10-Q 1 cbkm20210331_10q.htm FORM 10-Q cbkm20210331_10q.htm
 

 



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

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

   
Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the quarterly period ended March 31, 2021

 

Commission File No. 033-79130

 

CONSUMERS BANCORP, INC.

(Exact name of registrant as specified in its charter)

 

OHIO

34-1771400

(State or other jurisdiction

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

of incorporation or organization)

 

 

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

44657

(Address of principal executive offices)

(Zip Code)

 

(330) 868-7701

(Registrant’s telephone number)

 

Not applicable

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

 

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

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).              Yes ☒ No ☐

 

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

 

Large accelerated filer ☐   

Accelerated filer ☐  

Non-accelerated filer ☐  

Smaller reporting company ☒

 

Emerging growth company ☐

 

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

 

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

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

None

   

 

There were 3,028,100 shares of Registrant’s common stock, no par value, outstanding as of May 12, 2021.

 

 

 

 

 

CONSUMERS BANCORP, INC.

FORM 10-Q

QUARTER ENDED March 31, 2021

 

Table of Contents

 

 

Page

Number (s)

Part I  Financial Information

   

Item 1 – Financial Statements

 
   

Consolidated Balance Sheets at March 31, 2021 and June 30, 2020

1

   

Consolidated Statements of Income for the three and nine months ended March 31, 2021 and 2020 (unaudited)

2

   

Consolidated Statements of Comprehensive Income for the three and nine months ended March 31, 2021 and 2020 (unaudited)

3

   

Condensed Consolidated Statements of Changes in Shareholders’ Equity for the three and nine months ended March 31, 2021 and 2020 (unaudited)

4

   

Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 2021 and 2020 (unaudited)

5

   

Notes to the Consolidated Financial Statements (unaudited)

6-22

   

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

23-32

   

Item 3 – Not Applicable for Smaller Reporting Companies

 
   

Item 4 – Controls and Procedures

33

   

Part II  Other Information

 

Item 1 – Legal Proceedings

34

   

Item 1A – Not Applicable for Smaller Reporting Companies

34

   

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

34

   

Item 3 – Defaults Upon Senior Securities

34

   

Item 4 – Mine Safety Disclosure

34

   

Item 5 – Other Information

34

   

Item 6 – Exhibits

34

   

Signatures

35

 

 

 
 
 

 

PART I – FINANCIAL INFORMATION

Item 1 – Financial Statements

 

CONSUMERS BANCORP, INC.

CONSOLIDATED BALANCE SHEETS

 

(Dollars in thousands, except per share data)

 

March 31,

2021

(unaudited)

   

June 30,

2020

 

ASSETS

               

Cash on hand and noninterest-bearing deposits in financial institutions

  $ 8,541     $ 8,429  

Federal funds sold and interest-bearing deposits in financial institutions

    32,491       1,230  

Total cash and cash equivalents

    41,032       9,659  

Certificates of deposit in other financial institutions

    7,335       11,635  

Securities, available-for-sale

    169,059       143,918  

Securities, held-to-maturity (fair value of $8,483 at March 31, 2021 and $3,868 at June 30, 2020)

    8,036       3,541  

Equity securities, at fair value

    412        

Federal bank and other restricted stocks, at cost

    2,472       2,472  

Loans held for sale

    561       3,507  

Total loans

    553,137       542,861  

Less allowance for loan losses

    (6,076

)

    (5,678

)

Net loans

    547,061       537,183  

Cash surrender value of life insurance

    9,637       9,442  

Premises and equipment, net

    15,345       14,901  

Goodwill

    836       836  

Core deposit intangible, net

    236       256  

Accrued interest receivable and other assets

    3,470       3,470  

Total assets

  $ 805,492     $ 740,820  
                 

LIABILITIES

               

Deposits

               

Noninterest-bearing demand

  $ 215,828     $ 190,233  

Interest bearing demand

    124,046       99,173  

Savings

    275,636       228,567  

Time

    88,478       115,382  

Total deposits

    703,988       633,355  
                 

Short-term borrowings

    9,419       6,943  

Federal Home Loan Bank advances

    18,067       31,161  

Accrued interest and other liabilities

    6,445       6,121  

Total liabilities

    737,919       677,580  

Commitments and contingent liabilities

               
                 

SHAREHOLDERS EQUITY

               

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

           

Common stock (no par value, 8,500,000 shares authorized; 3,124,053 shares issued as of March 31, 2021 and June 30, 2020)

    20,011       19,974  

Retained earnings

    46,154       40,460  

Treasury stock, at cost (95,953 and 108,475 common shares as of March 31, 2021 and June 30, 2020, respectively)

    (1,324

)

    (1,454

)

Accumulated other comprehensive income

    2,732       4,260  

Total shareholders’ equity

    67,573       63,240  

Total liabilities and shareholders’ equity

  $ 805,492     $ 740,820  

 

See accompanying notes to consolidated financial statements.

 

1

 
 

 

CONSUMERS BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

 

   

Three Months ended

March 31,

   

Nine Months ended

March 31,

 

(Dollars in thousands, except per share amounts)

 

2021

   

2020

   

2021

   

2020

 

Interest and dividend income

                               

Loans, including fees

  $ 5,840     $ 5,654     $ 18,912     $ 15,277  

Securities, taxable

    368       488       1,084       1,478  

Securities, tax-exempt

    428       387       1,275       1,186  

Equity securities

    8             8        

Federal bank and other restricted stocks

    19       16       58       56  

Federal funds sold and other interest-bearing deposits

    41       61       130       103  

Total interest and dividend income

    6,704       6,606       21,467       18,100  

Interest expense

                               

Deposits

    299       918       1,363       2,773  

Short-term borrowings

    2       14       8       38  

Federal Home Loan Bank advances

    67       80       208       218  

Total interest expense

    368       1,012       1,579       3,029  

Net interest income

    6,336       5,594       19,888       15,071  

Provision for loan losses

    185       445       445       760  

Net interest income after provision for loan losses

    6,151       5,149       19,443       14,311  
                                 

Noninterest income

                               

Service charges on deposit accounts

    290       355       911       1,088  

Debit card interchange income

    467       367       1,368       1,142  

Gain on sale of mortgage loans

    149       121       631       397  

Bank owned life insurance death benefit

                      324  

Bank owned life insurance income

    64       65       195       199  

Securities gains, net

    6       121       14       231  

Other

    78       78       229       220  

Total noninterest income

    1,054       1,107       3,348       3,601  
                                 

Noninterest expenses

                               

Salaries and employee benefits

    2,527       2,760       7,978       7,140  

Occupancy and equipment

    662       655       1,938       1,782  

Data processing expenses

    182       206       544       732  

Debit card processing expenses

    242       204       696       599  

Professional and director fees

    188       414       674       804  

FDIC assessments

    76       54       224       52  

Franchise taxes

    132       106       349       296  

Marketing and advertising

    114       125       364       399  

Telephone and network communications

    84       79       247       223  

Amortization of intangible

    6       7       20       7  

Other

    452       464       1,261       1,280  

Total noninterest expenses

    4,665       5,074       14,295       13,314  

Income before income taxes

    2,540       1,182       8,496       4,598  

Income tax expense

    424       164       1,472       637  

Net income

  $ 2,116     $ 1,018     $ 7,024     $ 3,961  
                                 

Basic and diluted earnings per share

  $ 0.70     $ 0.34     $ 2.33     $ 1.40  

 

See accompanying notes to consolidated financial statements.

 

2

 
 

 

CONSUMERS BANCORP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

(Dollars in thousands)  

Three Months ended

March 31,

   

Nine Months ended

March 31,

 
   

2021

   

2020

   

2021

   

2020

 

Net income

  $ 2,116     $ 1,018     $ 7,024     $ 3,961  
                                 

Other comprehensive income, net of tax:

                               

Net change in unrealized gains (losses) on securities:

                               

Unrealized gains (losses) arising during the period

    (2,269

)

    1,900       (1,921

)

    2,690  

Reclassification adjustment for gains included in income

    (6

)

    (121

)

    (14

)

    (231

)

Net unrealized gains (losses)

    (2,275

)

    1,779       (1,935

)

    2,459  

Income tax effect

    478       (373

)

    407       (517

)

Other comprehensive income (loss)

    (1,797

)

    1,406       (1,528

)

    1,942  
                                 

Total comprehensive income

  $ 319     $ 2,424     $ 5,496     $ 5,903  

 

See accompanying notes to consolidated financial statements.

 

3

 
 

 

CONSUMERS BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY

(Unaudited)

 

 

(Dollars in thousands, except per share data)

 

Common

Stock

   

Retained
Earnings

   

Treasury
Stock

   

Accumulated
Other
Comprehensive
Income (Loss)

   

Total
Shareholders
Equity

 

Balance, December 31, 2019

  $ 14,697     $ 38,691     $ (1,454

)

  $ 2,102     $ 54,036  

Net income

            1,018                       1,018  

Other comprehensive income

                            1,406       1,406  

269,920 shares issued for the Peoples acquisition

    5,277                               5,277  

Cash dividends declared ($0.135 per share)

            (409

)

                    (409

)

Balance, March 31, 2020

  $ 19,974     $ 39,300     $ (1,454

)

  $ 3,508     $ 61,328  
                                         

Balance, December 31, 2020

  $ 20,011     $ 44,492     $ (1,324

)

  $ 4,529     $ 67,708  

Net income

            2,116                       2,116  

Other comprehensive loss

                            (1,797

)

    (1,797

)

Cash dividends declared ($0.15 per share)

            (454

)

                    (454

)

Balance, March 31, 2021

  $ 20,011     $ 46,154     $ (1,324

)

  $ 2,732     $ 67,573  

 

 

(Dollars in thousands, except per share data)

 

Common

Stock

   

Retained
Earnings

   

Treasury
Stock

   

Accumulated
Other
Comprehensive
Income (Loss)

   

Total
Shareholders
Equity

 

Balance, June 30, 2019

  $ 14,656     $ 36,487     $ (1,543

)

  $ 1,566     $ 51,166  

Net income

            3,961                       3,961  

Other comprehensive income

                            1,942       1,942  

269,920 shares issued for the Peoples acquisition

    5,277                               5,277  

11,813 shares associated with vested stock awards

    41               89               130  

Cash dividends declared ($0.405 per share)

            (1,148

)

                    (1,148

)

Balance, March 31, 2020

  $ 19,974     $ 39,300     $ (1,454

)

  $ 3,508     $ 61,328  
                                         
                                         

Balance, June 30, 2020

  $ 19,974     $ 40,460     $ (1,454

)

  $ 4,260     $ 63,240  

Net income

            7,024                       7,024  

Other comprehensive loss

                            (1,528

)

    (1,528

)

12,522 shares associated with vested and expired stock awards

    37               130               167  

Cash dividends declared ($0.44 per share)

            (1,330

)

                    (1,330

)

Balance, March 31, 2021

  $ 20,011     $ 46,154     $ (1,324

)

  $ 2,732     $ 67,573  

 

See accompanying notes to consolidated financial statements.

 

4

 

 

CONSUMERS BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

(Dollars in thousands)

 

Nine Months Ended

March 31,

 
   

2021

   

2020

 

Cash flows from operating activities

               

Net cash from operating activities

  $ 11,421     $ 5,024  

Cash flow from investing activities

               

Purchases of securities, available-for-sale

    (63,825

)

    (18,610

)

Maturities, calls and principal pay downs of securities, available-for-sale

    30,890       17,575  

Sale of securities, available-for-sale

    5,545       11,841  

Purchase of securities, held-to-maturity

    (4,700

)

     

Principal pay downs of securities, held-to-maturity

    205       206  

Purchase of equity securities

    (400

)

     

Net decrease in certificate of deposit in other financial institutions

    4,300       1,914  

Purchase of Federal Reserve stock, at cost

          (595

)

Net increase in loans

    (10,332

)

    (43,405

)

Acquisition, net cash acquired

          (4,295

)

Proceeds from BOLI death benefit

          753  

Premises and equipment purchases

    (433

)

    (453

)

Sale of other repossessed assets

    17       39  

Net cash from investing activities

    (38,733

)

    (35,030

)

Cash flow from financing activities

               

Net increase in deposit accounts

    70,633       29,997  

Net change in short-term borrowings

    2,476       352  

Proceeds from Federal Home Loan Bank advances

    1,300       17,500  

Repayments of Federal Home Loan Bank advances

    (14,394

)

    (13,612

)

Dividends paid

    (1,330

)

    (1,148

)

Net cash from financing activities

    58,685       33,089  

Increase in cash or cash equivalents

    31,373       3,083  

Cash and cash equivalents, beginning of period

    9,659       9,461  

Cash and cash equivalents, end of period

  $ 41,032     $ 12,544  
                 

Supplemental disclosure of cash flow information:

               

Cash paid during the period:

               

Interest

  $ 1,627     $ 3,048  

Federal income taxes

    1,930       675  

Non-cash items:

               

Transfer of loans to other repossessed assets

    9        

Issuance of treasury stock for stock awards

    167       89  

Right of use assets obtained in exchange for lease liabilities

          582  
                 

Acquisition of Peoples:

               

Consideration paid

          $ 10,405  

Noncash assets acquired:

               

Certificates of deposit in other financial institutions

            11,839  

Securities, available-for-sale

            4,051  

Federal bank and other restricted stocks, at cost

            154  

Loans, net

            55,320  

Premises and equipment

            818  

Goodwill

            836  

Core deposit intangible

            270  

Accrued interest receivable and other assets

            140  

Total noncash assets acquired

            73,428  

Liabilities assumed:

               

Deposits

            60,851  

Federal funds purchased

            2,348  

Federal Home Loan Bank advances

            491  

Other liabilities

            166  

Total liabilities assumed

            63,856  

Net noncash assets acquired

            9,572  

Cash acquired

            833  

 

See accompanying notes to consolidated financial statements.

 

5

 

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited)

 

(Dollars in thousands, except per share amounts)

 

 

Note 1 Summary of Significant Accounting Policies:

 

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

 

Basis of Presentation: The consolidated financial statements for interim periods are unaudited and reflect all adjustments (consisting of only normal recurring adjustments), which, in the opinion of management, are necessary to present fairly the financial position and results of operations and cash flows for the periods presented. The unaudited financial statements are presented in accordance with the requirements of Form 10-Q and do not include all disclosures normally required by accounting principles generally accepted in the United States of America. The financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Corporation’s Form 10-K for the year ended June 30, 2020. 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 the revenues, operating income, and assets. Accordingly, all the Corporation’s operations are recorded in one segment, banking.

 

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

 

Recently Issued Accounting Pronouncements Not Yet Effective: In June 2016, the Financial Accounting Standards Board (FASB) issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU adds a new Topic 326 to the codification and removes the thresholds that companies apply to measure credit losses on financial instruments measured at amortized cost, such as loans, receivables, and held-to-maturity debt securities. Under current U.S. generally accepted accounting principles, companies generally recognize credit losses when it is probable that the loss has been incurred. The revised guidance will remove all current loss recognition thresholds and will require companies to recognize an allowance for credit losses for the difference between the amortized cost basis of a financial instrument and the amount of amortized cost that the corporation expects to collect over the instrument’s contractual life. ASU 2016-13 also amends the credit loss measurement guidance for available-for-sale debt securities and beneficial interests in securitized financial assets. The guidance in ASU 2016-13 is effective for “public business entities,” as defined in the guidance, that are SEC filers for fiscal years and for interim periods within those fiscal years beginning after December 15, 2019. Early adoption of the guidance is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. However, during July 2019, FASB unanimously voted for a proposal to delay this ASU to January 2023 for smaller reporting companies. On October 16, 2019, FASB approved a final ASU delaying the effective date. The new guidance is effective for annual and interim periods beginning after December 15, 2022 for certain entities, including smaller reporting companies. The Corporation is a smaller reporting company.

 

6

 

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

 

(Dollars in thousands, except per share amounts)

 

In March 2020, the FASB issued ASU 2020-04, "Facilitation of the Effects of Reference Rate Reform on Financial Reporting". The ASU is intended to provide relief for companies preparing for discontinuation of interest rates based on LIBOR, or other reference rates that may be discontinued, and provides optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria. The ASU also provides for a one-time sale and/or transfer to AFS or trading to be made for HTM debt securities that both reference an eligible reference rate and were classified as HTM before January 1, 2020. ASU 2020-04 is effective March 12, 2020 through December 31, 2022. The guidance requires companies to apply the guidance prospectively to contract modifications and hedging relationships while the one-time election to sell and/or transfer debt securities classified as HTM may be made any time after March 12, 2020. The Corporation does not expect ASU 2020-04 to have a material impact on its financial statements and disclosures.

 

 

Note 2 Acquisition

 

On December 29, 2020, the Bank entered into a Branch Purchase and Assumption Agreement (P&A Agreement) with CFBank National Association (CFBank) to acquire two branches of CFBank in Columbiana County, Ohio. The P&A Agreement provides for the sale and transfer by CFBank to the Bank the land, buildings and other associated assets of CFBank’s drive-up branch location in Wellsville, Ohio and CFBank’s branch location in Calcutta, Ohio (the Branches); approximately $100 million in deposits attributable to the Branches; $15 million in aggregate principal amount of subordinated debt securities issued by unrelated financial institutions; all performing loans attributable to the Branches which are outstanding at closing (totaling approximately $3.1 million in aggregate principal amount as of November 30, 2020); and up to $13.5 million in aggregate principal amount of single family residential mortgage loans and home equity lines of credit to be identified by the parties prior to the closing principally from CFBank’s Northeast Ohio loan portfolio. In addition, CFBank will provide the opportunity for the Corporation to purchase at par at least $15 million in aggregate principal amount of participation interests in commercial and commercial real estate loans originated by and held in CFBank’s portfolio. In exchange, Consumers will pay to CFBank the net book value of the land, building and associated assets of the Branches, a deposit premium equal to 1.75% of the average daily deposits of the Branches for the 30 days preceding the closing, and the par value of the subordinated debt securities and loans acquired by Consumers. The transaction is expected to close in July 2021, pending the completion of customary closing conditions. All necessary regulatory approvals have been received.

 

On January 1, 2020, Consumers completed the acquisition by merger of Peoples Bancorp of Mt. Pleasant, Inc. (Peoples) and its wholly owned subsidiary, The Peoples National Bank of Mount Pleasant (Peoples Bank) in a stock and cash transaction for an aggregate consideration of approximately $10,405. In connection with the acquisition, the Corporation issued 269,920 shares of common stock and paid $5,128 in cash to the former shareholders of Peoples. Immediately following the merger, Peoples Bank, was merged into the Corporation’s banking subsidiary, Consumers National Bank.

 

The assets and liabilities of Peoples were recorded on the Corporation’s Balance Sheet at their estimated fair values as of January 1, 2020, the acquisition date, and Peoples’ results of operations are included in the Corporation’s Consolidated Statements of Income beginning on that date. As of the date of acquisition of Peoples, the estimated fair value of loans received was $55,320 and the estimated fair value of deposits assumed was $60,851.

 

7

 

 

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

 

(Dollars in thousands, except per share amounts)

 

 

Note 3 Securities

 

Available for-Sale

 

Amortized
Cost

   

Gross
Unrealized
Gains

   

Gross
Unrealized

Losses

   

Fair
Value

 

March 31, 2021

                               

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

  $ 11,456     $ 222     $ (74

)

  $ 11,604  

Obligations of state and political subdivisions

    68,177       3,018       (153

)

    71,042  

U.S. Government-sponsored mortgage-backed securities–residential

    72,894       1,280       (918

)

    73,256  

U.S. Government-sponsored mortgage-backed securities– commercial

    2,869                   2,869  

U.S. Government-sponsored collateralized mortgage obligations– residential

    9,705       161       (70

)

    9,796  

Other

    500             (8

)

    492  

Total available-for-sale securities

  $ 165,601     $ 4,681     $ (1,223

)

  $ 169,059  

 

Held-to-Maturity

 

Amortized
Cost

   

Gross
Unrecognized
Gains

   

Gross
Unrecognized

Losses

   

Fair
Value

 

March 31, 2021

                               

Obligations of state and political subdivisions

  $ 8,036     $ 447     $     $ 8,483  

 

Availablefor-Sale

 

Amortized
Cost

   

Gross
Unrealized
Gains

   

Gross
Unrealized
Losses

   

Fair
Value

 

June 30, 2020

                               

U.S. Treasury

  $ 1,248     $ 8     $     $ 1,256  

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

    10,133       399             10,532  

Obligations of state and political subdivisions

    60,343       3,149             63,492  

U.S. government-sponsored mortgage-backed securities – residential

    48,645       1,515       (4

)

    50,156  

U.S. government-sponsored mortgage-backed securities – commercial

    8,444       55       (2

)

    8,497  

U.S. government-sponsored collateralized mortgage obligations – residential

    9,712       285       (12

)

    9,985  

Total available-for-sale securities

  $ 138,525     $ 5,411     $ (18

)

  $ 143,918  

 

Held-to-Maturity

 

Amortized
Cost

   

Gross
Unrecognized
Gains

   

Gross
Unrecognized
Losses

   

Fair
Value

 

June 30, 2020

                               

Obligations of state and political subdivisions

  $ 3,541     $ 327     $     $ 3,868  

 

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

 

   

Three Months Ended

March 31,

   

Nine Months Ended

March 31,

 
   

2021

   

2020

   

2021

   

2020

 

Proceeds from sales and calls

  $ 2,812     $ 5,731       5,545       11,841  

Gross realized gains

    13       121       44       231  

Gross realized losses

    7             30        

 

8

 

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

 

(Dollars in thousands, except per share amounts)

 

The income tax provision related to the net realized gains amounted to $1 and $3 for the three- and nine-month periods ended March 31, 2021, respectively. The income tax provision related to the net realized gains amounted to $26 and $49 for the three- and nine-month periods ended March 31, 2020, respectively.

 

The amortized cost and fair values of debt securities at March 31, 2021, 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, are shown separately. 

 

Available-for-Sale

 

Amortized

Cost

   

Estimated Fair

Value

 

Due in one year or less

  $ 4,525     $ 4,602  

Due after one year through five years

    13,129       13,596  

Due after five years through ten years

    17,662       18,060  

Due after ten years

    44,817       46,880  

Total

    80,133       83,138  
                 

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

    85,468       85,921  

Total available-for-sale securities

  $ 165,601     $ 169,059  
                 

Held-to-Maturity

               

Due after one year through five years

  $ 334     $ 350  

Due after five years through ten years

    5,367       5,686  

Due after ten years

    2,335       2,447  

Total held-to-maturity securities

  $ 8,036     $ 8,483  

 

The following table summarizes the securities with unrealized losses at March 31, 2021 and June 30, 2020, 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

 

March 31, 2021

                                               

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

  $ 3,006     $ (74

)

  $     $     $ 3,006     $ (74

)

Obligations of states and political subdivisions

    7,745       (153

)

                7,745       (153

)

U.S. Government-sponsored mortgage-backed securities – residential

    31,512       (918

)

                31,512       (918

)

U.S. Government-sponsored collateralized mortgage obligations - residential

    4,859       (70

)

                4,859       (70

)

Other

    492       (8

)

                    492       (8

)

Total temporarily impaired

  $ 47,614     $ (1,223

)

  $     $     $ 47,614     $ (1,223

)

 

9

 

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, 2020

                                               

U.S. Government-sponsored mortgage-backed securities – residential

                625       (4

)

    625       (4

)

U.S. Government-sponsored mortgage-backed securities – commercial

    1,806       (2

)

                1,806       (2

)

U.S. Government-sponsored collateralized mortgage obligations - residential

    1,700       (12

)

                1,700       (12

)

Total temporarily impaired

  $ 3,506     $ (14

)

  $ 625     $ (4

)

  $ 4,131     $ (18

)

 

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

 

In determining OTTI under the ASC Topic 320 model, management considers many factors, including: (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) whether the market decline was affected by macroeconomic conditions, and (4) whether the entity has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery. The assessment of whether an other-than-temporary decline exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time.

 

At March 31, 2021, there were a total of 44 available-for-sale securities in the portfolio with unrealized losses mainly due to an increase in market rates when compared to the time of purchase. The unrealized losses within the securities portfolio as of March 31, 2021 have not been recognized into income because the decline in fair value is not attributed to credit quality and management does not intend to sell, and it is not likely that management will be required to sell, the securities prior to their anticipated recovery. The mortgage-backed securities and collateralized mortgage obligations were primarily issued by Fannie Mae, Freddie Mac and Ginnie Mae, institutions which the government has affirmed its commitment to support. The Corporation does not own any private label mortgage-backed securities.

 

The following table presents the net unrealized gains and losses on equity securities recognized in earnings for the three and nine months ended March 31, 2021 and 2020. There were no realized gains or losses on the sale of equity securities during the periods presented.

 

   

Three Months Ended

March 31,

   

Nine Months Ended

March 31,

 
   

2021

   

2020

   

2021

   

2020

 

Unrealized gains recognized on equity securities held at the end of the period

  $ 12     $     $ 12     $  

 

10

 

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

 

(Dollars in thousands, except per share amounts)

 

 

Note 4 Loans

 

Major classifications of loans were as follows:

 

   

March 31,

2021

   

June 30,

2020

 

Commercial

  $ 131,079     $ 158,667  

Commercial real estate:

               

Construction

    4,030       16,235  

Other

    258,421       229,029  

1 – 4 Family residential real estate:

               

Owner occupied

    108,288       90,494  

Non-owner occupied

    19,528       19,370  

Construction

    7,771       9,344  

Consumer

    26,002       21,334  

Subtotal

    555,119       544,473  

Net deferred loan fees and costs

    (1,982

)

    (1,612

)

Allowance for loan losses

    (6,076

)

    (5,678

)

Net Loans

  $ 547,061     $ 537,183  

 

The commercial loan category in the above table includes PPP loans of $65,492 as of March 31, 2021 and $66,606 as of June 30, 2020 and a mortgage loan warehouse line of credit to another financial institution with an outstanding balance of $7,121 as of March 31, 2021 and $32,869 as of June 30, 2020. The outstanding balance of the warehouse line of credit can fluctuate significantly based on the other financial institution’s funding needs.

 

The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended March 31, 2021:

 

                   

1-4 Family

                 
           

Commercial

   

Residential

                 
           

Real

   

Real

                 
   

Commercial

   

Estate

   

Estate

   

Consumer

   

Total

 

Allowance for loan losses:

                                       

Beginning balance

  $ 858     $ 3,817     $ 1,028     $ 209     $ 5,912  

Provision for loan losses

    79       (109

)

    166       49       185  

Loans charged-off

                (4

)

    (39

)

    (43

)

Recoveries

          1       1       20       22  

Total ending allowance balance

  $ 937     $ 3,709     $ 1,191     $ 239     $ 6,076  

 

The following table presents the activity in the allowance for loan losses by portfolio segment for the nine months ended March 31, 2021:

 

                   

1-4 Family

                 
           

Commercial

   

Residential

                 
           

Real

   

Real

                 
   

Commercial

   

Estate

   

Estate

   

Consumer

   

Total

 

Allowance for loan losses:

                                       

Beginning balance

  $ 947     $ 3,623     $ 989     $ 119     $ 5,678  

Provision for loan losses

    12       83       205       145       445  

Loans charged-off

    (22

)

          (4

)

    (95

)

    (121

)

Recoveries

          3       1       70       74  

Total ending allowance balance

  $ 937     $ 3,709     $ 1,191     $ 239     $ 6,076  

 

11

 

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

 

(Dollars in thousands, except per share amounts)

 

The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended March 31, 2020:

 

                   

1-4 Family

                 
           

Commercial

   

Residential

                 
           

Real

   

Real

                 
   

Commercial

   

Estate

   

Estate

   

Consumer

   

Total

 

Allowance for loan losses:

                                       

Beginning balance

  $ 766     $ 2,652     $ 615     $ 62     $ 4,095  

Provision for loan losses

    25       203       116       101       445  

Loans charged-off

                      (91

)

    (91

)

Recoveries

          1       1       17       19  

Total ending allowance balance

  $ 791     $ 2,856     $ 732     $ 89     $ 4,468  

 

The following table presents the activity in the allowance for loan losses by portfolio segment for the nine months ended March 31, 2020:

 

                   

1-4 Family

                 
           

Commercial

   

Residential

                 
           

Real

   

Real

                 
   

Commercial

   

Estate

   

Estate

   

Consumer

   

Total

 

Allowance for loan losses:

                                       

Beginning balance

  $ 660     $ 2,575     $ 494     $ 59     $ 3,788  

Provision for loan losses

    131       278       236       115       760  

Loans charged-off

                      (114

)

    (114

)

Recoveries

          3       2       29       34  

Total ending allowance balance

  $ 791     $ 2,856     $ 732     $ 89     $ 4,468  

 

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 March 31, 2021. Included in the recorded investment in loans is $1,289 of accrued interest receivable.

 

                   

1-4 Family

                 
           

Commercial

   

Residential

                 
           

Real

   

Real

                 
   

Commercial

   

Estate

   

Estate

   

Consumer

   

Total

 

Ending allowance for loan losses balance attributable to loans:

                                       

Individually evaluated for impairment

  $ 1     $     $ 4     $     $ 5  

Acquired loans collectively evaluated for impairment

          99       79             178  

Originated loans collectively evaluated for impairment

    936       3,610       1,108       239       5,893  

Total ending allowance balance

  $ 937     $ 3,709     $ 1,191     $ 239     $ 6,076  
                                         

Recorded investment in loans:

                                       

Loans individually evaluated for impairment

  $ 446     $ 936     $ 692     $     $ 2,074  

Acquired loans collectively evaluated for impairment

    907       7,766       22,067       7,671       38,411  

Originated loans collectively evaluated for impairment

    128,064       253,673       113,849       18,355       513,941  

Total ending loans balance

  $ 129,417     $ 262,375     $ 136,608     $ 26,026     $ 554,426  

 

12

 

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, 2020. Included in the recorded investment in loans is $1,936 of accrued interest receivable.

 

                   

1-4 Family

                 
           

Commercial

   

Residential

                 
           

Real

   

Real

                 
   

Commercial

   

Estate

   

Estate

   

Consumer

   

Total

 

Allowance for loan losses:

                                       

Ending allowance balance attributable to loans:

                                       

Individually evaluated for impairment

  $ 28     $ 6     $     $     $ 34  

Acquired loans collectively evaluated for impairment

          103       94             197  

Originated loans collectively evaluated for impairment

    919       3,514       895       119       5,447  

Total ending allowance balance

  $ 947     $ 3,623     $ 989     $ 119     $ 5,678  
                                         

Recorded investment in loans:

                                       

Loans individually evaluated for impairment

  $ 179     $ 1,045     $ 699     $     $ 1,923  

Acquired loans collectively evaluated for impairment

    1,095       8,072       27,252       12,550       48,969  

Originated loans collectively evaluated for impairment

    156,054       236,840       92,168       8,843       493,905  

Total ending loans balance

  $ 157,328     $ 245,957     $ 120,119     $ 21,393     $ 544,797  

 

The following table presents information related to unpaid principal balance, recorded investment and interest income associated with loans individually evaluated for impairment by class of loans as of March 31, 2021 and for the nine months ended March 31, 2021:

 

   

As of March 31, 2021

   

Nine Months ended March 31, 2021

 
   

Unpaid

           

Allowance

for Loan

   

Average

   

Interest

   

Cash Basis

 
   

Principal

   

Recorded

   

Losses

   

Recorded

   

Income

   

Interest

 
   

Balance

   

Investment

   

Allocated

   

Investment

   

Recognized

   

Recognized

 

With no related allowance recorded:

                                               

Commercial

  $ 422     $ 306     $     $ 77     $     $  

Commercial real estate:

                                               

Other

    1,073       936             893       6       6  

1-4 Family residential real estate:

                                               

Owner occupied

    498       456             577       11       11  

Non-owner occupied

    270       209             220              

With an allowance recorded:

                                               

Commercial

    139       140       1       154       6       6  

Commercial real estate:

                                               

Other

                      160       7       7  

1-4 Family residential real estate:

                                               

Owner occupied

    29       27       4       13              

Total

  $ 2,431     $ 2,074     $ 5     $ 2,094     $ 30     $ 30  

 

13

 

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 March 31, 2021:

 

   

Average

   

Interest

   

Cash Basis

 
   

Recorded

   

Income

   

Interest

 
   

Investment

   

Recognized

   

Recognized

 

With no related allowance recorded:

                       

Commercial

  $ 308     $     $  

Commercial real estate:

                       

Other

    941       2       2  

1-4 Family residential real estate:

                       

Owner occupied

    473              

Non-owner occupied

    211              

With an allowance recorded:

                       

Commercial

    142       2       2  

Commercial real estate:

                       

Other

    68       1       1  

1-4 Family residential real estate:

                       

Owner occupied

    29              

Total

  $ 2,172     $ 5     $ 5  

 

The following table presents information related to unpaid principal balance, recorded investment and interest income associated with loans individually evaluated for impairment by class of loans as of June 30, 2020 and for the nine months ended March 31, 2020:

 

   

As of June 30, 2020

   

Nine Months ended March 31, 2020

 
   

Unpaid

           

Allowance

for Loan

   

Average

   

Interest

   

Cash Basis

 
   

Principal

   

Recorded

   

Losses

   

Recorded

   

Income

   

Interest

 
   

Balance

   

Investment

   

Allocated

   

Investment

   

Recognized

   

Recognized

 

With no related allowance recorded:

                                               

Commercial

  $     $     $     $ 5              

Commercial real estate:

                                               

Other

    922       836             415       88       88  

1-4 Family residential real estate:

                                               

Owner occupied

    604       463             27       7       7  

Non-owner occupied

    284       236             251              

With an allowance recorded:

                                               

Commercial

    176       179       28       164       7       7  

Commercial real estate:

                                               

Other

    209       209       6       218       10       10  

Total

  $ 2,195     $ 1,923     $ 34     $ 1,080     $ 112     $ 112  

 

14

 

 

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

 

(Dollars in thousands, except per share amounts)

 

The following table presents information related to average recorded investment and interest income associated with loans individually evaluated for impairment by class of loans for the three months ended March 31, 2020:

 

   

Average

   

Interest

   

Cash Basis

 
   

Recorded

   

Income

   

Interest

 
   

Investment

   

Recognized

   

Recognized

 

With no related allowance recorded:

                       

Commercial

  $ 14     $     $  

Commercial real estate:

                       

Other

    641       1       1  

1-4 Family residential real estate:

                       

Owner occupied

    31              

Non-owner occupied

    244              

With an allowance recorded:

                       

Commercial

    158       2       2  

Commercial real estate:

                       

Other

    216       4       4  

Total

  $ 1,304     $ 7     $ 7  

 

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 March 31, 2021 and June 30, 2020:

 

   

March 31, 2021

   

June 30, 2020

 
           

Loans Past Due

           

Loans Past Due

 
           

Over 90 Days

           

Over 90 Days

 
           

Still

           

Still

 
   

Non-accrual

   

Accruing

   

Non-accrual

   

Accruing

 

Commercial

  $ 306     $     $ 21     $  

Commercial real estate:

                               

Other

    888             785        

1 – 4 Family residential:

                               

Owner occupied

    480             143       29  

Non-owner occupied

    209             236        

Consumer

                      12  

Total

  $ 1,883     $     $ 1,185     $ 41  

 

Non-accrual loans and loans past due 90 days still on accrual include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.

 

15

 

 

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 March 31, 2021 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

  $     $     $     $     $ 129,417     $ 129,417  

Commercial real estate:

                                               

Construction

                            3,982       3,982  

Other

                629       629       257,764       258,393  

1-4 Family residential:

                                               

Owner occupied

    28             238       266       108,956       109,222  

Non-owner occupied

                            19,529       19,529  

Construction

                            7,857       7,857  

Consumer

    43       36             79       25,947       26,026  

Total

  $ 71     $ 36     $ 867     $ 974     $ 553,452     $ 554,426  

 

The above table of past due loans includes the recorded investment in non-accrual loans of $867 in the 90 days or greater category and $1,016 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, 2020 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

  $     $     $ 21     $ 21     $ 157,307     $ 157,328  

Commercial real estate:

                                               

Construction

                            16,241       16,241  

Other

          2       628       630       229,086       229,716  

1-4 Family residential:

                                               

Owner occupied

                172       172       91,102       91,274  

Non-owner occupied

                            19,410       19,410  

Construction

                            9,435       9,435  

Consumer

    127       49       12       188       21,205       21,393  

Total

  $ 127     $ 51     $ 833     $ 1,011     $ 543,786     $ 544,797  

 

The above table of past due loans includes the recorded investment in non-accrual loans of $2 in the 60-89 days, $792 in the 90 days or greater category and $391 in the loans not past due category.

 

Troubled Debt Restructurings (TDR):

The Corporation has certain loans that have been modified in order to maximize collection of loan balances that are classified as TDRs. A modified loan is usually classified as a TDR if, for economic reasons, management grants a concession to the original terms and conditions of the loan to a borrower who is experiencing financial difficulties that it would not have otherwise considered. In response to COVID-19, on March 22, 2020 the Corporation adopted a loan modification program to assist borrowers impacted by the virus. The program is available to most borrowers whose loan was not past due on March 22, 2020, the date this loan modification program was adopted. The program offers principal and interest payment deferrals for up to 90 days or interest only payments for up to 90 days. Borrowers are eligible for an additional 90 days of payment deferrals if situations warrant a need for an extension. Interest will be deferred but will continue to accrue during the deferment period and the maturity date on amortizing loans will be extended by the number of months the payment was deferred. Consistent with issued regulatory guidance, modifications made under this program in response to COVID-19 will not be classified as TDRs. As of March 31, 2021, 7 borrowers with an aggregate outstanding balance of $89 are in payment deferral status under this loan modification program.

 

As of March 31, 2021 and June 30, 2020, the Corporation had $706 and $974, respectively, of loans classified as TDRs which are included in impaired loans above. As of March 31, 2021 and June 30, 2020, the Corporation had not committed to lend any additional funds to customers with outstanding loans that were classified as troubled debt restructurings. As of March 31, 2021 and June 30, 2020, the Corporation had $1 and $12, respectively, of specific reserve allocated to these loans.

 

16

 

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

 

(Dollars in thousands, except per share amounts)

 

During the three- and nine-month periods ended March 31, 2021 and 2020, there were no loan modifications completed that were classified as troubled debt restructurings. There were no charge-offs from troubled debt restructurings that were completed during the three- and nine-month periods ended March 31, 2021 and 2020.

 

There were no loans classified as troubled debt restructurings for which there was a payment default within 12 months following the modification during the three- and nine-month periods ended March 31, 2021 and 2020. A loan is considered 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 affirms 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.

 

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered pass rated loans. Loans listed as not rated are either less than $100 or are included in groups of homogeneous loans. Generally, 1-4 Family Residential and Consumer loans are not risk rated, except when collateral is used for a business purpose. 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 March 31, 2021

 
           

Special

                   

Not

 
   

Pass

   

Mention

   

Substandard

   

Doubtful

   

Rated

 

Commercial

  $ 128,281     $ 295     $ 292     $ 306     $ 243  

Commercial real estate:

                                       

Construction

    3,982                          

Other

    247,040       4,739       4,789       888       937  

1-4 Family residential real estate:

                                       

Owner occupied

    1,461             17       480       107,264  

Non-owner occupied

    18,673       167       203       209       277  

Construction

    1,752                         6,105  

Consumer

    791                         25,235  

Total

  $ 401,980     $ 5,201     $ 5,301     $ 1,883     $ 140,061