UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
| Quarterly Report Pursuant to Section 13 or 15 (d) |
For the quarterly period ended December 31, 2017September 30, 2021
OR
☐ | Transition Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 |
Commission File No. 033-79130
CONSUMERS BANCORP, INC.
(Exact name of registrant as specified in its charter)
| 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’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.
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 SecuritiesExchange 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 2,729,6443,048,671 shares of Registrant’sRegistrant’s common stock, no par value, outstanding as of February 9, 2018.November 8, 2021.
CONSUMERS BANCORP, INC. FORM 10-Q QUARTER ENDED |
Table of Contents |
Page Number (s) |
Part I – Financial Information | |
Item 1 – Financial Statements | |
Consolidated Balance Sheets at | 1 |
Consolidated Statements of Income for the three | 2 |
Consolidated Statements of Comprehensive Income | 3 |
Condensed Consolidated Statements of Changes in | 4 |
Condensed Consolidated Statements of Cash Flows for the | 5 |
Notes to the Consolidated Financial Statements (unaudited) |
|
Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations |
|
Item 3 – Not Applicable for Smaller Reporting Companies | |
Item 4 – Controls and Procedures |
|
Part II – Other Information | |
Item 1 – Legal Proceedings |
|
Item 1A – Not Applicable for Smaller Reporting Companies |
|
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds |
|
Item 3 – Defaults Upon Senior Securities |
|
Item 4 – Mine Safety Disclosure |
|
Item 5 – Other Information |
|
Item 6 – Exhibits |
|
Signatures |
|
PART I – FINANCIAL INFORMATION
Item 1 – Financial Statements
CONSUMERS BANCORP, INC.
CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollars in thousands, except per share data) | December 31, 2017 | June 30, 2017 | ||||||
ASSETS | ||||||||
Cash on hand and noninterest-bearing deposits in financial institutions | $ | 8,910 | $ | 9,439 | ||||
Federal funds sold and interest-bearing deposits in financial institutions | 231 | 473 | ||||||
Total cash and cash equivalents | 9,141 | 9,912 | ||||||
Certificates of deposit in other financial institutions | 3,921 | 3,921 | ||||||
Securities, available-for-sale | 135,738 | 142,086 | ||||||
Securities, held-to-maturity (fair value of $4,083 at December 31, 2017 and $4,329 at June 30, 2017) | 4,061 | 4,259 | ||||||
Federal bank and other restricted stocks, at cost | 1,425 | 1,425 | ||||||
Loans held for sale | 814 | 1,252 | ||||||
Total loans | 293,594 | 272,867 | ||||||
Less allowance for loan losses | (3,225 | ) | (3,086 | ) | ||||
Net loans | 290,369 | 269,781 | ||||||
Cash surrender value of life insurance | 9,201 | 9,065 | ||||||
Premises and equipment, net | 13,137 | 13,398 | ||||||
Other real estate owned | 57 | 71 | ||||||
Accrued interest receivable and other assets | 2,418 | 2,713 | ||||||
Total assets | $ | 470,282 | $ | 457,883 | ||||
LIABILITIES | ||||||||
Deposits | ||||||||
Non-interest bearing demand | $ | 108,503 | $ | 102,683 | ||||
Interest bearing demand | 55,056 | 54,123 | ||||||
Savings | 152,659 | 151,154 | ||||||
Time | 66,771 | 66,511 | ||||||
Total deposits | 382,989 | 374,471 | ||||||
Short-term borrowings | 22,507 | 23,986 | ||||||
Federal Home Loan Bank advances | 17,188 | 12,320 | ||||||
Accrued interest and other liabilities | 3,427 | 3,571 | ||||||
Total liabilities | 426,111 | 414,348 | ||||||
Commitments and contingent liabilities | ||||||||
SHAREHOLDERS’ EQUITY | ||||||||
Preferred stock (no par value, 350,000 shares authorized, none outstanding) | — | — | ||||||
Common stock (no par value, 3,500,000 shares authorized; 2,854,133 shares issued as of December 31, 2017 and June 30, 2017) | 14,630 | 14,630 | ||||||
Retained earnings | 31,044 | 30,122 | ||||||
Treasury stock, at cost (124,489 and 130,606 common shares as of December 31, 2017 and June 30, 2017, respectively) | (1,576 | ) | (1,662 | ) | ||||
Accumulated other comprehensive income | 73 | 445 | ||||||
Total shareholders’ equity | 44,171 | 43,535 | ||||||
Total liabilities and shareholders’ equity | $ | 470,282 | $ | 457,883 | ||||
See accompanying notes to consolidated financial statements
CONSUMERS BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months ended December 31, | Six Months ended December 31, | |||||||||||||||
(Dollars in thousands, except per share amounts) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Interest income | ||||||||||||||||
Loans, including fees | $ | 3,437 | $ | 3,022 | $ | 6,665 | $ | 6,206 | ||||||||
Securities, taxable | 459 | 377 | 970 | 779 | ||||||||||||
Securities, tax-exempt | 367 | 357 | 734 | 708 | ||||||||||||
Federal funds sold and other interest bearing deposits | 28 | 30 | 65 | 60 | ||||||||||||
Total interest income | 4,291 | 3,786 | 8,434 | 7,753 | ||||||||||||
Interest expense | ||||||||||||||||
Deposits | 253 | 183 | 501 | 353 | ||||||||||||
Short-term borrowings | 57 | 11 | 112 | 23 | ||||||||||||
Federal Home Loan Bank advances | 54 | 56 | 108 | 114 | ||||||||||||
Total interest expense | 364 | 250 | 721 | 490 | ||||||||||||
Net interest income | 3,927 | 3,536 | 7,713 | 7,263 | ||||||||||||
Provision for loan losses | 60 | 140 | 150 | 276 | ||||||||||||
Net interest income after provision for loan losses | 3,867 | 3,396 | 7,563 | 6,987 | ||||||||||||
Non-interest income | ||||||||||||||||
Service charges on deposit accounts | 301 | 314 | 609 | 644 | ||||||||||||
Debit card interchange income | 325 | 285 | 648 | 536 | ||||||||||||
Bank owned life insurance income | 68 | 63 | 136 | 112 | ||||||||||||
Securities gains, net | — | 22 | 38 | 125 | ||||||||||||
Loss on disposition of other real estate owned | — | (3 | ) | - | (3 | ) | ||||||||||
Other | 145 | 116 | 280 | 231 | ||||||||||||
Total non-interest income | 839 | 797 | 1,711 | 1,645 | ||||||||||||
Non-interest expenses | ||||||||||||||||
Salaries and employee benefits | 1,966 | 1,790 | 3,776 | 3,528 | ||||||||||||
Occupancy and equipment | 465 | 478 | 920 | 930 | ||||||||||||
Data processing expenses | 147 | 145 | 295 | 290 | ||||||||||||
Debit card processing expenses | 188 | 149 | 368 | 282 | ||||||||||||
Professional and director fees | 122 | 146 | 239 | 278 | ||||||||||||
FDIC assessments | 46 | 46 | 92 | 101 | ||||||||||||
Franchise taxes | 84 | 84 | 168 | 168 | ||||||||||||
Marketing and advertising | 61 | 65 | 139 | 144 | ||||||||||||
Telephone and network communications | 75 | 76 | 157 | 157 | ||||||||||||
Other | 406 | 347 | 799 | 734 | ||||||||||||
Total non-interest expenses | 3,560 | 3,326 | 6,953 | 6,612 | ||||||||||||
Income before income taxes | 1,146 | 867 | 2,321 | 2,020 | ||||||||||||
Income tax expense | 489 | 145 | 735 | 397 | ||||||||||||
Net income | $ | 657 | $ | 722 | $ | 1,586 | $ | 1,623 | ||||||||
Basic and diluted earnings per share | $ | 0.24 | $ | 0.27 | $ | 0.58 | $ | 0.60 | ||||||||
See accompanying notes to consolidated financial statements
CONSUMERS BANCORP, INC.
Consolidated statements of comprehensive income (Loss)
(Unaudited)
(Dollars in thousands)
Three Months ended December 31 | Six Months ended December 31, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Net income | $ | 657 | $ | 722 | $ | 1,586 | $ | 1,623 | ||||||||
Other comprehensive income (loss), net of tax: | ||||||||||||||||
Net change in unrealized gains (losses) on securities available-for-sale: | ||||||||||||||||
Unrealized losses arising during the period | (631 | ) | (3,319 | ) | (527 | ) | (3,742 | ) | ||||||||
Reclassification adjustment for gains included in income | — | (22 | ) | (38 | ) | (125 | ) | |||||||||
Net unrealized losses | (631 | ) | (3,341 | ) | (565 | ) | (3,867 | ) | ||||||||
Income tax effect | 215 | 1,136 | 193 | 1,315 | ||||||||||||
Other comprehensive loss | (416 | ) | (2,205 | ) | (372 | ) | (2,552 | ) | ||||||||
Total comprehensive income (loss) | $ | 241 | $ | (1,483 | ) | $ | 1,214 | $ | (929 | ) | ||||||
(Dollars in thousands, except per share data) | September 30, 2021 (unaudited) | June 30, 2021 | ||||||
ASSETS | ||||||||
Cash on hand and noninterest-bearing deposits in financial institutions | $ | 10,104 | $ | 8,902 | ||||
Federal funds sold and interest-bearing deposits in financial institutions | 76,988 | 9,627 | ||||||
Total cash and cash equivalents | 87,092 | 18,529 | ||||||
Certificates of deposit in other financial institutions | 5,560 | 5,825 | ||||||
Securities, available-for-sale | 245,414 | 207,760 | ||||||
Securities, held-to-maturity (fair value of $8,219 at September 30, 2021 and $8,352 at June 30, 2021) | 7,896 | 7,996 | ||||||
Equity securities, at fair value | 424 | 424 | ||||||
Federal bank and other restricted stocks, at cost | 2,472 | 2,472 | ||||||
Loans held for sale | 1,803 | 1,457 | ||||||
Total loans | 577,161 | 566,427 | ||||||
Less allowance for loan losses | (6,677 | ) | (6,471 | ) | ||||
Net loans | 570,484 | 559,956 | ||||||
Cash surrender value of life insurance | 9,767 | 9,702 | ||||||
Premises and equipment, net | 16,469 | 15,793 | ||||||
Goodwill | 2,452 | 836 | ||||||
Core deposit intangible, net | 513 | 229 | ||||||
Accrued interest receivable and other assets | 3,540 | 2,825 | ||||||
Total assets | $ | 953,886 | $ | 833,804 | ||||
LIABILITIES | ||||||||
Deposits | ||||||||
Noninterest-bearing demand | $ | 243,418 | $ | 229,102 | ||||
Interest bearing demand | 145,686 | 127,447 | ||||||
Savings | 338,502 | 282,761 | ||||||
Time | 121,580 | 87,539 | ||||||
Total deposits | 849,186 | 726,849 | ||||||
Short-term borrowings | 10,773 | 12,203 | ||||||
Federal Home Loan Bank advances | 16,300 | 18,050 | ||||||
Accrued interest and other liabilities | 6,475 | 6,802 | ||||||
Total liabilities | 882,734 | 763,904 | ||||||
Commitments and contingent liabilities | ||||||||
SHAREHOLDERS’ EQUITY | ||||||||
Preferred stock (no par value, 350,000 shares authorized, none outstanding) | 0 | 0 | ||||||
Common stock (no par value, 8,500,000 shares authorized; 3,124,053 shares issued as of September 30, 2021 and June 30, 2021) | 20,113 | 20,011 | ||||||
Retained earnings | 49,844 | 47,663 | ||||||
Treasury stock, at cost (75,382 and 95,953 common shares as of September 30, 2021 and June 30, 2021, respectively) | (1,117 | ) | (1,324 | ) | ||||
Accumulated other comprehensive income | 2,312 | 3,550 | ||||||
Total shareholders’ equity | 71,152 | 69,900 | ||||||
Total liabilities and shareholders’ equity | $ | 953,886 | $ | 833,804 | ||||
See accompanying notes to consolidated financial statements.
CONSUMERS BANCORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
INCOME (Unaudited)
(Dollars in thousands, except per share data) | ||||||||||||||||
Three Months ended December 31, | Six Months ended December 31, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Balance at beginning of period | $ | 44,271 | $ | 44,020 | $ | 43,535 | $ | 43,793 | ||||||||
Net income | 657 | 722 | 1,586 | 1,623 | ||||||||||||
Other comprehensive loss | (416 | ) | (2,205 | ) | (372 | ) | (2,552 | ) | ||||||||
6,321 shares issued associated with stock awards during the six months ended December 31, 2017 | — | — | 90 | — | ||||||||||||
204 and 231 Dividend reinvestment plan shares associated with forfeited and expired restricted stock awards retired to treasury stock during the six months ended December 31, 2017 and 2016, respectively | — | — | — | — | ||||||||||||
Common cash dividends | (341 | ) | (327 | ) | (668 | ) | (654 | ) | ||||||||
Balance at the end of the period | $ | 44,171 | $ | 42,210 | $ | 44,171 | $ | 42,210 | ||||||||
Common cash dividends per share | $ | 0.125 | $ | 0.12 | $ | 0.245 | $ | 0.24 | ||||||||
Three Months ended September 30, | ||||||||
(Dollars in thousands, except per share amounts) | 2021 | 2020 | ||||||
Interest and dividend income | ||||||||
Loans, including fees | $ | 7,068 | $ | 6,489 | ||||
Securities, taxable | 711 | 372 | ||||||
Securities, tax-exempt | 478 | 420 | ||||||
Equity securities | 8 | 0 | ||||||
Federal bank and other restricted stocks | 20 | 18 | ||||||
Federal funds sold and other interest-bearing deposits | 50 | 47 | ||||||
Total interest and dividend income | 8,335 | 7,346 | ||||||
Interest expense | ||||||||
Deposits | 296 | 577 | ||||||
Short-term borrowings | 2 | 4 | ||||||
Federal Home Loan Bank advances | 64 | 71 | ||||||
Total interest expense | 362 | 652 | ||||||
Net interest income | 7,973 | 6,694 | ||||||
Provision for loan losses | 190 | 130 | ||||||
Net interest income after provision for loan losses | 7,783 | 6,564 | ||||||
Noninterest income | ||||||||
Service charges on deposit accounts | 358 | 307 | ||||||
Debit card interchange income | 509 | 456 | ||||||
Gain on sale of mortgage loans | 258 | 236 | ||||||
Bank owned life insurance income | 65 | 66 | ||||||
Other | 83 | 76 | ||||||
Total noninterest income | 1,273 | 1,141 | ||||||
Noninterest expenses | ||||||||
Salaries and employee benefits | 3,247 | 2,691 | ||||||
Occupancy and equipment | 708 | 640 | ||||||
Data processing expenses | 214 | 186 | ||||||
Debit card processing expenses | 268 | 238 | ||||||
Professional and director fees | 344 | 237 | ||||||
FDIC assessments | 84 | 61 | ||||||
Franchise taxes | 133 | 109 | ||||||
Marketing and advertising | 214 | 134 | ||||||
Telephone and network communications | 114 | 84 | ||||||
Amortization of intangible | 11 | 6 | ||||||
Other | 495 | 413 | ||||||
Total noninterest expenses | 5,832 | 4,799 | ||||||
Income before income taxes | 3,224 | 2,906 | ||||||
Income tax expense | 559 | 505 | ||||||
Net income | $ | 2,665 | $ | 2,401 | ||||
Basic and diluted earnings per share | $ | 0.88 | $ | 0.80 | ||||
See accompanying notes to consolidated financial statements.
CONSUMERS BANCORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSCOMPREHENSIVE INCOME
(Unaudited)
(Dollars in thousands) | Six Months Ended December 31, | |||||||
2017 | 2016 | |||||||
Cash flows from operating activities | ||||||||
Net cash from operating activities | $ | 3,484 | $ | 2,152 | ||||
Cash flow from investing activities | ||||||||
Securities available-for-sale | ||||||||
Purchases | (5,101 | ) | (17,368 | ) | ||||
Maturities, calls and principal pay downs | 8,848 | 11,753 | ||||||
Proceeds from sales | 1,586 | 3,383 | ||||||
Securities held-to-maturity | ||||||||
Purchases | — | (1,000 | ) | |||||
Principal pay downs | 198 | 198 | ||||||
Net decrease in certificates of deposits in other financial institutions | — | 990 | ||||||
Net increase in loans | (20,967 | ) | (9,255 | ) | ||||
Purchase of Bank owned life insurance | — | (2,000 | ) | |||||
Acquisition of premises and equipment | (129 | ) | (252 | ) | ||||
Sale of other real estate owned | 71 | 7 | ||||||
Net cash from investing activities | (15,494 | ) | (13,544 | ) | ||||
Cash flow from financing activities | ||||||||
Net increase in deposit accounts | 8,518 | 8,797 | ||||||
Net change in short-term borrowings | (1,479 | ) | 223 | |||||
Proceeds from Federal Home Loan Bank advances | 5,400 | 18,325 | ||||||
Repayments of Federal Home Loan Bank advances | (532 | ) | (14,630 | ) | ||||
Dividends paid | (668 | ) | (654 | ) | ||||
Net cash from financing activities | 11,239 | 12,061 | ||||||
Increase (decrease) in cash or cash equivalents | (771 | ) | 669 | |||||
Cash and cash equivalents, beginning of period | 9,912 | 10,181 | ||||||
Cash and cash equivalents, end of period | $ | 9,141 | $ | 10,850 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Cash paid during the period: | ||||||||
Interest | $ | 709 | $ | 484 | ||||
Federal income taxes | 405 | 150 | ||||||
Non-cash items: | ||||||||
Transfer from loans to other real estate owned | 57 | 10 | ||||||
Transfer from loans held for sale to portfolio | 172 | — | ||||||
Issuance of treasury stock for stock awards | 90 | — | ||||||
Expired and forfeited dividend reinvestment plan shares associated with restricted stock awards that were retired to treasury stock | 4 | 4 | ||||||
(Dollars in thousands) | Three Months ended September 30, | |||||||
2021 | 2020 | |||||||
Net income | $ | 2,665 | $ | 2,401 | ||||
Other comprehensive income, net of tax: | ||||||||
Net change in unrealized gains (losses) on securities: | ||||||||
Unrealized gains (losses) arising during the period | (1,566 | ) | 70 | |||||
Income tax effect | 328 | (14 | ) | |||||
Other comprehensive income (loss) | (1,238 | ) | 56 | |||||
Total comprehensive income | $ | 1,427 | $ | 2,457 | ||||
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) | Common Stock | Retained | Treasury | Accumulated | Total | |||||||||||||||
Balance, June 30, 2021 | $ | 20,011 | $ | 47,663 | $ | (1,324 | ) | $ | 3,550 | $ | 69,900 | |||||||||
Net income | 0 | 2,665 | 0 | 0 | 2,665 | |||||||||||||||
Other comprehensive loss | 0 | 0 | 0 | (1,238 | ) | (1,238 | ) | |||||||||||||
14,963 shares associated with vested stock awards | 102 | 0 | 207 | 0 | 309 | |||||||||||||||
Cash dividends declared ($0.16 per share) | 0 | (484 | ) | 0 | 0 | (484 | ) | |||||||||||||
Balance, September 30, 2021 | $ | 20,113 | $ | 49,844 | $ | (1,117 | ) | $ | 2,312 | $ | 71,152 | |||||||||
Balance, June 30, 2020 | $ | 19,974 | $ | 40,460 | $ | (1,454 | ) | $ | 4,260 | $ | 63,240 | |||||||||
Net income | 0 | 2,401 | 0 | 0 | 2,401 | |||||||||||||||
Other comprehensive income | 0 | 0 | 0 | 56 | 56 | |||||||||||||||
12,522 shares associated with vested stock awards | 37 | 0 | 130 | 0 | 167 | |||||||||||||||
Cash dividends declared ($0.145 per share) | 0 | (437 | ) | 0 | 0 | (437 | ) | |||||||||||||
Balance, September 30, 2020 | $ | 20,011 | $ | 42,424 | $ | (1,324 | ) | $ | 4,316 | $ | 65,427 | |||||||||
See accompanying notes to consolidated financial statements.
CONSUMERS BANCORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands) | Three Months Ended September 30, | |||||||
2021 | 2020 | |||||||
Cash flows from operating activities | ||||||||
Net cash from operating activities | $ | 2,778 | $ | 1,041 | ||||
Cash flow from investing activities | ||||||||
Purchases of securities, available-for-sale | (31,123 | ) | (500 | ) | ||||
Maturities, calls and principal pay downs of securities, available-for-sale | 7,159 | 7,355 | ||||||
Principal pay downs of securities, held-to-maturity | 100 | 100 | ||||||
Net decrease in certificate of deposit in other financial institutions | 265 | 2,763 | ||||||
Net decrease (increase) in loans | 9,225 | (19,327 | ) | |||||
Acquisition, net cash received | 66,552 | 0 | ||||||
Premises and equipment purchases | (528 | ) | (106 | ) | ||||
Sale of other repossessed assets | 0 | 8 | ||||||
Net cash from investing activities | 51,650 | (9,707 | ) | |||||
Cash flow from financing activities | ||||||||
Net increase in deposit accounts | 17,799 | 6,743 | ||||||
Net change in short-term borrowings | (1,430 | ) | 1,471 | |||||
Proceeds from Federal Home Loan Bank advances | 0 | 1,300 | ||||||
Repayments of Federal Home Loan Bank advances | (1,750 | ) | (1,562 | ) | ||||
Dividends paid | (484 | ) | (437 | ) | ||||
Net cash from financing activities | 14,135 | 7,515 | ||||||
Increase (decrease) in cash or cash equivalents | 68,563 | (1,151 | ) | |||||
Cash and cash equivalents, beginning of period | 18,529 | 9,659 | ||||||
Cash and cash equivalents, end of period | $ | 87,092 | $ | 8,508 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Cash paid during the period: | ||||||||
Interest | $ | 347 | $ | 652 | ||||
Federal income taxes | 0 | 300 | ||||||
Non-cash items: | ||||||||
Issuance of treasury stock for stock awards | 309 | 167 | ||||||
Branch acquisition: | ||||||||
Noncash assets acquired: | ||||||||
Securities, available-for-sale | 15,602 | |||||||
Loans | 19,943 | |||||||
Premises and equipment | 413 | |||||||
Goodwill | 1,616 | |||||||
Core deposit intangible | 295 | |||||||
Accrued interest receivable and other assets | 216 | |||||||
Total noncash assets acquired | 38,085 | |||||||
Liabilities assumed: | ||||||||
Deposits | 104,538 | |||||||
Other liabilities | 99 | |||||||
Total liabilities assumed | 104,637 | |||||||
Net noncash assets acquired | (66,552 | ) | ||||||
See accompanying notes to consolidated financial statements.
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.Ohio, Pennsylvania, and West Virginia. The Bank’s business involves attracting deposits from businesses and individual customers and using such deposits to originate commercial, mortgage and consumer loans in its primary market area.
Basis of Presentation: The consolidated financial statements for interim periods are unaudited and reflect all adjustments (consisting of only normal recurring adjustments), which, in the opinion of management, are necessary to present fairly the financial position and results of operations and cash flows for the periods presented. The unaudited financial statements are presented in accordance with the requirements of Form 10-Q and do not include all disclosures normally required by accounting principles generally accepted in the United States of America. The financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Corporation’s Form 10-K for the year ended June 30, 2017.2021. 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 Issued Accounting Pronouncements Not Yet Effective: In May 2014, FASB issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606). The ASU creates a new topic, Topic 606, to provide guidance on revenue recognition for entities that enter into contracts with customers to transfer goods or services or enter into contracts for the transfer of nonfinancial assets. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additional disclosures are required to provide quantitative and qualitative information regarding the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The new guidance is effective for annual reporting periods, and interim reporting periods within those annual periods, beginning after December 15, 2017. Most of the Corporation’s revenue is derived from loans and financial instruments, which is not part of the scope of this ASU.The adoption of ASU 2014-09 as it relates to non-interest income, such as service charges and debit card interchange income, is not expected to have a material effect on the Corporation’s financial statements.
In January 2016, the FASB issued ASU 2016-01, Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. The main provisions of ASU 2016-01 address the valuation and impairment of certain equity investments along with simplified disclosures about those investments. Equity securities with readily determinable fair values will be treated in the same manner as other financial instruments. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The adoption of ASU 2016-01 is not expected to have a material impact on the Corporation's financial statements.
CONSUMERS BANCORP, INC.
Notes to the Consolidated Financial Statements
(Unaudited) (continued)
(Dollars in thousands, except per share amounts)
In June 2016, FASB Issuedthe 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. 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 2016-13 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 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, 2018.2022 Early adoptionfor certain entities, including smaller reporting companies. The Corporation is permitted. Managementa smaller reporting company. The Corporation is currently evaluating thehow adopting this new guidance will impact of the adoption of this guidance on the Corporation’s consolidated financial statements and expectsthe Corporation’s current systems and processes. The Corporation is reviewing potential methodologies for estimating expected credit losses using reasonable and supportable forecast information and has identified certain data and system requirements. Once the new guidance is adopted, we expect our allowance for loan losses to recognize anincrease through a one-time adjustment to retained earnings; however, until our evaluation is complete, the estimated increase in other assets and other liabilities forallowance will be unknown. The Corporation is planning to adopt this new guidance within 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.time frame noted above.
Note 2 – Securities Acquisition
On July 16, 2021, the Corporation completed its acquisition of two branches located in Calcutta and Wellsville, Ohio from CFBank, National Association. In connection with the acquisition, the Corporation assumed $104,538 in branch deposits for a deposit premium of 1.75%. In addition, the Corporation acquired $15,602 of subordinated debt securities issued by unrelated financial institutions and $19,943 of loans. This transaction qualifies as a business combination.
The following table summarizes the estimated fair values of the assets acquired and liabilities assumed by the Corporation at the date of acquisition. The 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.
Assets acquired: | ||||
Cash and cash equivalents | $ | 515 | ||
Securities, available-for-sale | 15,602 | |||
Loans | 19,943 | |||
Premises and equipment | 413 | |||
Core deposit intangible | 295 | |||
Accrued interest receivable | 216 | |||
Total assets acquired | 36,984 | |||
Liabilities assumed: | ||||
Noninterest-bearing deposits | 10,535 | |||
Interest-bearing deposits | 94,003 | |||
Other liabilities | 99 | |||
Total liabilities assumed | 104,637 | |||
Fair value of net liabilities assumed | (67,653 | ) | ||
Cash received | 66,037 | |||
Goodwill | $ | 1,616 |
The acquired assets and liabilities were measured at estimated fair values. Management made certain estimates and exercised judgement in accounting for the acquisition. The fair value of loans was estimated using discounted contractual cash flows. The book balance of the loans at the time of the acquisition was $20,325. The fair value disclosed above reflects a credit-related adjustment of $(388) and an adjustment for other factors of $6. Loans evidencing credit deterioration since origination, purchased credit impaired loans, included in loans receivable were immaterial. Acquisition costs of $144 pre-tax, or $118 after-tax, were recorded during the first quarter of fiscal year 2022. The fair value measurements of assets acquired and liabilities assumed are subject to refinement for up to one year after the closing date of the acquisition as additional information relative to closing date fair values becomes available.
Available –for-Sale
| Amortized | Gross | Gross | Fair | ||||||||||||
December 31, 2017 | ||||||||||||||||
Obligations of U.S. government-sponsored entities and agencies | $ | 13,752 | $ | 30 | $ | (146 | ) | $ | 13,636 | |||||||
Obligations of state and political subdivisions | 56,718 | 746 | (283 | ) | 57,181 | |||||||||||
Mortgage-backed securities – residential | 58,051 | 98 | (631 | ) | 57,518 | |||||||||||
Mortgage-backed securities– commercial | 1,446 | — | (10 | ) | 1,436 | |||||||||||
Collateralized mortgage obligations– residential | 5,483 | — | (137 | ) | 5,346 | |||||||||||
Pooled trust preferred security | 178 | 443 | — | 621 | ||||||||||||
Total available-for-sale securities | $ | 135,628 | $ | 1,317 | $ | (1,207 | ) | $ | 135,738 | |||||||
Held-to-Maturity
| Amortized | Gross | Gross | Fair | ||||||||||||
December 31, 2017 | ||||||||||||||||
Obligations of state and political subdivisions | $ | 4,061 | $ | 22 | $ | — | $ | 4,083 | ||||||||
Available–for-Sale | Amortized | Gross | Gross | Fair | ||||||||||||
June 30, 2017 | ||||||||||||||||
Obligations of U.S. government-sponsored entities and agencies | $ | 12,571 | $ | 90 | $ | (74 | ) | $ | 12,587 | |||||||
Obligations of state and political subdivisions | 56,824 | 890 | (254 | ) | �� | 57,460 | ||||||||||
Mortgage-backed securities – residential | 64,092 | 184 | (438 | ) | 63,838 | |||||||||||
Mortgage-backed securities – commercial | 1,459 | — | (1 | ) | 1,458 | |||||||||||
Collateralized mortgage obligations - residential | 6,310 | 1 | (100 | ) | 6,211 | |||||||||||
Pooled trust preferred security | 155 | 377 | — | 532 | ||||||||||||
Total available-for-sale securities | $ | 141,411 | $ | 1,542 | $ | (867 | ) | $ | 142,086 | |||||||
Held-to-Maturity | Amortized | Gross | Gross | Fair | ||||||||||||
June 30, 2017 | ||||||||||||||||
Obligations of state and political subdivisions | $ | 4,259 | $ | 73 | $ | (3 | ) | $ | 4,329 | |||||||
Note 3– Securities
Proceeds from the sale of available-for-saleDebt securities were as follows:
Three Months Ended December 31 | Six Months Ended December 31, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Proceeds from sales | $ | — | $ | 1,594 | $ | 1,586 | $ | 3,383 | ||||||||
Gross realized gains | — | 24 | 39 | 127 | ||||||||||||
Gross realized losses | — | 2 | 1 | 2 | ||||||||||||
The income tax provision related to these net realized gains and losses amounted tofollowing tables summarize the Corporation’s debt securities as of $13 for the six months ended December 31, 2017September 30, 2021 and $8June 30, 2021: and $43 for the three and six months ended December 31, 2016.
Available –for-Sale | Amortized | Gross | Gross | Fair | ||||||||||||
September 30, 2021 | ||||||||||||||||
Obligations of U.S. government-sponsored entities and agencies | $ | 14,248 | $ | 186 | $ | (115 | ) | $ | 14,319 | |||||||
Obligations of state and political subdivisions | 77,315 | 3,091 | (225 | ) | 80,181 | |||||||||||
U.S. Government-sponsored mortgage-backed securities–residential | 104,215 | 1,097 | (1,110 | ) | 104,202 | |||||||||||
U.S. Government-sponsored mortgage-backed securities– commercial | 8,636 | 37 | (23 | ) | 8,650 | |||||||||||
U.S. Government-sponsored collateralized mortgage obligations– residential | 22,010 | 100 | (121 | ) | 21,989 | |||||||||||
Other debt securities | 16,063 | 77 | (67 | ) | 16,073 | |||||||||||
Total securities available-for-sale | $ | 242,487 | $ | 4,588 | $ | (1,661 | ) | $ | 245,414 | |||||||
Held-to-Maturity | Amortized | Gross | Gross | Fair | ||||||||||||
September 30, 2021 | ||||||||||||||||
Obligations of state and political subdivisions | $ | 7,896 | $ | 323 | $ | 0 | $ | 8,219 | ||||||||
Available–for-Sale | Amortized | Gross | Gross | Fair | ||||||||||||
June 30, 2021 | ||||||||||||||||
Obligations of U.S. government-sponsored entities and agencies | $ | 14,746 | $ | 301 | $ | (14 | ) | $ | 15,033 | |||||||
Obligations of state and political subdivisions | 73,013 | 3,561 | (75 | ) | 76,499 | |||||||||||
U.S. Government-sponsored mortgage-backed securities – residential | 90,065 | 1,136 | (684 | ) | 90,517 | |||||||||||
U.S. Government-sponsored mortgage-backed securities – commercial | 8,641 | 204 | 0 | 8,845 | ||||||||||||
U.S. Government-sponsored collateralized mortgage obligations – residential | 16,302 | 129 | (57 | ) | 16,374 | |||||||||||
Other debt securities | 500 | 0 | (8 | ) | 492 | |||||||||||
Total securities available-for-sale | $ | 203,267 | $ | 5,331 | $ | (838 | ) | $ | 207,760 | |||||||
Held-to-Maturity | Amortized | Gross | Gross | Fair | ||||||||||||
June 30, 2021 | ||||||||||||||||
Obligations of state and political subdivisions | $ | 7,996 | $ | 356 | $ | 0 | $ | 8,352 | ||||||||
The amortized cost and fair values of debt securities at December 31, 2017,September 30, 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, collateralized mortgage obligations and the pooled trust preferred security are shown separately.
Available-for-Sale | Amortized Cost | Estimated Fair Value | ||||||
Due in one year or less | $ | 2,170 | $ | 2,192 | ||||
Due after one year through five years | 18,053 | 18,167 | ||||||
Due after five years through ten years | 28,838 | 28,992 | ||||||
Due after ten years | 21,409 | 21,466 | ||||||
Total | 70,470 | 70,817 | ||||||
U.S. Government-sponsored mortgage-backed and related securities | 64,980 | 64,300 | ||||||
Pooled trust preferred security | 178 | 621 | ||||||
Total available-for-sale securities | $ | 135,628 | $ | 135,738 | ||||
Held-to-Maturity | ||||||||
Due after five years through ten years | 564 | 579 | ||||||
Due after ten years | 3,497 | 3,504 | ||||||
Total held-to-maturity securities | $ | 4,061 | $ | 4,083 | ||||
Available-for-Sale | Amortized Cost | Estimated Fair Value | ||||||
Due in one year or less | $ | 5,366 | $ | 5,401 | ||||
Due after one year through five years | 25,848 | 26,285 | ||||||
Due after five years through ten years | 22,183 | 22,527 | ||||||
Due after ten years | 54,229 | 56,360 | ||||||
Total | 107,626 | 110,573 | ||||||
U.S. Government-sponsored mortgage-backed and related securities | 134,861 | 134,841 | ||||||
Total securities available-for-sale | $ | 242,487 | $ | 245,414 | ||||
Held-to-Maturity | ||||||||
Due after one year through five years | $ | 294 | $ | 305 | ||||
Due after five years through ten years | 5,367 | 4,854 | ||||||
Due after ten years | 2,235 | 3,060 | ||||||
Total securities held-to-maturity | $ | 7,896 | $ | 8,219 | ||||
CONSUMERS BANCORP, INC.
NotesSecurities with a carrying value of approximately $114,320 and $96,970 were pledged at September 30, 2021 and June 30, 2021, respectively, to the Consolidated Financial Statements
(Unaudited) (continued)secure public deposits and commitments as required or permitted by law.
The following table summarizes the securities with unrealized losses at December 31, 2017September 30, 2021 and June 30, 2021, 30,2017,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 | Unrealized | Fair | Unrealized | Fair | Unrealized | ||||||||||||||||||
September 30, 2021 | ||||||||||||||||||||||||
Obligations of U.S. government-sponsored entities and agencies | $ | 5,696 | $ | (115 | ) | $ | 0 | $ | 0 | $ | 5,696 | $ | (115 | ) | ||||||||||
Obligations of state and political subdivisions | 14,428 | (225 | ) | 0 | 0 | 14,428 | (225 | ) | ||||||||||||||||
U.S. Government-sponsored mortgage-backed securities – residential | 62,030 | (1,110 | ) | 0 | 0 | 62,030 | (1,110 | ) | ||||||||||||||||
U.S. Government-sponsored mortgage-backed securities – commercial | 2,783 | (23 | ) | 0 | 0 | 2,783 | (23 | ) | ||||||||||||||||
Collateralized mortgage obligations - residential | 14,488 | (121 | ) | 0 | 0 | 14,488 | (121 | ) | ||||||||||||||||
Other debt securities | 9,729 | (67 | ) | 0 | 0 | 9,729 | (67 | ) | ||||||||||||||||
Total temporarily impaired | $ | 109,154 | $ | (1,661 | ) | $ | 0 | $ | 0 | $ | 109,154 | $ | (1,661 | ) | ||||||||||
Less than 12 Months | 12 Months or more | Total | ||||||||||||||||||||||
Available-for-sale | Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | ||||||||||||||||||
December 31, 2017 | ||||||||||||||||||||||||
Obligations of US government-sponsored entities and agencies | $ | 9,901 | $ | (146 | ) | $ | — | $ | — | $ | 9,901 | $ | (146 | ) | ||||||||||
Obligations of states and political subdivisions | 11,862 | (93 | ) | 8,179 | (190 | ) | 20,041 | (283 | ) | |||||||||||||||
Mortgage-backed securities - residential | 27,316 | (243 | ) | 22,415 | (388 | ) | 49,731 | (631 | ) | |||||||||||||||
Mortgage-backed securities - commercial | 1,435 | (10 | ) | — | — | 1,435 | (10 | ) | ||||||||||||||||
Collateralized mortgage obligations – residential | — | — | 5,346 | (137 | ) | 5,346 | (137 | ) | ||||||||||||||||
Total temporarily impaired | $ | 50,514 | $ | (492 | ) | $ | 35,940 | $ | (715 | ) | $ | 86,454 | $ | (1,207 | ) | |||||||||
Less than 12 Months | 12 Months or more | Total | ||||||||||||||||||||||
Available-for-sale | Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | ||||||||||||||||||
June 30, 2017 | ||||||||||||||||||||||||
Obligations of US government-sponsored entities and agencies | $ | 4,336 | $ | (74 | ) | $ | — | $ | — | $ | 4,336 | $ | (74 | ) | ||||||||||
Obligations of states and political subdivisions | 13,881 | (241 | ) | 834 | (13 | ) | 14,715 | (254 | ) | |||||||||||||||
Mortgage-backed securities - residential | 42,071 | (391 | ) | 2,805 | (47 | ) | 44,876 | (438 | ) | |||||||||||||||
Mortgage-backed securities - commercial | 1,458 | (1 | ) | — | — | 1,458 | (1 | ) | ||||||||||||||||
Collateral mortgage obligation - residential | 5,417 | (88 | ) | 654 | (12 | ) | 6,071 | (100 | ) | |||||||||||||||
Total temporarily impaired | $ | 67,163 | $ | (795 | ) | $ | 4,293 | $ | (72 | ) | $ | 71,456 | $ | (867 | ) | |||||||||
Less than 12 Months | 12 Months or more | Total | ||||||||||||||||||||||
Available-for-sale | Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | ||||||||||||||||||
June 30, 2021 | ||||||||||||||||||||||||
Obligations of U.S. government-sponsored entities and agencies | $ | 2,003 | $ | (14 | ) | $ | 0 | $ | 0 | $ | 2,003 | $ | (14 | ) | ||||||||||
Obligations of state and political subdivisions | 7,398 | (75 | ) | 0 | 0 | 7,398 | (75 | ) | ||||||||||||||||
Mortgage-backed securities – residential | 42,378 | (684 | ) | 0 | 0 | 42,378 | (684 | ) | ||||||||||||||||
Collateralized mortgage obligations - residential | 7,707 | (56 | ) | 552 | (1 | ) | 8,259 | (57 | ) | |||||||||||||||
Other debt securities | 492 | (8 | ) | 0 | 0 | 492 | (8 | ) | ||||||||||||||||
Total temporarily impaired | $ | 59,978 | $ | (837 | ) | $ | 552 | $ | (1 | ) | $ | 60,530 | $ | (838 | ) | |||||||||
Management evaluates securities for other-than-temporary impairmentimpairment (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.
CONSUMERS BANCORP, INC.
Notes to the Consolidated Financial Statements
(Unaudited) (continued)
(DollarsAt September 30, 2021, there were a total of 87 available-for-sale securities in thousands, except per share amounts)
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 December 31, 2017September 30, 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 decline in fair value within the securities portfolio is largely due to changes in interest rates and the fair value is expected to recover as the securities approach maturity. The mortgage-backed securities and collateralized mortgage obligations were primarily issued by Fannie Mae, Freddie Mac and Ginnie Mae, institutions which the government has affirmed its commitment to support. The Corporation does not own any private label mortgage-backed securities.
Equity Securities
As of September 30, 2021 and June 30, 2021, the Corporation owned equity securities with an amortized cost of $400 and fair value of $424. Changes in the fair value of these securities are included in noninterest income on the consolidated statements of income. There were no unrealized gains and losses on equity securities during the three-month periods ended September 30, 2021 and 2020. Also, there were no sales of equity securities during the three-month periods ended September 30, 2021 and 2020.
Note 34– – Loans
Major classifications of loans were as follows:
December 31, 2017 | June 30, 2017 | September 30, 2021 | June 30, 2021 | |||||||||||||
Commercial | $ | 49,561 | $ | 46,336 | $ | 95,568 | $ | 112,337 | ||||||||
Commercial real estate: | ||||||||||||||||
Construction | 5,936 | 5,588 | 17,477 | 10,525 | ||||||||||||
Other | 169,692 | 157,861 | 269,627 | 269,679 | ||||||||||||
1 – 4 Family residential real estate: | ||||||||||||||||
Owner occupied | 45,351 | 41,581 | 137,037 | 118,269 | ||||||||||||
Non-owner occupied | 16,163 | 14,377 | 20,123 | 19,151 | ||||||||||||
Construction | 1,931 | 1,993 | 6,591 | 9,073 | ||||||||||||
Consumer | 4,960 | 5,131 | 32,109 | 29,646 | ||||||||||||
Subtotal | 293,594 | 272,867 | 578,532 | 568,680 | ||||||||||||
Net deferred loan fees and costs | (1,371 | ) | (2,253 | ) | ||||||||||||
Allowance for loan losses | (3,225 | ) | (3,086 | ) | (6,677 | ) | (6,471 | ) | ||||||||
Net Loans | $ | 290,369 | $ | 269,781 | $ | 570,484 | $ | 559,956 | ||||||||
Loans presentedThe commercial loan category in the above are nettable includes PPP loans of deferred loan fees $29,505 as of September 30, 2021 and costs$50,686 as of $313 and $294 for December 31, 2017 and June 30, 2017, 2021.respectively.
CONSUMERS BANCORP, INC.
Notes to the Consolidated Financial Statements
(Unaudited) (continued)
(Dollars in thousands, except per share amounts)
The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended December 31, 2017:September 30, 2021:
1-4 Family | ||||||||||||||||||||
Commercial | Residential | |||||||||||||||||||
Real | Real | |||||||||||||||||||
Commercial | Estate | Estate | Consumer | Total | ||||||||||||||||
Allowance for loan losses: | ||||||||||||||||||||
Beginning balance | $ | 572 | $ | 2,081 | $ | 473 | $ | 68 | $ | 3,194 | ||||||||||
Provision for loan losses | (17 | ) | 57 | 20 | — | 60 | ||||||||||||||
Loans charged-off | — | — | (33 | ) | (5 | ) | (38 | ) | ||||||||||||
Recoveries | — | 6 | 1 | 2 | 9 | |||||||||||||||
Total ending allowance balance | $ | 555 | $ | 2,144 | $ | 461 | $ | 65 | $ | 3,225 | ||||||||||
The following table presents the activity in the allowance for loan losses by portfolio segment for the six months ended December 31, 2017:
1-4 Family | ||||||||||||||||||||||||||||||||||||||||
1-4 Family | Commercial | Residential | ||||||||||||||||||||||||||||||||||||||
Commercial | Residential | Real | Real | |||||||||||||||||||||||||||||||||||||
Real | Real | Commercial | Estate | Estate | Consumer | Total | ||||||||||||||||||||||||||||||||||
Commercial | Estate | Estate | Consumer | Total | ||||||||||||||||||||||||||||||||||||
Allowance for loan losses: | ||||||||||||||||||||||||||||||||||||||||
Beginning balance | $ | 518 | $ | 2,038 | $ | 473 | $ | 57 | $ | 3,086 | $ | 904 | $ | 3,949 | $ | 1,307 | $ | 311 | $ | 6,471 | ||||||||||||||||||||
Provision for loan losses | 35 | 82 | 20 | 13 | 150 | 2 | 36 | 110 | 42 | 190 | ||||||||||||||||||||||||||||||
Loans charged-off | — | — | (33 | ) | (8 | ) | (41 | ) | 0 | 0 | 0 | (34 | ) | (34 | ) | |||||||||||||||||||||||||
Recoveries | 2 | 24 | 1 | 3 | 30 | 0 | 0 | 13 | 37 | 50 | ||||||||||||||||||||||||||||||
Total ending allowance balance | $ | 555 | $ | 2,144 | $ | 461 | $ | 65 | $ | 3,225 | $ | 906 | $ | 3,985 | $ | 1,430 | $ | 356 | $ | 6,677 | ||||||||||||||||||||
The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended December 31, 2016:September 30, 2020:
1-4 Family | 1-4 Family | |||||||||||||||||||||||||||||||||||||||
Commercial | Residential | Commercial | Residential | |||||||||||||||||||||||||||||||||||||
Real | Real | Real | Real | |||||||||||||||||||||||||||||||||||||
Commercial | Estate | Estate | Consumer | Total | Commercial | Estate | Estate | Consumer | Total | |||||||||||||||||||||||||||||||
Allowance for loan losses: | ||||||||||||||||||||||||||||||||||||||||
Beginning balance | $ | 510 | $ | 2,643 | $ | 411 | $ | 120 | $ | 3,684 | $ | 947 | $ | 3,623 | $ | 989 | $ | 119 | $ | 5,678 | ||||||||||||||||||||
Provision for loan losses | (14 | ) | 157 | 51 | (54 | ) | 140 | 15 | 70 | 8 | 37 | 130 | ||||||||||||||||||||||||||||
Loans charged-off | — | (700 | ) | (23 | ) | (8 | ) | (731 | ) | (22 | ) | 0 | 0 | (44 | ) | (66 | ) | |||||||||||||||||||||||
Recoveries | 1 | — | 26 | 3 | 30 | 0 | 1 | 0 | 24 | 25 | ||||||||||||||||||||||||||||||
Total ending allowance balance | $ | 497 | $ | 2,100 | $ | 465 | $ | 61 | $ | 3,123 | $ | 940 | $ | 3,694 | $ | 997 | $ | 136 | $ | 5,767 | ||||||||||||||||||||
The following table presents the activity in the allowance for loan losses by portfolio segment for the six months ended December 31, 2016:
1-4 Family | ||||||||||||||||||||
Commercial | Residential | |||||||||||||||||||
Real | Real | |||||||||||||||||||
Commercial | Estate | Estate | Consumer | Total | ||||||||||||||||
Allowance for loan losses: | ||||||||||||||||||||
Beginning balance | $ | 505 | $ | 2,518 | $ | 402 | $ | 141 | $ | 3,566 | ||||||||||
Provision for loan losses | (9 | ) | 282 | 78 | (75 | ) | 276 | |||||||||||||
Loans charged-off | — | (700 | ) | (44 | ) | (12 | ) | (756 | ) | |||||||||||
Recoveries | 1 | — | 29 | 7 | 37 | |||||||||||||||
Total ending allowance balance | $ | 497 | $ | 2,100 | $ | 465 | $ | 61 | $ | 3,123 | ||||||||||
The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of December 31, 2017.September 30, 2021. Included in the recorded investment in loans is $695$1,292 of accrued interest receivable.
1-4 Family | ||||||||||||||||||||
Commercial | Residential | |||||||||||||||||||
Real | Real | |||||||||||||||||||
Commercial | Estate | Estate | Consumer | Total | ||||||||||||||||
Allowance for loan losses: | ||||||||||||||||||||
Ending allowance balance attributable to loans: | ||||||||||||||||||||
Individually evaluated for impairment | $ | — | $ | 30 | $ | — | $ | — | $ | 30 | ||||||||||
Collectively evaluated for impairment | 555 | 2,114 | 461 | 65 | 3,195 | |||||||||||||||
Total ending allowance balance | $ | 555 | $ | 2,144 | $ | 461 | $ | 65 | $ | 3,225 | ||||||||||
Recorded investment in loans: | ||||||||||||||||||||
Loans individually evaluated for impairment | $ | 122 | $ | 1,303 | $ | 340 | $ | — | $ | 1,765 | ||||||||||
Loans collectively evaluated for impairment | 49,553 | 174,707 | 63,293 | 4,971 | 292,524 | |||||||||||||||
Total ending loans balance | $ | 49,675 | $ | 176,010 | $ | 63,633 | $ | 4,971 | $ | 294,289 | ||||||||||
CONSUMERS BANCORP, INC.
Notes to the Consolidated Financial Statements
(Unaudited) (continued)
(Dollars in thousands, except per share amounts)
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 | $ | 0 | $ | 0 | $ | 3 | $ | 0 | $ | 3 | ||||||||||
Acquired loans collectively evaluated for impairment | 1 | 67 | 100 | 0 | 168 | |||||||||||||||
Originated loans collectively evaluated for impairment | 905 | 3,918 | 1,327 | 356 | 6,506 | |||||||||||||||
Total ending allowance balance | $ | 906 | $ | 3,985 | $ | 1,430 | $ | 356 | $ | 6,677 | ||||||||||
Recorded investment in loans: | ||||||||||||||||||||
Loans individually evaluated for impairment | $ | 429 | $ | 911 | $ | 558 | $ | 0 | $ | 1,898 | ||||||||||
Acquired loans collectively evaluated for impairment | 810 | 12,219 | 32,402 | 5,807 | 51,238 | |||||||||||||||
Originated loans collectively evaluated for impairment | 93,125 | 273,879 | 132,022 | 26,291 | 525,317 | |||||||||||||||
Total ending loans balance | $ | 94,364 | $ | 287,009 | $ | 164,982 | $ | 32,098 | $ | 578,453 | ||||||||||
The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of June 30, 2017.2021. Included in the recorded investment in loans is $581$1,184 of accrued interestinterest receivable.
1-4 Family | 1-4 Family | |||||||||||||||||||||||||||||||||||||||
Commercial | Residential | Commercial | Residential | |||||||||||||||||||||||||||||||||||||
Real | Real | Real | Real | |||||||||||||||||||||||||||||||||||||
Commercial | Estate | Estate | Consumer | Total | Commercial | Estate | Estate | Consumer | Total | |||||||||||||||||||||||||||||||
Allowance for loan losses: | ||||||||||||||||||||||||||||||||||||||||
Ending allowance balance attributable to loans: | ||||||||||||||||||||||||||||||||||||||||
Individually evaluated for impairment | $ | — | $ | 42 | $ | 2 | $ | — | $ | 44 | $ | 1 | $ | 0 | $ | 3 | $ | 0 | $ | 4 | ||||||||||||||||||||
Collectively evaluated for impairment | 518 | 1,996 | 471 | 57 | 3,042 | |||||||||||||||||||||||||||||||||||
Acquired loans collectively evaluated for impairment | 0 | 83 | 77 | 0 | 160 | |||||||||||||||||||||||||||||||||||
Originated loans collectively evaluated for impairment | 903 | 3,866 | 1,227 | 311 | 6,307 | |||||||||||||||||||||||||||||||||||
Total ending allowance balance | $ | 518 | $ | 2,038 | $ | 473 | $ | 57 | $ | 3,086 | $ | 904 | $ | 3,949 | $ | 1,307 | $ | 311 | $ | 6,471 | ||||||||||||||||||||
Recorded investment in loans: | ||||||||||||||||||||||||||||||||||||||||
Loans individually evaluated for impairment | $ | 444 | $ | 1,587 | $ | 203 | $ | — | $ | 2,234 | $ | 437 | $ | 921 | $ | 596 | $ | 0 | $ | 1,954 | ||||||||||||||||||||
Loans collectively evaluated for impairment | 45,993 | 162,176 | 57,901 | 5,144 | 271,214 | |||||||||||||||||||||||||||||||||||
Acquired loans collectively evaluated for impairment | 834 | 6,542 | 21,363 | 6,488 | 35,227 | |||||||||||||||||||||||||||||||||||
Originated loans collectively evaluated for impairment | 109,016 | 272,563 | 125,689 | 23,162 | 530,430 | |||||||||||||||||||||||||||||||||||
Total ending loans balance | $ | 46,437 | $ | 163,763 | $ | 58,104 | $ | 5,144 | $ | 273,448 | $ | 110,287 | $ | 280,026 | $ | 147,648 | $ | 29,650 | $ | 567,611 | ||||||||||||||||||||
The following table presents information related to unpaid principal balance, recorded investment and interest income associated with loans individually evaluated for impairment by class of loans as of December 31, 2017September 30, 2021 and for the sixthree months ended December 31, 2017:September 30, 2021:
As of December 31, 2017 | Six Months ended December 31, 2017 | |||||||||||||||||||||||
Unpaid | Allowance for Loan | Average | Interest | Cash Basis | ||||||||||||||||||||
Principal | Recorded | Losses | Recorded | Income | Interest | |||||||||||||||||||
Balance | Investment | Allocated | Investment | Recognized | Recognized | |||||||||||||||||||
With no related allowance recorded: | ||||||||||||||||||||||||
Commercial | $ | 122 | $ | 122 | $ | — | $ | 117 | $ | 3 | $ | 3 | ||||||||||||
Commercial real estate: | ||||||||||||||||||||||||
Other | 973 | 976 | — | 1,057 | 16 | 16 | ||||||||||||||||||
1-4 Family residential real estate: | ||||||||||||||||||||||||
Owner occupied | 25 | 25 | — | 80 | — | — | ||||||||||||||||||
Non-owner occupied | 315 | 315 | — | 322 | — | — | ||||||||||||||||||
With an allowance recorded: | ||||||||||||||||||||||||
Commercial real estate: | ||||||||||||||||||||||||
Other | 327 | 327 | 30 | 337 | 5 | 5 | ||||||||||||||||||
Total | $ | 1,762 | $ | 1,765 | $ | 30 | $ | 1,913 | $ | 24 | $ | 24 | ||||||||||||
CONSUMERS BANCORP, INC.
Notes to the Consolidated Financial Statements
(Unaudited) (continued)
(Dollars in thousands, except per share amounts)
As of September 30, 2021 | Three Months ended September 30, 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 | $ | 421 | $ | 298 | $ | — | $ | 299 | $ | 0 | $ | 0 | ||||||||||||
Commercial real estate: | ||||||||||||||||||||||||
Other | 1,053 | 911 | — | 914 | 3 | 3 | ||||||||||||||||||
1-4 Family residential real estate: | ||||||||||||||||||||||||
Owner occupied | 403 | 359 | — | 363 | 2 | 2 | ||||||||||||||||||
Non-owner occupied | 267 | 199 | — | 200 | 0 | 0 | ||||||||||||||||||
With an allowance recorded: | ||||||||||||||||||||||||
Commercial | 130 | 131 | 3 | 131 | 2 | 2 | ||||||||||||||||||
Total | $ | 2,274 | $ | 1,898 | $ | 3 | $ | 1,907 | $ | 7 | $ | 7 | ||||||||||||
The following table presents information related to average recorded investment and interest income associated with loans individually evaluated for impairment by class of loans for the three months ended December 31,2017:
Average | Interest | Cash Basis | ||||||||||
Recorded | Income | Interest | ||||||||||
Investment | Recognized | Recognized | ||||||||||
With no related allowance recorded: | ||||||||||||
Commercial | $ | 120 | $ | 1 | $ | 1 | ||||||
Commercial real estate: | ||||||||||||
Other | 1,061 | 6 | 6 | |||||||||
1-4 Family residential real estate: | ||||||||||||
Owner occupied | 318 | — | — | |||||||||
Non-owner occupied | 58 | — | — | |||||||||
With an allowance recorded: | ||||||||||||
Commercial real estate: | ||||||||||||
Other | 330 | 5 | 5 | |||||||||
Total | $ | 1,887 | $ | 12 | $ | 12 | ||||||
The following table presents information related to unpaid principal balance, recorded investment and interest income associated with loans individually evaluated for impairment by class of loans as of June 30, 20172021 and for the sixthree months ended December 31, 2016:September 30, 2020:
As of June 30, 2017 | Six Months ended December 31, 2016 | As of June 30, 2021 | Three Months ended September 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||
Unpaid | Allowance for Loan | Average | Interest | Cash Basis | Unpaid | Allowance for Loan | Average | Interest | Cash Basis | |||||||||||||||||||||||||||||||||||||||
Principal | Recorded | Losses | Recorded | Income | Interest | Principal | Recorded | Losses | Recorded | Income | Interest | |||||||||||||||||||||||||||||||||||||
Balance | Investment | Allocated | Investment | Recognized | Recognized | Balance | Investment | Allocated | Investment | Recognized | Recognized | |||||||||||||||||||||||||||||||||||||
With no related allowance recorded: | ||||||||||||||||||||||||||||||||||||||||||||||||
Commercial | $ | 482 | $ | 444 | $ | — | $ | 330 | $ | 80 | $ | 80 | $ | 421 | $ | 303 | $ | — | $ | 0 | $ | 0 | $ | 0 | ||||||||||||||||||||||||
Commercial real estate: | ||||||||||||||||||||||||||||||||||||||||||||||||
Construction | — | — | — | 170 | 6 | 6 | ||||||||||||||||||||||||||||||||||||||||||
Other | 1,928 | 1,039 | — | 1,081 | 105 | 105 | 1,062 | 921 | — | 826 | 1 | 1 | ||||||||||||||||||||||||||||||||||||
1-4 Family residential real estate: | ||||||||||||||||||||||||||||||||||||||||||||||||
Owner occupied | 104 | 103 | — | 127 | — | — | 409 | 367 | — | 539 | 6 | 6 | ||||||||||||||||||||||||||||||||||||
Non-owner occupied | — | — | — | 205 | — | — | 267 | 202 | — | 229 | 0 | 0 | ||||||||||||||||||||||||||||||||||||
With an allowance recorded: | ||||||||||||||||||||||||||||||||||||||||||||||||
Commercial | — | — | — | 7 | — | — | 133 | 134 | 1 | 171 | 2 | 2 | ||||||||||||||||||||||||||||||||||||
Commercial real estate: | ||||||||||||||||||||||||||||||||||||||||||||||||
Other | 548 | 548 | 42 | 2,030 | 15 | 15 | 0 | 0 | 0 | 206 | 3 | 3 | ||||||||||||||||||||||||||||||||||||
1-4 Family residential real estate: | ||||||||||||||||||||||||||||||||||||||||||||||||
Owner occupied | 99 | 100 | 2 | 139 | 3 | 3 | 28 | 27 | 3 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||
Total | $ | 3,161 | $ | 2,234 | $ | 44 | $ | 4,089 | $ | 209 | $ | 209 | $ | 2,320 | $ | 1,954 | $ | 4 | $ | 1,971 | $ | 12 | $ | 12 | ||||||||||||||||||||||||
The following table presents information related to average recorded investment and interest income associated with loans individually evaluated for impairment by class of loans for the three months ended December 31, 2016:
Average | Interest | Cash Basis | ||||||||||
Recorded | Income | Interest | ||||||||||
Investment | Recognized | Recognized | ||||||||||
With no related allowance recorded: | ||||||||||||
Commercial real estate: | ||||||||||||
Construction | $ | 10 | $ | — | $ | — | ||||||
Other | 607 | — | — | |||||||||
1-4 Family residential real estate: | ||||||||||||
Owner occupied | 127 | — | — | |||||||||
Non-owner occupied | 202 | — | — | |||||||||
With an allowance recorded: | ||||||||||||
Commercial | 14 | — | — | |||||||||
Commercial real estate: | ||||||||||||
Other | 1,612 | 7 | 7 | |||||||||
1-4 Family residential real estate: | ||||||||||||
Owner occupied | 101 | 1 | 1 | |||||||||
Total | $ | 2,673 | $ | 8 | $ | 8 | ||||||
The following table presents the recorded investment in non-accrual and loans past due over 90 days still on accrual by class of loans as of December 31, 2017September 30, 2021 and June 30, 2017:2021:
December 31, 2017 | June 30, 2017 | September 30, 2021 | June 30, 2021 | |||||||||||||||||||||||||||||
Loans Past Due | Loans Past Due | Loans Past Due | Loans Past Due | |||||||||||||||||||||||||||||
Over 90 Days | Over 90 Days | Over 90 Days | Over 90 Days | |||||||||||||||||||||||||||||
Still | Still | Still | Still | |||||||||||||||||||||||||||||
Non-accrual | Accruing | Non-accrual | Accruing | Non-accrual | Accruing | Non-accrual | Accruing | |||||||||||||||||||||||||
Commercial | $ | — | $ | — | $ | 368 | $ | — | ||||||||||||||||||||||||
Commercial | $ | 298 | $ | 0 | $ | 303 | $ | 0 | ||||||||||||||||||||||||
Commercial real estate: | ||||||||||||||||||||||||||||||||
Other | 537 | — | 729 | — | 865 | 0 | 874 | 0 | ||||||||||||||||||||||||
1 – 4 Family residential: | ||||||||||||||||||||||||||||||||
Owner occupied | 13 | — | 90 | — | 357 | 0 | 392 | 29 | ||||||||||||||||||||||||
Non-owner occupied | 315 | — | — | — | 199 | 0 | 202 | 0 | ||||||||||||||||||||||||
Consumer | 0 | 0 | 0 | 12 | ||||||||||||||||||||||||||||
Total | $ | 865 | $ | — | $ | 1,187 | $ | — | $ | 1,719 | $ | 0 | $ | 1,771 | $ | 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.
The following table presents the aging of the recorded investment in past due loans as of December 31, 2017September 30, 2021 by class of loans:
Days Past Due | Days Past Due | |||||||||||||||||||||||||||||||||||||||||||||||
30 - 59 | 60 - 89 | 90 Days or | Total | Loans Not | 30 - 59 | 60 - 89 | 90 Days or | Total | Loans Not | |||||||||||||||||||||||||||||||||||||||
Days | Days | Greater | Past Due | Past Due | Total | Days | Days | Greater | Past Due | Past Due | Total | |||||||||||||||||||||||||||||||||||||
Commercial | $ | — | $ | — | $ | — | $ | — | $ | 49,675 | $ | 49,675 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 94,364 | $ | 94,364 | ||||||||||||||||||||||||
Commercial real estate: | ||||||||||||||||||||||||||||||||||||||||||||||||
Construction | — | — | — | — | 5,943 | 5,943 | 0 | 0 | 0 | 0 | 17,459 | 17,459 | ||||||||||||||||||||||||||||||||||||
Other | 230 | — | — | 230 | 169,837 | 170,067 | 0 | 0 | 629 | 629 | 268,921 | 269,550 | ||||||||||||||||||||||||||||||||||||
1-4 Family residential: | ||||||||||||||||||||||||||||||||||||||||||||||||
Owner occupied | 12 | — | — | 12 | 45,477 | 45,489 | 0 | 209 | 123 | 332 | 137,854 | 138,186 | ||||||||||||||||||||||||||||||||||||
Non-owner occupied | — | — | — | — | 16,210 | 16,210 | 0 | 0 | 0 | 0 | 20,131 | 20,131 | ||||||||||||||||||||||||||||||||||||
Construction | — | — | — | — | 1,934 | 1,934 | 0 | 0 | 0 | 0 | 6,665 | 6,665 | ||||||||||||||||||||||||||||||||||||
Consumer | 4 | 2 | — | 6 | 4,965 | 4,971 | 130 | 16 | 0 | 146 | 31,952 | 32,098 | ||||||||||||||||||||||||||||||||||||
Total | $ | 246 | $ | 2 | $ | — | $ | 248 | $ | 294,041 | $ | 294,289 | $ | 130 | $ | 225 | $ | 752 | $ | 1,107 | $ | 577,346 | $ | 578,453 | ||||||||||||||||||||||||
The above table of past due loans includes the recorded investment in non-accrual loans of $209 in the $86560 to 89 days category, $752 in the 90 days or greater category and $758 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, 20172021 by class of loans:
Days Past Due | Days Past Due | |||||||||||||||||||||||||||||||||||||||||||||||
| 30 - 59 | 60 - 89 | 90 Days or | Total | Loans Not | 30 - 59 | 60 - 89 | 90 Days or | Total | Loans Not | |||||||||||||||||||||||||||||||||||||||
Days | Days | Greater | Past Due | Past Due | Total | Days | Days | Greater | Past Due | Past Due | Total | |||||||||||||||||||||||||||||||||||||
Commercial | $ | — | $ | — | $ | 35 | $ | 35 | $ | 46,402 | $ | 46,437 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 110,287 | $ | 110,287 | ||||||||||||||||||||||||
Commercial real estate: | ||||||||||||||||||||||||||||||||||||||||||||||||
Construction | — | — | — | — | 5,596 | 5,596 | 0 | 0 | 0 | 0 | 10,478 | 10,478 | ||||||||||||||||||||||||||||||||||||
Other | — | — | 130 | 130 | 158,037 | 158,167 | 0 | 175 | 629 | 804 | 268,744 | 269,548 | ||||||||||||||||||||||||||||||||||||
1-4 Family residential: | ||||||||||||||||||||||||||||||||||||||||||||||||
Owner occupied | 13 | — | 74 | 87 | 41,605 | 41,692 | 29 | 0 | 365 | 394 | 118,937 | 119,331 | ||||||||||||||||||||||||||||||||||||
Non-owner occupied | — | — | — | — | 14,416 | 14,416 | 0 | 0 | 0 | 0 | 19,148 | 19,148 | ||||||||||||||||||||||||||||||||||||
Construction | — | — | — | — | 1,996 | 1,996 | 0 | 0 | 0 | 0 | 9,169 | 9,169 | ||||||||||||||||||||||||||||||||||||
Consumer | 22 | — | — | 22 | 5,122 | 5,144 | 95 | 11 | 0 | 106 | 29,544 | 29,650 | ||||||||||||||||||||||||||||||||||||
Total | $ | 35 | $ | — | $ | 239 | $ | 274 | $ | 273,174 | $ | 273,448 | $ | 124 | $ | 186 | $ | 994 | $ | 1,304 | $ | 566,307 | $ | 567,611 | ||||||||||||||||||||||||
The above table of past due loans includes the recorded investment in non-accrual loans of$239 $994 in the 90 days or greater category and $948$777 in the loans not past due category.
Troubled Debt Restructurings: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 September 30, 2021, four borrowers with an aggregate outstanding balance of $51 are in payment deferral status under this loan modification program.
As of December 31, 2017,September 30, 2021 and June 30, 2021, the recorded investmentCorporation had $675 and $688, respectively, of loans classified as troubled debt restructurings was $1,582 with $30 of specific reserves allocated to these loans.TDRs which are included in impaired loans above. As of December 31, 2017,September 30, 2021 and June 30, 2021, the Corporation had notcommitted to lend anany additional $192funds to customers with outstanding loans that were classified as troubled debt restructurings. As of September 30, 2021 and June 30, 2017,2021, the recorded investment of loans classified as troubled debt restructurings was $1,740 with $33Corporation had $3 and $4, respectively, of specific reservesreserve allocated to these loans. As of June 30, 2017, the Corporation had committed to lend an additional $175 to customers with outstanding loans that were classified as troubled debt restructurings.
During the three and six months-month periods ended December 31, 2017September 30, 2021 and 20162020,, there were no loan modifications completed that were classified as troubled debt restructurings. There were no charge offs charge-offs from troubled debt restructurings that were completed during the three and six month-month periods ended December 31, 2017September 30, 2021 and 2016.2020.
ThereThere were no0 loans classified as troubled debt restructurings for which there was a payment default within 12 months following the modification during the three and six month-month periods ended December 31, 2017September 30, 2021 and 2016.2020. 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: currentcurrent 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$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 affirmaffirms 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 eithereither 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 December 31, 2017 | ||||||||||||||||||||
Special | Not | |||||||||||||||||||
Pass | Mention | Substandard | Doubtful | Rated | ||||||||||||||||
Commercial | $ | 48,091 | $ | 883 | $ | 339 | $ | — | $ | 362 | ||||||||||
Commercial real estate: | ||||||||||||||||||||
Construction | 5,941 | — | 2 | — | — | |||||||||||||||
Other | 156,415 | 10,365 | 1,772 | 537 | 978 | |||||||||||||||
1-4 Family residential real estate: | ||||||||||||||||||||
Owner occupied | 2,661 | 58 | 14 | 13 | 42,743 | |||||||||||||||
Non-owner occupied | 14,669 | 203 | 433 | 315 | 590 | |||||||||||||||
Construction | 765 | — | — | — | 1,169 | |||||||||||||||
Consumer | 119 | — | — | — | 4,852 | |||||||||||||||
Total | $ | 228,661 | $ | 11,509 | $ | 2,560 | $ | 865 | $ | 50,694 | ||||||||||
As of June 30, 2017 | As of September 30, 2021 | |||||||||||||||||||||||||||||||||||||||
Special | Not | Special | Not | |||||||||||||||||||||||||||||||||||||
Pass | Mention | Substandard | Doubtful | Rated | Pass | Mention | Substandard | Doubtful | Rated | |||||||||||||||||||||||||||||||
Commercial | $ | 44,435 | $ | 907 | $ | 642 | $ | — | $ | 453 | $ | 92,817 | $ | 707 | $ | 291 | $ | 298 | $ | 251 | ||||||||||||||||||||
Commercial real estate: | ||||||||||||||||||||||||||||||||||||||||
Construction | 4,514 | 1,035 | — | 4 | 43 | |||||||||||||||||||||||||||||||||||
Construction | 17,459 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||||
Other | 150,460 | 5,110 | 1,566 | 470 | 561 | 258,628 | 4,430 | 4,677 | 865 | 950 | ||||||||||||||||||||||||||||||
1-4 Family residential real estate: | ||||||||||||||||||||||||||||||||||||||||
Owner occupied | 2,668 | — | 11 | 30 | 38,983 | |||||||||||||||||||||||||||||||||||
Owner occupied | 1,028 | 0 | 6 | 357 | 136,795 | |||||||||||||||||||||||||||||||||||
Non-owner occupied | 13,633 | 210 | 261 | 187 | 125 | 19,425 | 157 | 79 | 199 | 271 | ||||||||||||||||||||||||||||||
Construction | 1,223 | — | — | — | 773 | 1,439 | 0 | 0 | 0 | 5,226 | ||||||||||||||||||||||||||||||
Consumer | 145 | — | — | — | 4,999 | 551 | 0 | 0 | 0 | 31,547 | ||||||||||||||||||||||||||||||
Total | $ | 217,078 | $ | 7,262 | $ | 2,480 | $ | 691 | $ | 45,937 | $ | 391,347 | $ | 5,294 | $ | 5,053 | $ | 1,719 | $ | 175,040 | ||||||||||||||||||||
As of June 30, 2021, and based on the most recent analysis performed, the recorded investment by risk category of loans by class of loans is as follows:
As of June 30, 2021 | ||||||||||||||||||||
Special | Not | |||||||||||||||||||
Pass | Mention | Substandard | Doubtful | Rated | ||||||||||||||||
Commercial | $ | 109,118 | $ | 280 | $ | 309 | $ | 303 | $ | 277 | ||||||||||
Commercial real estate: | ||||||||||||||||||||
Construction | 10,478 | 0 | 0 | 0 | 0 | |||||||||||||||
Other | 259,327 | 3,700 | 4,718 | 874 | 929 | |||||||||||||||
1-4 Family residential real estate: | ||||||||||||||||||||
Owner occupied | 1,715 | 0 | 6 | 392 | 117,218 | |||||||||||||||
Non-owner occupied | 18,312 | 163 | 197 | 202 | 274 | |||||||||||||||
Construction | 1,849 | 0 | 0 | 0 | 7,320 | |||||||||||||||
Consumer | 694 | 0 | 0 | 0 | 28,956 | |||||||||||||||
Total | $ | 401,493 | $ | 4,143 | $ | 5,230 | $ | 1,771 | $ | 154,974 | ||||||||||
Note 45 - 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 measurementmeasurement 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.
LevelLevel 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’scompany’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 recurringrecurring 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 unobservable inputs (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 measuremeasure fair value:
Fair Value Measurements at December 31, 2017 Using | ||||||||||||||||
Balance at December 31, 2017 | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets: | ||||||||||||||||
Obligations of U.S. government-sponsored entities and agencies | $ | 13,636 | $ | — | $ | 13,636 | $ | — | ||||||||
Obligations of states and political subdivisions | 57,181 | — | 57,181 | — | ||||||||||||
Mortgage-backed securities – residential | 57,518 | — | 57,518 | — | ||||||||||||
Mortgage-backed securities – commercial | 1,436 | — | 1,436 | — | ||||||||||||
Collateralized mortgage obligations - residential | 5,346 | — | 5,346 | — | ||||||||||||
Pooled trust preferred security | 621 | — | 621 | — | ||||||||||||
Balance at | Fair Value Measurements at September 30, 2021 | |||||||||||||||
September 30, 2021 | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets: | ||||||||||||||||
Obligations of U.S. government-sponsored entities and agencies | $ | 14,319 | $ | 0 | $ | 14,319 | $ | 0 | ||||||||
Obligations of state and political subdivisions | 80,181 | 0 | 80,181 | 0 | ||||||||||||
U.S. Government-sponsored mortgage-backed securities – residential | 104,202 | 0 | 104,202 | 0 | ||||||||||||
U.S. Government-sponsored mortgage-backed securities – commercial | 8,650 | 0 | 8,650 | 0 | ||||||||||||
U.S. Government-sponsored collateralized mortgage obligations - residential | 21,989 | 0 | 21,989 | 0 | ||||||||||||
Other debt securities | 16,073 | 0 | 16,073 | 0 | ||||||||||||
Equity securities | 424 | 0 | 424 | 0 | ||||||||||||
CONSUMERS BANCORP, INC.
Notes to the Consolidated Financial Statements
(Unaudited) (continued)
(Dollars in thousands, except per share amounts)
Fair Value Measurements at June 30, 2017 Using | ||||||||||||||||
Balance at June 30, 2017 | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets: | ||||||||||||||||
Obligations of U.S. government-sponsored entities and agencies | $ | 12,587 | $ | — | $ | 12,587 | $ | — | ||||||||
Obligations of states and political subdivisions | 57,460 | — | 57,460 | — | ||||||||||||
Mortgage-backed securities - residential | 63,838 | — | 63,838 | — | ||||||||||||
Mortgage-backed securities - commercial | 1,458 | — | 1,458 | — | ||||||||||||
Collateralized mortgage obligations - residential | 6,211 | — | 6,211 | — | ||||||||||||
Pooled trust preferred security | 532 | — | 532 | — | ||||||||||||
Balance at | Fair Value Measurements at June 30, 2021 | |||||||||||||||
June 30, 2021 | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets: | ||||||||||||||||
Obligations of U.S. government-sponsored entities and agencies | $ | 15,033 | $ | 0 | $ | 15,033 | $ | 0 | ||||||||
Obligations of state and political subdivisions | 76,499 | 0 | 76,499 | 0 | ||||||||||||
U.S. government-sponsored mortgage-backed securities - residential | 90,517 | 0 | 90,517 | 0 | ||||||||||||
U.S. government-sponsored mortgage-backed securities - commercial | 8,845 | 0 | 8,845 | 0 | ||||||||||||
U.S. government-sponsored collateralized mortgage obligations - residential | 16,374 | 0 | 16,374 | 0 | ||||||||||||
Other debt securities | 492 | 0 | 492 | 0 | ||||||||||||
Equity securities | 424 | 0 | 424 | 0 | ||||||||||||
There were no transfers between Level 1 and Level 2 during the three or six month periods-month period ended December 31, 2017 September 30, 2021.or 2016.
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 assetsAssets and financial liabilities measured at fair value on a non-recurring basis include the following:
Impaired Loans: At the time a loan is considered impaired, it is valued at the lower of cost or fair value. Impaired loans carried at fair value generally receive specific allocations of the allowance for loan losses or are charged down to their fair value. For collateral dependent loans, fair value is commonly based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. There were 0 impaired loans measured at fair value on a non-recurring basis at September 30, 2021 or June 30, 2021 and there was 0 impact to the provision for loan losses for the three -month periods ended September 30, 2021 or 2020.
Other Real Estate and Repossessed Assets Owned: Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. Real estate owned properties and other repossessed assets, which are primarily vehicles, are evaluated on a quarterly basis for additional impairment and adjusted accordingly.
CONSUMERS BANCORP, INC.
Notes to the Consolidated Financial Statements
(Unaudited) (continued)
(Dollars in thousands, except per share amounts)
There were no financial assets measured at fair value on a non-recurring basis at December 31, 2017. Financial assets measured at fair value on a non-recurring basis at June 30, 2017 are summarized below:
Fair Value Measurements at June 30, 2017 Using | ||||||||||||||||
Balance at June 30, 2017 | Level 1 | Level 2 | Level 3 | |||||||||||||
Impaired loans: | ||||||||||||||||
Commercial Real Estate - Other | $ | 130 | $ | — | $ | — | $ | 130 | ||||||||
Other Real Estate Owned: | ||||||||||||||||
1-4 Family residential real estate | 71 | — | — | 71 | ||||||||||||
There were no impaired loans measured at fair value on a non-recurring basis at December 31, 2017 and there was no impact to the provision for loan losses for the three months ended December 31, 2017. The resulting impact to the provision for loan losses was a decrease of $17 being recorded for the six months ended December 31, 2017. Impaired loans, measured for impairment using the fair value of the collateral, had a recorded investment of $130, with no valuation allowance at June 30, 2017. The resulting impact to the provision for loan losses was a decrease of $87 and $47 being recorded for the three and six months ended December 31, 2016, respectively.
Other real estate owned, which is measured at the lower of carrying or fair value less costs to sell, had a net carrying amount of $71, which was made up of the outstanding balance of $103, net of a valuation allowance of $32 at June 30, 2017. There were no0 other real estate owned or other repossessed assets being carried at fair value as of December 31, 2017.September 30, 2021
The following tables present quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis atand June 30, 2017:2021.
June 30, 2017 | Fair Value | Valuation Technique | Unobservable Inputs | Range | Weighted Average | ||||||||||||
Impaired loans: | |||||||||||||||||
Commercial Real Estate – Other | $ | 130 | Bid Indications | N/A | 0.0 | % | 0.0 | % | |||||||||
Other Real Estate Owned: | |||||||||||||||||
1-4 Family residential real estate | $ | 71 | Bid Indications | N/A | 0.0 | % | 0.0 | % | |||||||||
CONSUMERS BANCORP, INC.
Notes to the Consolidated Financial Statements
(Unaudited) (continued)
(Dollars in thousands, except per share amounts)
The following table shows the estimated fair values of financial instruments that are reported at amortized cost in the Corporation’sCorporation’s consolidated balance sheets, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:
December 31, 2017 | June 30, 2017 | |||||||||||||||
Carrying | Estimated | Carrying | Estimated | |||||||||||||
Financial Assets: | ||||||||||||||||
Level 1 inputs: | ||||||||||||||||
Cash and cash equivalents | $ | 9,141 | $ | 9,141 | $ | 9,912 | $ | 9,912 | ||||||||
Level 2 inputs: | ||||||||||||||||
Certificates of deposits in other financial institutions | 3,921 | 3,924 | 3,921 | 3,927 | ||||||||||||
Loans held for sale | 814 | 833 | 1,252 | 1,286 | ||||||||||||
Accrued interest receivable | 1,310 | 1,310 | 1,212 | 1,212 | ||||||||||||
Level 3 inputs: | ||||||||||||||||
Securities held-to-maturity | 4,061 | 4,083 | 4,259 | 4,329 | ||||||||||||
Loans, net | 290,369 | 284,618 | 269,781 | 266,041 | ||||||||||||
Financial Liabilities: | ||||||||||||||||
Level 2 inputs: | ||||||||||||||||
Demand and savings deposits | 316,218 | 316,218 | 307,960 | 307,960 | ||||||||||||
Time deposits | 66,771 | 66,676 | 66,511 | 66,535 | ||||||||||||
Short-term borrowings | 22,507 | 22,507 | 23,986 | 23,986 | ||||||||||||
Federal Home Loan Bank advances | 17,188 | 16,796 | 12,320 | 12,054 | ||||||||||||
Accrued interest payable | 74 | 74 | 40 | 40 | ||||||||||||
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: Fair value of certificates of deposits in other financial institutions was estimated using current rates for deposits of similar remaining maturities resulting in a Level 2 classification.
Accrued interest receivable and payable, demand and savings deposits and short-term borrowings: The carrying value of 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.
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.
CONSUMERS BANCORP, INC.
Notes to the Consolidated Financial Statements
(Unaudited) (continued)
(Dollars in thousands, except per share amounts)
Securities held-to-maturity: The held-to-maturity securities are general obligation and revenue bonds made to local municipalities. The fair values of these securities are estimated using a spread to the applicable municipal fair market 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, 2017 and June 30, 2017, for deposits of similar remaining maturities, resulting in a Level 2 classification. Estimated fair value does not include the benefit that results from low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market.
Federal Home Loan Bank advances: Fair value of Federal Home Loan Bank advances was estimated using current rates at December 31, 2017 and June 30, 2017 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.
September 30, 2021 | June 30, 2021 | |||||||||||||||
Carrying | Estimated | Carrying | Estimated | |||||||||||||
Financial Assets: | ||||||||||||||||
Level 1 inputs: | ||||||||||||||||
Cash and cash equivalents | $ | 87,092 | $ | 87,092 | $ | 18,529 | $ | 18,529 | ||||||||
Level 2 inputs: | ||||||||||||||||
Certificates of deposit in other financial institutions | 5,560 | 5,693 | 5,825 | 5,955 | ||||||||||||
Loans held for sale | 1,803 | 1,834 | 1,457 | 1,488 | ||||||||||||
Accrued interest receivable | 2,531 | 2,531 | 2,077 | 2,077 | ||||||||||||
Level 3 inputs: | ||||||||||||||||
Securities held-to-maturity | 7,896 | 8,219 | 7,996 | 8,352 | ||||||||||||
Loans, net | 570,484 | 578,780 | 559,956 | 560,208 | ||||||||||||
Financial Liabilities: | ||||||||||||||||
Level 2 inputs: | ||||||||||||||||
Demand and savings deposits | 727,606 | 727,606 | 639,310 | 639,310 | ||||||||||||
Time deposits | 121,580 | 122,296 | 87,539 | 88,147 | ||||||||||||
Short-term borrowings | 10,773 | 10,773 | 12,203 | 12,203 | ||||||||||||
Federal Home Loan Bank advances | 16,300 | 16,342 | 18,050 | 18,247 | ||||||||||||
Accrued interest payable | 66 | 66 | 51 | 51 | ||||||||||||
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. There were 2,06211,461 shares of restricted stock that were anti-dilutive for the three and six months-month period ended December 31, 2017. There were no equity instruments that were anti-dilutive for the three and six months ended December 31, 2016.September 30, 2020. 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, | For the Three Months Ended September 30, | ||||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | 2021 | 2020 | |||||||||||||||||||
Basic: | ||||||||||||||||||||||||
Net income available to common shareholders | $ | 657 | $ | 722 | $ | 1,586 | $ | 1,623 | $ | 2,665 | $ | 2,401 | ||||||||||||
Weighted average common shares outstanding | 2,727,666 | 2,724,061 | 2,725,859 | 2,723,988 | 3,024,794 | 3,010,844 | ||||||||||||||||||
Basic income per share | $ | 0.24 | $ | 0.27 | $ | 0.58 | $ | 0.60 | $ | 0.88 | $ | 0.80 | ||||||||||||
Diluted: | ||||||||||||||||||||||||
Net income available to common shareholders | $ | 657 | $ | 722 | $ | 1,586 | $ | 1,623 | $ | 2,665 | $ | 2,401 | ||||||||||||
Weighted average common shares outstanding | 2,727,666 | 2,724,061 | 2,725,859 | 2,723,988 | 3,024,794 | 3,010,844 | ||||||||||||||||||
Dilutive effect of restricted stock | — | 19 | — | 13 | 202 | 0 | ||||||||||||||||||
Total common shares and dilutive potential common shares | 2,727,666 | 2,724,080 | 2,725,859 | 2,724,001 | 3,024,996 | 3,010,844 | ||||||||||||||||||
Dilutive income per share | $ | 0.24 | $ | 0.27 | $ | 0.58 | $ | 0.60 | $ | 0.88 | $ | 0.80 | ||||||||||||
Note 67 –Accumulated Other Comprehensive Income (Loss)
The components of other comprehensive income related to unrealized gains and losses on available-for-sale securities and equity securities for the three and six month period-period ended December 31, 2017September 30, 2021 and 2016,2020, were as follows:
Pretax | Tax Effect | After-tax | Affected Line Item in Consolidated Statements of Income | ||||||||||
Balance as of September 30, 2017 | $ | 741 | $ | (252 | ) | $ | 489 | ||||||
Unrealized holding loss on available-for-sale securities arising during the period | (631 | ) | 215 | (416 | ) | ||||||||
Balance as of December 31, 2017 | $ | 110 | $ | (37 | ) | $ | 73 | ||||||
Balance as of September 30, 2016 | $ | 3,095 | $ | (1,053 | ) | $ | 2,042 | ||||||
Unrealized holding loss on available-for-sale securities arising during the period | (3,319 | ) | 1,128 | (2,191 | ) | ||||||||
Amounts reclassified from accumulated other comprehensive income | (22 | ) | 8 | (14 | ) | (a)(b) | |||||||
Net current period other comprehensive loss | (3,341 | ) | 1,136 | (2,205 | ) | ||||||||
Balance as of December 31, 2016 | $ | (246 | ) | $ | 83 | $ | (163 | ) | |||||
Pretax | Tax Effect | After-tax | Affected Line Item in Consolidated Statements of Income | ||||||||||
Balance as of June 30, 2021 | $ | 4,493 | $ | (943 | ) | $ | 3,550 | ||||||
Unrealized holding losses on securities arising during the period | (1,566 | ) | 328 | (1,238 | ) | (a)(b) | |||||||
Balance as of September 30, 2021 | $ | 2,927 | $ | (615 | ) | $ | 2,312 | ||||||
Balance as of June 30, 2020 | $ | 5,393 | $ | (1,133 | ) | $ | 4,260 | ||||||
Unrealized holding gains on available-for-sale securities arising during the period | 70 | (14 | ) | 56 | (a)(b) | ||||||||
Balance after reclassification as of September 30, 2020 | $ | 5,463 | $ | (1,147 | ) | $ | 4,316 | ||||||
(a)(a) Securities gains,(gains) losses, net
(b) Income tax expense
CONSUMERS BANCORP, INC.
Notes to the Consolidated Financial Statements
(Unaudited) (continued)
Pretax | Tax Effect | After-tax | Affected Line Item in Consolidated Statements of Income | ||||||||||
Balance as of June 30, 2017 | $ | 675 | $ | (230 | ) | $ | 445 | ||||||
Unrealized holding loss on available-for-sale securities arising during the period | (527 | ) | 180 | (347 | ) | ||||||||
Amounts reclassified from accumulated other comprehensive income | (38 | ) | 13 | (25 | ) | (a)(b) | |||||||
Net current period other comprehensive loss | (565 | ) | 193 | (372 | ) | ||||||||
Balance as of December 31, 2017 | $ | 110 | $ | (37 | ) | $ | 73 | ||||||
Balance as of June 30, 2016 | $ | 3,621 | $ | (1,232 | ) | $ | 2,389 | ||||||
Unrealized holding loss on available-for-sale securities arising during the period | (3,742 | ) | 1,272 | (2,470 | ) | ||||||||
Amounts reclassified from accumulated other comprehensive income | (125 | ) | 43 | (82 | ) | (a)(b) | |||||||
Net current period other comprehensive loss | (3,867 | ) | 1,315 | (2,552 | ) | ||||||||
Balance as of December 31, 2016 | $ | (246 | ) | $ | 83 | $ | (163 | ) | |||||
(a) Securities gains, net
(b) Income tax expense
Note 78 – COVID-19Income Taxes
OnIn December 22, 2017,2019, a novel strain of coronavirus surfaced in Wuhan, China, and has spread around the U.S. government enacted comprehensive tax legislation commonly referred to asworld, resulting in business and social disruption. The coronavirus was declared a Pandemic by the Tax CutsWorld Health Organization on March 11, 2020. The operations and Jobs Act (Tax Act). The Tax Act significantly revises the future ongoing U.S. corporate income tax by, among other things, decreasing U.S. corporate income tax rates to 21.0% from 35.0%. Asbusiness results of the Corporation has acould be materially adversely affected. The extent to which the coronavirus June 30may fiscal year-end,impact business activity or investment results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the lower corporate income tax rate will be phased in, resulting in a blended U.S. statutory federal rate of approximately 27.55% for the Corporation's fiscal year ending June 30, 2018, and 21.0% for subsequent fiscal years. In addition, the reductionseverity of the corporate tax ratecoronavirus and the actions required to contain the Corporation to revaluecoronavirus or treat its deferred tax assets and liabilities based on the lower federal tax rate of 21.0%.
impact, among others. As a result of the new legislation, duringeconomic shutdown engineered to slow down the quarter ended spread of COVID-December 31, 2017, 19,the Corporation recorded a one-time income tax expenseability of $348our customers to make payments on loans could be adversely impacted, resulting in conjunction with writing down its net deferred tax assets. The impact of using the 27.55% blended federal tax rate for the quarter ended December 31, 2017 versus a 34.0% rate reduced the income tax expense by approximately $95. Therefore, the effective tax rate was 42.7%elevated loan losses and 31.7% for the three and six months ended December 31, 2017, respectively, compared to 16.7% and 19.7% for the three and six months ended December 31, 2016, respectively.
The changes includedan increase in the Tax Act are broad and complex. The final transition impacts of the Tax Act may differ from the above estimates, possibly materially, due to, among other things, changes in interpretations of the Tax Act, any legislative action to address questions that arise because of the Tax Act, and any changes in accounting standardsCorporation’s allowance for income taxes or related interpretations in response to the Tax Act.loan losses.
Item 2 – Management’s Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Dollars in thousands, except per share data)
General
The following is management’smanagement’s analysis of the Corporation’s results of operations for the three and six monthsthree-month periods ended December 31, 2017,September 30, 2021, compared to the same period in 2016,2020, and the consolidated balance sheet at December 31, 2017,September 30, 2021, compared to June 30, 2017.2021. 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 thethe 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 Carroll, Columbiana, Jefferson, Stark, Summit, Wayne and contiguous counties in Ohio.Ohio, Pennsylvania, and West Virginia. 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.
On July 16, 2021, the Corporation completed its acquisition of two branches located in Calcutta and Wellsville, Ohio from CFBank, National Association. As part of the acquisition, the Corporation assumed $104,538 of branch deposits for a 1.75% deposit premium and purchased $15,602 in subordinated debt securities issued by unrelated financial institutions and $19,943 in loans. In relation to the acquisition, the Corporation recorded goodwill of $1,616.
COVID-19 Pandemic
In response to COVID-19, management actively pursued multiple avenues to assist customers during these uncertain times. For commercial borrowers, the Coronavirus Aid, Relief and Economic Security Act (the CARES Act) includes key SBA initiatives to assist small businesses. The Paycheck Protection Program (PPP) was designed to provide a direct incentive for small businesses to keep their workers on the payroll. The SBA will forgive loans obtained under this program if the borrower meets payroll and other requirements. The Bank originated a total of $113,367 of PPP loans during the first and second rounds of assistance. As of September 30, 2021, there were $29,505 of PPP loans outstanding.
Additionally, on March 22, 2020 the Corporation adopted a loan modification program to assist borrowers impacted by COVID-19. 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 troubled debt restructurings. As of September 30, 2021, four borrowers with an outstanding balance of $51 are in payment deferral status under this loan modification program.
We have assisted, and may continue to assist, customers who are experiencing financial hardship due to COVID-19 by waiving late charges, refunding NSF and overdraft fees, and waiving CD prepayment penalties. The consumer reserve personal line of credit, an unsecured line of credit that is linked to a personal checking account, was redesigned to provide easier access and a lower initial rate.
Given the dynamic nature of the circumstances surrounding the pandemic, it is difficult to ascertain the full impact that the ongoing economic disruption will have on the Corporation. The Corporation has modified its business practices with a portion of employees working remotely from their homes to limit interruptions to operations as much as possible and to help reduce the risk of COVID-19 infecting entire departments. The branch lobbies were closed at various times throughout the pandemic but are now open for normal business. The Corporation is encouraging virtual meetings and conference calls in place of in-person meetings. Additionally, travel for business has been restricted. The Corporation is promoting social distancing, frequent hand washing and thorough disinfection of all surfaces. The Corporation will continue to closely monitor situations arising from the pandemic and adjust operations accordingly.
Results of Operations
Three Three-Month Periods Ended September 30, 2021 and Six Months Ended December 31, 2017 and December 31, 20162020
InNet income for the secondfirst quarter of fiscal year 2018, pre-tax income increased by $279,2022 was $2,665, or 32.2% from the same period last year. Net income for the second quarter of fiscal year 2018 was $657, or $0.24$0.88 per common share, compared to $722,$2,401, or $0.27$0.80 per common share for the three months ended December 31, 2016.September 20, 2020. The following are key highlights of our results of operations for the three months ended December 31, 2017:September 30, 2021 compared to the prior fiscal year comparable period:
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In the first six months of fiscal year 2018, pre-tax income increased by $301, or 14.9% from the same period last year. Net income for the six months ended December 31, 2017 was $1,586, or $0.58 per common share, compared to $1,623, or $0.60 per common share for the six months ended December 31, 2016. The following are key highlights of our results of operations for the six months ended December 31, 2017:
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Return on average equity and return on average assets were 7.09%14.75% and 0.67%1.14%, respectively, for the first sixthree months of fiscal year 2018ended September 30, 2021 compared to 7.34%14.74% and 0.74%1.29%, respectively, for the same prior year period.
CONSUMERS BANCORP, INC.
Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
(Dollars in thousands, except per share data)
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’sCorporation’s earnings. Net interest income is affected by changes in the volumes, rates and composition of interest-earning assets and interest-bearing liabilities. In addition, prevailing economic conditions, fiscal and monetary policies and the policies of various regulatory agencies all affect market rates of interest and the availability and cost of credit, which, in turn, can significantly affect net interest income. As a result of the Federal Open Market Committee establishing a near-zero target range for the federal funds rate, earnings could be negatively affected if the interest we receive on loans and securities falls more quickly than interest we pay on deposits and borrowings. 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. The federal income tax rate in effect for the 20182022 and 2021 fiscal yearyears was 27.55% and for the 2017 fiscal year was 34.0%. With the enactment of the Tax Act, the statutory tax rate was changed in the second quarter of fiscal year 2018 to 27.55% by using a blended rate of the new 21.0% federal rate that went into effect on January 1, 2018 and the previous federal rate of 34.0%. All average balances are daily average balances. Non-accruing loans are included in average loan balances.
The Corporation’sCorporation’s net interest margin was 3.61%3.62% for the three months ended December 31, 2017,September 30, 2021, compared with 3.62%3.84% for the same period in 2016.2020. FTE net interest income for the three months ended December 31, 2017September 30, 2021 increased by $290,$1,300, or 7.8%19.1%, to $4,011$8,092 from $3,721$6,792 for the same prior year ago period.
Tax-equivalent interest income for the three months ended December 31, 2017September 30, 2021 increased by $404,$1,010, or 10.2%13.6%, from the same prior year ago period. Interest income was positively impacted by the recognition of origination fees on PPP loans that were forgiven during the quarter. The PPP loans had an average balance of $42,735 in the first quarter of fiscal year 2022 and, during this same period, $997 of interest and fee income was recognized on the PPP loans. Interest income was also positively impacted by a $31,513,$185,452, or 7.7%26.2%, increase in average interest-earning assets from the same prior year period.period due to the additional assets acquired as part of the branch acquisition. The Corporation’s yield on average interest-earning assets increaseddeclined to 3.94%3.78% for the three months ended December 31, 2017 from 3.86%September 30, 2021 compared with 4.21% for the same period last year. TheA reduction in the accretion of origination fees from PPP loans as these loans are forgiven combined with the significant decline in interest rates, will continue to impact the yield on average interest-earning assets increased despiteand could ultimately result in a decline in the tax-equivalent yield on nontaxable securities which occurred as a result of the decline in the statutory federal tax rate. The increase in the yield on average interest-earning assets was primarily a result of a positive change in the earning asset mix with higher yielding loans increasing faster than lower yielding securities as well as an increase in interest rates.income.
Interest expense for the three months ended December 31, 2017 increasedSeptember 30, 2021 decreased by $114$290, or 44.5%, from the same prior year ago period.period primarily due to a reduction in deposit and borrowing costs as a result of lower market interest rates. The Corporation’s cost of funds was 0.46%0.23% for the three months ended December 31, 2017September 30, 2021 compared with 0.34%0.54% for the same prior year ago period. The increase in short term market interest rates has impacted the rates paid on money market accounts, short-term borrowings and time deposits.
The Corporation’s net interest margin was 3.62% for the six months ended December 31, 2017 compared with 3.74% for the same period in 2016. FTE net interest income for the six months ended December 31, 2017 increased by $356, or 4.7%, to $7,985 from $7,629 for the same year ago period.
Tax-equivalent interest income for the six months ended December 31, 2017 increased by $587, or 7.2%, from the same year ago period. The Corporation’s yield on average interest-earning assets declined to 3.95% for the six months ended December 31, 2017 from 3.98% for the same period last year. For the six months ended December 31, 2017, the tax-equivalent yield on nontaxable securities was negatively impacted by 0.36% due to the enactment of the Tax Act and the resulting decline in the statutory federal tax rate. Interest expense for the six months ended December 31, 2017 increased by $231 from the same year ago period. The Corporation’s cost of funds was 0.46% for the six months ended December 31, 2017 compared with 0.34% for the same year ago period.
CONSUMERS
Average Balance Sheets and Analysis of Net Interest Income for the Three Months Ended December 31, (In thousands, except percentages) | ||||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||||
Average Balance |
Interest | Yield/ Rate | Average Balance |
Interest | Yield/ Rate | |||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||||
Taxable securities | $ | 81,941 | $ | 459 | 2.22 | % | $ | 75,524 | $ | 377 | 2.01 | % | ||||||||||||
Nontaxable securities (1) | 60,556 | 448 | 2.97 | 60,326 | 535 | 3.58 | ||||||||||||||||||
Loans receivable (1) | 292,149 | 3,440 | 4.67 | 263,909 | 3,029 | 4.55 | ||||||||||||||||||
Interest bearing deposits and federal funds sold | 6,533 | 28 | 1.70 | 9,907 | 30 | 1.20 | ||||||||||||||||||
Total interest-earning assets | 441,179 | 4,375 | 3.94 | % | 409,666 | 3,971 | 3.86 | % | ||||||||||||||||
Noninterest-earning assets | 31,646 | 29,148 | ||||||||||||||||||||||
Total Assets | $ | 472,825 | $ | 438,814 | ||||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||
NOW | $ | 53,913 | $ | 20 | 0.15 | % | $ | 48,960 | $ | 19 | 0.15 | % | ||||||||||||
Savings | 152,502 | 78 | 0.20 | 138,402 | 36 | 0.10 | ||||||||||||||||||
Time deposits | 66,770 | 155 | 0.92 | 66,425 | 128 | 0.76 | ||||||||||||||||||
Short-term borrowings | 26,249 | 57 | 0.86 | 20,481 | 11 | 0.21 | ||||||||||||||||||
FHLB advances | 12,829 | 54 | 1.67 | 14,042 | 56 | 1.58 | ||||||||||||||||||
Total interest-bearing liabilities | 312,263 | 364 | 0.46 | % | 288,310 | 250 | 0.34 | % | ||||||||||||||||
Noninterest-bearing liabilities: | ||||||||||||||||||||||||
Noninterest-bearing checking accounts | 112,039 | 103,143 | ||||||||||||||||||||||
Other liabilities | 3,956 | 3,695 | ||||||||||||||||||||||
Total liabilities | 428,258 | 395,148 | ||||||||||||||||||||||
Shareholders’ equity | 44,567 | 43,666 | ||||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 472,825 | $ | 438,814 | ||||||||||||||||||||
Net interest income, interest rate spread (1) | $ | 4,011 | 3.48 | % | $ | 3,721 | 3.52 | % | ||||||||||||||||
Net interest margin (net interest as a percent of average interest-earning assets) (1) | 3.61 | % | 3.62 | % | ||||||||||||||||||||
Federal tax exemption on non-taxable securities and loans included in interest income | $ | 84 | $ | 185 | ||||||||||||||||||||
Average interest-earning assets to interest-bearing liabilities | 141.28 | % | 142.09 | % | ||||||||||||||||||||
Average Balance Sheets and Analysis of Net Interest Income for the Three Months Ended September 30, (In thousands, except percentages) |
2021 | 2020 | |||||||||||||||||||||||
Average Balance | Interest | Yield/ Rate | Average Balance | Interest | Yield/ Rate | |||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||||
Taxable securities | $ | 153,942 | $ | 711 | 1.85 | % | $ | 78,430 | $ | 372 | 1.94 | % | ||||||||||||
Nontaxable securities (1) | 82,250 | 595 | 3.00 | 66,475 | 514 | 3.23 | ||||||||||||||||||
Loans receivable (1) | 578,361 | 7,070 | 4.85 | 544,164 | 6,493 | 4.73 | ||||||||||||||||||
Federal bank and other restricted stocks | 2,472 | 20 | 3.21 | 2,472 | 18 | 2.89 | ||||||||||||||||||
Equity securities | 400 | 8 | 7.93 | — | — | — | ||||||||||||||||||
Interest bearing deposits and federal funds sold | 74,641 | 50 | 0.27 | 15,073 | 47 | 1.24 | ||||||||||||||||||
Total interest-earning assets | 892,066 | 8,454 | 3.78 | % | 706,614 | 7,444 | 4.21 | % | ||||||||||||||||
Noninterest-earning assets | 35,102 | 30,338 | ||||||||||||||||||||||
Total Assets | $ | 927,168 | $ | 736,952 | ||||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||
NOW | $ | 137,899 | $ | 33 | 0.09 | % | $ | 102,102 | $ | 45 | 0.17 | % | ||||||||||||
Savings | 324,680 | 89 | 0.11 | 228,493 | 105 | 0.18 | ||||||||||||||||||
Time deposits | 121,112 | 174 | 0.57 | 114,816 | 427 | 1.48 | ||||||||||||||||||
Short-term borrowings | 11,568 | 2 | 0.07 | 7,881 | 4 | 0.20 | ||||||||||||||||||
FHLB advances | 16,597 | 64 | 1.53 | 24,111 | 71 | 1.17 | ||||||||||||||||||
Total interest-bearing liabilities | 611,856 | 362 | 0.23 | % | 477,403 | 652 | 0.54 | % | ||||||||||||||||
Noninterest-bearing liabilities: | ||||||||||||||||||||||||
Noninterest-bearing checking accounts | 236,456 | 189,134 | ||||||||||||||||||||||
Other liabilities | 7,164 | 5,797 | ||||||||||||||||||||||
Total liabilities | 855,476 | 672,334 | ||||||||||||||||||||||
Shareholders’ equity | 71,692 | 64,618 | ||||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 927,168 | $ | 736,952 | ||||||||||||||||||||
Net interest income, interest rate spread (1) | $ | 8,092 | 3.55 | % | $ | 6,792 | 3.67 | % | ||||||||||||||||
Net interest margin (net interest as a percent of average interest-earning assets) (1) | 3.62 | % | 3.84 | % | ||||||||||||||||||||
Federal tax exemption on non-taxable securities and loans included in interest income | $ | 119 | $ | 98 | ||||||||||||||||||||
Average interest-earning assets to interest-bearing liabilities | 145.80 | % | 148.01 | % | ||||||||||||||||||||
(1) calculated on a fully taxable equivalent basis utilizing a statutory federal income tax rate of 27.55% in the 2018 fiscal year and 34.0% in the 2017 fiscal year21.0%
Average Balance Sheets and Analysis of Net Interest Income for the Six Months Ended December 31, (In thousands, except percentages) | ||||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||||
Average Balance |
Interest | Yield/ Rate | Average Balance |
Interest | Yield/ Rate | |||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||||
Taxable securities | $ | 83,578 | $ | 970 | 2.30 | % | $ | 75,745 | $ | 779 | 2.07 | % | ||||||||||||
Nontaxable securities (1) | 60,635 | 997 | 3.30 | 59,710 | 1,061 | 3.61 | ||||||||||||||||||
Loans receivable (1) | 286,273 | 6,674 | 4.62 | 262,296 | 6,219 | 4.70 | ||||||||||||||||||
Interest bearing deposits and federal funds sold | 7,546 | 65 | 1.71 | 9,225 | 60 | 1.29 | ||||||||||||||||||
Total interest-earning assets | 438,032 | 8,706 | 3.95 | % | 406,976 | 8,119 | 3.98 | % | ||||||||||||||||
Noninterest-earning assets | 31,699 | 28,008 | ||||||||||||||||||||||
Total Assets | $ | 469,731 | $ | 434,984 | ||||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||
NOW | $ | 53,556 | $ | 40 | 0.15 | % | $ | 48,770 | $ | 36 | 0.15 | % | ||||||||||||
Savings | 152,080 | 158 | 0.21 | 135,957 | 67 | 0.10 | ||||||||||||||||||
Time deposits | 66,595 | 303 | 0.90 | 66,216 | 250 | 0.75 | ||||||||||||||||||
Short-term borrowings | 26,197 | 112 | 0.85 | 19,965 | 23 | 0.23 | ||||||||||||||||||
FHLB advances | 12,915 | 108 | 1.66 | 14,583 | 114 | 1.55 | ||||||||||||||||||
Total interest-bearing liabilities | 311,343 | 721 | 0.46 | % | 285,491 | 490 | 0.34 | % | ||||||||||||||||
Noninterest-bearing liabilities: | ||||||||||||||||||||||||
Noninterest-bearing checking accounts | 110,111 | 102,144 | ||||||||||||||||||||||
Other liabilities | 3,920 | 3,507 | ||||||||||||||||||||||
Total liabilities | 425,374 | 391,142 | ||||||||||||||||||||||
Shareholders’ equity | 44,357 | 43,842 | ||||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 469,731 | $ | 434,984 | ||||||||||||||||||||
Net interest income, interest rate spread (1) | $ | 7,985 | 3.49 | % | $ | 7,629 | 3.64 | % | ||||||||||||||||
Net interest margin (net interest as a percent of average interest-earning assets) (1) | 3.62 | % | 3.74 | % | ||||||||||||||||||||
Federal tax exemption on non-taxable securities and loans included in interest income | $ | 272 | $ | 366 | ||||||||||||||||||||
Average interest-earning assets to interest-bearing liabilities | 140.69 | % | 142.55 | % | ||||||||||||||||||||
(1) calculated on a fully taxable equivalent basis utilizing a statutory federal income tax rate of 27.55% in the 2018 fiscal year and 34.0% in the 2017 fiscal year
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’smanagement’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 monthsthree-month period ended December 31, 2017,September 30, 2021, the provision for loan losses was $60$190 compared to $140with $130 for the same prior year period. ForNet recoveries of $16 were recorded during the six-monththree-month period ended December 31, 2017,September 30, 2021, compared with net charge-offs of $41 during the three-month period ended September 30, 2020. In the first quarter of fiscal year 2022, the provision for loan losses was $150 comparedsufficient to $276 formaintain an adequate allowance of loan losses due to the same prior year period.organic loan growth.
Non-performing loans were $865$1,719 as of December 31, 2017September 30, 2021, compared with $1,187$1,771 as of June 30, 20172021 and $1,589$1,369 as of December 31, 2016. For the six months ended December 31, 2017 net charge-offs totaled $11 compared with net charge-offs of $719 for the same prior year period.September 30, 2020. Non-performing loans to total loans were 0.30% at September 30, 2021 and 0.31% at June 30, 2021. The allowance for loan losses as a percentage of loans was 1.10%1.16% at December 31, 2017September 30, 2021 and 1.13%1.14% at June 30, 2017. The provision for loan losses for the period ended December 31, 2017 was considered sufficient by management for maintaining an appropriate allowance for probable incurred credit losses.2021.
Non-InterestNoninterest Income
Non-interestNoninterest income increased by $42,$132, or 5.3%11.6%, for the secondfirst quarter of fiscal year 20182022 from the same period last year and by $66,primarily due to a $53, or 4.0%11.6%, for the first six months of fiscal year 2018 from the same period last year. Non-interest income was positively impacted by increasesincrease in debit card interchange income, a $51, or 16.6%, increase in service charges on deposit accounts, and a $22, or 9.3%, increase in the gains from the sale of mortgage loans and earnings on bank owned life insurance. These increases were partially offset by a decline in gains from the sale of securities.loans.
Non-InterestNoninterest Expenses
Total non-interestnoninterest expenses increased to $3,560,by $1,033, or by 7.0%21.5%, duringfor the secondfirst quarter of fiscal year 2018,2022 compared with $3,326 during the same year ago period. Total non-interestperiod last year. Increases in salaries and employee benefits; professional and director fees; and marketing and advertising expenses increasedcontributed to $6,953, or by 5.2%, during the first six monthsincrease in noninterest expenses for the three-month period ended September 30, 2021. Included within noninterest expenses is $144 of fiscal year 2018, compared with $6,612 duringexpenses related to the same year ago period. Total non-interest expensesacquisition of the Calcutta and Wellsville, Ohio branch locations, a majority of which were impacted by increases in salary, incentiveconsulting and debit card processinglegal expenses.
Income Taxes
Income tax expense was $489 and $735$559 for the three and six monthsthree-month period ended December 31, 2017, respectively,September 30, 2021 compared to $145 and $397$505 for the three and six monthsthree-month period ended December 31, 2016, respectively.September 30, 2020. The effective tax rate was 42.7% and 31.7%17.3% for the three and six monthsthree-month period ended December 31, 2017, respectively,September 30, 2021 compared to 16.7% and 19.7%with 17.4% for the three and six monthsthree-month period ended December 31, 2016, respectively. Income tax expense and theSeptember 30, 2020. The effective tax rate was higher in the 2018 fiscal year compared to the same prior year periods primarily due to the enactment of the Tax Act and increased income before income taxes. As a result of the enactment of the Tax Act, a one-time income tax expense of $253 was recorded in conjunction with revaluing the Company's net deferred tax assets and utilization of a blended tax rate. The enactment of the Tax Act required the Corporation to revalue its deferred tax assets and liabilities based upon the lower enacted federal corporate income tax rate at which the Corporation expects to recognize the benefit. During the three months ended December 31, 2017 a one-time income tax expense of $348 was recorded in conjunction with writing down its net deferred tax assets. In addition, the Company will utilize a blended tax rate for its fiscal year ending June 30, 2018 given the Tax Act loweredrates differed from the federal corporate taxstatutory rate beginning January 1, 2018. As a resultbecause of utilizing a blended tax rate for its fiscal year ending June 30, 2018, the Company recognized a $95 benefit totax-exempt income tax expense for both the threefrom obligations of state and six months ended December 31, 2017. political subdivisions, loans, and bank owned life insurance income.
Financial Condition
Total assets at December 31, 2017as of September 30, 2021 were $470,282$953,886 compared to $457,883$833,804 at June 30, 2017,2021, an increase of $12,399,$120,082, or an annualized 5.4%57.6%. Since June 30, 2021, total deposits increased by $122,337, or an annualized 67.3% and includes $104,538 of deposits acquired as part of the branch acquisition. The Corporation has maintained a favorable deposit mix, with 28.7% in noninterest-bearing deposits, 17.1% in interest bearing demand deposits, 39.9% in savings and money market deposits, and 14.3% in time deposits as of September 30, 2021. Since June 30, 2021, total cash and cash equivalents increased by $68,563 primarily as a result of the cash received from the branch acquisition. These funds are expected to be redeployed into higher yielding loans and securities.
Total loans increased by $10,734, or an annualized 7.6%, from June 30, 2021. As the pace of PPP loan forgiveness has increased since June 30, 2021, the outstanding balance of these loans declined by $21,181 to $29,505 as of September 30, 2021. The decline in the PPP loans was offset by the addition of loans acquired as part of the branch acquisition that had an outstanding balance of $17,789 as of September 30, 2021 and organic loan growth of $14,126.
Total loans increased by $20,727, or an annualized 15.2%, from $272,867 at June 30, 2017 to $293,594 at December 31, 2017. The growth in the loan portfolio was primarily related to growth within the commercial real estate and 1-4 family residential real estate segments to borrowers within the Bank’s primary market area. The loan growth was primarily funded by an increase of $8,518, or an annualized 4.5%, in total deposits and a decline of $6,348 in available-for-sale securities.
Non-Performing Assets
The following table presents the aggregate amounts of non-performing assets and respectiveselect ratios as of the dates indicated.
December 31, 2017 | June 30, 2017 | December 31, 2016 | September 30, 2021 | June 30, 2021 | September 30, 2020 | |||||||||||||||||||
Non-accrual loans | $ | 865 | $ | 1,187 | $ | 1,589 | $ | 1,719 | $ | 1,771 | $ | 1,369 | ||||||||||||
Loans past due over 90 days and still accruing | — | — | — | — | — | — | ||||||||||||||||||
Total non-performing loans | 865 | 1,187 | 1,589 | |||||||||||||||||||||
Other real estate owned | 57 | 71 | — | |||||||||||||||||||||
Total non-performing assets | $ | 922 | $ | 1,258 | $ | 1,589 | ||||||||||||||||||
Total non-performing loans | 1,719 | 1,771 | 1,369 | |||||||||||||||||||||
Other real estate and repossessed assets | — | — | 9 | |||||||||||||||||||||
Total non-performing assets | $ | 1,719 | $ | 1,771 | $ | 1,378 | ||||||||||||||||||
Non-performing loans to total loans | 0.29 | % | 0.44 | % | 0.60 | % | 0.30 | % | 0.31 | % | 0.24 | % | ||||||||||||
Allowance for loan losses to total non-performing loans | 372.83 | % | 259.98 | % | 196.54 | % | 388.42 | % | 365.39 | % | 421.26 | % | ||||||||||||
As of December 31, 2017,September 30, 2021, impaired loans totaled $1,765,$1,898, of which $865$1,719 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 insureensure 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)
ForFor the sixthree months ended December 31, 2017,September 30, 2021, net cash inflow from operating activities was $3,484,$2,778, net cash outflowsinflows from investing activities was $15,494$51,650 and net cash inflows from financing activities was $11,239.$14,135. A major source of cash was $10,434$66,552 from sales, maturities, calls or principal pay downs on available-for-sale securities, $8,518the branch acquisition, a $17,799 increase in organic deposits and $5,400 proceeds from FHLB advances. Thea $9,225 decrease in organic loans primarily due to PPP loan forgiveness. A major use of cash was a $20,967 increase in loans.$31,123 purchases of available-for-sale securities. Total cash and cash equivalents was $9,141were $87,092 as of December 31, 2017,September 30, 2021, compared to $9,912$18,529 at June 30, 20172021 and $10,850$8,508 at December 31, 2016.September 30, 2020.
The Bank offers several types of deposit products to its customers. We believe the rates offered by the Bank and the fees charged for them are competitive with othersthe rates and fees charged by other banks for similar deposit products currently available in the market area. Deposits totaled $382,989$849,186 at December 31, 2017September 30, 2021 compared with $374,471$726,849 at June 30, 2017.2021.
To provide an additional source of liquidity, the Corporation has entered into an agreement with the FHLB of Cincinnati. At December 31, 2017,September 30, 2021, advances from the FHLB of Cincinnati totaled $17,188$16,300 compared with $12,320$18,050 at June 30, 2017.2021. As of December 31, 2017,September 30, 2021, the Bank had the ability to borrow an additional $17,032$76,040 from the FHLB of Cincinnati based on a blanket pledge of qualifying first mortgage and multi-family loans. The Corporation considers the FHLB of Cincinnati to be a reliable source of liquidity funding, secondary to its deposit base.
Short-term borrowings consisted of repurchase agreements, which are financing arrangements that mature daily, and federal funds purchased from correspondent banks.daily. The Bank pledges securities as collateral for the repurchase agreements. Short-term borrowings totaled $22,507$10,773 at December 31, 2017September 30, 2021 and $23,986$12,203 at June 30, 2017.2021.
Jumbo time deposits (those with balances of $250 and over) totaled $13,754 at December 31, 2017$21,499 as of September 30, 2021 and $14,252 at$18,488 as of June 30, 2017.2021. 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. 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)
Off-Balance Sheet Arrangements
In the normal course of business, to meet the financial needs of our customers, we are a party to financial instruments with off-balance sheet risk. These financial instruments generally include commitments to originate mortgage, commercial and consumer loans,loans, and involve to varying degrees, elements of credit and interest rate risk in excess of amounts recognized in the Consolidated Balance Sheets. The maximum exposure to credit loss in the event of nonperformance by the borrower is represented by the contractual amount of those instruments. Since commitments to extend credit have a fixed expiration date or other termination clause, some commitments will expire without being drawn upon and the total commitment amounts do not necessarily represent future cash requirements. The same credit policies are used in making commitments as are used for on-balance sheet instruments and collateral is required in instances where deemed necessary. Undisbursed balances of loans closed include funds not disbursed but committed for construction projects. Unused lines of credit include funds not disbursed, but committed for home equity, commercial and consumer lines of credit. Financial standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. Total unused commitments were $62,158 at December 31, 2017$137,549 as of September 30, 2021 and $53,742 at$119,299 as of June 30, 2017.2021.
Capital Resources
Total shareholders’shareholders’ equity increased to $44,171$71,152 as of December 31, 2017September 30, 2021 from $43,535$69,900 as of June 30, 2017.2021. The primary reason for the increase in shareholders’ equity was the result offrom net income of $1,586$2,665 for the 2018first three months of fiscal year 2022 which was partially offset by $668a decrease of $1,238 in accumulated other comprehensive income due to a decline in the unrealized gain in the mark-to-market of available-for-sale securities and by cash dividends paid and a $372 other comprehensive loss from a decline in unrealized gains on available-for-sale securities.of $484.
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.
As of December 31, 2017,September 30, 2021, the Bank’s common equity tier 1 capital and tier 1 capital ratios were 12.64%10.91% and the leverage and total risk-based capital ratios were 9.00%6.99% and 13.60%12.02%, respectively. This compares with common equity tier 1 capital and tier 1 capital ratios of 13.21%11.87% and leverage and total risk-based capital ratios of 9.06%7.83% and 14.20%13.06%, respectively, as of June 30, 2017.2021. 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, 2017September 30, 2021 that would cause the Bank’s capital category to change.
CONSUMERS BANCORP, INC.
Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
(Dollars in thousands, except per share data)
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’sManagement’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 evaluation of goodwill for impairment as a critical accounting policypolicies and an understanding of this policythese policies is necessary to understand the financial statements. Critical accounting policies are those policies thatthat 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 - Allowance for Loan Losses)Losses and Goodwill and Other Intangible Assets), note threeNote four (Loans), Note six (Goodwill and Intangible Assets) and Management’s Discussion and Analysis of Financial Condition and Results of Operation (Critical Accounting Policies and Use of Significant Estimates) of the 20172021 Form 10-K provide detail with regard to the Corporation’s accounting for the allowance for loan losses. There have been no significant changes in the application of accounting policies since June 30, 2017.2021.
Forward-Looking Statements
When usedCertain statements contained in this report (including information incorporated by reference in this report),Quarterly Report on Form 10-Q, which are not statements of historical fact, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The words or phrases “will likely result,“may,” “are expected to,” “will continue,” “is anticipated,“continue,” “estimate,” “intend,” “plan,” “seek,” “will,” “believe,” “project,” “believe” or“expect,” “anticipate” and 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.forward-looking statements. These forward-looking statements may involve risks and uncertainties that are difficult to predict, may be beyond the Corporation’sour 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 undertakeswe undertake no obligation to update these forward-looking statements to reflect subsequent events or circumstances. FactorsThe COVID-19 pandemic is affecting us, our customers, employees, and third-party service providers, and the ultimate extent of the impact on our business, financial position, results of operations, liquidity, and prospects is uncertain. Other risks and uncertainties that could cause actual results for future periods to differ materially from those anticipated or projected include, but are not limited to:
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| local, regional and national economic conditions becoming less favorable than |
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● | the effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities, and insurance) with which we must comply; | |
● | declining asset values impacting the underlying value of collateral; | |
● | unanticipated changes in our liquidity | |
● | the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve Board; | |
● | changes in consumer spending, borrowing and savings habits; | |
● | changes in accounting policies, rules and interpretations that may come as a result |
● | our ability to attract and retain qualified employees; | |
● | competitive pressures on product pricing and services; |
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● | changes in the |
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.
Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
(Dollars in thousands, except per share data)
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’sCorporation’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, 2017.September 30, 2021.
Changes in Internal Controls Over Financial Reporting
There have not been any changes in the Corporation’sCorporation’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.
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 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 | |
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101.SCH | Inline XBRL Taxonomy Extension Schema Document (1) |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document (1) |
101.DEF | Inline XBRL Taxonomy Extension Definitions Linkbase Document (1) |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document (1) |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document (1) |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101.1) |
(1) | These interactive date files shall not be deemed filed for purposes of Section 11 or 12 of the |
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.
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