|
|
|
$
|
—
|
|
|
$
|
63
|
|
|
$
|
—
|
|
|
$
|
—
|
|
1-4 Family residential real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied
|
|
|
125
|
|
|
|
125
|
|
|
|
—
|
|
|
|
103
|
|
|
|
—
|
|
|
|
—
|
|
Non-owner occupied
|
|
|
56
|
|
|
|
56
|
|
|
|
—
|
|
|
|
57
|
|
|
|
5
|
|
|
|
5
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
51
|
|
|
|
51
|
|
|
|
3
|
|
|
|
88
|
|
|
|
8
|
|
|
|
8
|
|
Commercial real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
793
|
|
|
|
800
|
|
|
|
89
|
|
|
|
808
|
|
|
|
72
|
|
|
|
72
|
|
1-4 Family residential real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied
|
|
|
283
|
|
|
|
281
|
|
|
|
56
|
|
|
|
298
|
|
|
|
—
|
|
|
|
—
|
|
Non-owner occupied
|
|
|
933
|
|
|
|
934
|
|
|
|
187
|
|
|
|
927
|
|
|
|
24
|
|
|
|
24
|
|
Total
|
|
$
|
2,306
|
|
|
$
|
2,312
|
|
|
$
|
335
|
|
|
$
|
2,344
|
|
|
$
|
109
|
|
|
$
|
109
|
|
The following table presents information related to loans individually
evaluated for impairment by class of loans as of and for the year ended June 30, 2012:
|
|
Unpaid
|
|
|
|
|
|
Allowance for
|
|
|
Average
|
|
|
Interest
|
|
|
Cash Basis
|
|
|
|
Principal
|
|
|
Recorded
|
|
|
Loan Losses
|
|
|
Recorded
|
|
|
Income
|
|
|
Interest
|
|
|
|
Balance
|
|
|
Investment
|
|
|
Allocated
|
|
|
Investment
|
|
|
Recognized
|
|
|
Recognized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
12
|
|
|
$
|
12
|
|
|
$
|
—
|
|
|
$
|
22
|
|
|
$
|
1
|
|
|
$
|
1
|
|
Commercial real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
144
|
|
|
|
144
|
|
|
|
—
|
|
|
|
412
|
|
|
|
67
|
|
|
|
67
|
|
1-4 Family residential real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied
|
|
|
238
|
|
|
|
238
|
|
|
|
—
|
|
|
|
92
|
|
|
|
2
|
|
|
|
2
|
|
Non-owner occupied
|
|
|
64
|
|
|
|
65
|
|
|
|
—
|
|
|
|
59
|
|
|
|
5
|
|
|
|
5
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
136
|
|
|
|
136
|
|
|
|
50
|
|
|
|
100
|
|
|
|
3
|
|
|
|
3
|
|
Commercial real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
851
|
|
|
|
852
|
|
|
|
82
|
|
|
|
813
|
|
|
|
14
|
|
|
|
14
|
|
1-4 Family residential real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied
|
|
|
160
|
|
|
|
160
|
|
|
|
13
|
|
|
|
271
|
|
|
|
3
|
|
|
|
3
|
|
Non-owner occupied
|
|
|
952
|
|
|
|
954
|
|
|
|
245
|
|
|
|
936
|
|
|
|
14
|
|
|
|
14
|
|
Total
|
|
$
|
2,557
|
|
|
$
|
2,561
|
|
|
$
|
390
|
|
|
$
|
2,705
|
|
|
$
|
109
|
|
|
$
|
109
|
|
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
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 June 30, 2013 and 2012:
|
|
June 30, 2013
|
|
|
June 30, 2012
|
|
|
|
|
|
|
Loans Past Due
|
|
|
|
|
|
Loans Past Due
|
|
|
|
|
|
|
Over 90 Days
|
|
|
|
|
|
Over 90 Days
|
|
|
|
|
|
|
Still
|
|
|
|
|
|
Still
|
|
|
|
Non-accrual
|
|
|
Accruing
|
|
|
Non-accrual
|
|
|
Accruing
|
|
Commercial
|
|
$
|
46
|
|
|
$
|
—
|
|
|
$
|
51
|
|
|
$
|
—
|
|
Commercial real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
86
|
|
|
|
—
|
|
|
|
911
|
|
|
|
—
|
|
1 – 4 Family residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied
|
|
|
295
|
|
|
|
—
|
|
|
|
307
|
|
|
|
—
|
|
Non-owner occupied
|
|
|
663
|
|
|
|
—
|
|
|
|
663
|
|
|
|
—
|
|
Consumer
|
|
|
7
|
|
|
|
2
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
1,097
|
|
|
$
|
2
|
|
|
$
|
1,932
|
|
|
$
|
—
|
|
Non-accrual loans and loans past due 90
days still on accrual include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually
classified impaired loans.
The following table presents the aging
of the recorded investment in past due loans as of June 30, 2013 by class of loans:
|
|
Days Past Due
|
|
|
|
|
|
|
|
|
|
|
|
|
30 - 59
|
|
|
60 - 89
|
|
|
90 Days or
|
|
|
Total
|
|
|
Loans Not
|
|
|
|
|
|
|
Days
|
|
|
Days
|
|
|
Greater
|
|
|
Past Due
|
|
|
Past Due
|
|
|
Total
|
|
Commercial
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
46
|
|
|
$
|
46
|
|
|
$
|
26,688
|
|
|
$
|
26,734
|
|
Commercial real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,088
|
|
|
|
2,088
|
|
Other
|
|
|
1,158
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,158
|
|
|
|
124,500
|
|
|
|
125,658
|
|
1-4 Family residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied
|
|
|
245
|
|
|
|
—
|
|
|
|
252
|
|
|
|
497
|
|
|
|
32,365
|
|
|
|
32,862
|
|
Non-owner occupied
|
|
|
—
|
|
|
|
—
|
|
|
|
84
|
|
|
|
84
|
|
|
|
17,854
|
|
|
|
17,938
|
|
Construction
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
376
|
|
|
|
376
|
|
Consumer
|
|
|
72
|
|
|
|
35
|
|
|
|
2
|
|
|
|
109
|
|
|
|
11,821
|
|
|
|
11,930
|
|
Total
|
|
$
|
1,475
|
|
|
$
|
35
|
|
|
$
|
384
|
|
|
$
|
1,894
|
|
|
$
|
215,692
|
|
|
$
|
217,586
|
|
The above table of past due loans includes
the recorded investment in non-accrual loans of $7 in the 30-59 days past due category, $382 in the 90 days or greater category
and $708 in the loans not past due category.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
The following table presents the aging
of the recorded investment in past due loans as of June 30, 2012 by class of loans:
|
|
Days Past Due
|
|
|
|
|
|
|
|
|
|
|
|
|
30 - 59
|
|
|
60 - 89
|
|
|
90 Days or
|
|
|
Total
|
|
|
Loans Not
|
|
|
|
|
|
|
Days
|
|
|
Days
|
|
|
Greater
|
|
|
Past Due
|
|
|
Past Due
|
|
|
Total
|
|
Commercial
|
|
$
|
85
|
|
|
$
|
—
|
|
|
$
|
33
|
|
|
$
|
118
|
|
|
$
|
22,970
|
|
|
$
|
23,088
|
|
Commercial real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction
|
|
|
202
|
|
|
|
—
|
|
|
|
—
|
|
|
|
202
|
|
|
|
1,345
|
|
|
|
1,547
|
|
Other
|
|
|
82
|
|
|
|
—
|
|
|
|
268
|
|
|
|
350
|
|
|
|
110,451
|
|
|
|
110,801
|
|
1-4 Family residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied
|
|
|
174
|
|
|
|
—
|
|
|
|
178
|
|
|
|
352
|
|
|
|
33,766
|
|
|
|
34,118
|
|
Non-owner occupied
|
|
|
43
|
|
|
|
—
|
|
|
|
—
|
|
|
|
43
|
|
|
|
18,753
|
|
|
|
18,796
|
|
Construction
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
186
|
|
|
|
186
|
|
Consumer
|
|
|
—
|
|
|
|
8
|
|
|
|
—
|
|
|
|
8
|
|
|
|
9,380
|
|
|
|
9,388
|
|
Total
|
|
$
|
586
|
|
|
$
|
8
|
|
|
$
|
479
|
|
|
$
|
1,073
|
|
|
$
|
196,851
|
|
|
$
|
197,924
|
|
The above table of past due loans includes
the recorded investment in non-accrual loans of $43 in the 30-59 days past due category, $479 in the 90 days or greater category
and $1,410 in the loans not past due category.
Troubled Debt Restructurings:
As of June 30, 2013, the recorded investment
of loans classified as troubled debt restructurings was $1,946 with $245 of specific reserves allocated to these loans. As of
June 30, 2012, the recorded investment of loans classified as troubled debt restructurings was $1,973 with $258 of specific reserves
allocated to these loans. As of June 30, 2013 and 2012, the Corporation had not committed to lend any additional amounts to customers
with outstanding loans that are classified as troubled debt restructurings.
During the years ended June 30, 2013 and
2012, the terms of certain loans were modified as troubled debt restructurings. The modification of the terms of such loans included
one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date
at a stated rate of interest lower than the current market rate for new debt with similar risk; a permanent reduction of the recorded
investment in the loan; or a temporary reduction in the payment amount to interest only.
During the 2013 fiscal year, modifications
completed involving a reduction of the stated interest rate of the loan were for periods ranging from 6 months to 5 years and
modifications involving the extension of the maturity date were for a period of 5 years to 10 years. During the 2012 fiscal year,
modifications completed involving a reduction of the stated interest rate of the loan were for periods ranging from 12 months
to 25 years and modifications involving an extension of the maturity date were for a period of 6.5 years to 25 years.
The following table presents loans by
class modified as troubled debt restructurings that occurred during the years ended June 30, 2013 and 2012:
|
|
|
|
|
Pre-Modification
|
|
|
Post-Modification
|
|
|
|
Number of
|
|
|
Outstanding Recorded
|
|
|
Outstanding Recorded
|
|
|
|
Loans
|
|
|
Investment
|
|
|
Investment
|
|
June 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
1
|
|
|
$
|
285
|
|
|
$
|
282
|
|
1 – 4 Family residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied
|
|
|
1
|
|
|
|
21
|
|
|
|
21
|
|
Total
|
|
|
2
|
|
|
$
|
306
|
|
|
$
|
303
|
|
The troubled debt restructurings described
above increased the allowance for loan losses by $42 and there were no charge offs from troubled debt restructurings during the
fiscal year ending June 30, 2013.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
Post-Modification
|
|
|
Pre-Modification
|
|
|
|
Number of
|
|
|
Outstanding Recorded
|
|
|
Outstanding Recorded
|
|
|
|
Loans
|
|
|
Investment
|
|
|
Investment
|
|
June 30, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
1
|
|
|
$
|
85
|
|
|
$
|
85
|
|
Commercial real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
2
|
|
|
|
137
|
|
|
|
137
|
|
1 – 4 Family residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied
|
|
|
1
|
|
|
|
114
|
|
|
|
114
|
|
Non-owner occupied
|
|
|
7
|
|
|
|
534
|
|
|
|
466
|
|
Total
|
|
|
11
|
|
|
$
|
870
|
|
|
$
|
802
|
|
The troubled debt restructurings described
above increased the allowance for loan losses by $32 and resulted in charge offs of $63 during the period ended June 30, 2012.
There were no loans classified as troubled
debt restructurings for which there was a payment default during the 2013 fiscal year. The following table presents loans by class
modified as troubled debt restructurings for which there was a payment default within 12 months following the modification during
the period ended June 30, 2012:
|
|
Number of
|
|
|
Recorded
|
|
|
|
Loans
|
|
|
Investment
|
|
Troubled debt restructuring:
|
|
|
|
|
|
|
|
|
Commercial real estate:
|
|
|
|
|
|
|
|
|
Other
|
|
|
1
|
|
|
$
|
428
|
|
A loan is considered to be in payment
default once it is 90 days contractually past due under the modified terms. The troubled debt restructuring that subsequently
defaulted described above did not increase the allowance for loan losses or have any charge-off during the period ended June 30,
2012.
Credit Quality Indicators:
The Corporation 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 Corporation analyzes loans individually by classifying the loans as to credit risk. This analysis includes loans
with a total outstanding loan relationship greater than $100 and non-homogeneous loans, such as commercial and commercial real
estate loans. This analysis is performed on a monthly basis. The Corporation 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. Loans listed as not rated
are either less than $100 or are included in groups of homogeneous loans. These loans are evaluated based on delinquency status,
which was discussed previously. As of June 30, 2013, and based on the most recent analysis performed, the recorded investment
by risk category of loans by class of loans is as follows:
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
Special
|
|
|
|
|
|
|
|
|
Not
|
|
|
|
Pass
|
|
|
Mention
|
|
|
Substandard
|
|
|
Doubtful
|
|
|
Rated
|
|
Commercial
|
|
$
|
23,886
|
|
|
$
|
1,236
|
|
|
$
|
224
|
|
|
$
|
51
|
|
|
$
|
1,337
|
|
Commercial real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction
|
|
|
2,003
|
|
|
|
85
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Other
|
|
|
115,269
|
|
|
|
4,439
|
|
|
|
4,073
|
|
|
|
865
|
|
|
|
1,012
|
|
1-4 Family residential real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied
|
|
|
4,083
|
|
|
|
—
|
|
|
|
—
|
|
|
|
406
|
|
|
|
28,373
|
|
Non-owner occupied
|
|
|
14,443
|
|
|
|
1,104
|
|
|
|
995
|
|
|
|
990
|
|
|
|
406
|
|
Construction
|
|
|
243
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
133
|
|
Consumer
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
11,930
|
|
Total
|
|
$
|
159,927
|
|
|
$
|
6,864
|
|
|
$
|
5,292
|
|
|
$
|
2,312
|
|
|
$
|
43,191
|
|
As of June 30, 2012, and based on the most recent analysis
performed, the recorded investment by risk category of loans by class of loans is as follows:
|
|
|
|
|
Special
|
|
|
|
|
|
|
|
|
Not
|
|
|
|
Pass
|
|
|
Mention
|
|
|
Substandard
|
|
|
Doubtful
|
|
|
Rated
|
|
Commercial
|
|
$
|
21,642
|
|
|
$
|
240
|
|
|
$
|
14
|
|
|
$
|
148
|
|
|
$
|
1,044
|
|
Commercial real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction
|
|
|
1,353
|
|
|
|
163
|
|
|
|
—
|
|
|
|
—
|
|
|
|
31
|
|
Other
|
|
|
98,942
|
|
|
|
7,332
|
|
|
|
2,657
|
|
|
|
996
|
|
|
|
874
|
|
1-4 Family residential real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied
|
|
|
4,256
|
|
|
|
—
|
|
|
|
99
|
|
|
|
398
|
|
|
|
29,365
|
|
Non-owner occupied
|
|
|
14,205
|
|
|
|
2,197
|
|
|
|
875
|
|
|
|
1,019
|
|
|
|
500
|
|
Construction
|
|
|
47
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
139
|
|
Consumer
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
9,388
|
|
Total
|
|
$
|
140,445
|
|
|
$
|
9,932
|
|
|
$
|
3,645
|
|
|
$
|
2,561
|
|
|
$
|
41,341
|
|
The Bank has granted
loans to certain of its executive officers, directors and their affiliates. A summary of activity during the year ended June 30,
2013 of related party loans were as follows:
Principal balance, July 1
|
|
$
|
873
|
|
New loans
|
|
|
45
|
|
Repayments
|
|
|
(224
|
)
|
Principal balance, June 30
|
|
$
|
694
|
|
NOTE 4—PREMISES AND EQUIPMENT
Major classifications
of premises and equipment were as follows as of June 30:
|
|
2013
|
|
|
2012
|
|
Land
|
|
$
|
1,467
|
|
|
$
|
1,379
|
|
Land improvements
|
|
|
406
|
|
|
|
385
|
|
Building and leasehold improvements
|
|
|
5,046
|
|
|
|
4,957
|
|
Furniture, fixture and equipment
|
|
|
4,598
|
|
|
|
4,594
|
|
Total premises and equipment
|
|
|
11,517
|
|
|
|
11,315
|
|
Accumulated depreciation and amortization
|
|
|
(5,809
|
)
|
|
|
(5,563
|
)
|
Premises and equipment, net
|
|
$
|
5,708
|
|
|
$
|
5,752
|
|
Depreciation expense
was $558 and $369 for the years ended June 30, 2013 and 2012, respectively.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Corporation is obligated under non-cancelable
operating leases for facilities and equipment. The approximate minimum annual rentals and commitments under these non-cancelable
agreements and leases with remaining terms in excess of one year are as follows:
2014
|
|
$
|
118
|
|
2015
|
|
|
106
|
|
2016
|
|
|
47
|
|
2017
|
|
|
28
|
|
2018
|
|
|
17
|
|
Thereafter
|
|
|
—
|
|
|
|
$
|
316
|
|
Rent expense incurred
was $110 and $110 during the years ended June 30, 2013 and 2012, respectively.
NOTE 5—DEPOSITS
The aggregate amount
of time deposits, each with a minimum denomination of $100 was $33,693 and $34,422 as of June 30, 2013 and 2012, respectively.
Scheduled maturities
of time deposits at June 30, 2013 were as follows:
2013
|
|
$
|
41,683
|
|
2014
|
|
|
21,827
|
|
2015
|
|
|
7,614
|
|
2016
|
|
|
3,912
|
|
2017
|
|
|
2,935
|
|
Thereafter
|
|
|
1,238
|
|
|
|
$
|
79,209
|
|
Related party deposits
totaled $5,069 as of June 30, 2013 and $5,920 as of June 30, 2012.
NOTE 6—SHORT-TERM BORROWINGS
Short-term borrowings
consisted of repurchase agreements. Repurchase agreements are financing arrangements. Physical control is maintained for all securities
pledged to secure repurchase agreements. Information concerning all short-term borrowings at June 30, maturing in less than
one year is summarized as follows:
|
|
2013
|
|
|
2012
|
|
Balance at June 30
|
|
$
|
12,490
|
|
|
$
|
13,722
|
|
Average balance during the year
|
|
|
13,457
|
|
|
|
15,293
|
|
Maximum month-end balance
|
|
|
15,005
|
|
|
|
17,636
|
|
Average interest rate during the year
|
|
|
0.16
|
%
|
|
|
0.19
|
%
|
Weighted average rate, June 30
|
|
|
0.17
|
%
|
|
|
0.16
|
%
|
Repurchase agreements
mature daily. The Bank has pledged obligations of government-sponsored entities and mortgage-backed securities with a carrying
value of $14,948 and $15,320 at June 30, 2013 and 2012, respectively, as collateral for the repurchase agreements. Total interest
expense on short-term borrowings was $22 and $29 for the years ended June 30, 2013 and 2012, respectively.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7—FEDERAL HOME LOAN BANK
ADVANCES
A summary of Federal
Home Loan Bank (FHLB) advances were as follows:
Advance Type
|
|
Maturity
|
|
|
Term
|
|
|
Interest Rate
|
|
|
Balance
June 30, 2013
|
|
|
Balance
June 30, 2012
|
|
Principal and interest, mortgage matched
|
|
|
04/01/2014
|
|
|
|
Fixed
|
|
|
|
2.54
|
%
|
|
$
|
16
|
|
|
$
|
44
|
|
Interest-only, single maturity
|
|
|
10/09/2015
|
|
|
|
Fixed
|
|
|
|
1.43
|
|
|
|
500
|
|
|
|
500
|
|
Interest-only, single maturity
|
|
|
10/12/2017
|
|
|
|
Fixed
|
|
|
|
2.07
|
|
|
|
500
|
|
|
|
500
|
|
Interest-only, putable
|
|
|
12/07/2017
|
|
|
|
Fixed
|
|
|
|
3.24
|
|
|
|
5,000
|
|
|
|
5,000
|
|
Principal and interest, mortgage
matched
|
|
|
04/01/2019
|
|
|
|
Fixed
|
|
|
|
4.30
|
|
|
|
350
|
|
|
|
402
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,366
|
|
|
$
|
6,446
|
|
Each fixed rate advance
has a prepayment penalty equal to the present value of 100% of the lost cash flow based upon the difference between the contract
rate on the advance and the current rate on the new advance. The $5 million putable advance with the maturity date of December
7, 2017 can be called quarterly until maturity at the option of the FHLB, with the next call option being September 9, 2013. The
following table is a summary of the scheduled principal payments for all advances:
Twelve Months Ending June 30
|
|
Principal
Payments
|
|
2014
|
|
$
|
75
|
|
2015
|
|
|
56
|
|
2016
|
|
|
559
|
|
2017
|
|
|
62
|
|
2018
|
|
|
5,564
|
|
Thereafter
|
|
|
50
|
|
|
|
$
|
6,366
|
|
During fiscal year
2011, the Corporation prepaid two $500 fixed rate single maturity advances and replaced them with two $500 fixed rate single maturity
advances with lower rates. Because the present value of the cash flows of the new debt including the prepayment penalty was not
more than 10% different than the old debt, the transaction was considered to be an exchange rather than an extinguishment of debt.
As such, prepayment penalties totaling $16 were capitalized and are being amortized over the life of the new debt. Unamortized
capitalized prepayment penalties totaled $9 and $11 at June 30, 2013 and 2012, respectively.
Pursuant to collateral
agreements with the FHLB, advances are secured by all the stock invested in the FHLB and certain qualifying first mortgage loans.
The advances were collateralized by $33,950 and $36,907 of first mortgage loans under a blanket lien arrangement at June 30, 2013
and 2012, respectively. Based on this collateral and the Corporation’s holdings of FHLB stock, the Bank was eligible to
borrow up to a total of $19,382 in advances at June 30, 2013.
NOTE 8—EMPLOYEE BENEFIT PLANS
The Bank maintains
a 401(k) savings and retirement plan that permits eligible employees
to make before- or after-tax contributions
to the plan, subject to the dollar limits from Internal Revenue Service regulations. The Bank matches 100% of the employee’s
voluntary contributions to the plan based on the amount of each participant’s contributions up to a maximum of 4% of eligible
compensation. All regular full-time and part-time employees who complete six months of service and are at least 21 years of age
are eligible to participate.
Amounts charged to operations were $136 and $122, for the years ended June 30, 2013 and 2012,
respectively.
The Bank has adopted
a Salary Continuation Plan (the Plan) to encourage Bank executives to remain employees of the Bank. The Plan provides such executives
(and, in the event of the executive’s death, surviving beneficiary) with 180 months of salary continuation payments equal
to a certain percentage of an executive’s average compensation, as defined within each agreement, for the three full calendar
years prior to Normal Retirement Age. For purposes of the Plan, “Normal Retirement Age” means the executive’s
65th birthday. Vesting under the Plan commences at age 50 and is prorated until age 65. If an executive dies during active service,
the executive’s beneficiary is entitled to the Normal Retirement Benefit. The executive can become fully vested in the Accrual
Balance upon termination of employment following a disability or a change in control of the Bank. For purposes of the Plan, “Accrual
Balance” means the liability that should be accrued by the Corporation for the Corporation’s obligation to the executive
under the Plan. For purposes of calculating the Accrual Balance, the discount rate in effect at June 30, 2013 was 5.0%. The accrued
liability for the salary continuation plan was $1,566 as of June 30, 2013 and $1,351 as of June 30, 2012. For the years
ended June 30, 2013 and 2012, $237 and $210, respectively, have been charged to expense in connection with the Plan. Distributions
to participants were $22 for both of the years ending June 30, 2013 and 2012.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The 2010 Omnibus
Incentive Plan (2010 Plan) is a nonqualified share based compensation plan. The 2010 Plan was established to promote alignment
between key employee’s performance and the Corporation’s shareholder interests by motivating performance through the
award of stock-based compensation. The 2010 Plan is intended to attract, retain and motivate key employees and as a means to compensate
outside directors for their service to the Corporation. The 2010 Plan has been approved by the Corporation’s shareholders.
The Compensation Committee of the Corporation’s Board of Directors has sole authority to select the employees, establish
the awards to be issued, and approve the terms and conditions of each award contract.
Under the 2010 Plan,
the Corporation may grant, among other things, nonqualified stock options, incentive stock options, stock appreciation rights,
restricted stock, restricted stock units, or any combination thereof to certain employees and directors. Each award is evidenced
by an award agreement that specifies the number of shares awarded, the vesting period, the performance requirements, and such
other provisions as the Compensation Committee determines. Upon a change-in-control of the Corporation, as defined in the 2010
Plan, all outstanding awards immediately vest.
The Corporation
has granted restricted stock awards to certain employees and directors. Restricted stock awards are issued at no cost to the recipient,
and can be settled only in shares at the end of the vesting period. These awards vest on the anniversary date of the award if
certain specified net income performance targets as established by the Compensation Committee are achieved. Restricted stock awards
provide the holder with full voting rights and cash dividends during the vesting period. The fair value of the restricted stock
awards is the closing market price of the Corporation’s common stock on the date of the grant and compensation expense is
recognized over the vesting period of the awards. Restricted stock awarded during the period presented vest under a graduated
schedule over a five-year period.
The following table
summarizes the status of the restricted stock awards as of June 30, 2013, and activity for the year ended June 30, 2013:
|
|
Restricted Stock
Awards
|
|
|
Weighted-Average
Grant Date Fair
Value Per Share
|
|
Outstanding at June 30, 2012
|
|
|
5,116
|
|
|
$
|
10.85
|
|
Granted
|
|
|
4,942
|
|
|
|
14.55
|
|
Vested
|
|
|
(691
|
)
|
|
|
10.85
|
|
Expired
|
|
|
(1,585
|
)
|
|
|
12.50
|
|
Forfeited
|
|
|
(890
|
)
|
|
|
11.78
|
|
Nonvested at June 30, 2013
|
|
|
6,892
|
|
|
$
|
13.00
|
|
There was no expense
recognized in the 2013 fiscal year in connection with the restricted stock awards since the grants scheduled to vest in the 2013
fiscal year expired due to not meeting the performance targets. For the year ended June 30, 2012, $12 has been charged to expense
in connection with the restricted stock awards. As of June 30, 2013, there was $108 of total unrecognized compensation cost related
to nonvested shares granted under the plan. The cost is expected to be recognized over a weighted-average period of 4.0 years.
NOTE 9—INCOME TAXES
The provision for
income taxes consists of the following for the years ended June 30:
|
|
2013
|
|
|
2012
|
|
Current income taxes
|
|
$
|
730
|
|
|
$
|
1,070
|
|
Deferred income taxes (benefits)
|
|
|
(96
|
)
|
|
|
(271
|
)
|
|
|
$
|
634
|
|
|
$
|
799
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The net deferred income tax asset consists of the following
components at June 30:
|
|
2013
|
|
|
2012
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Allowance for loan losses
|
|
$
|
742
|
|
|
$
|
627
|
|
Deferred compensation
|
|
|
581
|
|
|
|
532
|
|
Net unrealized securities loss
|
|
|
8
|
|
|
|
—
|
|
Recognized loss on impairment of security
|
|
|
265
|
|
|
|
265
|
|
Intangibles
|
|
|
66
|
|
|
|
109
|
|
OREO deferred gain
|
|
|
16
|
|
|
|
16
|
|
Nonaccrual loan interest income
|
|
|
82
|
|
|
|
74
|
|
Gross deferred tax asset
|
|
|
1,760
|
|
|
|
1,623
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
(294
|
)
|
|
|
(261
|
)
|
Loan fees
|
|
|
(217
|
)
|
|
|
(211
|
)
|
Prepaid expenses
|
|
|
(74
|
)
|
|
|
(80
|
)
|
FHLB stock dividends
|
|
|
(165
|
)
|
|
|
(165
|
)
|
Net unrealized securities
gain
|
|
|
—
|
|
|
|
(826
|
)
|
Gross deferred tax liabilities
|
|
|
(750
|
)
|
|
|
(1,543
|
)
|
Net deferred asset
|
|
$
|
1,010
|
|
|
$
|
80
|
|
The difference between
the provision for income taxes and amounts computed by applying the statutory income tax rate of 34% to statutory income before
taxes consists of the following for the years ended June 30:
|
|
2013
|
|
|
2012
|
|
Income taxes computed at the statutory rate
on pretax income
|
|
$
|
1,123
|
|
|
$
|
1,211
|
|
Tax exempt income
|
|
|
(437
|
)
|
|
|
(359
|
)
|
Cash surrender value income
|
|
|
(63
|
)
|
|
|
(66
|
)
|
Other
|
|
|
11
|
|
|
|
13
|
|
|
|
$
|
634
|
|
|
$
|
799
|
|
At June 30, 2013
and June 30, 2012, the Corporation had no unrecognized tax benefits recorded. The Corporation does not expect the total amount
of unrecognized tax benefits to significantly increase within the next twelve months. There were no interest or penalties recorded
for the years ended June 30, 2013 and 2012 and there were no amounts accrued for interest and penalties at June 30, 2013 and 2012.
The Corporation and
the Bank are subject to U.S. federal income tax as an income-based tax and a capital-based franchise tax in the state of Ohio.
The Corporation and the Bank are no longer subject to examination by taxing authorities for years before 2009.
NOTE 10—REGULATORY MATTERS
The Bank is subject
to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and prompt corrective-action
regulations involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory
accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators about components,
risk weightings, and other factors and the regulators can lower classifications in certain cases. Failure to meet various capital
requirements can initiate regulatory action that could have a direct material effect on the financial statements. Management believes
as of June 30, 2013, the Bank has met all capital adequacy requirements to which it is subject.
The prompt corrective
action regulations provide five classifications, including well capitalized, adequately capitalized, under-capitalized, significantly
undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition.
If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions
are limited, as is asset growth and expansion, and plans for capital restoration are required.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of fiscal year-end
2013, the Corporation met the definition of a small bank holding company and, therefore, was exempt from consolidated risk-based
and leverage capital adequacy guidelines for bank holding companies. At year-end 2013 and 2012, actual Bank capital levels (in
millions) and minimum required levels were as follows:
|
|
Actual
|
|
|
Minimum Required
For Capital
Adequacy Purposes
|
|
|
Minimum Required
To Be Well
Capitalized Under
Prompt Corrective
Action Regulations
|
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
June 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital (to risk weighted assets) Bank
|
|
$
|
30.5
|
|
|
|
13.0
|
%
|
|
$
|
18.8
|
|
|
|
8.0
|
%
|
|
$
|
23.4
|
|
|
|
10.0
|
%
|
Tier 1 capital (to risk weighted assets) Bank
|
|
|
28.0
|
|
|
|
12.0
|
|
|
|
9.4
|
|
|
|
4.0
|
|
|
|
14.1
|
|
|
|
6.0
|
|
Tier 1 capital (to average assets) Bank
|
|
|
28.0
|
|
|
|
8.1
|
|
|
|
13.9
|
|
|
|
4.0
|
|
|
|
17.4
|
|
|
|
5.0
|
|
June 30, 2012 Total capital (to risk weighted assets)
Bank
|
|
$
|
28.5
|
|
|
|
13.4
|
%
|
|
$
|
17.0
|
|
|
|
8.0
|
%
|
|
$
|
21.2
|
|
|
|
10.0
|
%
|
Tier 1 capital (to risk weighted assets) Bank
|
|
|
24.2
|
|
|
|
11.4
|
|
|
|
8.5
|
|
|
|
4.0
|
|
|
|
12.7
|
|
|
|
6.0
|
|
Tier 1 capital (to average assets) Bank
|
|
|
24.2
|
|
|
|
7.4
|
|
|
|
13.1
|
|
|
|
4.0
|
|
|
|
16.4
|
|
|
|
5.0
|
|
As of the latest
regulatory examination, the Bank was categorized as well capitalized. There are no conditions or events since that examination
that management believes may have changed the Bank’s category.
The Corporation’s
principal source of funds for dividend payment is dividends received from the Bank. Banking regulations limit the amount of dividends
that may be paid without prior approval of regulatory agencies. Under these regulations, the amount of dividends that may be paid
in any calendar year is limited to the current year’s net profits, combined with the retained net profits of the preceding
two years, subject to the capital requirements described above. As of June 30, 2013 the Bank could, without prior approval,
declare a dividend of approximately $4,494.
On
February 26, 2013, the Corporation filed a registration statement with the Securities and Exchange Commission (SEC) related to
a $10 million shareholder rights offering. Under the rights offering, the Corporation distributed to its shareholders of record
as of March 26, 2013, proportional rights to purchase additional shares and the opportunity to purchase shares in excess of their
basic subscription rights. The Corporation also offered any shares not subscribed for in the rights offering and public offering
through a subsequent public offering.
In July 2013, the Corporation completed its rights offering with the sale of 655,668
shares of common stock for gross proceeds of approximately $10.0 million.
The Corporation intends to
use the net proceeds to enhance the Bank’s overall capital position, for general corporate purposes and
future organic
and other growth opportunities.
NOTE 11—COMMITMENTS
WITH OFF-BALANCE SHEET RISK
The Bank is a party
to commitments to extend credit in the normal course of business to meet the financing needs of its customers. Commitments are
agreements to lend to customers providing there are no violations of any condition established in the contract. Commitments to
extend credit have a fixed expiration date or other termination clause. These instruments involve elements of credit and interest
rate risk more than the amount recognized in the statements of financial position. The Bank uses the same credit policies in making
commitments to extend credit as it does for on-balance sheet instruments.
The Bank evaluates
each customer’s credit on a case by case basis. The amount of collateral obtained is based on management’s credit
evaluation of the customer. The amount of commitments to extend credit and the exposure to credit loss for non-performance by
the customer was $35,776 and $33,808 as of June 30, 2013 and 2012, respectively. Of the June 30, 2013 commitments, $27,913
carried variable rates of interest ranging from 1.25% to 8.25% and $7,863 carried fixed rates of interest ranging from 1.52% to
17.25%. Of the June 30, 2012 commitments, $28,978 carried variable rates of interest ranging from 2.00% to 7.25% and $4,830
carried fixed rates of interest ranging from 2.25% to 8.50%. Financial standby letters of credit were $485 and $645 as of June
30, 2013 and 2012, respectively. In addition, commitments to extend credit of $8,351 and $8,029 as of June 30, 2013 and 2012,
respectively, were available to checking account customers related to the overdraft protection program. Since some loan commitments
expire without being used, the amount does not necessarily represent future cash commitments.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12—FAIR VALUE
Fair value is the
exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous
market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three
levels of inputs that may be used to measure fair values:
Level 1:
Quoted
prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the
measurement date.
Level 2:
Significant
other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets
that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3:
Significant
unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in
pricing an asset or liability.
Financial assets and financial liabilities
measured at fair value on a recurring basis include the following:
Securities available-for-sale:
When available, the fair values of available-for-sale securities are determined by obtaining quoted prices on nationally recognized
securities exchanges (Level 1 inputs). For securities where quoted market prices are not available, fair values are calculated
based on market prices of similar securities (Level 2 inputs). For securities where quoted prices or market prices of similar
securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3 inputs).
The fair value of the Level 3 security is calculated using spread to the swap and LIBOR curves. During times when trading is more
liquid, broker quotes are used (if available) to validate the model. Rating agency and industry research reports as well as defaults
and deferrals on the individual security is reviewed and incorporated into the calculation.
Assets and liabilities
measured at fair value on a recurring basis are summarized below, segregated by the level of the valuation inputs within the fair
value hierarchy utilized to measure fair value:
|
|
|
|
|
Fair Value Measurements at
June 30, 2013 Using
|
|
|
|
Balance at
June 30, 2013
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of government-sponsored entities
|
|
$
|
4,658
|
|
|
$
|
—
|
|
|
$
|
4,658
|
|
|
$
|
—
|
|
Obligations of states and political subdivisions
|
|
|
39,812
|
|
|
|
—
|
|
|
|
39,812
|
|
|
|
—
|
|
Mortgage-backed securities - residential
|
|
|
46,889
|
|
|
|
—
|
|
|
|
46,889
|
|
|
|
—
|
|
Collateralized mortgage obligations
|
|
|
5,708
|
|
|
|
—
|
|
|
|
5,708
|
|
|
|
—
|
|
Trust preferred security
|
|
|
162
|
|
|
|
—
|
|
|
|
—
|
|
|
|
162
|
|
|
|
|
|
|
Fair Value Measurements at
June 30, 2012 Using
|
|
|
|
Balance at
June 30, 2012
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Securities available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of government sponsored entities
|
|
$
|
8,567
|
|
|
$
|
—
|
|
|
$
|
8,567
|
|
|
$
|
—
|
|
Obligations of states and political subdivisions
|
|
|
35,276
|
|
|
|
—
|
|
|
|
35,276
|
|
|
|
—
|
|
Mortgage-backed securities - residential
|
|
|
49,331
|
|
|
|
—
|
|
|
|
49,331
|
|
|
|
—
|
|
Collateralized mortgage obligations
|
|
|
12,097
|
|
|
|
—
|
|
|
|
12,097
|
|
|
|
—
|
|
Trust preferred security
|
|
|
64
|
|
|
|
—
|
|
|
|
—
|
|
|
|
64
|
|
There were no transfers between Level
1 and Level 2 during the 2013 or the 2012 fiscal year.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table presents a reconciliation of the trust
preferred security measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the years ended
June 30, 2013 and 2012:
|
|
Trust Preferred Security
|
|
|
|
2013
|
|
|
2012
|
|
Beginning balance
|
|
$
|
64
|
|
|
$
|
67
|
|
Realized losses included in other income
|
|
|
—
|
|
|
|
—
|
|
Change in fair value included in other comprehensive income
|
|
|
98
|
|
|
|
(3
|
)
|
Ending balance, June 30
|
|
$
|
162
|
|
|
$
|
64
|
|
The significant unobservable inputs used
in the fair value measurement of the Corporation’s trust preferred security are probabilities of specific-issuer defaults
and deferrals and specific-issuer recovery assumptions. Significant increases in specific-issuer default assumptions or decreases
in specific-issuer recovery assumptions would result in a significantly lower fair value measurement. Conversely, decreases in
specific-issuer default assumptions or increases in specific-issuer recovery assumptions would result in a higher fair value measurement.
Certain financial assets and financial
liabilities are measured at fair value on a non-recurring basis; that is, the instruments are not measured at fair value on an
ongoing basis but are subject to fair value adjustments in certain circumstances. Financial assets and financial liabilities measured
at fair value on a non-recurring basis include the following:
Impaired Loans:
At the time a loan is considered impaired, it is valued at the lower of cost or fair value. Impaired loans carried at fair
value generally receive specific allocations of the allowance for loan losses or are charged down to their fair value. For collateral
dependent loans, fair value is commonly based on recent real estate appraisals. These appraisals may utilize a single valuation
approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in
the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such
adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.
Financial assets and financial liabilities
measured at fair value on a non-recurring basis are summarized below:
|
|
|
|
|
Fair Value Measurements at
June 30, 2013 Using
|
|
|
|
Balance at
June 30, 2013
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Impaired loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
43
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
43
|
|
1-4 Family:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied
|
|
|
101
|
|
|
|
—
|
|
|
|
—
|
|
|
|
101
|
|
Non-owner occupied
|
|
|
475
|
|
|
|
—
|
|
|
|
—
|
|
|
|
475
|
|
|
|
|
|
|
Fair Value Measurements at
June 30, 2012 Using
|
|
|
|
Balance at
June 30, 2012
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Impaired loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
11
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
11
|
|
Commercial real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
647
|
|
|
|
—
|
|
|
|
—
|
|
|
|
647
|
|
1-4 Family:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied
|
|
|
40
|
|
|
|
—
|
|
|
|
—
|
|
|
|
40
|
|
Non-owner occupied
|
|
|
438
|
|
|
|
—
|
|
|
|
—
|
|
|
|
438
|
|
Impaired loans,
which are generally measured for impairment using the fair value of the collateral for collateral dependent loans, had a principal
balance of $839, with a valuation allowance of $220 at June 30, 2013. The resulting impact to the provision for loan losses was
a reduction of $48 being recorded for the year ended June 30, 2013. As of June 30, 2012, impaired loans with a principal balance
of $1,479 had a valuation allowance of $343. The resulting impact to the provision for loan losses was a reduction of $24 being
recorded for the year ended June 30, 2012.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The valuation technique used by an independent
third party appraiser in the fair value measurement of collateral for collateral-dependent commercial real estate impaired loans
primarily consisted of the sales comparison approach. The valuation technique used by an independent third party appraiser in
the fair value measurement of collateral for collateral-dependent 1-4 family non-owner occupied impaired loans primarily consisted
of the sales comparison and income approach. The significant unobservable inputs used in the fair value measurement relate to
adjustments made to the value set forth in the appraisal by deducting estimated holding costs, costs to sell and a distressed
sale adjustment. During the 2013 fiscal year, collateral discounts for 1-4 family non-owner occupied impaired loans ranged from
0% to 20%. During the 2012 fiscal year, collateral discounts for commercial real estate impaired loans ranged from 33% to 41%
and for 1-4 family non-owner occupied impaired loans ranged from 15% to 39%.
Estimated fair value for cash and cash
equivalents, certificates of deposits in other financial institutions, accrued interest receivable and payable, demand and savings
deposits and short-term borrowings were considered to approximate carrying value. The methodologies for other financial assets
and financial liabilities are discussed below:
Loans held for sale:
The fair value
of loans held for sale is estimated based upon binding contracts and quotes from third party investors resulting in a Level 2
classification.
Loans:
Fair value for loans was
estimated for portfolios of loans with similar financial characteristics. For adjustable rate loans that reprice at least annually
and for fixed rate commercial loans with maturities of six months or less which possess normal risk characteristics, carrying
value was determined to be fair value. Fair value of other types of loans (including adjustable rate loans which reprice less
frequently than annually and fixed rate term loans or loans which possess higher risk characteristics) was estimated by discounting
future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for
similar anticipated maturities resulting in a Level 3 classification. The methods utilized to estimate the fair value of loans
do not necessarily represent an exit price.
Securities held-to-maturity:
The
held-to-maturity security is a revenue bond made to a local municipality.
The fair value of this security is calculated
using a spread to the Bloomberg municipal fair market health care curve resulting in a Level 3 classification.
Time deposits:
Fair value of fixed-maturity
certificates of deposit was estimated using the rates offered at June 30, 2013 and 2012, for deposits of similar remaining maturities.
Estimated fair value does not include the benefit that result from low-cost funding provided by the deposit liabilities compared
to the cost of borrowing funds in the market resulting in a Level 2 classification.
Federal Home Loan Bank advances:
Fair value of Federal Home Loan Bank advances was estimated using current rates at June 30, 2013 and 2012 for similar financing
resulting in a Level 2 classification.
Federal bank and other restricted stocks:
Federal bank and other restricted stocks include stock acquired for regulatory purposes, such as Federal Home Loan Bank stock
and Federal Reserve Bank stock that are accounted for at cost due to restrictions placed on their transferability; and therefore,
are not subject to the fair value disclosure requirements. The Corporation’s lending commitments have variable interest
rates and “escape” clauses if the customer’s credit quality deteriorates. Therefore, the fair values of these
items are not significant and are not included in the following table.
The following table shows the estimated
fair values of financial instruments that are reported at amortized cost in the Corporation’s consolidated balance sheets,
segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
2013
|
|
|
2012
|
|
|
|
Carrying
Amount
|
|
|
Estimated
Fair
Value
|
|
|
Carrying
Amount
|
|
|
Estimated
Fair
Value
|
|
Financial Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1 inputs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
9,356
|
|
|
$
|
9,356
|
|
|
$
|
13,745
|
|
|
$
|
13,745
|
|
Level 2 inputs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificates of deposits in other financial institutions
|
|
|
4,175
|
|
|
|
4,175
|
|
|
|
5,645
|
|
|
|
5,645
|
|
Loans held for sale
|
|
|
93
|
|
|
|
97
|
|
|
|
377
|
|
|
|
387
|
|
Accrued interest receivable
|
|
|
1,044
|
|
|
|
1,044
|
|
|
|
1,043
|
|
|
|
1,043
|
|
Level 3 inputs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities held-to-maturity
|
|
|
3,000
|
|
|
|
2,926
|
|
|
|
—
|
|
|
|
—
|
|
Loans, net
|
|
|
214,544
|
|
|
|
212,555
|
|
|
|
195,095
|
|
|
|
196,592
|
|
Financial Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 2 inputs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand and savings deposits
|
|
|
214,898
|
|
|
|
214,898
|
|
|
|
200,011
|
|
|
|
200,011
|
|
Time deposits
|
|
|
79,209
|
|
|
|
79,575
|
|
|
|
84,470
|
|
|
|
85,262
|
|
Short-term borrowings
|
|
|
12,490
|
|
|
|
12,490
|
|
|
|
13,722
|
|
|
|
13,722
|
|
Federal Home Loan Bank advances
|
|
|
6,366
|
|
|
|
7,049
|
|
|
|
6,446
|
|
|
|
7,398
|
|
Accrued interest payable
|
|
|
48
|
|
|
|
48
|
|
|
|
56
|
|
|
|
56
|
|
NOTE 13—PARENT COMPANY FINANCIAL
STATEMENTS
Condensed financial
information of Consumers Bancorp. Inc. (parent company only) follows:
|
|
June 30,
2013
|
|
|
June 30,
2012
|
|
Condensed Balance Sheets
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
31
|
|
|
$
|
74
|
|
Subordinated debenture receivable from subsidiary
|
|
|
—
|
|
|
|
2,000
|
|
Other assets
|
|
|
126
|
|
|
|
87
|
|
Investment in subsidiary
|
|
|
28,012
|
|
|
|
25,785
|
|
Total assets
|
|
$
|
28,169
|
|
|
$
|
27,946
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Other liabilities
|
|
$
|
26
|
|
|
$
|
56
|
|
Shareholders’ equity
|
|
|
28,143
|
|
|
|
27,890
|
|
Total liabilities & shareholders’
equity
|
|
$
|
28,169
|
|
|
$
|
27,946
|
|
|
|
Year Ended
June 30, 2013
|
|
|
Year Ended
June 30, 2012
|
|
Condensed Statements of Income
|
|
|
|
|
|
|
|
|
Cash dividends from subsidiary
|
|
$
|
880
|
|
|
$
|
855
|
|
Other income
|
|
|
94
|
|
|
|
160
|
|
Other expense
|
|
|
174
|
|
|
|
163
|
|
Income before income taxes and equity in undistributed
net income of subsidiary
|
|
|
800
|
|
|
|
852
|
|
Income tax expense (benefit)
|
|
|
(22
|
)
|
|
|
3
|
|
Income before equity in undistributed net income of subsidiary
|
|
|
822
|
|
|
|
849
|
|
Equity in undistributed net income
of subsidiary
|
|
|
1,847
|
|
|
|
1,915
|
|
Net income
|
|
$
|
2,669
|
|
|
$
|
2,764
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Statements of Cash Flows
|
|
Year Ended
June 30, 2013
|
|
|
Year Ended
June 30, 2012
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
2,669
|
|
|
$
|
2,764
|
|
Equity in undistributed net income of Bank
subsidiary
|
|
|
(1,847
|
)
|
|
|
(1,915
|
)
|
Change in other assets and liabilities
|
|
|
(69
|
)
|
|
|
14
|
|
Net cash flows from operating activities
|
|
|
753
|
|
|
|
863
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
Repayment of subordinated note
|
|
|
2,000
|
|
|
|
—
|
|
Net cash flows from financing activities
|
|
|
2,000
|
|
|
|
—
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
Dividend paid
|
|
|
(993
|
)
|
|
|
(905
|
)
|
Investment in subsidiary
|
|
|
(2,000
|
)
|
|
|
—
|
|
Proceeds from dividend reinvestment and stock
purchase plan
|
|
|
188
|
|
|
|
91
|
|
Issuance of treasury stock for restricted
stock awards
|
|
|
9
|
|
|
|
—
|
|
Net cash flows from financing activities
|
|
|
(2,796
|
)
|
|
|
(814
|
)
|
Change in cash and cash equivalents
|
|
|
(43
|
)
|
|
|
49
|
|
Beginning cash and cash equivalents
|
|
|
74
|
|
|
|
25
|
|
Ending cash and cash equivalents
|
|
$
|
31
|
|
|
$
|
74
|
|
Note 14 – EARNINGS PER SHARE
Basic earnings per share is the amount
of earnings available to each share of common stock outstanding during the reporting period and is equal to net income divided
by the weighted average number of shares outstanding during the period. Diluted earnings per share is the amount of
earnings available to each share of common stock outstanding during the reporting period adjusted to include the effect of potentially
dilutive common shares that may be issued upon the vesting of restricted stock awards. The following table details
the calculation of basic and diluted earnings per share:
|
|
For the year Ended June 30,
|
|
|
|
2013
|
|
|
2012
|
|
Basic:
|
|
|
|
|
|
|
|
|
Net income available to common shareholders
|
|
$
|
2,669
|
|
|
$
|
2,764
|
|
Weighted average common shares outstanding
|
|
|
2,063,666
|
|
|
|
2,051,390
|
|
Basic income per share
|
|
$
|
1.29
|
|
|
$
|
1.35
|
|
|
|
|
|
|
|
|
|
|
Diluted:
|
|
|
|
|
|
|
|
|
Net income available to common shareholders
|
|
$
|
2,669
|
|
|
$
|
2,764
|
|
Weighted average common shares outstanding
|
|
|
2,063,666
|
|
|
|
2,051,390
|
|
Dilutive effect of restricted stock
|
|
|
539
|
|
|
|
579
|
|
Total common shares and dilutive potential common shares
|
|
|
2,064,205
|
|
|
|
2,051,969
|
|
Dilutive income per share
|
|
$
|
1.29
|
|
|
$
|
1.35
|
|
Note 15 –ACCUMULATED OTHER COMPREHENSIVE
INCOME (LOSS)
The components of other comprehensive income related to unrealized
gains and losses on available-for-sale securities for the period ended June 30, 2013, were as follows:
|
|
June 30, 2013
|
|
Beginning balance
|
|
$
|
1,604
|
|
Other comprehensive income (loss) before reclassification, net of taxes of $780
|
|
|
(1,516
|
)
|
Amounts reclassified from accumulated other
comprehensive income (loss), net of taxes of $53
1
|
|
|
(104
|
)
|
Net current period other comprehensive income (loss), net of tax
|
|
|
(1,620
|
)
|
Ending balance
|
|
$
|
(16
|
)
|
1
Within the consolidated statement
of income, security gains (losses), net in non-interest income was impacted by $157 and income tax expense was impacted by $53
due to reclassifications from accumulated other comprehensive income.