UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

For the quarterly period ended December 31, 20172019

Commission File No. 033-79130

CONSUMERS BANCORP, INC.

(Exact name of registrant as specified in its charter)

(330) 868-7701

(Registrant’sRegistrant’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 periodperiod that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. 

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).      

Yes ☒ No ☐

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

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

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

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

There were 2,729,6443,015,578 shares of Registrant’sRegistrant’s common stock, no par value, outstanding as of February 9, 2018.11, 2020.

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-Q10-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-K10-K for the year ended June 30, 2017. 2019. 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.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 itsthe 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 IssuedAdoption of New Accounting Pronouncements Not Yet Effective:Standards: In May 2014, February 2016, FASB issued Accounting Standards Updateaccounting standards update (ASU) 2014-09, Revenue from Contracts with Customers2016-02, Leases (Topic 606)842). TheThis ASU creates a new topic, Topic 606,requires all organizations that lease assets to provide guidancerecognize on revenue recognition for entities that enter into contracts with customers to transfer goods or services or enter into contractsthe balance sheet the assets and liabilities for the transfer of nonfinancial assets. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange forrights and obligations created by those goods or services.leases. Additional qualitative and quantitative disclosures are required to provide quantitative and qualitative information regardingso users can understand more about the nature amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.an entity’s leasing activities. The new guidance iswas effective for annual reporting periods, and interim reporting periods within those annual periods, beginning after December 15, 2017. Most of the2018. The Corporation’s revenue is derived from loans and financial instruments, which is not part of the scope of this ASU.The adoption of ASU 2014-09 as it relates to non-interest income, has several lease agreements, such as service chargesbranch locations, which were previously considered operating leases, and debit card interchange income, is therefore, not expected to have a material effect recognized on the Corporation’s consolidated condensed statements of financial statements.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities.condition. The main provisions of ASU 2016-01 address the valuation and impairment of certain equity investments along with simplified disclosures about those investments. Equity securities with readily determinable fair values willnew guidance requires these lease agreements to now be treated in the same manner as other financial instruments. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The adoption of ASU 2016-01 is not expected to have a material impactrecognized on the Corporation'sconsolidated condensed statements of financial statements.condition as a right-of-use asset and a corresponding lease liability. As of July 1, 2019, the Corporation adopted ASU 2016-02 using the modified retrospective method. There was no cumulative-effect adjustment to the opening balance of retained earnings for the period of adoption. At December 31, 2019, the Corporation had contractual operating lease commitments of $527.

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

Recently Issued Accounting Pronouncements Not Yet Effective:In June 2016, FASB IssuedFinancial Accounting Standards Board (FASB) issued ASU 2016-13,2016-13, Financial Instruments—Credit Losses (Topic 326)326): Measurement of Credit Losses on Financial Instruments. This ASU adds a new Topic 326 to the codification and removes the thresholds that companies apply to measure credit losses on financial instruments measured at amortized cost, such as loans, receivables, and held-to-maturity debt securities. Under current U.S. GAAP,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 2016-132016-13 also amends the credit loss measurement guidance for available-for-sale debt securities and beneficial interests in securitized financial assets. The guidance in ASU 2016-132016-13 is effective for “public business entities,” as defined in the guidance, that are SEC filers for fiscal years and for interim periods withwithin those fiscal years beginning after December 15, 2019. Early adoption of the guidance is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Management is currently evaluatingHowever, 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 impact of the adoption of this guidance on the Corporation’s consolidated financial statements, and are in the midst of gathering critical data to evaluate the impact. However, it is too early to estimate the impact.

In February 2016, the FASB issued ASU 2016-02 - Leases (Topic 842). The ASU will require all organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. Additional qualitative and quantitative disclosures will be required so that users can understand more about the nature of an entity’s leasing activities.effective date. The new guidance is effective for annual reporting periods and interim reporting periods within those annual periods beginning after December 15, 2018. Early adoption2022 for certain entities, including smaller reporting companies. The Corporation is permitted. Management is currently evaluatinga smaller reporting company.

Note 2 – Acquisition

On June 14, 2019, Consumers entered into an Agreement and Plan of Merger with Peoples Bancorp of Mt. Pleasant, Inc. (Peoples) and its wholly owned subsidiary, The Peoples National Bank of Mount Pleasant (Peoples Bank). On January 1, 2020, Consumers completed the impactacquisition by merger of Peoples in a stock and cash transaction for an aggregate consideration of approximately $10,405. In connection with the adoptionacquisition, the Corporation issued 269,920 shares of this guidancecommon stock and paid $5,128 in cash to the former shareholders of Peoples. Immediately following the merger, Peoples Bank, was merged into Consumers banking subsidiary, Consumers National Bank.

On December 31, 2019, Peoples had approximately $72,016 in total assets, $55,273 in loans and $60,826 in deposits at its three banking centers located in Mt. Pleasant, Adena, and Dillonvale, Ohio. The transaction will be recorded as a purchase and, accordingly, the operating results of Peoples will be included in the Corporation’s Consolidated Financial Statements beginning on January 1, 2020. The assets and liabilities of Peoples will be recorded on the Corporation’s consolidated financial statementsBalance Sheet at their estimated fair values as of January 1, 2020, the acquisition date, and expects to recognize an increasePeoples’ results of operations will be included in otherthe Corporation’s Consolidated Statements of Income beginning on that date.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition of Peoples. Core deposit intangible will be amortized over ten years on a straight-line basis. Goodwill will not be amortized, but instead will be evaluated for impairment.

The acquired assets and other liabilities were measured at estimated fair values. Management made certain estimates and exercised judgement in accounting for the rights and obligations created by leasing of branch offices. Management also expects minimal impact in the income statement with respect to occupancy expense related to leases.acquisition.

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

Note 23– Securities