UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
| x | Quarterly Report Pursuant to Section 13 or 15 (d) or the Securities Exchange Act of 1934 |
For the
quarterly period ended December 31, 2014
Or
| ¨ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
for the transition period from |
|
To |
|
Commission File No. 033-79130
CONSUMERS BANCORP, INC.
(Exact name of registrant as specified in
its charter)
OHIO |
|
34-1771400 |
(State or other jurisdiction |
|
(I.R.S. Employer Identification No.) |
of incorporation or organization) |
|
|
|
|
|
614 East Lincoln Way, P.O. Box 256, Minerva, Ohio |
|
44657 |
(Address of principal executive offices) |
|
(Zip Code) |
(330) 868-7701
(Registrant’s telephone number)
Not applicable
(Former name, former address and former
fiscal year, if changed since last report)
Indicate
by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes x No
¨
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No
¨
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions
of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act.
Large accelerated filer ¨ |
Accelerated filer ¨ |
Non-accelerated filer ¨ (Do not check if smaller reporting company) |
Smaller reporting company x |
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No
x
Indicate the number of shares outstanding
of each of the issuer’s classes of common stock, as of the latest practicable date.
Common Stock, no par value |
Outstanding at February 13, 2015 |
|
2,731,612 Common Shares |
CONSUMERS BANCORP, INC.
FORM 10-Q
QUARTER ENDED December 31, 2014
Table of Contents
PART I – FINANCIAL
INFORMATION
Item 1 – Financial Statements
CONSUMERS BANCORP, INC.
CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollars in thousands, except per share data) | |
December 31, 2014 | | |
June 30, 2014 | |
ASSETS | |
| | | |
| | |
Cash on hand and noninterest-bearing deposits in financial institutions | |
$ | 8,487 | | |
$ | 9,049 | |
Federal funds sold and interest-bearing deposits in financial institutions | |
| 3,543 | | |
| 2,076 | |
Total cash and cash equivalents | |
| 12,030 | | |
| 11,125 | |
Certificates of deposit in other financial institutions | |
| 5,456 | | |
| 2,703 | |
Securities, available-for-sale | |
| 132,342 | | |
| 126,393 | |
Securities, held-to-maturity (fair value of $3,726 at December 31, 2014 and $3,040 at June 30, 2014) | |
| 3,690 | | |
| 3,000 | |
Federal bank and other restricted stocks, at cost | |
| 1,396 | | |
| 1,396 | |
Loans held for sale | |
| 625 | | |
| 559 | |
Total loans | |
| 228,074 | | |
| 224,966 | |
Less allowance for loan losses | |
| (2,452 | ) | |
| (2,405 | ) |
Net loans | |
| 225,622 | | |
| 222,561 | |
Cash surrender value of life insurance | |
| 6,531 | | |
| 5,967 | |
Premises and equipment, net | |
| 9,112 | | |
| 6,713 | |
Other real estate owned | |
| 54 | | |
| 204 | |
Accrued interest receivable and other assets | |
| 1,489 | | |
| 1,856 | |
Total assets | |
$ | 398,347 | | |
$ | 382,477 | |
| |
| | | |
| | |
LIABILITIES | |
| | | |
| | |
Deposits | |
| | | |
| | |
Non-interest bearing demand | |
$ | 83,635 | | |
$ | 75,353 | |
Interest bearing demand | |
| 44,572 | | |
| 42,718 | |
Savings | |
| 128,498 | | |
| 125,151 | |
Time | |
| 67,933 | | |
| 70,675 | |
Total deposits | |
| 324,638 | | |
| 313,897 | |
| |
| | | |
| | |
Short-term borrowings | |
| 16,435 | | |
| 19,489 | |
Federal Home Loan Bank advances | |
| 12,768 | | |
| 6,296 | |
Accrued interest and other liabilities | |
| 3,185 | | |
| 2,592 | |
Total liabilities | |
| 357,026 | | |
| 342,274 | |
Commitments and contingent liabilities | |
| — | | |
| — | |
| |
| | | |
| | |
SHAREHOLDERS’ EQUITY | |
| | | |
| | |
Preferred stock (no par value, 350,000 shares authorized, none outstanding) | |
| — | | |
| — | |
Common stock (no par value, 3,500,000 shares authorized; 2,854,133 shares issued as of December 31, 2014 and June 30, 2014) | |
| 14,630 | | |
| 14,630 | |
Retained earnings | |
| 26,850 | | |
| 25,940 | |
Treasury stock, at cost (122,521 and 129,875 common shares as of December 31, 2014 and June 30, 2014, respectively) | |
| (1,652 | ) | |
| (1,650 | ) |
Accumulated other comprehensive income | |
| 1,493 | | |
| 1,283 | |
Total shareholders’ equity | |
| 41,321 | | |
| 40,203 | |
Total liabilities and shareholders’ equity | |
$ | 398,347 | | |
$ | 382,477 | |
See accompanying notes to consolidated financial
statements
CONSUMERS BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
| |
Three Months ended December 31, | | |
Six Months ended December 31, | |
(Dollars in thousands, except per share amounts) | |
2014 | | |
2013 | | |
2014 | | |
2013 | |
| |
| | |
| | |
| | |
| |
Interest income | |
| | | |
| | | |
| | | |
| | |
Loans, including fees | |
$ | 2,728 | | |
$ | 2,645 | | |
$ | 5,432 | | |
$ | 5,312 | |
Securities, taxable | |
| 496 | | |
| 413 | | |
| 959 | | |
| 694 | |
Securities, tax-exempt | |
| 342 | | |
| 344 | | |
| 694 | | |
| 672 | |
Federal funds sold and other interest bearing deposits | |
| 19 | | |
| 9 | | |
| 33 | | |
| 21 | |
Total interest income | |
| 3,585 | | |
| 3,411 | | |
| 7,118 | | |
| 6,699 | |
Interest expense | |
| | | |
| | | |
| | | |
| | |
Deposits | |
| 182 | | |
| 199 | | |
| 372 | | |
| 398 | |
Short-term borrowings | |
| 8 | | |
| 6 | | |
| 15 | | |
| 12 | |
Federal Home Loan Bank advances | |
| 47 | | |
| 41 | | |
| 95 | | |
| 91 | |
Total interest expense | |
| 237 | | |
| 246 | | |
| 482 | | |
| 501 | |
Net interest income | |
| 3,348 | | |
| 3,165 | | |
| 6,636 | | |
| 6,198 | |
Provision for loan losses | |
| 57 | | |
| 35 | | |
| 124 | | |
| 168 | |
Net interest income after provision for loan losses | |
| 3,291 | | |
| 3,130 | | |
| 6,512 | | |
| 6,030 | |
| |
| | | |
| | | |
| | | |
| | |
Non-interest income | |
| | | |
| | | |
| | | |
| | |
Service charges on deposit accounts | |
| 320 | | |
| 336 | | |
| 640 | | |
| 699 | |
Debit card interchange income | |
| 230 | | |
| 225 | | |
| 459 | | |
| 439 | |
Bank owned life insurance income | |
| 44 | | |
| 45 | | |
| 88 | | |
| 91 | |
Securities gains, net | |
| 85 | | |
| 32 | | |
| 122 | | |
| 32 | |
Gain on disposition of other real estate owned | |
| — | | |
| — | | |
| 22 | | |
| — | |
Other | |
| 114 | | |
| 99 | | |
| 253 | | |
| 171 | |
Total non-interest income | |
| 793 | | |
| 737 | | |
| 1,584 | | |
| 1,432 | |
| |
| | | |
| | | |
| | | |
| | |
Non-interest expenses | |
| | | |
| | | |
| | | |
| | |
Salaries and employee benefits | |
| 1,699 | | |
| 1,569 | | |
| 3,416 | | |
| 3,129 | |
Occupancy and equipment | |
| 367 | | |
| 328 | | |
| 735 | | |
| 644 | |
Data processing expenses | |
| 141 | | |
| 139 | | |
| 283 | | |
| 277 | |
Professional and director fees | |
| 121 | | |
| 130 | | |
| 218 | | |
| 241 | |
FDIC assessments | |
| 56 | | |
| 55 | | |
| 116 | | |
| 106 | |
Franchise taxes | |
| 72 | | |
| 76 | | |
| 149 | | |
| 151 | |
Marketing and advertising | |
| 54 | | |
| 67 | | |
| 120 | | |
| 132 | |
Telephone and network communications | |
| 65 | | |
| 69 | | |
| 137 | | |
| 142 | |
Debit card processing expenses | |
| 123 | | |
| 103 | | |
| 237 | | |
| 214 | |
Other | |
| 363 | | |
| 388 | | |
| 722 | | |
| 737 | |
Total non-interest expenses | |
| 3,061 | | |
| 2,924 | | |
| 6,133 | | |
| 5,773 | |
Income before income taxes | |
| 1,023 | | |
| 943 | | |
| 1,963 | | |
| 1,689 | |
Income tax expense | |
| 215 | | |
| 188 | | |
| 399 | | |
| 313 | |
Net income | |
$ | 808 | | |
$ | 755 | | |
$ | 1,564 | | |
$ | 1,376 | |
| |
| | | |
| | | |
| | | |
| | |
Basic and diluted earnings per share | |
$ | 0.30 | | |
$ | 0.28 | | |
$ | 0.57 | | |
$ | 0.51 | |
See accompanying notes to consolidated financial
statements
CONSUMERS BANCORP, INC.
Consolidated
statements of comprehensive income (LOSS)
(Unaudited)
(Dollars in thousands)
| |
Three Months ended December 31, | | |
Six Months ended December 31, | |
| |
2014 | | |
2013 | | |
2014 | | |
2013 | |
| |
| | |
| | |
| | |
| |
Net income | |
$ | 808 | | |
$ | 755 | | |
$ | 1,564 | | |
$ | 1,376 | |
| |
| | | |
| | | |
| | | |
| | |
Other comprehensive income (loss), net of tax: | |
| | | |
| | | |
| | | |
| | |
Net change in unrealized gains (losses): | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Unrealized gains (losses) arising during the period | |
| 531 | | |
| (595 | ) | |
| 440 | | |
| (293 | ) |
Reclassification adjustment for gains included in income | |
| (85 | ) | |
| (32 | ) | |
| (122 | ) | |
| (32 | ) |
Net unrealized gain (losses) | |
| 446 | | |
| (627 | ) | |
| 318 | | |
| (325 | ) |
Income tax effect | |
| 151 | | |
| (214 | ) | |
| 108 | | |
| (111 | ) |
Other comprehensive income (loss) | |
| 295 | | |
| (413 | ) | |
| 210 | | |
| (214 | ) |
| |
| | | |
| | | |
| | | |
| | |
Total comprehensive income | |
$ | 1,103 | | |
$ | 342 | | |
$ | 1,774 | | |
$ | 1,162 | |
See accompanying notes to consolidated financial
statements.
CONSUMERS BANCORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
CHANGES IN SHAREHOLDERS’ EQUITY
(Unaudited)
(Dollars in thousands, except per share data)
| |
Three Months ended December 31, | | |
Six Months ended December 31, | |
| |
2014 | | |
2013 | | |
2014 | | |
2013 | |
| |
| | |
| | |
| | |
| |
Balance at beginning of period | |
$ | 40,546 | | |
$ | 37,872 | | |
$ | 40,203 | | |
$ | 28,143 | |
| |
| | | |
| | | |
| | | |
| | |
Net income | |
| 808 | | |
| 755 | | |
| 1,564 | | |
| 1,376 | |
Other comprehensive income (loss) | |
| 295 | | |
| (413 | ) | |
| 210 | | |
| (214 | ) |
Issuance of 655,668 shares for rights and public offering, net of offering costs of $762 | |
| — | | |
| — | | |
| — | | |
| 9,237 | |
1,254 and 1,384 Dividend reinvestment plan shares associated with forfeited and expired restricted stock awards retired to treasury stock during the three and six months ended December 31, 2014, respectively | |
| — | | |
| — | | |
| — | | |
| — | |
Common cash dividends | |
| (328 | ) | |
| (328 | ) | |
| (656 | ) | |
| (656 | ) |
| |
| | | |
| | | |
| | | |
| | |
Balance at the end of the period | |
$ | 41,321 | | |
$ | 37,886 | | |
$ | 41,321 | | |
$ | 37,886 | |
| |
| | | |
| | | |
| | | |
| | |
Common cash dividends per share | |
$ | 0.12 | | |
$ | 0.12 | | |
$ | 0.24 | | |
$ | 0.24 | |
See accompanying notes to consolidated financial
statements.
CONSUMERS BANCORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(Unaudited)
(Dollars in thousands) | |
Six Months Ended December 31, | |
| |
2014 | | |
2013 | |
Cash flows from operating activities | |
| | | |
| | |
Net cash from operating activities | |
$ | 3,034 | | |
$ | 2,495 | |
| |
| | | |
| | |
Cash flow from investing activities | |
| | | |
| | |
Securities available-for-sale | |
| | | |
| | |
Purchases | |
| (28,920 | ) | |
| (31,918 | ) |
Maturities, calls and principal pay downs | |
| 9,912 | | |
| 8,993 | |
Proceeds from sales of available-for-sale securities | |
| 13,044 | | |
| 2,765 | |
Securities held-to-maturity | |
| | | |
| | |
Purchases | |
| (780 | ) | |
| — | |
Principal pay downs | |
| 90 | | |
| — | |
Net (increase) decrease in certificates of deposits in
other financial institutions | |
| (2,753 | ) | |
| 2,447 | |
Net increase in loans | |
| (3,185 | ) | |
| (3,660 | ) |
Purchase of Bank owned life insurance | |
| (476 | ) | |
| — | |
Acquisition of premises and equipment | |
| (2,698 | ) | |
| (869 | ) |
Disposal of premises and equipment | |
| 6 | | |
| — | |
Proceeds from sale of other real
estate owned | |
| 128 | | |
| 1 | |
Net cash from investing activities | |
| (15,632 | ) | |
| (22,241 | ) |
| |
| | | |
| | |
Cash flow from financing activities | |
| | | |
| | |
Net increase in deposit accounts | |
| 10,741 | | |
| 5,485 | |
Net change in short-term borrowings | |
| (3,054 | ) | |
| 2,967 | |
Net proceeds from rights and public offering | |
| — | | |
| 9,237 | |
Proceeds from Federal Home Loan Bank advances | |
| 8,500 | | |
| 2,500 | |
Repayments of Federal Home Loan Bank advances | |
| (2,028 | ) | |
| (36 | ) |
Dividends paid | |
| (656 | ) | |
| (656 | ) |
Net cash from financing activities | |
| 13,503 | | |
| 19,497 | |
| |
| | | |
| | |
Increase (decrease) in cash or cash equivalents | |
| 905 | | |
| (249 | ) |
| |
| | | |
| | |
Cash and cash equivalents, beginning of period | |
| 11,125 | | |
| 9,356 | |
Cash and cash equivalents, end of period | |
$ | 12,030 | | |
$ | 9,107 | |
| |
| | | |
| | |
Supplemental disclosure of cash flow information: | |
| | | |
| | |
Cash paid during the period: | |
| | | |
| | |
Interest | |
$ | 480 | | |
$ | 499 | |
Federal income taxes | |
| 375 | | |
| 510 | |
Non-cash items: | |
| | | |
| | |
Transfer from loans to repossessed assets | |
| — | | |
| 709 | |
Expired and forfeited dividend
reinvestment plan shares associated with restricted stock awards that were retired to treasury stock | |
| 2 | | |
| — | |
See accompanying notes to consolidated
financial statements.
Note 1 – Summary of Significant Accounting Policies:
Nature of
Operations: Consumers Bancorp, Inc. (the Corporation) is a bank holding company headquartered in Minerva, Ohio that provides,
through its banking subsidiary, Consumers National Bank (the Bank), a broad array of products and services throughout its primary
market area of 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.
Basis of Presentation: The
consolidated financial statements for interim periods are unaudited and reflect all adjustments (consisting of only normal recurring
adjustments), which, in the opinion of management, are necessary to present fairly the financial position and results of operations
and cash flows for the periods presented. The unaudited financial statements are presented in accordance with the requirements
of Form 10-Q and do not include all disclosures normally required by accounting principles generally accepted in the United States
of America. The financial statements should be read in conjunction with the consolidated financial statements and notes
thereto included in the Corporation’s Form 10-K for the year ended June 30, 2014. The results of operations for the interim
period disclosed herein are not necessarily indicative of the results that may be expected for a full year.
The consolidated financial statements
include the accounts of the Corporation and the Bank. All significant inter-company transactions and accounts have been eliminated
in consolidation.
Segment Information: The Corporation
is a bank holding company engaged in the business of commercial and retail banking, which accounts for substantially all of the
revenues, operating income, and assets. Accordingly, all of its operations are recorded in one segment, banking.
Reclassifications: Certain items
in prior financial statements have been reclassified to conform to the current presentation. Any reclassifications had no impact
on prior year net income or shareholders’ equity.
Recently Issued Accounting Pronouncements:
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (a new revenue recognition standard).
The Update’s core principle is that a company will recognize revenue to depict the transfer of goods or services to customers
in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
In addition, this Update specifies the accounting for certain costs to obtain or fulfill a contract with a customer and expands
disclosure requirements for revenue recognition. This Update is effective for annual reporting periods beginning after December 15,
2016, including interim periods within that reporting period. The Corporation is evaluating the effect of adopting this new accounting
Update.
CONSUMERS BANCORP,
INC.
Notes to the Consolidated
Financial Statements
(Unaudited) (continued)
(Dollars in thousands, except per share amounts)
Note 2 – Securities
| |
| | |
| | |
| | |
| |
Available –for-Sale | |
Amortized Cost | | |
Gross Unrealized Gains | | |
Gross Unrealized Losses | | |
Fair Value | |
December 31, 2014 | |
| | | |
| | | |
| | | |
| | |
Obligations of U.S. government-sponsored
entities and agencies | |
$ | 17,384 | | |
$ | 152 | | |
$ | (24 | ) | |
$ | 17,512 | |
Obligations of state and political subdivisions | |
| 44,930 | | |
| 1,071 | | |
| (111 | ) | |
| 45,890 | |
Mortgage-backed securities – residential | |
| 63,129 | | |
| 957 | | |
| (124 | ) | |
| 63,962 | |
Collateralized mortgage obligations | |
| 4,439 | | |
| 26 | | |
| (3 | ) | |
| 4,462 | |
Trust preferred security | |
| 198 | | |
| 318 | | |
| — | | |
| 516 | |
Total available-for-sale securities | |
$ | 130,080 | | |
$ | 2,524 | | |
$ | (262 | ) | |
$ | 132,342 | |
| |
| | | |
| | | |
| | | |
| | |
Held-to-Maturity | |
Amortized Cost | | |
Gross Unrecognized Gains | | |
Gross Unrecognized
Losses | | |
Fair Value | |
December 31, 2014 | |
| | |
| | |
| | |
| |
Obligations of state and political subdivisions | |
$ | 3,690 | | |
$ | 36 | | |
$ | — | | |
$ | 3,726 | |
| |
| | | |
| | | |
| | | |
| | |
Available–for-Sale | |
Amortized Cost | | |
Gross Unrealized Gains | | |
Gross Unrealized Losses | | |
Fair Value | |
June 30, 2014 | |
| | | |
| | | |
| | | |
| | |
Obligations of U.S. government-sponsored
entities and agencies | |
$ | 18,345 | | |
$ | 126 | | |
$ | (35 | ) | |
$ | 18,436 | |
Obligations of state and political subdivisions | |
| 44,645 | | |
| 1,124 | | |
| (257 | ) | |
| 45,512 | |
Mortgage-backed securities – residential | |
| 57,370 | | |
| 965 | | |
| (231 | ) | |
| 58,104 | |
Collateralized mortgage obligations | |
| 3,887 | | |
| 42 | | |
| — | | |
| 3,929 | |
Trust preferred security | |
| 202 | | |
| 210 | | |
| — | | |
| 412 | |
Total available-for-sale securities | |
$ | 124,449 | | |
$ | 2,467 | | |
$ | (523 | ) | |
$ | 126,393 | |
| |
| | | |
| | | |
| | | |
| | |
Held-to-Maturity | |
Amortized Cost | | |
Gross Unrecognized Gains | | |
Gross Unrecognized Losses | | |
Fair Value | |
June 30, 2014 | |
| | | |
| | | |
| | | |
| | |
Obligations of state and political subdivisions | |
$ | 3,000 | | |
$ | 40 | | |
$ | — | | |
$ | 3,040 | |
Proceeds from the sales and calls of available-for-sale
securities were as follows:
| |
Three Months Ended December 31, | | |
Six Months Ended December 31, | |
| |
2014 | | |
2013 | | |
2014 | | |
2013 | |
Proceeds | |
$ | 8,672 | | |
$ | 2,765 | | |
$ | 13,044 | | |
$ | 2,765 | |
Gross realized gains | |
| 154 | | |
| 33 | | |
| 191 | | |
| 33 | |
Gross realized losses | |
| 69 | | |
| 1 | | |
| 69 | | |
| 1 | |
CONSUMERS BANCORP,
INC.
Notes to the Consolidated
Financial Statements
(Unaudited) (continued)
(Dollars in thousands, except per share amounts)
The income tax provision applicable to
these net realized gains and losses was $29 and $42 for the three and six months ended December 31, 2014, respectively and $11 for
the three and six months ended December 31, 2013.
The amortized cost and fair values of
debt securities at December 31, 2014, by expected maturity, are shown below. Expected maturities will differ from contractual
maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Securities
not due at a single maturity date, primarily mortgage-backed securities, collateralized mortgage obligations and the trust preferred
security are shown separately.
Available-for-Sale | |
Amortized Cost | | |
Fair
Value | |
Due in one year or less | |
$ | 3,309 | | |
$ | 3,317 | |
Due after one year through five years | |
| 10,534 | | |
| 10,612 | |
Due after five years through ten years | |
| 32,514 | | |
| 33,114 | |
Due after ten years | |
| 15,957 | | |
| 16,359 | |
Total | |
| 62,314 | | |
| 63,402 | |
| |
| | | |
| | |
Mortgage-backed securities – residential | |
| 63,129 | | |
| 63,962 | |
Collateralized mortgage obligations | |
| 4,439 | | |
| 4,462 | |
Trust preferred security | |
| 198 | | |
| 516 | |
Total available-for-sale securities | |
$ | 130,080 | | |
$ | 132,342 | |
| |
| | | |
| | |
Held-to-Maturity | |
| | | |
| | |
| |
| | | |
| | |
Due after five years through ten years | |
| 780 | | |
| 780 | |
Due after ten years | |
| 2,910 | | |
| 2,946 | |
Total held-to-maturity securities | |
$ | 3,690 | | |
$ | 3,726 | |
The following table summarizes the securities
with unrealized losses at December 31, 2014 and June 30, 2014, aggregated by investment category and length of time that
individual securities have been in a continuous unrealized 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 |
|
December
31, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations
of U.S. government- sponsored entities and agencies |
|
$ |
5,460 |
|
|
$ |
(24 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
5,460 |
|
|
$ |
(24 |
) |
Obligations
of states and political subdivisions |
|
|
5,646 |
|
|
|
(41 |
) |
|
|
4,910 |
|
|
|
(70 |
) |
|
|
10,556 |
|
|
|
(111 |
) |
Mortgage-backed securities – residential |
|
|
8,437 |
|
|
|
(25 |
) |
|
|
6,669 |
|
|
|
(99 |
) |
|
|
15,106 |
|
|
|
(124 |
) |
Collateralized mortgage obligations |
|
|
1,263 |
|
|
|
(3 |
) |
|
|
— |
|
|
|
— |
|
|
|
1,263 |
|
|
|
(3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total temporarily impaired |
|
$ |
20,806 |
|
|
$ |
(93 |
) |
|
$ |
11,579 |
|
|
$ |
(169 |
) |
|
$ |
32,385 |
|
|
$ |
(262 |
) |
CONSUMERS BANCORP,
INC.
Notes to the Consolidated
Financial Statements
(Unaudited) (continued)
(Dollars in thousands, except per share amounts)
|
|
Less
than 12 Months |
|
|
12
Months or more |
|
|
Total
|
|
Available-for-sale |
|
Fair
Value |
|
|
Unrealized
Loss |
|
|
Fair
Value |
|
|
Unrealized
Loss |
|
|
Fair
Value |
|
|
Unrealized
Loss |
|
June 30,
2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligation
of U.S. government- sponsored entities and agencies |
|
$ |
1,492 |
|
|
$ |
(7 |
) |
|
$ |
5,411 |
|
|
$ |
(28 |
) |
|
$ |
6,903 |
|
|
$ |
(35 |
) |
Obligations
of states and political subdivisions |
|
|
9,929 |
|
|
|
(223 |
) |
|
|
3,719 |
|
|
|
(34 |
) |
|
|
13,648 |
|
|
|
(257 |
) |
Mortgage-backed
securities - residential |
|
|
10,403 |
|
|
|
(210 |
) |
|
|
2,342 |
|
|
|
(21 |
) |
|
|
12,745 |
|
|
|
(231 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total temporarily
impaired |
|
$ |
21,824 |
|
|
$ |
(440 |
) |
|
$ |
11,472 |
|
|
$ |
(83 |
) |
|
$ |
33,296 |
|
|
$ |
(523 |
) |
Management evaluates securities for other-than-temporary
impairment (OTTI) on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. The
securities portfolio is evaluated for OTTI by segregating the portfolio into two general segments and applying the appropriate
OTTI model. Investment securities are generally evaluated for OTTI under FASB ASC Topic 320, Accounting for Certain Investments
in Debt and Equity Securities.
In determining OTTI under the ASC Topic
320 model, management considers many factors, including: (1) the length of time and the extent to which the fair value has
been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) whether the market decline
was affected by macroeconomic conditions, and (4) whether the entity has the intent to sell the debt security or more likely
than not will be required to sell the debt security before its anticipated recovery. The assessment of whether an other-than-temporary
decline exists involves a high degree of subjectivity and judgment and is based on the information available to management at
a certain point in time.
The unrealized losses within the securities
portfolio as of December 31, 2014 have not been recognized into income because the decline in fair value is not attributed to
credit quality, management does not intend to sell and it is likely that management will not be required to sell the securities
prior to their anticipated recovery. The decline in fair value of the residential mortgage-backed securities, obligations of state
and political subdivisions and obligations of U.S. government-sponsored entities and agencies is largely due to changes in interest
rates. The fair value is expected to recover as the securities approach maturity.
CONSUMERS BANCORP,
INC.
Notes to the Consolidated
Financial Statements
(Unaudited) (continued)
(Dollars in thousands, except per share amounts)
Note 3 – Loans
Major classifications of loans were as
follows:
| |
December 31, 2014 | | |
June 30, 2014 | |
Commercial | |
$ | 32,079 | | |
$ | 33,809 | |
Commercial real estate: | |
| | | |
| | |
Construction | |
| 6,868 | | |
| 3,688 | |
Other | |
| 135,176 | | |
| 131,518 | |
1 – 4 Family residential real estate: | |
| | | |
| | |
Owner occupied | |
| 29,779 | | |
| 31,044 | |
Non-owner occupied | |
| 15,541 | | |
| 16,505 | |
Construction | |
| 814 | | |
| 186 | |
Consumer | |
| 8,224 | | |
| 8,604 | |
Subtotal | |
| 228,481 | | |
| 225,354 | |
Less: Net deferred loan fees | |
| (407 | ) | |
| (388 | ) |
Allowance for loan losses | |
| (2,452 | ) | |
| (2,405 | ) |
Net Loans | |
$ | 225,622 | | |
$ | 222,561 | |
CONSUMERS BANCORP,
INC.
Notes to the Consolidated
Financial Statements
(Unaudited) (continued)
(Dollars in thousands, except per share amounts)
The following table presents the activity in the allowance
for loan losses by portfolio segment for the three months ending December 31, 2014:
| |
| | |
| | |
1-4 Family | | |
| | |
| |
| |
| | |
Commercial | | |
Residential | | |
| | |
| |
| |
| | |
Real | | |
Real | | |
| | |
| |
| |
Commercial | | |
Estate | | |
Estate | | |
Consumer | | |
Total | |
| |
| | |
| | |
| | |
| | |
| |
Allowance for loan losses: | |
| | | |
| | | |
| | | |
| | | |
| | |
Beginning balance | |
$ | 300 | | |
$ | 1,455 | | |
$ | 289 | | |
$ | 375 | | |
$ | 2,419 | |
Provision for loan losses | |
| 11 | | |
| 38 | | |
| (2 | ) | |
| 10 | | |
| 57 | |
Loans charged-off | |
| — | | |
| — | | |
| — | | |
| (35 | ) | |
| (35 | ) |
Recoveries | |
| — | | |
| — | | |
| 1 | | |
| 10 | | |
| 11 | |
Total ending allowance balance | |
$ | 311 | | |
$ | 1,493 | | |
$ | 288 | | |
$ | 360 | | |
$ | 2,452 | |
The following table presents the activity in the allowance
for loan losses by portfolio segment for the six months ending December 31, 2014:
| |
| | |
| | |
1-4 Family | | |
| | |
| |
| |
| | |
Commercial | | |
Residential | | |
| | |
| |
| |
| | |
Real | | |
Real | | |
| | |
| |
| |
Commercial | | |
Estate | | |
Estate | | |
Consumer | | |
Total | |
| |
| | |
| | |
| | |
| | |
| |
Allowance for loan losses: | |
| | | |
| | | |
| | | |
| | | |
| | |
Beginning balance | |
$ | 307 | | |
$ | 1,440 | | |
$ | 294 | | |
$ | 364 | | |
$ | 2,405 | |
Provision for loan losses | |
| 4 | | |
| 53 | | |
| 25 | | |
| 42 | | |
| 124 | |
Loans charged-off | |
| — | | |
| — | | |
| (33 | ) | |
| (68 | ) | |
| (101 | ) |
Recoveries | |
| — | | |
| — | | |
| 2 | | |
| 22 | | |
| 24 | |
Total ending allowance balance | |
$ | 311 | | |
$ | 1,493 | | |
$ | 288 | | |
$ | 360 | | |
$ | 2,452 | |
CONSUMERS BANCORP, INC.
Notes to the Consolidated Financial Statements
(Unaudited) (continued)
(Dollars in thousands, except per share amounts)
The following table presents the activity in the allowance
for loan losses by portfolio segment for the three months ending December 31, 2013:
| |
| | |
| | |
1-4 Family | | |
| | |
| |
| |
| | |
Commercial | | |
Residential | | |
| | |
| |
| |
| | |
Real | | |
Real | | |
| | |
| |
| |
Commercial | | |
Estate | | |
Estate | | |
Consumer | | |
Total | |
| |
| | |
| | |
| | |
| | |
| |
Allowance for loan losses: | |
| | | |
| | | |
| | | |
| | | |
| | |
Beginning balance | |
$ | 150 | | |
$ | 1,499 | | |
$ | 500 | | |
$ | 337 | | |
$ | 2,486 | |
Provision for loan losses | |
| 26 | | |
| 3 | | |
| (49 | ) | |
| 55 | | |
| 35 | |
Loans charged-off | |
| (17 | ) | |
| (1 | ) | |
| — | | |
| (54 | ) | |
| (72 | ) |
Recoveries | |
| — | | |
| — | | |
| — | | |
| 38 | | |
| 38 | |
Total ending allowance balance | |
$ | 159 | | |
$ | 1,501 | | |
$ | 451 | | |
$ | 376 | | |
$ | 2,487 | |
The following table presents the activity in the allowance
for loan losses by portfolio segment for the six months ending December 31, 2013:
| |
| | |
| | |
1-4 Family | | |
| | |
| |
| |
| | |
Commercial | | |
Residential | | |
| | |
| |
| |
| | |
Real | | |
Real | | |
| | |
| |
| |
Commercial | | |
Estate | | |
Estate | | |
Consumer | | |
Total | |
| |
| | |
| | |
| | |
| | |
| |
Allowance for loan losses: | |
| | | |
| | | |
| | | |
| | | |
| | |
Beginning balance | |
$ | 161 | | |
$ | 1,471 | | |
$ | 614 | | |
$ | 250 | | |
$ | 2,496 | |
Provision for loan losses | |
| 15 | | |
| 31 | | |
| (109 | ) | |
| 231 | | |
| 168 | |
Loans charged-off | |
| (17 | ) | |
| (1 | ) | |
| (61 | ) | |
| (153 | ) | |
| (232 | ) |
Recoveries | |
| — | | |
| — | | |
| 7 | | |
| 48 | | |
| 55 | |
Total ending allowance balance | |
$ | 159 | | |
$ | 1,501 | | |
$ | 451 | | |
$ | 376 | | |
$ | 2,487 | |
CONSUMERS BANCORP, INC.
Notes to the Consolidated Financial Statements
(Unaudited) (continued)
(Dollars in thousands, except per share amounts)
The following table presents the balance
in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of
December 31, 2014. Included in the recorded investment in loans is $506 of accrued interest receivable net of deferred loan fees
of $407.
| |
| | |
| | |
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 | |
$ | — | | |
$ | 106 | | |
$ | 18 | | |
$ | — | | |
$ | 124 | |
Collectively evaluated for impairment | |
| 311 | | |
| 1,387 | | |
| 270 | | |
| 360 | | |
| 2,328 | |
Total ending allowance balance | |
$ | 311 | | |
$ | 1,493 | | |
$ | 288 | | |
$ | 360 | | |
$ | 2,452 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Recorded investment in loans: | |
| | | |
| | | |
| | | |
| | | |
| | |
Loans individually evaluated for impairment | |
$ | — | | |
$ | 3,736 | | |
$ | 781 | | |
$ | — | | |
$ | 4,517 | |
Loans collectively evaluated for impairment | |
| 32,134 | | |
| 138,245 | | |
| 45,442 | | |
| 8,242 | | |
| 224,063 | |
Total ending loans balance | |
$ | 32,134 | | |
$ | 141,981 | | |
$ | 46,223 | | |
$ | 8,242 | | |
$ | 228,580 | |
CONSUMERS BANCORP, INC.
Notes to the Consolidated Financial Statements
(Unaudited) (continued)
(Dollars in thousands, except per share amounts)
The following table presents the balance
in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of
June 30, 2014. Included in the recorded investment in loans is $491 of accrued interest receivable net of deferred loan fees of
$388.
| |
| | |
| | |
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 | |
$ | — | | |
$ | 110 | | |
$ | 8 | | |
$ | — | | |
$ | 118 | |
Collectively evaluated for impairment | |
| 307 | | |
| 1,330 | | |
| 286 | | |
| 364 | | |
| 2,287 | |
Total ending allowance balance | |
$ | 307 | | |
$ | 1,440 | | |
$ | 294 | | |
$ | 364 | | |
$ | 2,405 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Recorded investment in loans: | |
| | | |
| | | |
| | | |
| | | |
| | |
Loans individually evaluated for impairment | |
$ | — | | |
$ | 2,404 | | |
$ | 798 | | |
$ | — | | |
$ | 3,202 | |
Loans collectively evaluated for impairment | |
| 33,855 | | |
| 132,760 | | |
| 47,019 | | |
| 8,621 | | |
| 222,255 | |
Total ending loans balance | |
$ | 33,855 | | |
$ | 135,164 | | |
$ | 47,817 | | |
$ | 8,621 | | |
$ | 225,457 | |
CONSUMERS BANCORP, INC.
Notes to the Consolidated Financial Statements
(Unaudited) (continued)
(Dollars in thousands, except per share amounts)
The following table presents information related to average
recorded investment and interest income associated with loans individually evaluated for impairment by class of loans as of December
31, 2014 and for the six months ended December 31, 2014:
| |
As of December 31, 2014 | | |
Six Months ended December 31, 2014 | |
| |
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 | |
$ | 2,973 | | |
$ | 2,973 | | |
$ | — | | |
$ | 1,426 | | |
$ | — | | |
$ | — | |
1-4 Family residential real estate: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Owner occupied | |
| 119 | | |
| 119 | | |
| — | | |
| 120 | | |
| — | | |
| — | |
Non-owner occupied | |
| 74 | | |
| 74 | | |
| — | | |
| 37 | | |
| — | | |
| — | |
With an allowance recorded: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Commercial real estate: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Other | |
| 762 | | |
| 762 | | |
| 106 | | |
| 763 | | |
| 18 | | |
| 18 | |
1-4 Family residential real estate: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Owner occupied | |
| 125 | | |
| 125 | | |
| 4 | | |
| 126 | | |
| 4 | | |
| 4 | |
Non-owner occupied | |
| 464 | | |
| 463 | | |
| 14 | | |
| 505 | | |
| 10 | | |
| 10 | |
Total | |
$ | 4,517 | | |
$ | 4,516 | | |
$ | 124 | | |
$ | 2,977 | | |
$ | 32 | | |
$ | 32 | |
CONSUMERS BANCORP, INC.
Notes to the Consolidated Financial Statements
(Unaudited) (continued)
(Dollars in thousands, except per share amounts)
The following table presents information related to average
recorded investment and interest income associated with loans individually evaluated for impairment by class of loans for the
three months ended December 31, 2014:
| |
Average | | |
Interest | | |
Cash Basis | |
| |
Recorded | | |
Income | | |
Interest | |
| |
Investment | | |
Recognized | | |
Recognized | |
With no related allowance recorded: | |
| | | |
| | | |
| | |
Commercial real estate: | |
| | | |
| | | |
| | |
Other | |
$ | 1,502 | | |
$ | — | | |
$ | — | |
1-4 Family residential real estate: | |
| | | |
| | | |
| | |
Owner occupied | |
| 120 | | |
| — | | |
| — | |
Non-owner occupied | |
| 74 | | |
| — | | |
| — | |
With an allowance recorded: | |
| | | |
| | | |
| | |
Commercial real estate: | |
| | | |
| | | |
| | |
Other | |
| 760 | | |
| 9 | | |
| 9 | |
1-4 Family residential real estate: | |
| | | |
| | | |
| | |
Owner occupied | |
| 125 | | |
| 2 | | |
| 2 | |
Non-owner occupied | |
| 465 | | |
| 5 | | |
| 5 | |
Total | |
$ | 3,046 | | |
$ | 16 | | |
$ | 16 | |
CONSUMERS BANCORP, INC.
Notes to the Consolidated Financial Statements
(Unaudited) (continued)
(Dollars in thousands, except per share amounts)
The following table presents information related to loans individually
evaluated for impairment by class of loans as of June 30, 2014 and for the six months ended December 31, 2013:
| |
As of June 30, 2014 | | |
Six Months ended December 31, 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 | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | 3 | | |
$ | — | | |
$ | — | |
Commercial real estate: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Other | |
| 1,642 | | |
| 1,635 | | |
| — | | |
| 1,009 | | |
| — | | |
| — | |
1-4 Family residential real estate: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Owner occupied | |
| 121 | | |
| 121 | | |
| — | | |
| 124 | | |
| — | | |
| — | |
Non-owner occupied | |
| 472 | | |
| 472 | | |
| — | | |
| 132 | | |
| 2 | | |
| 2 | |
With an allowance recorded: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Commercial | |
| — | | |
| — | | |
| — | | |
| 15 | | |
| 3 | | |
| 3 | |
Commercial real estate: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Other | |
| 768 | | |
| 769 | | |
| 110 | | |
| 787 | | |
| 10 | | |
| 10 | |
1-4 Family residential real estate: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Owner occupied | |
| 127 | | |
| 127 | | |
| 4 | | |
| 280 | | |
| — | | |
| — | |
Non-owner occupied | |
| 78 | | |
| 78 | | |
| 4 | | |
| 690 | | |
| 9 | | |
| 9 | |
Total | |
$ | 3,208 | | |
$ | 3,202 | | |
$ | 118 | | |
$ | 3,040 | | |
$ | 24 | | |
$ | 24 | |
CONSUMERS BANCORP, INC.
Notes to the Consolidated Financial Statements
(Unaudited) (continued)
(Dollars in thousands, except per share amounts)
The following table presents information related to average
recorded investment and interest income associated with loans individually evaluated for impairment by class of loans for the
three months ended December 31, 2013:
| |
Average | | |
Interest | | |
Cash Basis | |
| |
Recorded | | |
Income | | |
Interest | |
| |
Investment | | |
Recognized | | |
Recognized | |
With no related allowance recorded: | |
| | | |
| | | |
| | |
Commercial | |
$ | 3 | | |
$ | — | | |
$ | — | |
Commercial real estate: | |
| | | |
| | | |
| | |
Other | |
| 1,480 | | |
| — | | |
| — | |
1-4 Family residential real estate: | |
| | | |
| | | |
| | |
Owner occupied | |
| 123 | | |
| — | | |
| — | |
Non-owner occupied | |
| 121 | | |
| 1 | | |
| 1 | |
With an allowance recorded: | |
| | | |
| | | |
| | |
Commercial | |
| — | | |
| — | | |
| | |
Commercial real estate: | |
| | | |
| | | |
| | |
Other | |
| 784 | | |
| 5 | | |
| 5 | |
1-4 Family residential real estate: | |
| | | |
| | | |
| | |
Owner occupied | |
| 279 | | |
| — | | |
| — | |
Non-owner occupied | |
| 541 | | |
| 3 | | |
| 3 | |
Total | |
$ | 3,331 | | |
$ | 9 | | |
$ | 9 | |
CONSUMERS BANCORP, INC.
Notes to the Consolidated Financial Statements
(Unaudited) (continued)
(Dollars in thousands, except per share amounts)
The following table presents the recorded investment in non-accrual
and loans past due over 90 days still on accrual by class of loans as of December 31, 2014 and June 30, 2014:
| |
December 31, 2014 | | |
June 30, 2014 | |
| |
| | |
Loans Past Due | | |
| | |
Loans Past Due | |
| |
| | |
Over 90 Days | | |
| | |
Over 90 Days | |
| |
| | |
Still | | |
| | |
Still | |
| |
Non-accrual | | |
Accruing | | |
Non-accrual | | |
Accruing | |
Commercial | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | |
Commercial real estate: | |
| | | |
| | | |
| | | |
| | |
Other | |
| 811 | | |
| — | | |
| 1,683 | | |
| — | |
1 – 4 Family residential: | |
| | | |
| | | |
| | | |
| | |
Owner occupied | |
| 289 | | |
| — | | |
| 276 | | |
| — | |
Non-owner occupied | |
| — | | |
| — | | |
| — | | |
| — | |
Consumer | |
| — | | |
| — | | |
| — | | |
| — | |
Total | |
$ | 1,100 | | |
$ | — | | |
$ | 1,959 | | |
$ | — | |
Non-accrual loans include both smaller
balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.
CONSUMERS BANCORP, INC.
Notes to the Consolidated Financial
Statements
(Unaudited) (continued)
(Dollars in thousands, except per share amounts)
The following table presents the aging
of the recorded investment in past due loans as of December 31, 2014 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 | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | 32,134 | | |
$ | 32,134 | |
Commercial real estate: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Construction | |
| — | | |
| — | | |
| — | | |
| — | | |
| 6,844 | | |
| 6,844 | |
Other | |
| — | | |
| — | | |
| 756 | | |
| 756 | | |
| 134,381 | | |
| 135,137 | |
1-4 Family residential: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Owner occupied | |
| 72 | | |
| 69 | | |
| 223 | | |
| 364 | | |
| 29,504 | | |
| 29,868 | |
Non-owner occupied | |
| — | | |
| — | | |
| — | | |
| — | | |
| 15,535 | | |
| 15,535 | |
Construction | |
| — | | |
| — | | |
| — | | |
| — | | |
| 820 | | |
| 820 | |
Consumer | |
| 58 | | |
| 43 | | |
| — | | |
| 101 | | |
| 8,141 | | |
| 8,242 | |
Total | |
$ | 130 | | |
$ | 112 | | |
$ | 979 | | |
$ | 1,221 | | |
$ | 227,359 | | |
$ | 228,580 | |
The above table of past due loans includes
the recorded investment in non-accrual loans of $56 in the 60-89 days category, $979 in the 90 days or greater category and $65
in the loans not past due category.
The following table presents the aging
of the recorded investment in past due loans as of June 30, 2014 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 | |
$ | 66 | | |
$ | — | | |
$ | — | | |
$ | 66 | | |
$ | 33,789 | | |
$ | 33,855 | |
Commercial real estate: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Construction | |
| — | | |
| — | | |
| — | | |
| — | | |
| 3,679 | | |
| 3,679 | |
Other | |
| — | | |
| — | | |
| 1,625 | | |
| 1,625 | | |
| 129,860 | | |
| 131,485 | |
1-4 Family residential: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Owner occupied | |
| 111 | | |
| 122 | | |
| 81 | | |
| 314 | | |
| 30,817 | | |
| 31,131 | |
Non-owner occupied | |
| — | | |
| 39 | | |
| — | | |
| 39 | | |
| 16,462 | | |
| 16,501 | |
Construction | |
| — | | |
| — | | |
| — | | |
| — | | |
| 185 | | |
| 185 | |
Consumer | |
| 106 | | |
| — | | |
| — | | |
| 106 | | |
| 8,515 | | |
| 8,621 | |
Total | |
$ | 283 | | |
$ | 161 | | |
$ | 1,706 | | |
$ | 2,150 | | |
$ | 223,307 | | |
$ | 225,457 | |
The above table of past due loans includes the recorded investment
in non-accrual loans of $40 in the 30-59 days past due category, $122 in the 60-90 days past due category, $1,706 in the 90
days or greater and $91 in the loans not past due category.
Troubled Debt Restructurings:
As of December 31, 2014, the recorded
investment of loans classified as troubled debt restructurings was $1,507 with $124 of specific reserves allocated to these loans.
As of June 30, 2014, the recorded investment of loans classified as troubled debt restructurings was $1,528 with $118 of specific
reserves allocated to these loans. As of December 31, 2014 and June 30, 2014, the Corporation had not committed to lend any additional
amounts to customers with outstanding loans that are classified as troubled debt restructurings.
CONSUMERS BANCORP, INC.
Notes to the Consolidated Financial
Statements
(Unaudited) (continued)
(Dollars in thousands, except per share amounts)
During the three and six months ended
December 31, 2014 and 2013 there were no loan modifications completed that were classified as troubled debt restructurings. There
were no charge offs from troubled debt restructurings during the three and six month periods ended December 31, 2014 and 2013.
There were no loans classified as troubled
debt restructurings for which there was a payment default during the three or six month periods ending December 31, 2014 or 2013.
A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms.
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, current economic trends and other relevant
information. 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. Management monitors the loans on an ongoing basis for any changes in the borrower’s ability to service their
debt and affirm the risk ratings for the loans and leases in their respective portfolio on an annual 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.
CONSUMERS BANCORP, INC.
Notes to the Consolidated Financial
Statements
(Unaudited) (continued)
(Dollars in thousands, except per share amounts)
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 are disclosed in the previous table within this footnote. Based on the most recent analysis performed, the recorded investment
by risk category of loans by class of loans was as follows:
| |
As of December 31, 2014 | |
| |
| | |
Special | | |
| | |
| | |
Not | |
| |
Pass | | |
Mention | | |
Substandard | | |
Doubtful | | |
Rated | |
Commercial | |
$ | 27,297 | | |
$ | 3,830 | | |
$ | 126 | | |
$ | — | | |
$ | 881 | |
Commercial real estate: | |
| | | |
| | | |
| | | |
| | | |
| | |
Construction | |
| 6,791 | | |
| — | | |
| 53 | | |
| — | | |
| — | |
Other | |
| 124,291 | | |
| 2,636 | | |
| 5,614 | | |
| 1,526 | | |
| 1,070 | |
1-4 Family residential real estate: | |
| | | |
| | | |
| | | |
| | | |
| | |
Owner occupied | |
| 4,315 | | |
| — | | |
| — | | |
| 244 | | |
| 25,309 | |
Non-owner occupied | |
| 13,682 | | |
| 500 | | |
| 582 | | |
| 537 | | |
| 234 | |
Construction | |
| 716 | | |
| — | | |
| — | | |
| — | | |
| 104 | |
Consumer | |
| — | | |
| — | | |
| — | | |
| — | | |
| 8,242 | |
Total | |
$ | 177,092 | | |
$ | 6,966 | | |
$ | 6,375 | | |
$ | 2,307 | | |
$ | 35,840 | |
| |
As of June 30, 2014 | |
| |
| | |
Special | | |
| | |
| | |
Not | |
| |
Pass | | |
Mention | | |
Substandard | | |
Doubtful | | |
Rated | |
Commercial | |
$ | 29,337 | | |
$ | 3,503 | | |
$ | 62 | | |
$ | — | | |
$ | 953 | |
Commercial real estate: | |
| | | |
| | | |
| | | |
| | | |
| | |
Construction | |
| 3,619 | | |
| — | | |
| 60 | | |
| — | | |
| — | |
Other | |
| 121,659 | | |
| 3,040 | | |
| 3,526 | | |
| 2,404 | | |
| 856 | |
1-4 Family residential real estate: | |
| | | |
| | | |
| | | |
| | | |
| | |
Owner occupied | |
| 3,959 | | |
| — | | |
| — | | |
| 248 | | |
| 26,924 | |
Non-owner occupied | |
| 14,632 | | |
| 565 | | |
| 599 | | |
| 550 | | |
| 155 | |
Construction | |
| — | | |
| — | | |
| — | | |
| — | | |
| 185 | |
Consumer | |
| — | | |
| — | | |
| — | | |
| — | | |
| 8,621 | |
Total | |
$ | 173,206 | | |
$ | 7,108 | | |
$ | 4,247 | | |
$ | 3,202 | | |
$ | 37,694 | |
CONSUMERS BANCORP, INC.
Notes to the Consolidated Financial
Statements
(Unaudited) (continued)
(Dollars in thousands, except per share amounts)
Note 4 - 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).
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 December
31, 2014 Using | |
| |
Balance at December 31,
2014 | | |
Level 1 | | |
Level 2 | | |
Level 3 | |
Assets: | |
| | | |
| | | |
| | | |
| | |
Obligations of U.S. government-sponsored entities and agencies | |
$ | 17,512 | | |
$ | — | | |
$ | 17,512 | | |
$ | — | |
Obligations of states and political subdivisions | |
| 45,890 | | |
| — | | |
| 45,890 | | |
| — | |
Mortgage-backed securities – residential | |
| 63,962 | | |
| — | | |
| 63,962 | | |
| — | |
Collateralized mortgage obligations | |
| 4,462 | | |
| — | | |
| 4,462 | | |
| — | |
Trust preferred security | |
| 516 | | |
| — | | |
| 516 | | |
| — | |
CONSUMERS BANCORP, INC.
Notes to the Consolidated Financial
Statements
(Unaudited) (continued)
(Dollars in thousands, except per share amounts)
| |
| | |
Fair Value Measurements at June 30,
2014 Using | |
| |
Balance at June 30, 2014 | | |
Level 1 | | |
Level 2 | | |
Level 3 | |
Assets: | |
| | | |
| | | |
| | | |
| | |
Obligations of U.S. government-sponsored entities and agencies | |
$ | 18,436 | | |
$ | — | | |
$ | 18,436 | | |
$ | — | |
Obligations of states and political subdivisions | |
| 45,512 | | |
| — | | |
| 45,512 | | |
| — | |
Mortgage-backed securities - residential | |
| 58,104 | | |
| — | | |
| 58,104 | | |
| — | |
Collateralized mortgage obligations | |
| 3,929 | | |
| — | | |
| 3,929 | | |
| — | |
Trust preferred security | |
| 412 | | |
| — | | |
| 412 | | |
| — | |
There were no transfers between Level
1 and Level 2 during the six month periods ended December 31, 2014 or 2013.
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. 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 December
31, 2014 Using | |
| |
Balance at December 31,
2014 | | |
Level 1 | | |
Level 2 | | |
Level 3 | |
Impaired loans: | |
| | | |
| | | |
| | | |
| | |
Commercial Real Estate - Other | |
$ | 101 | | |
$ | — | | |
$ | — | | |
$ | 101 | |
CONSUMERS BANCORP, INC.
Notes to the Consolidated Financial
Statements
(Unaudited) (continued)
(Dollars in thousands, except per share amounts)
| |
| | |
Fair Value Measurements at June 30,
2014 Using | |
| |
Balance at June 30, 2014 | | |
Level 1 | | |
Level 2 | | |
Level 3 | |
Impaired loans: | |
| | | |
| | | |
| | | |
| | |
Commercial Real Estate - Other | |
$ | 101 | | |
$ | — | | |
$ | — | | |
$ | 101 | |
Impaired loans included in the tables
above are measured for impairment using the fair value of the collateral and had a carrying amount of $101, with no valuation
allowance at December 31, 2014 and June 30, 2014. The resulting impact to the provision for loan losses was an increase of $25
being recorded for the three month period ended December 31, 2013 and a reduction of $63 being recorded for the six month period
ended December 31, 2013. There was no provision for loan loss recorded related to impaired loans measured at fair value for the
three or six month periods ended December 31, 2014.
The following
table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value
on a non-recurring basis at December 31, 2014 and June 30, 2014:
| |
Fair Value | | |
Valuation Technique | |
Unobservable Inputs | |
Range | |
Weighted Average | |
Impaired loans: | |
| | | |
| |
| |
| |
| | |
| |
| | | |
| |
| |
| |
| | |
Commercial Real Estate - Other | |
$ | 101 | | |
Sales comparison approach | |
Adjustment for differences between comparable sales | |
-14.00% to 31.90% | |
| 22.52 | % |
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
consisted of the sales comparison approach. The significant unobservable inputs used in the fair value measurement relate to any
adjustment made to the value set forth in the appraisal due to a distressed sale situation.
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:
CONSUMERS BANCORP, INC.
Notes to the Consolidated Financial
Statements
(Unaudited) (continued)
(Dollars in thousands, except per share amounts)
| |
December 31, 2014 | | |
June 30, 2014 | |
| |
Carrying Amount | | |
Estimated Fair Value | | |
Carrying Amount | | |
Estimated Fair Value | |
Financial Assets: | |
| | | |
| | | |
| | | |
| | |
Level 1 inputs: | |
| | | |
| | | |
| | | |
| | |
Cash and cash equivalents | |
$ | 12,030 | | |
$ | 12,030 | | |
$ | 11,125 | | |
$ | 11,125 | |
Level 2 inputs: | |
| | | |
| | | |
| | | |
| | |
Certificates of deposits in other financial institutions | |
| 5,456 | | |
| 5,456 | | |
| 2,703 | | |
| 2,703 | |
Loans held for sale | |
| 625 | | |
| 635 | | |
| 559 | | |
| 570 | |
Accrued interest receivable | |
| 1,059 | | |
| 1,059 | | |
| 1,048 | | |
| 1,048 | |
Level 3 inputs: | |
| | | |
| | | |
| | | |
| | |
Securities held-to-maturity | |
| 3,690 | | |
| 3,726 | | |
| 3,000 | | |
| 3,040 | |
Loans, net | |
| 225,622 | | |
| 226,567 | | |
| 222,561 | | |
| 223,128 | |
Financial Liabilities: | |
| | | |
| | | |
| | | |
| | |
Level 2 inputs: | |
| | | |
| | | |
| | | |
| | |
Demand and savings deposits | |
| 256,705 | | |
| 256,705 | | |
| 243,222 | | |
| 243,222 | |
Time deposits | |
| 67,933 | | |
| 68,050 | | |
| 70,675 | | |
| 70,583 | |
Short-term borrowings | |
| 16,435 | | |
| 16,435 | | |
| 19,489 | | |
| 19,489 | |
Federal Home Loan Bank advances | |
| 12,768 | | |
| 13,022 | | |
| 6,296 | | |
| 6,655 | |
Accrued interest payable | |
| 46 | | |
| 46 | | |
| 44 | | |
| 44 | |
The assumptions used to estimate fair
value are described as follows:
Cash and cash equivalents: The
carrying value of cash, deposits in other financial institutions and federal funds sold were considered to approximate fair value
resulting in a Level 1 classification.
Certificates of deposits in other financial
institutions, accrued interest receivable and payable, demand and savings deposits and short-term borrowings: The carrying
value of certificates of deposits in other financial institutions, accrued interest receivable and payable, demand and savings
deposits and short-term borrowings were considered to approximate fair value due to their short-term duration resulting in a Level
2 classification.
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.
CONSUMERS BANCORP, INC.
Notes to the Consolidated Financial
Statements
(Unaudited) (continued)
(Dollars in thousands, except per share amounts)
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 December 31, 2014 and June 30, 2014, 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 December 31, 2014 and June 30, 2014 for similar
financing resulting in a Level 2 classification.
Federal bank and other restricted stocks,
at cost: 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.
Off-balance sheet commitments: 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 above table.
CONSUMERS BANCORP, INC.
Notes to the Consolidated Financial
Statements
(Unaudited) (continued)
(Dollars in thousands, except per share amounts)
Note 5 – 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 Three Months
Ended December 31, | | |
For the Six Months
Ended December 31, | |
| |
2014 | | |
2013 | | |
2014 | | |
2013 | |
Basic: | |
| | | |
| | | |
| | | |
| | |
Net income available to common shareholders | |
$ | 808 | | |
$ | 755 | | |
$ | 1,564 | | |
$ | 1,376 | |
Weighted average common shares outstanding | |
| 2,728,686 | | |
| 2,726,687 | | |
| 2,728,114 | | |
| 2,674,816 | |
Basic income per share | |
$ | 0.30 | | |
$ | 0.28 | | |
$ | 0.57 | | |
$ | 0.51 | |
| |
| | | |
| | | |
| | | |
| | |
Diluted: | |
| | | |
| | | |
| | | |
| | |
Net income available to common shareholders | |
$ | 808 | | |
$ | 755 | | |
$ | 1,564 | | |
$ | 1,376 | |
Weighted average common shares outstanding | |
| 2,728,686 | | |
| 2,726,687 | | |
| 2,728,114 | | |
| 2,674,816 | |
Dilutive effect of restricted
stock | |
| 271 | | |
| 364 | | |
| 342 | | |
| 296 | |
Total common shares and dilutive potential common shares | |
| 2,728,957 | | |
| 2,727,051 | | |
| 2,728,456 | | |
| 2,675,112 | |
Dilutive income per share | |
$ | 0.30 | | |
$ | 0.28 | | |
$ | 0.57 | | |
$ | 0.51 | |
CONSUMERS BANCORP, INC.
Notes to the Consolidated Financial
Statements
(Unaudited) (continued)
(Dollars in thousands, except per share amounts)
Note 6 –Accumulated Other
Comprehensive Income
The components of other comprehensive
income related to unrealized gains and losses on available-for-sale securities for the three and six month periods ended December
31, 2014 and 2013, were as follows:
| |
Pretax | | |
Tax
Expense (Benefit) | | |
After-tax | | |
Affected Line
Item in Consolidated Statements of
Income |
Balance as of September 30, 2014 | |
$ | 1,816 | | |
$ | (618 | ) | |
$ | 1,198 | | |
|
Unrealized holding gain on available-for-sale securities arising during the period | |
| 531 | | |
| (180 | ) | |
| 351 | | |
|
Amounts reclassified from accumulated other comprehensive income | |
| (85 | ) | |
| 29 | | |
| (56 | ) | |
(a)(b) |
Net current period other comprehensive income | |
| 446 | | |
| (151 | ) | |
| 295 | | |
|
Balance as of December 31, 2014 | |
$ | 2,262 | | |
$ | (769 | ) | |
$ | 1,493 | | |
|
| |
| | | |
| | | |
| | | |
|
Balance as of September 30, 2013 | |
$ | 278 | | |
$ | (95 | ) | |
$ | 183 | | |
|
Net current period other comprehensive
income | |
| (627 | ) | |
| 214 | | |
| (413 | ) | |
|
Balance as of December 31, 2013 | |
$ | (349 | ) | |
$ | 119 | | |
$ | (230 | ) | |
|
| |
Pretax | | |
Tax
Expense
(Benefit) | | |
After-tax | | |
Affected Line
Item in Consolidated Statements of
Income |
Balance as of June 30, 2014 | |
$ | 1,944 | | |
$ | (661 | ) | |
$ | 1,283 | | |
|
Unrealized holding gain on available-for-sale securities arising during the period | |
| 440 | | |
| (150 | ) | |
| 290 | | |
|
Amounts reclassified from accumulated other comprehensive income | |
| (122 | ) | |
| 42 | | |
| (80 | ) | |
(a)(b) |
Net current period other comprehensive income | |
| 318 | | |
| (108 | ) | |
| 210 | | |
|
Balance as of December 31, 2014 | |
$ | 2,262 | | |
$ | (769 | ) | |
$ | 1,493 | | |
|
| |
| | | |
| | | |
| | | |
|
Balance as of June 30, 2013 | |
$ | (24 | ) | |
$ | 8 | | |
$ | (16 | ) | |
|
Net current period other comprehensive income | |
| (325 | ) | |
| 111 | | |
| (214 | ) | |
|
Balance as of December 31, 2013 | |
$ | (349 | ) | |
$ | 119 | | |
$ | (230 | ) | |
|
| |
| | | |
| | | |
| | | |
|
(a) Securities gains, net
(b) Income tax expense
Item 2 – Management’s Discussion
and Analysis of Financial Condition and Results of Operations
(Dollars in thousands, except per share
data)
General
The following is management’s analysis
of the Corporation’s results of operations for the three and six month periods ended December 31, 2014, compared to the
same periods in 2013, and the consolidated balance sheet at December 31, 2014, compared to June 30, 2014. This discussion is designed
to provide a more comprehensive review of the operating results and financial condition than could be obtained from an examination
of the financial statements alone. This analysis should be read in conjunction with the consolidated financial statements and
related footnotes and the selected financial data included elsewhere in this report.
Overview
Consumers Bancorp, Inc., a bank holding
company incorporated under the laws of the State of Ohio (the Corporation), owns all of the issued and outstanding common shares
of Consumers National Bank, a bank chartered under the laws of the United States of America (the Bank). The Corporation’s
activities have been limited primarily to holding the common shares of the Bank. 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 market area, consisting primarily of Stark, Columbiana, Carroll, Summit and contiguous counties in Ohio. The Bank also
invests in securities consisting primarily of U.S. government sponsored entities, municipal obligations, mortgage-backed and collateralized
mortgage obligations issued by Fannie Mae, Freddie Mac and Ginnie Mae.
Results of Operations
Three and Six Months Ended December
31, 2014 and December 31, 2013
In the second quarter of fiscal year 2015,
net income was $808, or $0.30 per common share, compared with $755, or $0.28 per common share, in the prior year period. The
following are key highlights of our results of operations for the three months ending December 31, 2014:
| · | net
interest income increased by $183, or by 5.8%, in the second quarter of fiscal year 2015
from the same prior year period; |
| · | noninterest
income increased by $56 primarily as a result of a $53 increase from the gains
on sale of securities and a $33 increase in gains from the sale of mortgage loans;
and |
| · | noninterest
expenses increased by $137, or 4.7%, in the second quarter of fiscal year 2015 principally
as a result of higher salary and employee benefits and occupancy expenses. |
CONSUMERS BANCORP, INC.
Management's Discussion and Analysis
of Financial Condition
and Results of Operations (continued)
(Dollars in thousands, except per share data)
In the first six months of fiscal year
2015, net income was $1,564, or $0.57 per common share, compared with $1,376, or $0.51 per common share, in the prior year period.
The following are key highlights of our results of operations for the six months ending December 31, 2014:
| · | net
interest income increased by $438, or 7.1%, in fiscal year 2015 from the same prior year
period; |
| · | loan
loss provision expense in fiscal year 2015 totaled $124 compared to $168 in the same
prior year period; |
| · | noninterest
income increased by $152, or 10.6%, in fiscal year 2015 from the same prior year period
mainly as a result of a $90 increase from the gains on sale of securities and
a $75 increase in gains from the sale of mortgage loans; and |
| · | noninterest
expenses increased by $360, or 6.2%, in fiscal year 2015 principally as a result of higher
salary and employee benefits due to staff hired in the lending area and an increase in
occupancy expenses. |
Return on average equity (ROE) and return
on average assets (ROA) were 7.78% and 0.82%, respectively, for the second quarter of fiscal year 2015 compared to 7.87% and 0.82%,
respectively, for the same prior year period. ROE and ROA were 7.59% and 0.80%, respectively, for the first six months of fiscal
year 2015 compared to 7.36% and 0.76%, respectively, for the same prior year period.
Net Interest Income
Net interest income, the difference between
interest income earned on interest-earning assets and interest expense incurred on interest-bearing liabilities, is the largest
component of the Corporation’s earnings. Net interest income is affected by changes in the volumes, rates and composition
of interest-earning assets and interest-bearing liabilities. Net interest margin is calculated by dividing net interest income
on a fully tax equivalent basis (FTE) by total average interest-earning assets. FTE income includes tax-exempt income, restated
to a pre-tax equivalent, based on the statutory federal income tax rate. All average balances are daily average balances. Non-accruing
loans are included in average loan balances.
The Corporation’s net interest margin
was 3.79% for the three month period ended December 31, 2014 compared with 3.85% for the same prior year period.
Net interest income for the three months ended December 31, 2014 increased by $183, or 5.8%, to $3,348 from $3,165 for
the same year ago period. The increase in net interest income was primarily the result of an increase in average interest-earning
assets.
Interest income for the three months ended
December 31, 2014 increased by $174, or 5.1%, from the same year ago period. An increase of $26,498, or 7.7%, in average interest-earning
assets from the same prior year period partially offset the impact the low interest rate environment has had on the yield of average
interest-earning assets. Interest expense for the three months ended December 31, 2014 decreased by $9, or 3.7%, from the same
year ago period. The Corporation’s cost of funds decreased to 0.35% for the three month period ended December 31, 2014 from
0.39% for the same year ago period.
CONSUMERS BANCORP, INC.
Management's Discussion and Analysis
of Financial Condition
and Results of Operations (continued)
(Dollars in thousands, except per share data)
The Corporation’s net interest margin
for the six months ended December 31, 2014 was 3.79%, compared to 3.83% for the same year ago period. Net interest income for
the six months ended December 31, 2014 increased by $438, or 7.1%, to $6,636 from $6,198 for the same year ago period. The increase
in net interest income was primarily the result of an increase in average interest-earning assets.
Interest income for the six months ended
December 31, 2014 increased by $419, or 6.3%, from the same year ago period. An increase of $28,504, or 8.4%, in average interest-earning
assets more than offset the impact the low interest rate environment has had on the yield of average interest-earning assets.
Interest expense for the six months ended December 31, 2014 decreased by $19, or 3.8%, from the same year ago period. The Corporation’s
cost of funds decreased to 0.36% for the six month period ended December 31, 2014 from 0.40% for the same year ago period.
CONSUMERS BANCORP, INC.
Management's Discussion and Analysis
of Financial Condition
and Results of Operations (continued)
(Dollars in thousands, except per share data)
Average Balance Sheets and Analysis
of Net Interest Income for the Three Months Ended December 31
(In thousands, except percentages)
| |
2014 | | |
2013 | |
| |
Average
Balance | | |
Interest | | |
Yield/
Rate | | |
Average
Balance | | |
Interest | | |
Yield/
Rate | |
Interest-earning assets: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Taxable
securities | |
$ | 86,743 | | |
$ | 496 | | |
| 2.30 | % | |
$ | 75,455 | | |
$ | 413 | | |
| 2.18 | % |
Nontaxable securities
(1) | |
| 48,317 | | |
| 512 | | |
| 4.30 | | |
| 44,497 | | |
| 514 | | |
| 4.58 | |
Loans receivable (1) | |
| 225,412 | | |
| 2,738 | | |
| 4.82 | | |
| 216,335 | | |
| 2,656 | | |
| 4.87 | |
Interest bearing deposits
and federal funds sold | |
| 10,596 | | |
| 19 | | |
| 0.71 | | |
| 8,283 | | |
| 9 | | |
| 0.43 | |
Total interest-earning assets | |
| 371,068 | | |
| 3,765 | | |
| 4.05 | % | |
| 344,570 | | |
| 3,592 | | |
| 4.14 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Noninterest-earning assets | |
| 21,550 | | |
| | | |
| | | |
| 19,755 | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Total Assets | |
$ | 392,618 | | |
| | | |
| | | |
$ | 364,325 | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Interest-bearing liabilities: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
NOW | |
$ | 45,572 | | |
$ | 16 | | |
| 0.14 | % | |
$ | 39,670 | | |
$ | 21 | | |
| 0.21 | % |
Savings | |
| 126,720 | | |
| 26 | | |
| 0.08 | | |
| 114,662 | | |
| 22 | | |
| 0.08 | |
Time deposits | |
| 69,266 | | |
| 140 | | |
| 0.80 | | |
| 74,863 | | |
| 156 | | |
| 0.83 | |
Short-term borrowings | |
| 18,567 | | |
| 8 | | |
| 0.17 | | |
| 15,690 | | |
| 6 | | |
| 0.15 | |
Federal
Home Loan Bank advances | |
| 6,801 | | |
| 47 | | |
| 2.74 | | |
| 6,477 | | |
| 41 | | |
| 2.51 | |
Total interest-bearing liabilities | |
| 266,926 | | |
| 237 | | |
| 0.35 | % | |
| 251,362 | | |
| 246 | | |
| 0.39 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Noninterest-bearing liabilities: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Noninterest-bearing
checking accounts | |
| 81,216 | | |
| | | |
| | | |
| 72,473 | | |
| | | |
| | |
Other
liabilities | |
| 3,296 | | |
| | | |
| | | |
| 2,374 | | |
| | | |
| | |
Total liabilities | |
| 351,438 | | |
| | | |
| | | |
| 326,209 | | |
| | | |
| | |
Shareholders’ equity | |
| 41,180 | | |
| | | |
| | | |
| 38,116 | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Total liabilities and | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
shareholders’ equity | |
$ | 392,618 | | |
| | | |
| | | |
$ | 364,325 | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net interest income, interest rate
spread (1) | |
| | | |
$ | 3,528 | | |
| 3.70 | % | |
| | | |
$ | 3,346 | | |
| 3.75 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net interest margin (net interest as a percent of average interest-earning
assets) (1) | |
| | | |
| | | |
| 3.79 | % | |
| | | |
| | | |
| 3.85 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Federal tax exemption on non-taxable securities
and loans included in interest income | |
| | | |
$ | 180 | | |
| | | |
| | | |
$ | 181 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Average interest-earning assets to interest-bearing liabilities | |
| 139.02 | % | |
| | | |
| | | |
| 137.08 | % | |
| | | |
| | |
(1) calculated on a fully taxable equivalent basis
CONSUMERS BANCORP, INC.
Management's Discussion and Analysis
of Financial Condition
and Results of Operations (continued)
(Dollars in thousands, except per share data)
Average Balance Sheets and Analysis of Net Interest Income for the Six Months Ended December 31
(In thousands, except percentages)
| |
2014 | | |
2013 | |
| |
Average Balance | | |
Interest | | |
Yield/ Rate | | |
Average
Balance | | |
Interest | | |
Yield/ Rate | |
Interest-earning assets: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Taxable securities | |
$ | 84,954 | | |
$ | 959 | | |
| 2.27 | % | |
$ | 70,703 | | |
$ | 694 | | |
| 1.95 | % |
Nontaxable securities (1) | |
| 48,380 | | |
| 1,038 | | |
| 4.34 | | |
| 43,470 | | |
| 1,003 | | |
| 4.56 | |
Loans receivable (1) | |
| 225,053 | | |
| 5,453 | | |
| 4.81 | | |
| 216,256 | | |
| 5,334 | | |
| 4.89 | |
Interest bearing deposits and federal funds sold | |
| 9,782 | | |
| 33 | | |
| 0.67 | | |
| 9,236 | | |
| 21 | | |
| 0.45 | |
Total interest-earning assets | |
| 368,168 | | |
| 7,483 | | |
| 4.05 | % | |
| 339,665 | | |
| 7,052 | | |
| 4.12 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Noninterest-earning assets | |
| 20,858 | | |
| | | |
| | | |
| 19,554 | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Total Assets | |
$ | 389,027 | | |
| | | |
| | | |
$ | 359,219 | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Interest-bearing liabilities: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
NOW | |
$ | 46,449 | | |
$ | 38 | | |
| 0.16 | % | |
$ | 39,150 | | |
$ | 40 | | |
| 0.20 | % |
Savings | |
| 125,965 | | |
| 51 | | |
| 0.08 | | |
| 112,129 | | |
| 43 | | |
| 0.08 | |
Time deposits | |
| 69,448 | | |
| 283 | | |
| 0.81 | | |
| 76,415 | | |
| 315 | | |
| 0.82 | |
Short-term borrowings | |
| 18,108 | | |
| 15 | | |
| 0.16 | | |
| 14,732 | | |
| 12 | | |
| 0.16 | |
Federal Home Loan Bank
advances | |
| 6,745 | | |
| 95 | | |
| 2.79 | | |
| 6,473 | | |
| 91 | | |
| 2.79 | |
Total interest-bearing liabilities | |
| 266,715 | | |
| 482 | | |
| 0.36 | % | |
| 248,899 | | |
| 501 | | |
| 0.40 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Noninterest-bearing liabilities: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Noninterest-bearing checking accounts | |
| 78,420 | | |
| | | |
| | | |
| 70,765 | | |
| | | |
| | |
Other liabilities | |
| 3,029 | | |
| | | |
| | | |
| 2,452 | | |
| | | |
| | |
Total liabilities | |
| 348,164 | | |
| | | |
| | | |
| 322,116 | | |
| | | |
| | |
Shareholders’ equity | |
| 40,863 | | |
| | | |
| | | |
| 37,103 | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Total liabilities and shareholders’
equity | |
$ | 389,027 | | |
| | | |
| | | |
$ | 359,219 | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net interest income, interest rate spread (1) | |
| | | |
$ | 7,001 | | |
| 3.69 | % | |
| | | |
$ | 6,551 | | |
| 3.72 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net interest margin (net interest as a percent of average interest-earning assets) (1) | |
| | | |
| | | |
| 3.79 | % | |
| | | |
| | | |
| 3.83 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Federal tax exemption on non-taxable securities and loans included in
interest income | |
| | | |
$ | 365 | | |
| | | |
| | | |
$ | 353 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Average interest-earning assets to interest-bearing liabilities | |
| 138.04 | % | |
| | | |
| | | |
| 136.47 | % | |
| | | |
| | |
(1) calculated on a fully taxable equivalent basis
CONSUMERS BANCORP, INC.
Management's Discussion and Analysis
of Financial Condition
and Results of Operations (continued)
(Dollars in thousands, except per share data)
Provision for Loan Losses
The provision for loan losses represents
the charge to income necessary to adjust the allowance for loan losses to an amount that represents management's assessment of
the estimated probable incurred credit losses in the Bank’s loan portfolio that have been incurred at each balance sheet
date. For the three month period ended December 31, 2014, the provision for loan losses was $57 compared to $35 for the same prior
year period. For the six month period ended December 31, 2014, the provision for loan losses was $124 compared to $168 for the
same prior year period. For the six month period ended December 31, 2014, net charge-offs totaled $77, or an annualized net charge-offs
to total loan ratio of 0.07%, compared with $177, or 0.16% of total loans, for the same period last year. The allowance for loan
losses as a percentage of loans was 1.07% at December 31, 2014 and June 30, 2014.
Non-performing loans were $1,100
as of December 31, 2014 and represented 0.48% of total loans. This compared with $1,959, or 0.87%, at June 30, 2014 and
$2,401, or 1.09%, at December 31, 2013. Non-performing loans and loans past due 90 days or greater declined from June 30,
2014 as a result of receiving proceeds from the private sale of a portion of the collateral securing a commercial real estate
credit that was placed on non-accrual during the first quarter of fiscal year 2014. This commercial real estate credit has
no specific reserve allocation since it is well secured. The allowance for loan losses to total non-performing loans at
December 31, 2014 was 222.91% compared with 122.77% at June 30, 2014 and 103.58% at December 31, 2013. Impaired loans
increased from $3,202 at June 30, 2014 to $4,517 as of December 31, 2014 as a result of the downgrade of a commercial real
estate credit with an unpaid principal balance of $2,203 that is secured by two commercial real estate properties and a
residential real estate property. As of December 31, 2014 the loan was not past due and payments were received in January
and February 2015. However; subsequent to quarter end management became aware of legal difficulties the borrower is
experiencing that could potentially result in foreclosure proceedings. In the event management pursues foreclosure, this credit
will be placed on non-accrual which will result in the increase of non-performing loans. This commercial real estate credit
has no specific reserve allocation since it appears to be well secured by underlying collateral comprised of residential real
estate and two commercial business properties that remain operational.
The provision for loan losses for the
period ending December 31, 2014 was considered sufficient by management for maintaining an appropriate allowance for loan losses
for probable incurred credit losses.
Non-Interest Income
Non-interest income increased by $56 for
the second quarter of fiscal year 2015 from the same period last year. Included in non-interest income for the second quarter
of fiscal year 2015 was an $85 gain from the sale of securities compared with a $32 gain in the same prior year period. Excluding
the securities gains, non-interest income increased to $708 for the three months ended December 31, 2014 from $705 during the
same period last year.
CONSUMERS BANCORP, INC.
Management's Discussion and Analysis
of Financial Condition
and Results of Operations (continued)
(Dollars in thousands, except per share data)
Debit card interchange income increased
by $5, or 2.2%, from the same period last year primarily due to an increase in debit card usage by our customers.
Service charges on deposit accounts decreased
by $16, or 4.8%, for the three month period ended December 31, 2014 compared to the same period last year primarily as a result
of a decline in overdraft fee income.
Non-interest income increased by $152,
or 10.6%, to $1,584 for the first six months of fiscal year 2015, compared to $1,432 for the same period last year. Non-interest
income for the first six months of fiscal year 2015 included a net gain from the sale of securities of $122 compared with a net
gain of $32 recognized during the same prior year period.
Service charges on deposit accounts decreased
by $59, or 8.4%, for the six month period ended December 31, 2014 compared to the same period last year primarily as a result
of a decline in overdraft fee income.
Debit card interchange income increased
by $20, or 4.6%, from the same period last year primarily due to an increase in debit card usage by our customers.
Other income increased by $82 from the
same period last year primarily as a result of $75 increase in gains from the sale of mortgage loans.
Non-Interest Expenses
Total non-interest expenses increased
to $3,061, or by 4.7%, during the second quarter of fiscal year 2015, compared with $2,924 during the same year ago period.
Salaries and employee benefits increased
by $130, or 8.3%, during the second quarter of fiscal year 2015 primarily due to additional staff hired in the lending area and
due to annual merit increases that went into effect on August 1, 2014.
Occupancy and equipment expenses increased
by $39, or 11.9%, during the second quarter of fiscal year 2015 from the same period last year primarily as a result of investments
in new computer and communication equipment.
Total non-interest expenses increased
to $6,133, or by 6.2%, during the first six months of fiscal year 2015, compared with $5,773 during the same year ago period.
CONSUMERS BANCORP, INC.
Management's Discussion and Analysis
of Financial Condition
and Results of Operations (continued)
(Dollars in thousands, except per share data)
Salaries and employee benefits increased
by $287, or 9.2%, during the first six months of fiscal year 2015 due to additional staff hired in the lending area, due to annual
merit increases that went into effect on August 1, 2014 and increased expenses associated with employee insurance due to a higher
level of employee enrollment.
Occupancy and equipment expenses increased
by $91, or 14.1%, during the first six months of fiscal year 2015 from the same period last year primarily as a result of investments
in new computer and communication equipment. In December 2014 a lease was signed for a loan
production office in Stow, Ohio that will be opened during the third quarter of fiscal year 2015. Also, a new facility is being
constructed at the Minerva, Ohio location to replace the existing branch and corporate headquarters. The remaining book value
of the Minerva facility is being expensed over the estimated remaining useful life. The new facility is anticipated to be completed
during the 2016 fiscal year and upon being placed into service, it is expected that occupancy expenses will increase.
Professional and director fees decreased
by $23 or 9.5%, during the first six months of fiscal year 2015 from the same period last year primarily as a result of lower
consulting fees.
Other expenses totaled $363 for the six
months ended December 31, 2014 and included $52 of loan and collection expenses. Loan and collection expenses are anticipated
to increase as a result of resolution efforts for the $2,203 commercial real estate credit previously mentioned.
Income Taxes
Income tax expense for the three month
period ended December 31, 2014 increased by $27, to $215 from $188, compared to a year ago. The effective tax rate was 21.0% for
the current quarter as compared to 19.9% for the same period last year.
Income tax expense for the six month period
ended December 31, 2014 increased by $86, to $399 from $313, compared to a year ago. The effective tax rate was 20.3% for the
current period as compared to 18.5% for the same period last year.
The effective tax rate differed from the
federal statutory rate principally as a result of tax-exempt income from obligations of states and political subdivisions, loans
and earnings on bank owned life insurance.
Financial Condition
Total assets at December 31, 2014 were
$398,347 compared to $382,477 at June 30, 2014, an increase of $15,870, or an annualized 8.2%. Net premises and equipment increased
by $2,399 from $6,713 at June 30, 2014 to $9,112 at December 31, 2014 as a result of payments toward the new facility that is
being constructed at the Minerva, Ohio location to replace the existing branch and corporate headquarters.
CONSUMERS BANCORP, INC.
Management's Discussion and Analysis
of Financial Condition
and Results of Operations (continued)
(Dollars in thousands, except per share data)
Available-for-sale securities increased
by $5,949 from $126,393 at June 30, 2014 to $132,342 at December 31, 2014. Total deposits increased by $10,741, or an annualized
6.8%, and loans increased by $3,108, or an annualized 2.7%, from June 30, 2014. Federal Home Loan Bank (FHLB) advances increased
by $6,472 from $6,296 at June 30, 2014 to $12,768 at December 31, 2014 to meet short-term funding needs.
CONSUMERS BANCORP, INC.
Management's Discussion and Analysis
of Financial Condition
and Results of Operations (continued)
(Dollars in thousands, except per share data)
Non-Performing Assets
The following table presents the aggregate
amounts of non-performing assets and respective ratios as of the dates indicated.
| |
December 31,
2014 | | |
June 30, 2014 | | |
December 31, 2013 | |
Non-accrual loans | |
$ | 1,100 | | |
$ | 1,959 | | |
$ | 2,401 | |
Loans past due over 90 days and still accruing | |
| — | | |
| — | | |
| — | |
Total non-performing loans | |
| 1,100 | | |
| 1,959 | | |
| 2,401 | |
Other real estate owned | |
| 54 | | |
| 204 | | |
| 709 | |
Total non-performing assets | |
$ | 1,154 | | |
$ | 2,163 | | |
$ | 3,110 | |
| |
| | | |
| | | |
| | |
Non-performing loans to total loans | |
| 0.48 | % | |
| 0.87 | % | |
| 1.09 | % |
Allowance for loan losses to total non-performing loans | |
| 222.91 | % | |
| 122.77 | % | |
| 103.58 | % |
As of December 31, 2014, impaired loans
totaled $4,517, of which $883 are included in non-accrual loans. Commercial and commercial real estate loans are classified as
impaired if management determines that full collection of principal and interest, in accordance with the terms of the loan documents,
is not probable. Impaired loans and non-performing loans have been considered in management’s analysis of the appropriateness
of the allowance for loan losses. Management and the Board of Directors are closely monitoring these loans and believe that the
prospects for recovery of principal and interest, less identified specific reserves, are favorable.
Contractual Obligations, Commitments,
Contingent Liabilities and Off-Balance Sheet Arrangements
Liquidity
The
objective of liquidity management is to ensure adequate cash flows to accommodate the demands of our customers and provide adequate
flexibility for the Corporation to take advantage of market opportunities under both normal operating conditions and under unpredictable
circumstances of industry or market stress. Cash is used to fund
loans, purchase investments, fund the maturity of liabilities, and at times to fund deposit outflows and operating activities.
The Corporation’s principal sources of funds are deposits; amortization and prepayments of loans; maturities, sales and
principal receipts from securities; borrowings; and operations. Management considers
the asset position of the Corporation to be sufficiently liquid to meet normal operating needs and conditions. The Corporation's
earning assets are mainly comprised of loans and investment securities. Management continually strives to obtain the best mix
of loans and investments to both maximize yield and insure the soundness of the portfolio, as well as to provide funding for loan
demand as needed.
CONSUMERS BANCORP, INC.
Management's Discussion and Analysis
of Financial Condition
and Results of Operations (continued)
(Dollars in thousands, except per share data)
Net cash inflow
from operating activities for the six month period ended December 31, 2014 was $3,034, net cash outflows from investing activities
was $15,632 and net cash inflows from financing activities was $13,503. A major source of cash was $22,956 from sales, maturities,
calls or principal pay downs on available-for-sale securities, a $10,741 increase in deposits and a net increase of $6,472 in
Federal Home Loan Bank (FHLB) advances. A major use of cash included the $28,920 purchase of
securities, $3,185 increase in loans and $2,698 acquisition of premises and equipment. Total cash and cash equivalents was $12,030
as of December 31, 2014 compared to $11,125 at June 30, 2014 and $9,107 at December 31, 2013.
The Bank offers several types of deposit
products to its customers. The rates offered by the Bank and the fees charged for them are competitive with others currently available
in the market area. Deposits totaled $324,638 at December 31, 2014 compared with $313,897 at June 30, 2014.
To provide an additional source of liquidity,
the Corporation has entered into an agreement with the FHLB of Cincinnati. At December 31, 2014, FHLB advances totaled $12,768
as compared with $6,296 at June 30, 2014. As of December 31, 2014, the Bank had the ability to borrow
an additional $11,598 from the FHLB based on a blanket pledge of qualifying first mortgage loans. The Corporation considers
the FHLB to be a reliable source of liquidity funding, secondary to its deposit base.
Short-term borrowings consisted of repurchase
agreements, which is a financing arrangement that matures daily and federal funds purchased from correspondent banks. The Bank
pledges securities as collateral for the repurchase agreements. Short-term borrowings decreased to $16,435 at December 31, 2014
from $19,489 at June 30, 2014.
Jumbo time deposits (those with balances
of $100 and over) totaled $27,344 at December 31, 2014 and $28,224 at June 30, 2014. These deposits
are monitored closely by the Corporation and are mainly priced on an individual basis. When these deposits are from a municipality,
certain bank-owned securities are pledged to guarantee the safety of these public fund deposits as required by Ohio law. The Corporation
has the option to use a fee-paid broker to obtain deposits from outside its normal service area as an additional source of funding.
The Corporation, however, does not rely upon these deposits as a primary source of funding and can foresee no dependence on these
types of deposits in the near term. The Corporation had no brokered deposits at December 31, 2014 or June 30, 2014. Although management
monitors interest rates on an ongoing basis, a quarterly rate sensitivity report is used to determine the effect of interest rate
changes on the financial statements. In the opinion of management, enough assets or liabilities could be repriced over the near
term (up to three years) to compensate for such changes. The spread on interest rates, or the difference between the average earning
assets and the average interest-bearing liabilities, is monitored quarterly.
CONSUMERS
BANCORP, INC.
Management's Discussion and Analysis
of Financial Condition
and Results of Operations (continued)
(Dollars in thousands, except per share data)
Capital Resources
Total shareholders’ equity increased
by $1,118 to $41,321 as of December 31, 2014 from $40,203 as of June 30, 2014. The increase was primarily the result of $1,564
in net income for the current fiscal year which was partially offset by cash dividends paid of $656.
The Bank is subject to various regulatory
capital requirements administered by federal regulatory 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. Failure to meet various capital requirements can initiate regulatory action that could have a direct material effect
on the Corporation’s financial statements.
The Bank’s leverage and risk-based
capital ratios as of December 31, 2014 were 9.7% and 15.3%, respectively. This compares to leverage and risk-based capital ratios
of 9.8% and 15.3 %, respectively, as of June 30, 2014. The Bank exceeded minimum regulatory capital requirements to be considered
well-capitalized for both periods. Management is not aware of any matters occurring subsequent to December 31, 2014 that would
cause the Bank’s capital category to change.
Critical Accounting Policies
The financial
condition and results of operations for the Corporation presented in the Consolidated Financial Statements, accompanying notes
to the Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of
Operations are, to a large degree, dependent upon the Corporation’s accounting policies. The selection and application of
these accounting policies involve judgments, estimates and uncertainties that are susceptible to change.
The Corporation has identified the appropriateness
of the allowance for loan losses and the valuation of securities as critical accounting policies and an understanding of these
policies are necessary to understand the financial statements. Critical accounting policies are those policies that require management’s
most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that
are inherently uncertain. Note one (Summary of Significant Accounting Policies - Securities and Allowance for Loan Losses), note
two (Securities), note three (Loans) and Management’s Discussion and Analysis of Financial Condition and Results of Operation
(Critical Accounting Policies and Use of Significant Estimates) of the 2014 Form 10-K provide detail with regard to the Corporation’s
accounting for the allowance for loan losses and valuation of securities and other-than-temporary impairment. There have been
no significant changes in the application of accounting policies since June 30, 2014.
CONSUMERS BANCORP, INC.
Management's Discussion and Analysis
of Financial Condition
and Results of Operations (continued)
(Dollars in thousands, except per share data)
Forward-Looking Statements
When used in this report (including information
incorporated by reference in this report), the words or phrases “will likely result,” “are expected to,”
“will continue,” “is anticipated,” “estimate,” “project,” “believe”
or similar expressions are intended to identify “forward-looking statements” within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements may involve
risks and uncertainties that are difficult to predict, may be beyond the Corporation’s control, and could cause actual results
to differ materially from those described in such statements. Any such forward-looking statements are made only as of the date
of this report or the respective dates of the relevant incorporated documents, as the case may be, and, except as required by
law, the Corporation undertakes no obligation to update these forward-looking statements to reflect subsequent events or circumstances.
Factors that could cause actual results for future periods to differ materially from those anticipated or projected include, but
are not limited to:
| · | regional
and national economic conditions becoming less favorable than expected, resulting in,
among other things, a deterioration in credit quality of assets and the underlying value
of collateral could prove to be less valuable than otherwise assumed; |
| · | an
extended period in which market levels of interest rates remain at historical low levels
which could reduce, or put pressure on our ability to maintain, anticipated or actual
margins; |
| · | material
unforeseen changes in the financial condition or results of Consumers National Bank’s
customers; |
| · | the
economic impact from the oil and gas activity in the region could be less than expected
or the timeline for development could be longer than anticipated; |
| · | the
nature, extent, and timing of government and regulatory actions; |
| · | competitive
pressures on product pricing and services; and |
| · | a
deterioration in market conditions causing debtors to be unable to meet their obligations. |
The risks and uncertainties identified
above are not the only risks the Corporation faces. Additional risks and uncertainties not presently known to the Corporation
or that the Corporation currently believes to be immaterial also may adversely affect the Corporation. Should any known or unknown
risks and uncertainties develop into actual events, those developments could have material adverse effects on the Corporation’s
business, financial condition and results of operations.
CONSUMERS BANCORP, INC.
Item 4 – Controls and Procedures
Evaluation of Disclosure Controls and
Procedures
As of the end of the period covered by
the report, an evaluation was performed under the supervision and with the participation of the Corporation's management, including
the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Corporation's
disclosure controls and procedures pursuant to Exchange Act Rule 13a-15e. Based on the evaluation, the Chief Executive Officer
and Chief Financial Officer concluded that the Corporation’s disclosure controls and procedures were effective as of December
31, 2014.
Changes in Internal Controls Over Financial
Reporting
There have not been any changes in the
Corporation's internal control over financial reporting that occurred during the Corporation's last quarter that have materially
affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.
CONSUMERS BANCORP, INC.
PART II – OTHER INFORMATION
Item 1 – Legal Proceedings
None
Item 2 – Unregistered Sales of
Equity Securities and Use of Proceeds
None
Item 3 – Defaults Upon Senior
Securities
None
Item 4 – Mine Safety Disclosures
Not Applicable
Item 5 – Other Information
None
Item 6 – Exhibits
Exhibit |
|
|
Number |
|
Description |
Exhibit 11 |
|
Statement regarding Computation of Per Share Earnings (included
in Note 5 to the Consolidated Financial Statements). |
|
|
|
Exhibit 31.1 |
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer |
|
|
|
Exhibit 31.2 |
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer |
|
|
|
Exhibit 32.1 |
|
Certification of Chief Executive Officer and Chief Financial
Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes Oxley Act of 2002. |
|
|
|
Exhibit 101 |
|
The following materials from Consumers Bancorp, Inc.’s
Form 10-Q Report for the quarterly period ended December 31, 2014, formatted in XBRL (Extensible Business Reporting Language)
include: (1) Unaudited Consolidated Balance Sheets, (2) Unaudited Consolidated Statements of Income, (3) Unaudited
Consolidated Statements of Comprehensive Income, (4) Unaudited
Consolidated Statement of Changes in Shareholders’ Equity, (5) Unaudited Condensed Consolidated Statements of Cash Flows,
and (6) the Notes to Unaudited Condensed Consolidated Financial Statements. |
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
|
CONSUMERS BANCORP, INC. |
|
(Registrant) |
|
|
Date: February 17, 2015 |
/s/ Ralph J. Lober |
|
Ralph J. Lober, II |
|
President & Chief Executive Officer |
|
(principal executive officer) |
|
|
Date: February 17, 2015 |
/s/ Renee K. Wood |
|
Renee K. Wood |
|
Chief Financial Officer & Treasurer |
|
(principal financial officer) |
EXHIBIT 31.1
I, Ralph J. Lober, certify that:
| 1. | I have reviewed this quarterly
report on Form 10-Q of Consumers Bancorp, Inc.; |
| 2. | Based on my knowledge, this report
does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period covered by this
report; |
| 3. | Based on my knowledge, the financial
statements, and other financial information included in this report, fairly present in
all material respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying
officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a – 15(e) and 15d – 15(e))
and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f)
and 15d-15(f)) for the registrant and have: |
| a. | Designed such disclosure controls
and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared; |
| b. | Designed
such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting principles; |
| c. | Evaluated the effectiveness of
the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as
of the end of the period covered by this report based on such evaluation; and |
| d. | Disclosed in this report any change
in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the registrant’s internal control over
financial reporting; and |
| 5. | The registrant’s other certifying
officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee
of the registrant’s board of directors: |
| a. | All significant deficiencies and
material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and |
| b. | Any fraud, whether or not material,
that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting. |
February 17, 2015 |
By: |
/s/ Ralph J. Lober |
Date |
|
Ralph J. Lober, II
President & Chief Executive Officer |
EXHIBIT 31.2
I, Renee K. Wood, certify that:
| 1. | I have reviewed this quarterly
report on Form 10-Q of Consumers Bancorp, Inc.; |
| 2. | Based on my knowledge, this report
does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period covered by this
report; |
| 3. | Based on my knowledge, the financial
statements, and other financial information included in this report, fairly present in
all material respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying
officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a – 15(e) and 15d – 15(e))
and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f)
and 15d-15(f)) for the registrant and have: |
| a. | Designed such disclosure controls
and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared; |
| b. | Designed
such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting principles; |
| c. | Evaluated the effectiveness of
the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as
of the end of the period covered by this report based on such evaluation; and |
| d. | Disclosed in this report any change
in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the registrant’s internal control over
financial reporting; and |
| 5. | The registrant’s other certifying
officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee
of the registrant’s board of directors: |
| a. | All significant deficiencies and
material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and |
| b. | Any fraud, whether or not material,
that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting. |
February 17, 2015 |
By: |
/s/ Renee K. Wood |
Date |
|
Renee K. Wood
Chief Financial Officer & Treasurer |
Exhibit
32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION
1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with
the Quarterly Report of Consumers Bancorp, Inc. (the “Corporation”) on Form 10-Q for the period ended December 31,
2014 as filed with the Securities and Exchange Commission on the date hereof (“the Report”), the undersigned officer
of the Corporation does hereby certify that:
| a) | The Report fully complies with
the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as
amended; and |
| b) | The information contained in the
Report fairly presents, in all material respects, the financial condition and results
of operations of the Corporation. |
Date: February 17, 2015
|
/s/ Ralph J. Lober |
|
Ralph J. Lober, II |
|
President & Chief Executive Officer |
|
|
|
/s/ Renee K. Wood |
|
Renee K. Wood |
|
Chief Financial Officer & Treasurer |
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