Reaching $1 Billion
Together
2 0 2 3 A N N U A L R E P O R T
Making a Difference Since 1965
Financial Highlights
Dollar amounts in thousands, except per share data.
$
$
$
Selected Items at Year End
FINANCIAL CONDITION:
Total assets
Securities, available-for-sale
Loans, net
Deposits
Shareholders’ equity
SHARE INFORMATION:
Book value
Cash dividends paid per share
Basic and diluted earnings per share
OPERATIONS:
Net interest income
Provision for loan losses
Noninterest income
Noninterest expenses
Net income
ASSET QUALITY:
Net charge-offs to total loans
Nonperforming assets to total assets
Allowance for loan losses to total loans
PERFORMANCE RATIOS:
Return on average assets
Return on average equity
Net interest margin (fully tax equivalent)
June 30, 2023
June 30, 2022
1,060,024 $
279,605
702,638
952,533
55,484
17.92 $
0.68
3.45
33,715 $
855
4,747
24,685
10,674
0.04%
0.06%
1.09%
1.05%
20.27%
3.37%
977,313
296,347
604,683
886,562
53,970
17.66
0.64
3.68
32,746
735
4,735
23,215
11,192
0.01%
0.05%
1.17%
1.17%
16.43%
3.60%
Please refer to the annual report on Form 10-K for additional financial information.
Reaching $1 Billion
Together
President’s Letter
Dear Fellow Shareholders:
When Romain Fry and his fellow visionaries
founded what was then Minerva National Bank
in 1965, they started with $300,000 in capital,
five employees, and a modern bank building
on Route 30, just east of downtown Minerva,
a village 25 miles
southeast of Canton.
The founders were
responding to bank
consolidations that
they believed were
restricting access to
the capital needed to grow businesses and farms
in their local communities. Ultimately, they were
investing in their town because, as entrepreneurs,
they believed that they could make a difference.
Over the past 58 years, a unique mix of
Original Minerva National Bank building opened in 1965.
In fiscal year 2023, the bank reached
an industry milestone, as it crossed
the $1 billion in assets threshold.
shareholders,
directors, employees,
and customers
embraced the
original vision and
contributed to the
bank’s growth and success. In fiscal year 2023,
the bank reached an industry milestone, as it
crossed the $1 billion in assets threshold.
Current Consumers Bank building opened on the original site in 2016,
Consumers Bancorp, Inc. | 1
2019, net income has increased at a 17.7%
compounded annual growth rate.
We expect the competitive deposit market and
higher interest rates to continue into fiscal year
Focusing on the needs of
one customer at a time,
we have built diversified deposit
and loan portfolios.
2024. To counter
the continued margin
pressure, we have
prioritized efforts to
gain lower-cost
transactional deposit
accounts and increase
noninterest income.
The company also realized record core earnings
(net of PPP-related earnings) in fiscal year 2023.
In a period marked by unprecedented market
rate increases, inflationary pressures, an
increasingly competitive deposit environment,
and a stalled residential
mortgage market,
core 2023 earnings
increased by $1.63
million, or 18% to $10.67
million. During this
period, higher yields
on new loans, slower
loan runoff, and the
bank’s legacy transaction and savings account
balances all reduced the impact of rising
rates on our net interest margin. 2023
continued a trend in which asset growth has
resulted in operating efficiencies. At 2.27,
the bank’s total operating expense to asset
ratio declined eight basis points from
quarter-end June 2022 and is 11 basis points
lower than our regulatory peer group. Since
Since 1965, the cumulative trust and support
of our customers has made Consumers a
$1 billion community bank. Focusing on the
needs of one customer at a time, we have
built diversified deposit and loan portfolios.
56% of deposit balances are held in personal
accounts, and 42% are held in non-personal
account types. 60% of deposits are checking
or traditional savings products. Developed
Earnings Trend (Millions)
$12.00
$10.00
$8.00
$6.00
$4.00
$2.00
$0.00
2019
2020
2021
2022
2023
After-Tax PPP-Related Earnings
After-Tax Core Earnings
Total Earnings
2
| Consumers Bancorp, Inc.
over a large, diverse territory, our stable core
deposit base showed its collective confidence
in the bank as deposit and repurchase balances
increased to $48 million, or 5% during the six-
month period ending June 30, 2023 — a period
when the industry absorbed the fallout from
the March 2023 banking crisis. During the
same period, the bank’s uninsured deposit
ratio, a measure of reliance on large, non-core
deposits, decreased to approximately 28%, which
includes fully collateralized public funds. Net of
public funds, the ratio is approximately 18%.
The bank strives for a stable loan portfolio
that represents the diversity of our markets and
customer base. While total loan production,
including residential mortgage loans originated
for sale, decreased by 20% to $255 million, the
bank’s portfolio growth of $99 million was
dispersed across these main portfolios.
Over the last 10 years, outstanding
loan balances have increased at a
12.5% compounded annual growth
rate, without sacrificing credit
quality or underwriting standards.
Over the last 10 years, outstanding loan balances
have increased at a 12.5% compounded annual
growth rate, without sacrificing credit quality or
underwriting standards. Through fiscal year 2023,
net charge-off and delinquency ratios continued
to trend downward and were consistently lower
than that of our peers throughout the growth
period. Since 2018, Consumers’ total past-due
loan ratio has averaged 72 basis points below
the average of our regulatory peer group.
Consumers Bank has evolved into a full-service
commercial lender with growing residential
and consumer loan departments. With this
growth, the bank has maintained a fundamental
commitment to credit quality across all business
lines. At June 30, nonaccrual loans were 0.01%
of total loans, and net charge-offs in 2023 totaled
0.04% of average loans outstanding. We will
7%
9%
37%
Loan Portfolio
Composition
15%
32%
21%
32%
Portion
of Total 2023
Loan Portfolio
Growth
Agriculture-Related
– No Change
26%
21%
Commercial Real Estate
1-4 Family &
Multifamily Real Estate
Commercial & Industrial
Consumer & Installment
Agriculture-Related
Consumers Bancorp, Inc. | 3
Commitments
#
Average
Commitment
% of Commercial
Commitments
% of Total Loan
Commitments
Real Estate
Rental & Leasing
Manufacturing
Healthcare
Agriculture
Construction
Total – Top Five
Industries
$191.7
466
$0.411
$57.1
$50.3
$50.1
$49.3
175
156
337
185
$0.326
$0.322
$0.149
$0.266
$398.5
1,319
$0.302
34%
10%
9%
9%
9%
71%
23%
7%
6%
6%
6%
48%
continue to monitor the impact of inflation
and higher interest rates on our consumer
and commercial borrowers.
to value in 2023) will allow the portfolio to
weather economic pressures.
The commercial portfolio, which comprises 67%
of total bank commitments, is diversified in both
industry segments and in number of individual
credit concentrations. The five largest industry
segments represent 1,319 individual credits and
only account for 48% of total loan balances.
While our residential mortgage business was
down close to 50% in fiscal year 2023, the
purchase mortgage market has shown signs of
life, and our pipeline has once again started to
grow as borrowers get used to higher market
interest rates and take advantage of our robust
secondary market and portfolio product lines.
We also believe that there are opportunities to
help consumers manage their credit card debt
load by taking advantage of the substantial gains
in equity that homeowners have experienced
over the past few years.
We realized a 33% increase in personal
installment lending in 2023 and expect continued
growth as we add to our in-market dealer
network and increase cross-selling efforts in the
branches. We believe our focus on credit quality
(763 weighted average credit score in 2023)
and loan structure (86% weighted average loan
Market interest rates, which rose rapidly and
have stayed higher for longer, continue to
impact the fair value of the bank’s securities
portfolio. The $38 million valuation adjustment
at June 30 and the related $30 million
accumulated comprehensive loss are temporary
and pertain to the market rates. This unrealized
loss in securities is temporary and is adjusted
monthly for additional market interest rate
fluctuations, principal paydowns, calls, and
maturities. Consumers has significant sources
of liquidity and, therefore, does not expect
to have to sell securities to fund growth.
Along the journey to $1 billion, the bank has
methodically expanded its market area, which
now encompasses a unique mix of rural, urban,
and suburban communities. With more than
half of our locations developed or acquired
since 2011, Consumers now has 22 offices
across six Ohio counties.
Our 11 business bankers, six mortgage loan
officers, and three commercial deposit specialists
work together to develop business in these and
the 14 surrounding counties, a 9,000-square-
mile territory that includes seven separate MSAs
in three states. There are 1.5 million households
4
| Consumers Bancorp, Inc.
Consumers’ growth has been fueled by and
has proved sustainable because we have been
able to recruit exceptional and experienced
bankers, sales, and support staff over the years.
Currently, 194 employees (184 FTE) support our
customers. Assets and income per employee
have reached $5.76 million and $58,000,
respectively. Average tenure is over nine years,
and 35% of the bank’s employees have more than
10 years’ tenure. In January 2023, Theresa Linder
(Minerva Office Relationship Manager) and Betty
Laubacher (Commercial Credit) retired from
Consumers with 90 years of combined service
at Consumers. I thank them for their service and
acknowledge the rest of the bankers who have
served our customers
and communities along
the road to $1 billion.
The 50 men and women
who have served as
bank directors since
1965 have supported
investments in technology,
people, and expansions
that have proved vital to sustained growth.
They represent the shareholders through their
thoughtful vision and reflect the founders in their
entrepreneurial independent spirit. In January
2023, we welcomed Ann Gano to the Board.
A resident of New Philadelphia, Ms. Gano owns
Keeping Tabs, Inc., a certified public accounting
$9.3
$2.0
$1.2
$0.454
$17.2
$7.0*
$30.2
4.25%
12.36%
8.47%
24.93%
0.14%
0.00%
2.93%
Rank
7/16
4/10
6/9
2/5
21/24
NA
7/31
Consumers Bancorp, Inc. | 5
Site of a new full-service
branch in Massillon, Ohio.
New full-service branch in Wellsville opened in May 2023.
and 96,000 businesses and organizations in the
$168.5 billion 20-county market. We expect
that the current economic climate, corporate
realignments, and continued developments
in technology will provide
opportunities to both add
talent to our sales team and
develop new relationships
throughout the region.
We continue to expand.
In 2023, we relocated
our Wellsville drive-up
location to a full-service
bank building. We have taken steps to increase
our Stark County Ohio presence with a new
full-service branch in Massillon. Situated in
the western part of the county, Massillon has
a population of 32,000 and is a $1 billion
deposit market. Consumers currently holds
4.25% of the $9.3 billion Stark County market.
Ohio County
Stark
Columbiana
Jefferson
Carroll
Summit
8
5
4
2
2
Mahoning
0 (Lending Center)
Total
21
*Mahoning County has no deposit facility – not included in deposit or market share totals.
Number of
Depository Offices
Deposit Market (June
2022) in Billions
Market Share
(June 2022)
...the current annualized
dividend, which has increased
over 40% since 2017, equates
to a 4% dividend yield.
The 2023 Annual Meeting of Shareholders will
be held solely online via live webcast at 10:00
a.m. on Thursday, October 19, 2023. Website and
password information for joining the meeting
virtually are provided in the accompanying
proxy statement.
In the meantime, I ask
for your continued
support, your business,
and your referrals.
Shareholder support,
an engaged Board,
committed employees,
loyal customers, expansive dynamic markets,
and diversified portfolios all contributed to
Consumers National Bank’s journey
to $1 billion. Each will be vital along the path
to future milestones.
firm that specializes in providing accounting
and consulting services to the agricultural
community. Her commitment to agriculture
and her approach to community service
reflect the spirit of our current and
past leaders.
This growth would not
be possible without
your support. We are
fortunate to have over
1,500 shareholders
who believe that
Consumers is resilient
enough to weather periods of economic
volatility and who believe in a business model
that emphasizes credit quality, loan structure,
moderation, and strategic initiative. Over the
years, you have supported critical investments
that have fueled more recent growth. We are
pleased to reward you with our stable quarterly
dividend that the Board recently increased
to $0.18 per share, a 6% increase. Based on
a market price of $18.00, the current annualized
dividend, which has increased over 40% since
2017, equates to a 4% dividend yield.
Sincerely,
Ralph J. Lober II
President & CEO
Chairman’s Letter
Dear Shareholders,
It has been my privilege to serve on the Board
of Directors of Consumers Bancorp, Inc., for
over 36 years, and it is with great pride and
gratitude that I share my thoughts on what
it means to reach $1 billion in assets. When
I reflect on the bank’s significant growth since
1965, I credit the investment of our local
shareholders, the tenacity of the Board of
Directors, the focus of local management and
staff, and the support of our local businesses,
organizations, and individuals who enabled
Consumers to reach this benchmark and
to make a difference in 22 local communities.
When the founders came together to raise the
required capital to open this bank, they were
relentless in their pursuit. We hear many stories
from original shareholders who were asked to
invest in the new local bank, many of whom and
whose family members continue to hold those
shares today. They have seen their investment
grow with the bank through stock splits,
increased share price, and consistent dividends.
We are grateful to those of you who took a
chance on the new local bank and to all of our
shareholders who have supported Consumers
throughout the past 58 years.
You can see that same tenacity our founding
directors possessed in the Board members
today. They are invested, committed, and
diligent in their support of the bank, and they
6
| Consumers Bancorp, Inc.
step up to meet any challenges we face.
The Board is made up of diverse individuals
with a broad spectrum of expertise that live
and work in the various communities served
by Consumers. Diversity is valued as it brings
options, open discussion, and thought-provoking
concepts and ideas, yet the Board of Directors
has remained united from day one in the mission
to make a difference in the communities served
by Consumers National Bank.
Our staff is made up of local, experienced
bankers who are capable and dedicated
to serving you. They keep their eye on the
ball and are focused on
meeting the bank’s goals.
They make a significant
impact in expanding and
growing the bank and
in making Consumers
“the community bank.”
We hear from our
customers, our partners,
and our community
the stories of how their
community banker has
gone above and beyond to help a customer
and how our staff is cooperative, prepared,
and equipped with the necessary expertise to
respond to our auditors and banking partners.
We are proud of our leaders and associates
who have propelled this bank forward.
We understand that the success of our customers
is the success of Consumers. Providing our
customers with the community bank experience
is what sets us apart. When we provide a small
business the funding to purchase equipment
or expand their operation, or when we make
a personal loan to a customer for their first car,
or guide a family through the process of buying
their first home, it is a rewarding experience for
both the customer and the banker. It is why they
want to refer their family and friends. It is why
we are thankful they chose Consumers as their
lender of choice. It is why as of June 30, 2023,
Consumers loan balances were at $710.4 million.
Although deposits are not a bank asset,they
are leveraged to fund loans, which make up the
majority of Consumers’ assets. The expansion
of our branch network to 21 branches and the
increase in our deposit base provide a good
way to measure overall growth. The following
deposits as of June 30, 2023, show the
expansion and growth of Consumers. Minerva,
our first office founded in 1965, had deposits
of $130.2 million, and Salem, our second office,
opened in 1975, had $76.2 million. Carrollton,
opened in 1994, and Lisbon, in 2000, had $83.0
million and $73.3 million in deposits, respectively.
The Board is made up of
diverse individuals with a broad
spectrum of expertise that
live and work in the
various communities served
by Consumers.
Branches with over
$50 million in deposits
include Alliance
(1999), Calcutta (2021),
and Jackson-Belden
(2012), totaling over
$163 million, and
those with over $30
million are Bergholz
(2017), East Canton
(2000), Louisville
(2000), Hartville
(2011), Malvern 2006), Waynesburg (1986), and
Wellsville (2021), totaling over $269 million.
The remaining branches, Adena (2020), Brewster
(2019),Dillonvale (2020), Fairlawn (2018), Green
(2021), Hanoverton (1989), and Mt. Pleasant
(2020), contributed over $157 million in deposits.
Thank you to our shareholders, customers,
directors, management, and associates.
Together, we grew to $1.0 billion in assets,
and together, we will move forward.
Sincerely,
Laurie McClellan
Chairman of the Board
Consumers Bancorp, Inc. | 7
Board of Directors
Laurie L. McClellan
Chairman of the Board
Frank Paden
Vice Chairman of the Board
John P. Furey
Retired President
Furey’s Wheel World, Inc.
Ann Gano
Owner
Keeping Tabs, Inc.
Bradley Goris
Managing Partner
Goris Properties
Richard T. Kiko, Jr.
President & Chairman
Coletta Holdings, Inc.
Shawna L’Italien
Partner
Harrington, Hoppe, and Mitchell, Ltd.
Ralph J. Lober II
John W. Parkinson
Harry W. Schmuck, Jr.
Michael A. Wheeler
President & Chief Executive Officer
President & Founder
Appalachian Capital Management, Ltd.
Operations Manager
Schmuck Partnership
President & Chief Legal Officer
Patriot Software
Executive Management
Ralph J. Lober II
Scott E. Dodds
Renee K. Wood
Kim Chuckalovchak
President & Chief Executive Officer
EVP, Senior Loan Officer
EVP, Chief Financial Officer
SVP, Chief Information Officer
Hillary Hudak
Suzanne Mikes
Derek Williams
SVP, Chief People Officer
SVP, Chief Credit Officer
SVP, Retail Sales & Operations
8
| Consumers Bancorp, Inc.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
☒
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended June 30, 2023
Commission File No. 033-79130
CONSUMERS BANCORP, INC.
(Exact name of registrant as specified in its charter)
OHIO
(State or other jurisdiction of incorporation or organization)
34-1771400
(I.R.S. Employer Identification No.)
614 East Lincoln Way,
P.O. Box 256, Minerva, Ohio 44657
(330) 868-7701
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Shares, no par value
(Title of each class)
(Trading Symbol(s))
(Name of each exchange on which registered)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
Yes ☒ No ☐
and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that
Yes ☒ No ☐
the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller
reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller
reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐
Non-accelerated filer ☒
Accelerated filer ☐
Smaller reporting company ☒
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the
effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by
☐
the registered public accounting firm that prepared or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the
☐
registrant included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-
based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-
☐
1(b).
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes ☐ No ☒
Based on the closing sales price on December 31, 2022, the aggregate market value of the voting and non-voting stock held by
non-affiliates of the Registrant was approximately $53,283,395.
The number of shares outstanding of the Registrant’s common stock, no par value, was 3,096,100 at September 7, 2023.
Certain specifically designated portions of Consumers Bancorp, Inc.’s definitive Proxy Statement, dated September 7, 2023, for its
2023 Annual Meeting of Shareholders are incorporated by reference into Part III of this Form 10-K.
DOCUMENTS INCORPORATED BY REFERENCE
TABLE OF CONTENTS
PART I.
Item 1—Business
Item 1A—Risk Factors
Item 1B—Unresolved Staff Comments
Item 2—Properties
Item 3—Legal Proceedings
Item 4—Mine Safety Disclosures
PART II.
Item 5—Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
Item 6—[Reserved]
Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A—Quantitative and Qualitative Disclosures About Market Risk
Item 8—Financial Statements and Supplementary Data
Item 9—Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Item 9A—Controls and Procedures
Item 9B—Other Information
Item 9C—Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
PART III.
Item 10—Directors, Executive Officers and Corporate Governance
Item 11—Executive Compensation
Item 12—Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13—Certain Relationships and Related Transactions, and Director Independence
Item 14—Principal Accounting Fees and Services
PART IV.
Item 15—Exhibit and Financial Statement Schedules
Item 16—Form 10-K Summary
Signatures
3
8
8
9
9
9
10
11
23
24
59
59
59
59
60
60
60
60
60
61
61
PART I
Item 1—Business
(Dollars in thousands, except per share data)
General
Consumers Bancorp, Inc. (Corporation) is a bank holding company as defined under the Bank Holding Company Act of 1956,
as amended (BHCA), and is a registered bank holding company under that act and was incorporated under the laws of the State of
Ohio in 1994. In February 1995, the Corporation acquired all the issued and outstanding capital stock of Consumers National Bank
(Bank), a bank chartered under the laws of the United States of America. The Corporation’s activities have been limited primarily
to holding the common stock of the Bank.
Consumers National Bank is a community-oriented financial institution that offers a wide range of commercial and consumer
loan and deposit products, as well as mortgage, financial planning and investment services to individuals, farmers and small and
medium sized businesses in our markets. Since 1965, the Bank’s main office has been serving Minerva, Ohio, and surrounding areas
from its location at 614 East Lincoln Way, Minerva, Ohio. The Bank seeks to be the provider of choice for financial solutions to
customers who value exceptional personalized service, local decision making, and modern banking technology. 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, Mahoning, Stark, Summit and Wayne
counties in Ohio. Its market includes these counties as well as the contiguous counties in northeast Ohio, western Pennsylvania, and
northern West Virginia. As of June 30, 2023, the Bank had 21 full-service branch locations and one loan production office. The
Bank also invests in securities consisting primarily of obligations of U.S. government-sponsored entities, municipal obligations and
mortgage-backed securities issued by Fannie Mae, Freddie Mac and Ginnie Mae.
On July 16, 2021, the Corporation completed its acquisition (branch acquisition) of two branches located in Calcutta and
Wellsville, Ohio from CFBank, National Association. In connection with the branch 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, $19,943 of loans, and recorded goodwill of $1,616. This transaction qualified as a business
combination.
Supervision and Regulation
The Corporation and the Bank are subject to regulation by the Securities and Exchange Commission (SEC), the Board of
Governors of the Federal Reserve System (Federal Reserve Board), the Office of the Comptroller of the Currency (OCC) and other
federal and state regulators. The regulatory framework is intended primarily for the protection of depositors, federal deposit
insurance funds and the banking system as a whole and not for the protection of shareholders and creditors. Earnings and dividends
of the Corporation are affected by state and federal laws and regulations and by policies of various regulatory authorities. Changes
in applicable law or in the policies of various regulatory authorities could affect materially the business and prospects of the
Corporation and the Bank. The following describes selected federal and state statutory and regulatory provisions that have, or could
have, a material impact on the Corporation. The following discussion of supervision and regulation is qualified in its entirety by
reference to the statutory and regulatory provisions discussed.
Regulation of the Corporation
The Bank Holding Company Act: As a bank holding company, the Corporation is subject to regulation under the BHCA,
and the examination and reporting requirements of the Federal Reserve Board. Under the BHCA, the Corporation is subject to
periodic examination by the Federal Reserve Board and is required to file periodic reports regarding its operations and any additional
information that the Federal Reserve Board may require.
The BHCA generally limits the activities of a bank holding company to banking, managing or controlling banks, furnishing
services to or performing services for its subsidiaries and engaging in any other activities that the Federal Reserve Board has
determined to be so closely related to banking or to managing or controlling banks as to be a proper incident to those activities. In
addition, subject to certain exceptions, the BHCA requires every bank holding company to obtain the approval of the Federal Reserve
Board prior to acquiring substantially all the assets of any bank, acquiring direct or indirect ownership or control of more than 5%
of the voting shares of a bank or merging or consolidating with another bank holding company.
Under Federal Reserve Board policy, a bank holding company is expected to act as a source of financial strength to each
subsidiary bank and to commit resources to support those subsidiary banks. Under this policy, the Federal Reserve Board may
4
require a bank holding company to contribute additional capital to an undercapitalized subsidiary bank and may disapprove of the
payment of dividends to shareholders if the Federal Reserve Board believes the payment of such dividends would be an unsafe or
unsound practice. The Federal Reserve Board has extensive enforcement authority over bank holding companies for violations of
laws and regulations and unsafe or unsound practices.
Privacy Provisions of Gramm-Leach-Bliley Act: The Gramm-Leach-Bliley Act of 1999 contains extensive provisions on a
customer’s right to privacy of non-public personal information. Under these provisions, a financial institution must provide its
customers with the institution’s policies and procedures regarding the handling of customers’ non-public personal information.
Except in certain cases, an institution may not provide personal information to unaffiliated third parties unless the institution
discloses that such information may be disclosed, and the customer is given the opportunity to opt out of such disclosure. The
Corporation and the Bank are also subject to certain state laws that deal with the use and distribution of non-public personal
information.
Sarbanes-Oxley Act: The Sarbanes-Oxley Act of 2002 contains important requirements for public companies in the areas of
financial disclosure and corporate governance. In accordance with section 302(a) of the Sarbanes-Oxley Act, written certifications
by the Corporation’s Chief Executive Officer and Chief Financial Officer are required. These certifications attest that the
Corporation’s quarterly and annual reports filed with the SEC do not contain any untrue statement of a material fact or omit to state
a material fact.
Regulation of the Bank
As a national bank, the Bank is subject to regulation, supervision, and examination by the OCC and by the Federal Deposit
Insurance Corporation (FDIC). These examinations are designed primarily for the protection of the depositors of the Bank.
Dividend Restrictions: Dividends from the Bank are the primary source of funds for payment of dividends to the
Corporation’s shareholders. There are statutory limits, however, on the amount of dividends the Bank can pay without regulatory
approval. Under regulations promulgated by the OCC, the Bank may not declare a dividend in excess of its undivided profits.
Additionally, the Bank may not declare a dividend if the total amount of all dividends, including the proposed dividend, declared by
the Bank in any calendar year exceeds the total of its retained net income of that year to date, combined with its retained net income
of the two preceding years, unless the dividend is approved by the OCC. The Bank may not declare or pay any dividend if, after
making the dividend, the Bank would be “undercapitalized,” as defined in the federal regulations.
FDIC: The FDIC is an independent federal agency, which insures the deposits of federally insured banks and savings
associations up to certain prescribed limits and safeguards the safety and soundness of financial institutions. The deposits of the
Bank are subject to the deposit insurance assessments of the Deposit Insurance Fund of the FDIC. Under the FDIC’s deposit
insurance assessment system, the assessment rate for any insured institution varies according to regulatory capital levels of the
institution and other factors such as supervisory evaluations.
The FDIC is authorized to prohibit any insured institution from engaging in any activity that poses a serious threat to the
insurance fund and may initiate enforcement actions against banks, after first giving the institution’s primary regulatory authority
an opportunity to take such action. The FDIC may also terminate the deposit insurance of any institution that has engaged in or is
engaging in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable
law, order or condition imposed by the FDIC.
Current Expected Credit Loss Model: In December 2018, the OCC, the Federal Reserve Board, and the FDIC issued a final
rule to address regulatory treatment of credit loss allowances under the current expected credit loss (CECL) model. The rule revised
the federal banking agencies’ regulatory capital rules to identify which credit loss allowances under the CECL model are eligible
for inclusion in regulatory capital and to provide banking organizations the option to phase in over three years the day one adverse
effects on regulatory capital that may result from the adoption of the CECL model. The Bank adopted the CECL model on July 1,
2023 since it’s a smaller reporting company and expects to elect to phase in the day-one effect of adopting CECL for regulatory
capital purposes.
Risk-Based Capital Requirements: The Federal Reserve Board and the OCC employ similar risk-based capital guidelines
in their examination and regulation of bank holding companies and national banks, respectively. The Corporation meets the
definition of a Small Bank Holding Company and, therefore, was exempt from maintaining consolidated regulatory capital ratios.
Instead, regulatory capital ratios only apply at the subsidiary bank level. The guidelines involve a process of assigning various risk
weights to different classes of assets, then evaluating the sum of the risk-weighted balance sheet structure against the capital base. If
capital falls below the minimum levels established by the guidelines, the bank holding company or bank may be denied approval to
acquire or establish additional banks or non-bank businesses or to open new facilities. In addition, failure to satisfy capital guidelines
could subject a banking institution to a variety of enforcement actions by federal bank regulatory authorities, including the
termination of deposit insurance by the FDIC and a prohibition on the acceptance of “brokered deposits.”
5
Effective January 1, 2020, qualifying community banking organizations may elect to comply with a greater than 9%
community bank leverage ratio (CBLR) requirement in lieu of the currently applicable requirements for calculating and reporting
risk-based capital ratios. The CBLR is equal to Tier 1 capital divided by average total consolidated assets. In order to qualify for the
CBLR election, a community bank must (i) have a leverage capital ratio greater than 9 percent, (ii) have less than $10 billion in
average total consolidated assets, (iii) not exceed certain levels of off-balance sheet exposure and trading assets plus trading liabilities
and (iv) not be an advanced approaches banking organization. A community bank that meets the above qualifications and elects to
utilize the CBLR is considered to have satisfied the risk-based and leverage capital requirements in the generally applicable capital
rules and is also considered to be "well capitalized" under the prompt corrective action rules. The Bank has not elected to be subject
to the CBLR.
Unless a community bank qualifies for, and elects to comply with the CBLR beginning on January 1, 2020, national banks are
required to maintain the Basel III minimum levels of regulatory capital. The Basel III capital requirements for U.S. banking
organizations became effective on January 1, 2015 and were fully phased in by January 1, 2019. Under Basel III, the Bank is required
to maintain a minimum common equity Tier 1 capital ratio of 4.5%, a Tier 1 capital ratio of 6%, a total capital ratio of 8%, and a
Tier 1 leverage ratio of 4%. Basel III also established a “capital conservation buffer” of 2.5% above the new regulatory minimum
capital requirements, which effectively resulted in a minimum common equity Tier 1 capital ratio of 7%, a Tier 1 capital ratio of
8.5%, a total capital ratio of 10.5% and a Tier 1 leverage ratio of 6.5%. The capital conservation buffer is designed to absorb losses
during periods of economic stress. Banking institutions with a common equity Tier 1 ratio to risk-weighted assets above the minimum
but below the conservation buffer will face constraints on dividends, equity repurchases, and compensation based on the amount of
the shortfall.
The OCC and the FDIC may take various corrective actions against any undercapitalized bank and any bank that fails to
submit an acceptable capital restoration plan or fails to implement a plan accepted by the OCC or the FDIC. These powers include,
but are not limited to, requiring the institution to be recapitalized, prohibiting asset growth, restricting interest rates paid, requiring
prior approval of capital distributions by any bank holding company that controls the institution, requiring divestiture by the
institution of its subsidiaries or by the holding company of the institution itself, requiring new election of directors, and requiring
the dismissal of directors and officers. The OCC’s final supervisory judgment concerning an institution’s capital adequacy could
differ significantly from the conclusions that might be derived from the absolute level of an institution’s risk-based capital ratios.
Therefore, institutions generally are expected to maintain risk-based capital ratios that exceed the minimum ratios. As of June 30,
2023, the Bank exceeded minimum regulatory capital requirements to be considered well-capitalized.
Dodd-Frank Wall Street Reform and Consumer Protection Act: The Dodd-Frank Wall Street Reform and Consumer
Protection Act (Dodd-Frank Act) established the Consumer Financial Protection Bureau (CFPB), which regulates consumer financial
products and services and certain financial services providers. The CFPB is authorized to prevent unfair, deceptive and abusive acts
or practices and seeks to ensure consistent enforcement of laws so that consumers have access to fair, transparent and competitive
markets for consumer financial products and services. Since it was established the CFPB has exercised extensive rulemaking and
interpretive authority.
Interstate Banking and Branching: The Interstate Banking and Branch Efficiency Act of 1995 has eased restrictions on
interstate expansion and consolidation of banking operations by, among other things: (i) permitting interstate bank acquisitions
regardless of host state laws, (ii) permitting interstate merger of banks unless specific states have opted out of this provision, and
(iii) permitting banks to establish new branches outside the state provided the law of the host state specifically allows interstate bank
branching.
Community Reinvestment Act: The Community Reinvestment Act (CRA) requires depository institutions to assist in
meeting the credit needs of their market areas, including low- and moderate-income areas, consistent with safe and sound banking
practices. Under this Act, each institution is required to adopt a statement for each of its market areas describing the depository
institution’s efforts to assist in its community’s credit needs. Depository institutions are periodically examined for compliance and
assigned ratings. Banking regulators consider these ratings when considering approval of a proposed transaction by an institution.
The Bank’s most recent CRA rating is satisfactory.
USA PATRIOT Act: In 2001, Congress enacted the Uniting and Strengthening America by Providing Appropriate Tools
Required to Intercept and Obstruct Terrorism Act of 2001 (Patriot Act). The Patriot Act is designed to deny terrorists and criminals
the ability to obtain access to the United States’ financial system and has significant implications for depository institutions, brokers,
dealers, and other businesses involved in the transfer of money. The Patriot Act mandates that financial services companies
implement additional policies and procedures with respect to additional measures designed to address any or all the following
matters: money laundering, terrorist financing, identifying and reporting suspicious activities and currency transactions, and currency
crimes.
6
The Anit-Money Laundering Act: In 2021, Congress enacted the Anti-Money Laundering Act of 2020 (AMLA), which
amended the Bank Secrecy Act of 1970 (BSA). The AMLA is intended to be a comprehensive reform and modernization to U.S.
bank secrecy and anti-money laundering laws. Among other things, the AMLA codifies a risk-based approach to anti-money
laundering compliance for financial institutions; requires the development of standards for evaluating technology and internal
processes for BSA compliance; expands enforcement-related and investigation-related authority, including increasing available
sanctions for certain BSA violations and instituting BSA whistleblower initiatives and protections.
Office of Foreign Assets Control Regulation: The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC)
administers and enforces economic and trade sanctions against targeted foreign countries and regimes, under authority of various
laws, including designated foreign countries, nationals and others. OFAC publishes lists of specially designated targets and countries.
We are responsible for, among other things, blocking accounts of, and transactions with, such targets and countries, prohibiting
unlicensed trade and financial transactions with them and reporting blocked transactions after their occurrence. Failure to comply
with these sanctions could have serious financial, legal and reputational consequences, including applicable bank regulatory
authorities not approving merger or acquisition transactions when regulatory approval is required or prohibiting such transactions
even if approval is not required. Regulatory authorities have imposed cease and desist orders and civil money penalties against
institutions found to be violating these obligations.
Cybersecurity: In March 2015, federal regulators issued two related statements regarding cybersecurity. One statement
indicates that financial institutions should design multiple layers of security controls to establish lines of defense and to ensure that
their risk management processes also address the risk posed by compromised customer credentials, including security measures to
reliably authenticate customers accessing internet-based services of the financial institution. The other statement indicates that a
financial institution’s management is expected to maintain sufficient business continuity planning processes to ensure the rapid
recovery, resumption and maintenance of the institution’s operations after a cyberattack involving destructive malware. A financial
institution is also expected to develop appropriate processes to enable recovery of data and business operations and address
rebuilding network capabilities and restoring data if the institution or its critical service providers fall victim to this type of
cyberattack.
In February 2018, the SEC published interpretive guidance to assist public companies in preparing disclosures about
cybersecurity risks and incidents. These SEC guidelines, and any other regulatory guidance, are in addition to notification and
disclosure requirements under state and federal banking law and regulations. In addition, in July 2023, the SEC adopted rules that
require disclosure of material cybersecurity incidents, processes, if any, for assessing, identifying and managing material
cybersecurity risk as well as whether any risks from cybersecurity threats, including as a result of any previous cybersecurity
incidents, have materially affected or are reasonably likely to materially affect the Corporation.
In November 2021, the OCC, the FRB and the FDIC issued a final rule, which became effective in May 2022, requiring
banking organizations that experience a computer-security incident to notify certain entities. A computer-security incident occurs
when actual or potential harm to the confidentiality, integrity, or availability of an information system or the information occurs, or
there is a violation or imminent threat of a violation to banking security policies and procedures. The affected bank must notify its
respective federal regulator of the computer-security incident as soon as possible and no later than 36 hours after the bank determines
a computer-security incident that rises to the level of a notification event has occurred. These notifications are intended to promote
early awareness of threats to banking organizations and will help banks react to those threats before they manifest into larger
incidents. This rule also requires bank service providers to notify their bank organization customers of a computer-security incident
that has caused, or is reasonably likely to cause, a material service disruption or degradation.
Furthermore, the Cyber Incident Reporting for Critical Infrastructure Act, enacted in March 2022, will require, once
administrative rules are adopted, certain covered entities, including those in the financial services industry, to report a covered cyber
incident to the U.S. Department of Homeland Security’s Cybersecurity & Infrastructure Security Agency (CISA) within 72 hours
after it reasonably believes an incident has occurred. Separate reporting to CISA will also be required within 24 hours if a ransom
payment is made as a result of a ransomware attack.
State regulators have also been increasingly active in implementing privacy and cybersecurity standards and regulations.
Recently, several states have adopted regulations requiring certain financial institutions to implement cybersecurity programs and
many states have also recently implemented or modified their data breach notification, information security and data privacy
requirements. We expect this trend of state-level activity in those areas to continue and we are monitoring developments in the states
in which our customers are located.
In the ordinary course of business, electronic communications and information systems are relied upon to conduct operations,
to deliver services to customers and to store sensitive data. The Corporation employs a variety of preventative and detective tools to
monitor, block, and provide alerts regarding suspicious activity, as well as to report on any suspected advanced persistent threats.
Risks and exposures related to cybersecurity attacks are expected to remain high for the foreseeable future due to the rapidly evolving
7
nature and sophistication of these threats, increasing volume of attacks, as well as due to the expanding use of internet banking,
mobile banking and other technology-based products and services by the Corporation and its customers.
Government Monetary Policy: The earnings of the Corporation are affected by general and local economic conditions and
by the policies of various governmental regulatory authorities. In particular, the Federal Reserve Board regulates money and credit
conditions and interest rates to influence general economic conditions, primarily through open market acquisitions or dispositions
of United States Government securities, varying the discount rate on member bank borrowings and setting reserve requirements
against member and nonmember bank deposits. Federal Reserve Board monetary policies have had a significant effect on the interest
income and interest expense of commercial banks, including the Bank, and are expected to continue to do so in the future.
Executive and Incentive Compensation: Under the Dodd-Frank Act and rules adopted by the SEC in October 2022, public
companies will be required, once stock exchanges adopt additional listing requirements, to adopt and implement “clawback” policies
for incentive compensation payments and to disclose the details of the procedures for recovery of incentive compensation that was
paid on the basis of erroneous financial information necessitating an accounting restatement due to material noncompliance with
financial reporting requirements. Such clawback policies are intended to apply to compensation paid within the three completed
fiscal years immediately preceding the date the issuer is required to prepare a restatement and would cover all executives (including
former executives) who received incentive awards.
Employees
As of June 30, 2023, the Bank employed 173 full-time and 21 part-time employees. None of the employees are represented
by a collective bargaining group. Management considers its relations with employees to be good.
Available Information
The Corporation files annual, quarterly, and current reports, proxy statements, and other information with the SEC. These
filings are available to the public over the Internet at the SEC’s website at www.sec.gov. Shareholders may also read and copy any
document that the Corporation files at the SEC’s public reference room located at 100 F Street, NE, Washington, DC 20549.
Shareholders may call the SEC at 1-800-SEC-0330 for further information on the public reference room.
The Corporation’s reports on Forms 10-K, 10-Q and 8-K, and amendments to those reports, are available, free of charge, on
our website (www.consumers.bank) as soon as reasonably practicable after such reports are filed with or furnished to the SEC. The
Corporation’s Code of Ethics Policy, which is applicable to all directors, officers and employees of the Corporation, and its Code of
Ethics for Principal Financial Officers, which is applicable to the principal executive officer and the principal financial officer, are
each available on the Investor Relations section under Corporate Governance of the Corporation’s website. The Corporation intends
to post amendments to or waivers from either of its Code of Ethics Policies on its website. A printed copy of any of these documents
will be provided to any requesting shareholder.
Item 1A—Risk Factors
Not applicable for Smaller Reporting Companies.
Item 1B—Unresolved Staff Comments
None.
8
Item 2—Properties
The Bank operates 21 full-service banking facilities and one loan production office (LPO) as noted below:
Location
Address
Owned
Leased
4086 Massillon Road, Green, Ohio 44685
440 W. Noble, East Canton, Ohio 44730
3680 Embassy Parkway Suite B, Fairlawn, Ohio 44333
9 East Main Street, Adena, Ohio 43901
610 West State Street, Alliance, Ohio 44601
256 2nd Street, Bergholz, Ohio 43908
210 Wabash Ave S, Brewster, Ohio 44613
49028 Foulks Drive, Calcutta, Ohio 43920
1017 Canton Road NW, Carrollton, Ohio 44615
44 Smithfield Street, Dillonvale, Ohio 43917
Adena
Alliance
Bergholz
Brewster
Calcutta
Carrollton
Dillonvale
East Canton
Fairlawn
Green
30034 Canal Street, P.O. Box 178, Hanoverton, Ohio 44423
Hanoverton
1215 W. Maple Street, Hartville, Ohio 44632
Hartville
Jackson-Belden 4026 Dressler Road NW, Canton, Ohio 44718
Lisbon
Louisville
Malvern
Minerva
Mount Pleasant
Salem
Waynesburg
Wellsville
Boardman LPO 725 Boardman-Canfield Road, Building 1, Boardman, Ohio 44512
7985 Dickey Drive, Lisbon, Ohio 44432
1111 N. Chapel Street, Louisville, Ohio 44641
4070 Alliance Road, Malvern, Ohio 44644
614 E. Lincoln Way, P.O. Box 256, Minerva, Ohio 44657
141 S. Ellsworth Avenue, P.O. Box 798, Salem, Ohio 44460
8607 Waynesburg Drive SE, P.O. Box 746, Waynesburg, Ohio 44688
298 Union Street, Mount Pleasant, Ohio 43939
565 Main Street, Wellsville, Ohio 43968
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
The Bank considers its physical properties to be in good operating condition and suitable for the purposes for which they are
being used. In management’s opinion, all properties owned and operated by the Bank are adequately insured.
Item 3—Legal Proceedings
The Corporation is not a party to any pending material legal or administrative proceedings, other than ordinary routine
litigation incidental to the business of the Corporation. Further, there are no material legal proceedings in which any director,
executive officer, principal shareholder or affiliate of the Corporation is a party or has a material interest therein that is adverse to
the Corporation. No routine litigation in which the Corporation is involved is expected to have a material adverse impact on the
financial position or results of operations of the Corporation.
Item 4—Mine Safety Disclosures
None.
9
PART II
Item 5—Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
The Corporation had 3,096,100 common shares outstanding on June 30, 2023, with 730 shareholders of record and an
estimated 816 additional beneficial holders whose stock was held in nominee name. Attention is directed to Item 12 in this Form 10-
K for information regarding the Corporation’s equity incentive plans, which information is incorporated herein by reference.
The common shares of Consumers Bancorp, Inc. are quoted on the OTCQX® Best Market under the symbol CBKM. The
following quoted market prices reflect inter-dealer prices, without adjustments for retail markups, markdowns, or commissions and
may not represent actual transactions. The market prices represent highs and lows reported during the applicable quarterly period.
Quarter Ended
High
Low
Cash dividends paid per share
September 30,
2022
December 31,
2022
March 31,
2023
June 30,
2023
$
21.00 $
18.20
0.17
21.00 $
17.90
0.17
20.45 $
17.21
0.17
18.50
15.83
0.17
Quarter Ended
High
Low
Cash dividends paid per share
September 30,
2021
December 31,
2021
March 31,
2022
June 30,
2022
$
23.75 $
19.21
0.16
23.20 $
21.47
0.16
24.50 $
21.86
0.16
23.40
19.00
0.16
Management does not have knowledge of the prices paid in all transactions and has not verified the accuracy of those prices
that have been reported. Because of the lack of an established market for the Corporation’s common shares, these prices may not
reflect the prices at which the common shares would trade in an active market.
The Corporation’s management is currently committed to continuing to pay regular cash dividends; however, there can be no
assurance as to future dividends because they are dependent on the Corporation’s future earnings, capital requirements and financial
condition. The Corporation’s principal source of funds for dividend payment is dividends received from the Bank. Banking
regulations limit the amount of dividends that may be paid without prior approval of regulatory agencies. Under these regulations,
the amount of dividends that may be paid in any calendar year is limited to the current year’s net profits, combined with the retained
net profits of the preceding two years, subject to the capital requirements described above. See Note 1 and Note 13 to the
Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations
for dividend restrictions.
There were no repurchases of the Corporation’s securities during fiscal year 2023.
10
Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Dollars in thousands, except per share data)
General
The following is management’s analysis of the Corporation’s financial condition and results of operations as of and for the
years ended June 30, 2023 and 2022. This discussion is designed to provide a more comprehensive review of the operating results
and financial position 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.
Forward-Looking Statements
Certain statements contained in this Annual Report on Form 10-K, 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 “may,” “continue,”
“estimate,” “intend,” “plan,” “seek,” “will,” “believe,” “project,” “expect,” “anticipate” and similar expressions are intended to
identify forward-looking statements. These forward-looking statements may involve risks and uncertainties that are difficult to
predict, may be beyond our 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, we undertake no obligation to update these forward-looking
statements to reflect subsequent events or circumstances. 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:
●
●
●
●
●
●
●
●
●
●
●
●
●
changes in local, regional and national economic conditions becoming less favorable than we expect, resulting in a
deterioration in asset credit quality or debtors being unable to meet their obligations because of high unemployment rates
and inflationary pressures;
rapid fluctuations in market interest rates could result in changes in fair market valuations and a decline in net interest
income;
changes in the level of non-performing assets and charge-offs;
unanticipated changes in our liquidity position, including, but not limited to, changes in the cost of liquidity and our ability
to find alternative funding sources;
the effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities, and
insurance) with which we must comply;
the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Federal
Reserve Board;
breaches of security or failures of our technology systems due to technological or other factors and cybersecurity threats;
changes in consumer spending, borrowing and savings habits;
declining asset values impacting the underlying value of collateral;
changes in accounting policies, rules and interpretations;
our ability to attract and retain qualified employees;
competitive pressures on product pricing and services; and
changes in the reliability of our vendors, internal control systems or information systems.
The risks and uncertainties identified above are not the only risks we face. Additional risks and uncertainties not presently
known to us or that we currently believe to be immaterial also may adversely affect us. Should any known or unknown risks and
uncertainties develop into actual events, those developments could have material adverse effects on our business, financial condition,
and results of operations.
Overview
Consumers Bancorp, Inc., a bank holding company incorporated under the laws of the State of Ohio, owns all the issued and
outstanding capital stock of Consumers National Bank, a bank chartered under the laws of the United States of America. The
Corporation’s activities have been limited primarily to holding the common stock 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, Mahoning, Stark, Summit, and Wayne
counties in Ohio. Its market includes these counties as well as the contiguous counties in northeast Ohio, western Pennsylvania, and
northern 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 the branch acquisition and 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
11
loans. In relation to the branch acquisition, the Corporation recorded goodwill of $1,616. This transaction qualified as a business
combination.
Comparison of Results of Operations for the Years Ended June 30, 2023 and June 30, 2022
Net Income. Net income was $10,674 for fiscal year 2023 compared with $11,192 for fiscal year 2022. The following key
factors summarize our results of operations for the year ended June 30, 2023 compared with the same prior year period:
●
●
●
net interest income increased by $969, or 3.0%, in fiscal year 2023, primarily because of a $51,065, or 5.6%, increase
in average interest-earning assets;
a $855 provision for loan loss expense was recorded during fiscal year 2023 compared with $735 during fiscal year
2022; and
total other expenses increased by $1,470, or 6.3%, in fiscal year 2023 due to increases in salaries and employee benefits;
occupancy and equipment expenses; and professional and director fees.
Return on average equity and return on average assets were 20.27% and 1.05%, respectively, for fiscal year 2023 compared
with 16.43% and 1.17%, respectively, for the same period last year.
Net Interest Income. Net interest income, the difference between interest income earned on interest-earning assets and interest
expense incurred on interest-bearing liabilities, is the largest component of the Corporation’s earnings. Net interest income is affected
by changes in the volumes, rates and composition of interest-earning assets and interest-bearing liabilities. 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.
Net interest margin is calculated by dividing net interest income on a fully tax equivalent basis (FTE) by total interest-earning
assets. FTE income includes tax-exempt income, restated to a pre-tax equivalent, based on the statutory federal income tax rate of
21.0%. All average balances are daily average balances. Non-accruing loans are included in average loan balances and average
securities include unrealized gains and losses on securities available for sale, while yields are based on average amortized cost.
Net Interest Income Year ended June 30,
Net interest income
Taxable equivalent adjustments to net interest
Net interest income, fully taxable equivalent
Net interest margin
Taxable equivalent adjustment
Net interest margin, fully taxable equivalent
$
$
2023
2022
33,715 $
204
33,919 $
3.35 %
0.02
3.37 %
32,746
513
33,259
3.54 %
0.06
3.60 %
FTE net interest income for fiscal year 2023 was $33,919, an increase of $660 or 2.0%, from $33,259 in fiscal year 2022. The
Corporation’s tax equivalent net interest margin was 3.37% for fiscal year 2023 and 3.60% for fiscal year 2022. FTE interest income
for fiscal year 2023 was $41,143, an increase of $6,470, or 18.70%, from fiscal year 2022, primarily due to a $51,065, or 5.6%,
increase in average interest-earning assets from fiscal year 2022. The growth in average interest-earning assets was primarily a result
of a $65,313, or 10.9%, increase in average loans. In fiscal year 2022, interest income was positively impacted by $2,612 in interest
and fee income that was recognized on Paycheck Protection Program loans. The Corporation’s yield on average interest-earning
assets was 4.09% for the 2023 fiscal year compared with 3.75% for the same period last year.
Interest expense for fiscal year 2023 was $7,224, an increase of $5,810 from fiscal year 2022 primarily because of the rapid
increase in current market interest rates and the increased competition for deposits. The Corporation’s average cost of funds was
1.03% for fiscal year 2023 compared with 0.22% for the same prior year period.
12
Average Balance Sheet and Net Interest Margin
2023
2022
Average
Balance
Interest
Yield/
Rate
Average
Balance
Interest
Yield/
Rate
Interest earning assets:
Taxable securities
Nontaxable securities (1)
Loan receivables (1)
Federal bank and other restricted stocks
Equity securities
Interest bearing deposits and federal funds sold
Total interest earning assets
Noninterest earning assets
Total assets
Interest bearing liabilities:
Interest bearing demand
Savings
Time deposits
Short-term borrowings
FHLB advances
Total interest-bearing liabilities
Noninterest-bearing liabilities
Total liabilities
Shareholders’ equity
Total liabilities and shareholders’ equity
Net interest income, interest rate spread (1)
Net interest margin (net interest as a percent of
$ 209,906 $ 5,338
84,023 2,459
662,163 32,757
149
33
407
970,954 41,143
2,360
384
12,118
48,917
$ 1,019,871
22,603
10,019
$ 157,508 $ 1,128
352,897 2,513
156,357 3,019
397
167
699,384 7,224
267,837
967,221
52,650
$ 1,019,871
average interest earning assets) (1)
Federal tax exemption on non-taxable
securities and loans included in interest
income
Average interest earning assets to interest
bearing liabilities
2.24 % $ 185,741 $
2.67
86,710
4.95
6.31
8.59
3.36
4.09 %
3,572
2,580
596,850 28,216
82
33
190
919,889 34,673
2,489
427
47,672
39,059
$ 958,948
0.72 % $ 147,312 $
349,380
0.71
113,143
1.93
12,960
1.76
14,639
1.67
637,434
1.03 %
253,407
890,841
68,107
$ 958,948
166
388
568
47
245
1,414
1.87 %
3.00
4.73
3.29
7.73
0.40
3.75 %
0.11 %
0.11
0.50
0.36
1.67
0.22 %
$ 33,919
3.06 %
$ 33,259
3.53 %
3.37 %
3.60 %
$
204
$
513
138.83 %
144.31 %
____________
(1)
Calculated on a fully taxable equivalent basis utilizing a statutory federal income tax rate of 21.0%.
13
The following table presents the changes in the Corporation’s interest income and interest expense resulting from changes in
interest rates and changes in the volume of interest-earning assets and interest-bearing liabilities. Changes attributable to both rate
and volume that cannot be segregated have been allocated in proportion to the changes due to rate and volume.
INTEREST RATES AND INTEREST DIFFERENTIAL
2023 Compared to 2022
Increase / (Decrease)
Change
due to
Volume
Change
due to
Rate
Total
Change
2022 Compared to 2021
Increase / (Decrease)
Change
due to
Volume
Change
due to
Rate
Total
Change
(In thousands)
$
1,766 $
(121 )
4,541
67
975 $
177
3,188
(4 )
1,932 $
558
2,188
1
791 $
(298 )
1,353
71
1,978 $
432
3,315
6
Interest earning assets:
Taxable securities
Nontaxable securities (1)
Loan receivables (2)
Federal bank and other restricted stocks
Interest bearing deposits and federal
funds sold
Equity securities
Total interest and dividend income
Interest bearing liabilities:
Interest bearing demand
Savings deposits
Time deposits
Short-term borrowings
FHLB advances
Total interest expense
Net interest income
____________
(1) Nontaxable income is adjusted to a fully tax equivalent basis utilizing a statutory federal income tax rate of 21.0%.
(2) Non-accrual loan balances are included for purposes of computing the rate and volume effects although interest on these
950
2,121
2,161
293
(1 )
5,524
(3,149 ) $
17
55
(565 )
38
(31 )
(486 )
6,257 $
41
115
107
6
(84 )
185
4,603 $
12
4
290
57
(77 )
286
3,809 $
962
2,125
2,451
350
(78 )
5,810
660 $
24
16
5,771
455
3
2,375
92
17
4,788
(238 )
(3 )
4,095
217
—
6,470
$
(68 )
(1 )
983
(24 )
(60 )
(672 )
32
53
(671 )
1,654
46
(126 )
1,127
5
balances has been excluded.
Provision for Loan Losses. The provision for loan losses represents the charge to income necessary to adjust the allowance
for loan losses to an amount that represents management’s assessment of the estimated probable credit losses in the Corporation’s
loan portfolio that have been incurred at each balance sheet date. The amount of the provision is affected by loan charge-offs,
recoveries and changes in specific and general allocations required for the allowance for loan losses. Management considers a
number of factors that impact the provision for loan losses, such as historical loss experience, the present and prospective financial
condition of borrowers, the current conditions within the markets where the Corporation originates loans, the status of nonperforming
assets, the estimated underlying value of the collateral and other factors related to the ultimate collectability of the loan portfolio.
A provision for loan loss expense of $855 was recorded in fiscal year 2023 compared with $735 in fiscal year 2022. The loan
loss provision expense recorded in fiscal year 2023 was primarily due to the organic growth within the loan portfolio. For fiscal year
2023, net charge offs of $291, or 0.04% of total loans, were recorded compared with $46, or 0.01% of total loans, for the same period
last year. The allowance for loan losses as a percentage of loans was 1.09% at June 30, 2023 and 1.17% at June 30, 2022. The decline
in the allowance for loan losses as a percentage of total loans was due to the improvement in economic conditions as the economy
has remained resilient following the pandemic and through the rapid rise in short-term interest rates. Also, substandard and non-
accrual loans are at very low levels.
Non-performing loans were $104, or 0.01% of total loans, as of June 30, 2023. This compared with $440, or 0.07% of total
loans, as of June 30, 2022. Non-performing loans declined primarily because two loans that had a balance of $382 as of June 30,
2022 were returned to accrual status during fiscal year 2023. 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 closely monitor these loans and
believe the prospect for recovery of principal, less identified specific reserves, are favorable.
Other Income. Total other income increased by $12, or 0.3%, to $4,747 for fiscal year 2023. Service charges on deposit
accounts increased by $138, or 9.5%, in fiscal year 2023 primarily as a result of increases in personal and business service charges
on demand deposit accounts. Debit card interchange income increased by $112, or 5.4% in fiscal year 2023 because of increased
debit card usage and an increase in the number of cards issued. These increases were partially offset by mortgage banking activity
14
income decreasing by $287 in fiscal year 2023 because of the increase in mortgage rates impacting refinancing and new home sales
volume.
Other Expenses. Total other expenses were $24,685 for the year ended June 30, 2023; an increase of $1,470, or 6.3%, from
$23,215 for the year ended June 30, 2022.
Salaries and employee benefit expenses increased by $760, or 5.7%, during fiscal year 2023 primarily due to merit and cost
of living increases and lower deferred loan costs. These increases were partially offset by lower salary continuation plan expenses
because of an increase in the discount rate and lower incentive expenses.
Professional and director fees increased by $187, or 21.3%, during fiscal year 2023 from the same period last year primarily
because of an increase in director fees and consulting expenses. Director fees increased mainly due to the issuance of restricted stock
awards and units in fiscal year 2023 as the Corporation started issuing restricted stock units in fiscal year 2023 to better align the
expense recognition with the performance criteria. In addition, consulting fees were higher in fiscal year 2023 as the Corporation
prepared for the additional documentation and audit requirements of the FDIC Improvement Act of 1991 since the Corporation now
has over $1 billion in total assets and as it prepared for the adoption of the current expected credit loss model accounting standard.
Financial institutions tax expenses decreased by $64, or 11.8%, in fiscal year 2023 since this is a capital-based tax and total
capital was lower as of the measurement date in fiscal year 2023 because of the accumulated other comprehensive loss.
Other expenses increased by $256, or 12.7%, because of increases primarily in insurance, postage, and loan expenses as a
result of the growth in the organization.
Income Tax Expense. Income tax expense totaled $2,248 and $2,339 and the effective tax rates were 17.4% and 17.3% for
the fiscal years ended June 30, 2023 and 2022, respectively. Income tax expense was calculated utilizing a statutory federal income
tax rate of 21.0% in fiscal years 2023 and 2022. The effective tax rate differs from the federal statutory rate as a result of tax-exempt
income from obligations of states and political subdivisions, loans and bank owned life insurance earnings.
Financial Condition
Total assets as of June 30, 2023 were $1,060,024 compared with $977,313 at June 30, 2022, an increase of $82,711, or 8.5%.
The growth in total assets is mainly attributable to an increase of $98,519, or 16.1%, in total loans and was primarily funded by a
$65,971, or 7.4%, increase in total deposits.
Securities. Total securities were $286,575 at June 30, 2023, of which $279,605 were classified as available-for-sale and $6,970
were classified as held-to-maturity. The securities portfolio is mainly comprised of mortgage-backed securities and collateralized
mortgage obligations issued by Fannie Mae, Freddie Mac and Ginnie Mae, state and political subdivisions and government-
sponsored enterprises. The following tables summarize the amortized cost and fair value of available-for-sale securities at June 30,
2023 and 2022 and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive
income or loss:
June 30, 2023
Available-for-sale
Obligation of U.S Treasury
Obligations of U.S. government-sponsored entities and agencies
Obligations of state and political subdivisions
U.S. Government-sponsored mortgage-backed securities - residential
U.S. Government-sponsored mortgage-backed securities –
commercial
U.S. Government-sponsored collateralized mortgage obligations –
residential
Other debt securities
Total available-for-sale securities
$
$
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
8,941 $
29,430
92,891
104,689
— $
7
63
12
(533 ) $
(3,745 )
(8,982 )
(15,066 )
8,408
25,692
83,972
89,635
8,604
—
(1,809 )
6,795
55,800
17,175
317,530 $
8
—
90 $
(5,738 )
(2,142 )
(38,015 ) $
50,070
15,033
279,605
15
June 30, 2022
Available-for-sale
U.S. Treasury
Obligations of U.S. government-sponsored entities and agencies
Obligations of state and political subdivisions
U.S. government-sponsored mortgage-backed securities - residential
U.S. government-sponsored mortgage-backed securities - commercial
U.S. government-sponsored collateralized mortgage obligations –
residential
Other debt securities
Total available-for-sale securities
$
$
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
8,909 $
28,689
105,977
113,812
8,623
40,952
17,367
324,329 $
— $
—
129
13
—
1
—
143 $
(462 ) $
(2,424 )
(8,749 )
(11,642 )
(1,322 )
8,447
26,265
97,357
102,183
7,301
(2,774 )
(752 )
(28,125 ) $
38,179
16,615
296,347
The following tables summarize the amortized cost and fair value of held-to-maturity securities at June 30, 2023 and 2022
and the corresponding gross unrecognized gains and losses:
June 30, 2023
Held-to-maturity
Obligations of state and political subdivisions
June 30, 2022
Held-to-maturity
Obligations of state and political subdivisions
Amortized
Cost
Gross
Unrecognized
Gains
Gross
Unrecognized
Losses
Fair
Value
$
6,970 $
— $
(676 ) $
6,294
Amortized
Cost
Gross
Unrecognized
Gains
Gross
Unrecognized
Losses
Fair
Value
$
7,874 $
47 $
(90 ) $
7,831
The following tables summarize the amounts and distribution of the Corporation’s securities held and the weighted average
yields as of June 30, 2023:
Available-for-sale
Obligations of U.S. Treasury
Over 3 months through 1 year
Over 1 year through 5 years
Total obligations of U.S. Treasury
Obligations of government-sponsored entities:
Over 3 months through 1 year
Over 1 year through 5 years
Over 5 years through 10 years
Over 10 years
Total obligations of government-sponsored entities
Obligations of state and political subdivisions:
3 months or less
Over 3 months through 1 year
Over 1 year through 5 years
Over 5 years through 10 years
Over 10 years
Total obligations of state and political subdivisions
Mortgage-backed securities - residential:
Over 3 months through 1 year
Over 1 year through 5 years
Over 5 years through 10 years
Over 10 years
Total mortgage-backed securities - residential
$
Amortized
Cost
Fair
Value
Average
Yield
2,494 $
6,447
8,941
1,001
5,767
20,181
2,481
29,430
1,000
502
16,891
13,777
60,721
92,891
94
18,834
76,352
9,409
104,689
2,412
5,996
8,408
987
5,476
17,134
2,095
25,692
996
504
16,168
12,650
53,654
83,972
91
17,492
64,444
7,608
89,635
0.60 %
0.91
0.82
2.22
2.79
2.03
2.04
2.48
0.50
5.43
2.94
2.76
3.00
2.94
2.09
2.62
1.94
1.92
2.06
16
Collateralized mortgage obligations:
Mortgage-backed securities – commercial:
Over 1 year through 5 years
Over 5 years through 10 years
Over 10 years
Total mortgage-backed securities - commercial
Collateralized mortgage obligations:
3 months or less
Over 3 months through 1 year
Over 1 year through 5 years
Over 5 years through 10 years
Over 10 years
Total collateralized mortgage obligations
Other debt securities
Over 5 years through ten years
Total other debt securities
Total available-for-sale securities
Held-to-maturity
Obligations of state and political subdivisions:
Over 1 year through 5 years
Over 5 years through 10 years
Over 10 years
Total held-to-maturity securities
Amortized
Cost
Fair
Value
Average
Yield
$
$
$
$
1,321 $
2,920
4,363
8,604
110
812
19,508
32,513
2,857
55,800
17,175
17,175
317,530 $
1,071
2,379
3,345
6,795
109
810
18,723
28,190
2,238
50,070
15,033
15,033
279,605
3,092 $
533
3,345
6,970 $
2,988
533
2,818
6,294
1.69 %
1.90
2.12
1.98
1.47
5.41
4.33
2.75
1.67
3.28
3.52
3.52
2.61 %
2.14 %
4.23
3.01
2.72 %
The weighted average interest rates are based on coupon rates for securities purchased at par value and on effective yields
considering amortization or accretion if the securities were purchased at a premium or discount. The weighted average yield on tax-
exempt obligations has been calculated on a tax equivalent basis. Average yields are based on amortized cost balances.
Loans. Loan receivables increased by $98,519, or 16.1%, to $710,362 at June 30, 2023 compared to $611,843 at June 30,
2022. Commercial loans increased by $25,547, or 29.3%, primarily because of a third-party residential mortgage warehouse line-of-
credit that had a balance of $10,000 as of June 30, 2023 and had a zero balance as of June 30, 2022. Consumer loans increased by
$20,588, or 45.9%, primarily as a result of the expansion of indirect auto lending and an increase in direct auto loans due to successful
marketing campaigns. Major classifications of loans, net of deferred loan fees and costs, were as follows as of June 30:
Commercial
Commercial real estate:
Construction
Other
1-4 Family residential real estate:
Owner occupied
Non-owner occupied
Construction
Consumer loans
Total loans
2023
2022
$
112,627 $
87,080
23,905
318,054
158,037
23,840
8,490
65,409
710,362 $
15,095
291,310
143,180
25,988
4,369
44,821
611,843
$
17
The following table shows the major classifications of loans, net of deferred fees and costs, which are based on the contractual
terms for repayment of principal, that are due in the periods indicated as of June 30, 2023:
Commercial
Commercial real estate:
Construction
Other
1-4 Family residential real estate:
Owner occupied
Non-owner occupied
Construction
Consumer loans
Total loans
After one year After five years
Maturing
Within
one year
but within
five years
But within
Fifteen years
After
Fifteen years
$
25,056 $
39,994 $
47,450 $
127 $
Total
112,627
1
10,626
985
696
—
1,839
39,203 $
12,718
12,959
2,396
1,264
3,215
33,369
105,915 $
2,878
123,828
35,547
14,649
—
30,018
254,370 $
8,308
170,641
23,905
318,054
119,109
7,231
5,275
183
310,874 $
158,037
23,840
8,490
65,409
710,362
$
The following is a schedule of fixed and variable rate 1-4 family residential real estate construction, commercial and
commercial real estate loans due after one year (variable rate loans are those loans with floating or adjustable interest rates) as of
June 30, 2023:
Total due after one year:
Commercial
Commercial real estate:
Construction
Other
1-4 Family residential real estate:
Owner occupied
Non-owner occupied
Construction
Consumer loans
Fixed
Interest Rates
$
76,299 $
Variable
Interest Rates
11,272
3,128
154,356
126,204
15,300
4,904
63,543
20,776
153,072
30,848
7,844
3,586
27
Allowance for Loan Losses. The allowance for loan losses balance and the provision charged to expense are judgmentally
determined by management based upon a periodic review of the loan portfolio for valuation purposes and to determine the adequacy
of the allowance for loan losses. Management establishes allowances for estimated losses on loans based upon its evaluation of the
pertinent factors underlying the types and quality of loans; historical loss experience based on volume and types of loans; trend in
portfolio volume and composition; level and trend of nonperforming assets; detailed analysis of individual loans for which full
collectability may not be assured; determination of the existence and realizable value of the collateral and guarantees securing such
loans and the current economic conditions affecting the collectability of loans in the portfolio.
Failure to receive principal and interest payments when due on any loan results in efforts to restore such loan to a current
status. Loans are classified as non-accrual when, in the opinion of management, full collection of principal and accrued interest is
not expected. The loans must be brought and kept current for six sustained payments before being considered for removal from non-
accrual status. 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. If a loan is impaired, a portion of the
allowance is allocated so the loan is reported, net, at the present value of estimated future cash flows using the loan’s existing rate
or at the fair value of collateral if repayment is expected from the collateral. Loans are evaluated for impairment when payments are
delayed, typically 90 days or more, or when it is probable that not all principal and interest amounts will be collected according to
the original terms of the loan. As of June 30, 2023, impaired loans totaled $405, of which $54 are included in non-accrual loans.
Continued unsuccessful collection efforts generally lead to initiation of foreclosure or other legal proceedings.
18
The following table summarizes non-accrual loans, non-performing assets, impaired and restructured loans, and associated
ratios for the years ended June 30:
Non-accrual loans
Accruing loans past due 90 days or more
Total non-performing loans
Other real estate and repossessed assets owned
Total non-performing assets
Impaired loans
Accruing restructured loans
Non-accrual to total loans
ALLL to non-accrual loans
*Not meaningful
$
$
$
$
$
2023
2022
54 $
50
104 $
124
228 $
405 $
351 $
0.01 %
N/M *
431
9
440
—
440
473
42
0.07 %
N/M *
The non-performing loans are either in the process of foreclosure or efforts are being made to work with the borrower to bring
the loan current. Properties and vehicles acquired by the Corporation as a result of foreclosure or repossession, or by deed in lieu of
foreclosure, are classified as “other real estate and repossessed assets owned” until they are sold or otherwise disposed of.
The following table summarizes the Corporation’s loan loss experience, and provides a breakdown of the charge-off, recovery
and other activity for the years ended June 30:
Allowance for loan losses at beginning of year
Loans charged off:
1-4 Family residential real estate
Consumer loans
Total charge offs
Recoveries:
Commercial
Commercial real estate
1-4 Family residential real estate
Consumer loans
Total recoveries
Net charge offs
Provision for loan losses charged to operations
Allowance for loan losses at end of year
$
2023
2022
$
7,160
$
6,471
6
441
447
—
1
4
151
156
291
855
7,724
$
41
132
173
23
2
20
82
127
46
735
7,160
Ratio of net charge offs to average loans outstanding
ALLL to total loans
0.04 %
1.09 %
0.01 %
1.17 %
The following schedule is a breakdown of the allowance for loan losses allocated by type of loan and related ratios:
Allocation of the Allowance for Loan Losses
Allowance
Amount
% of Loan
Type to
Total Loans
Allowance
Amount
% of Loan
Type to
Total Loans
$
$
June 30, 2023
1,308
3,943
1,571
902
7,724
June 30, 2022
15.9 % $
48.1
26.8
9.2
100.0 % $
960
3,927
1,645
628
7,160
14.2 %
50.1
28.4
7.3
100.0 %
Commercial
Commercial real estate loans
1-4 Family residential real estate
Consumer loans
Total
While management’s periodic analysis of the adequacy of the allowance for loan losses may allocate portions of the allowance
for specific problem loan situations, the entire allowance is available for any loan charge-off that may occur. While the Corporation
has historically experienced strong trends in asset quality, due to the current economic concerns with high inflation and rising interest
rates, uncertainty remains regarding future levels of criticized and classified loans, nonperforming loans and charge-offs.
Management will continue to closely monitor changes in the loan portfolio and adjust the provision accordingly.
19
Other Assets: As of June 30, 2023, the total accrued interest receivable and other assets were $22,967 compared with $10,184
as of June 30, 2022. As of June 30, 2023, a $10,250 investment in a limited partnership that invests in qualified affordable housing
projects that will generate tax benefits for the investors is included in other assets. See Note 16—Affordable Tax Credit Partnership
to the Consolidated Financial Statements, for information concerning the low-income housing tax credit investment.
Deposits. Total deposits increased by $65,971, or 7.4%, from $886,562 at June 30, 2022 to $952,533 at June 30, 2023. As
market rates have risen, customers have chosen to move funds from savings and money market deposit products to higher yielding
certificates of deposits. As of June 30, 2023, the Corporation maintained a favorable funding mix with 26.3% of total deposits in
noninterest-bearing demand deposits, 16.0% in interest-bearing demand deposits, 35.2% in savings and money market deposits, and
22.5% in certificates and other time deposits.
The following is a schedule of average deposit amounts and average rates paid on each category for the periods included:
Years Ended June 30,
2023
2022
Rate
Amount
Rate
Noninterest-bearing demand deposit
Interest-bearing demand deposit
Savings
Certificates and other time deposits
Total
Amount
$
258,463
157,508
352,897
156,357
925,225
$
— $
0.72 %
0.71
1.93
0.72 % $
246,089
147,312
349,380
113,143
855,924
—
0.11 %
0.11
0.50
0.13 %
Uninsured deposits as of June 30, 2023 were $267,449, or 28.1% of total deposits, and includes $95,445 of uninsured public
fund deposits that are fully collateralized. Uninsured deposits as of June 30, 2022 were $264,350, or 29.8% of total deposits, and
includes $95,075 of uninsured public fund deposits that are fully collateralized. Uninsured deposits as of June 30, 2023 and 2022
are based on estimates and include portions of FDIC-insured deposit accounts that exceed the insurance limit of $250 thousand per
separately insured depositor.
The following table summarizes time deposits issued in amounts of more than $250 thousand as of June 30, 2023 by time
remaining until maturity:
Maturing in:
Under 3 months
Over 3 to 6 months
Over 6 to 12 months
Over 12 months
Total
$
$
16,270
6,384
19,796
3,122
45,572
Short-term Borrowings: Short-term borrowings increased by $5,072, or 23.8%, to $26,367 at June 30, 2023 from $21,295 at
June 30, 2022. This increase was primarily associated with large new deposits from existing local commercial customers into the
sweep repurchase agreement product that is fully collateralized. See Note 8—Short-Term Borrowings to the Consolidated Financial
Statements, for information concerning short-term borrowings.
Other Liabilities: As of June 30, 2023, the total accrued interest payable and other liabilities was $16,864 compared with
$7,230 as of June 30, 2022. As of June 30, 2023, an unfunded commitment of $9,668 associated with an affordable housing tax
credit investment was included in other liabilities. See Note 16—Affordable Tax Credit Partnership to the Consolidated Financial
Statements, for information concerning the low-income housing tax credit investment.
Capital Resources
Total shareholders’ equity increased by $1,514 from $53,970 as of June 30, 2022 to $55,484 at June 30, 2023. The primary
reason for the increase in shareholders’ equity was because of net income of $10,674 for the 2023 fiscal year which was partially
offset by an increase of $7,855 in the accumulated other comprehensive loss from the mark-to-market of available-for-sale securities
and from cash dividends paid of $2,095. The total accumulated other comprehensive loss was $29,961 as of June 30, 2023. Available-
for-sale securities and shareholders’ equity were impacted by rapidly rising interest rates during 2022 and 2023 causing the
accumulated other comprehensive loss to increase as available-for-sale securities are marked to fair market value. As market interest
rates rise, the fair value of fixed-rate securities decline with a corresponding net of tax decline recorded in the accumulated other
comprehensive loss portion of equity. This unrealized loss in securities is temporary and is adjusted monthly for additional market
interest rate fluctuations, principal paydowns, calls, and maturities. The Corporation has significant sources of liquidity and therefore
does not expect to have to sell securities to fund growth.
20
For fiscal year 2023, the average equity to average total assets ratio was 5.16% and the dividend payout ratio was 19.6%. For
fiscal year 2022, the average equity to average total assets ratio was 7.10% and the dividend payout ratio was 17.4%.
At June 30, 2023, management believes the Bank complied with all regulatory capital requirements. Based on the Bank’s
computed regulatory capital ratios, the OCC has determined the Bank to be well capitalized under the Federal Deposit Insurance Act
as of its latest exam date. The Bank’s actual and required capital amounts are disclosed in Note 13-Regulatory Matters to the
Consolidated Financial Statements. Management is not aware of any matters occurring subsequent to that exam that would cause the
Bank’s capital category to change.
At June 30, 2023, the Corporation had no unconsolidated, related special purpose entities, nor did the Corporation engage in
hedging contracts, such as interest rate swaps, which may expose the Corporation to liabilities greater than the amounts recorded on
the consolidated balance sheet. The Corporation’s investment policy prohibits engaging in derivative contracts for speculative
trading purposes; however, in the future, the Corporation may pursue certain contracts, such as interest rate swaps, to execute a
sound and defensive interest rate risk management policy.
Liquidity
Management considers the asset position of the Bank to be sufficiently liquid to meet normal operating needs and conditions.
The Bank’s earning assets are divided primarily between loans and available-for-sale securities, with any excess funds placed in
federal funds sold or interest-bearing deposit accounts with other financial institutions.
For fiscal year 2023, net cash inflows from operating activities were $13,316, net cash inflows from financing activities were
$69,706 and net cash outflows from investing activities were $92,219. Major sources of cash were a $65,971 net increase in deposits
and $37,794 in cash received from sales, maturities, or principal pay downs of available-for-sale securities. Major uses of cash were
a $98,945 net increase in loans and $31,799 of purchases of available-for-sale securities. Total cash and cash equivalents were
$20,952 as of June 30, 2023 compared to $18,529 at June 30, 2022.
The Bank groups its loan portfolio into four major categories: commercial loans; commercial real estate loans; 1-4 family
residential real estate loans; and consumer loans. The Bank’s 1-4 family residential real estate loan portfolio primarily consists of
fixed and variable rate mortgage loans for terms generally not longer than thirty years and variable rate home equity lines of credit.
Commercial and commercial real estate loans are comprised of both variable rate notes subject to interest rate changes based on the
prime rate or Treasury index, and fixed rate notes having maturities of generally not greater than twenty years. Consumer loans
offered by the Bank are generally written for periods of up to seven years, based on the nature of the collateral. These may be either
installment loans having regular monthly payments or demand type loans for short periods of time.
Funds not allocated to the Bank’s loan portfolio are invested in various securities having diverse maturity schedules. A
majority of the Bank’s securities are held in obligations of U.S. Government-sponsored entities, mortgage-backed securities, and
investments in tax-exempt municipal bonds.
The Bank offers several forms of deposit products to its customers. We believe the rates offered by the Bank and the fees
charged for them are competitive with others currently available in the market area. While the Bank continues to be under competitive
pressures in the Bank’s market area as financial institutions attempt to attract and keep new deposits, we believe many commercial
and retail customers are turning to community banks. Compared to our peers, the Corporation’s core deposits consist of a larger
percentage of noninterest-bearing demand deposits resulting in a lower cost of funds of 1.03% for fiscal year 2023.
Jumbo time deposits (those with balances of $250 and over) were $46,822 and $18,164 at June 30, 2023 and 2022,
respectively. These deposits are monitored closely by the Bank and typically 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. However, these deposits are not relied upon as a primary source of funding and there were no brokered
deposits as of June 30, 2023 or 2022.
To provide additional sources of liquidity, the Corporation has lines of credit with other financial institutions and has entered
into agreements with the Federal Home Loan Bank of Cincinnati (FHLB) and the Federal Reserve Discount Window. As of June
30, 2023, advances from the FHLB of Cincinnati totaled $8,776 compared with $8,256 as of June 30, 2022. As of June 30, 2023,
the Bank had the ability to borrow an additional $109,442 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.
21
Dividends from the Bank are the primary source of funds for payment of dividends to our shareholders. However, there are
statutory limits on the amount of dividends the Bank can pay without regulatory approval. Under these regulations, the amount of
dividends that may be paid in any calendar year is limited to the current year’s net profits, combined with the retained net profits of
the preceding two years, subject to the capital requirements described above. Additionally, the Bank may not declare or pay any
dividend if, after making the dividend, the Bank would be “undercapitalized,” as defined in the federal regulations. As of June 30,
2023, the Bank could, without prior approval, declare a dividend of approximately $21,811.
Impact of Inflation and Changing Prices
The financial statements and related data presented herein have been prepared in accordance with U.S. generally accepted
accounting principles, which require the measurement of financial position and results of operations primarily in terms of historical
dollars without considering changes in the relative purchasing power of money over time due to inflation. Unlike most industrial
companies, virtually all the assets and liabilities of the Corporation are monetary in nature. Therefore, as a financial institution,
interest rates have a more significant impact on the Corporation’s performance than the effects of general levels of inflation. Interest
rates do not necessarily move in the same direction or in the same magnitude as the prices of goods and services. The liquidity,
maturity structure and quality of the Corporation’s assets and liabilities are critical to the maintenance of acceptable performance
levels.
Critical Accounting Policies and Use of Significant Estimates
The financial condition and results of operations for the Corporation presented in the Consolidated Financial Statements,
accompanying notes to the Consolidated Financial Statements and management’s discussion and analysis 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 most significant accounting policies followed by the Corporation are
presented in Note 1-Summary of Significant Accounting Policies to the Consolidated Financial Statements. These policies, along
with the disclosures presented in the other financial statement notes, provide information on how significant assets and liabilities are
valued in the financial statements and how those values are determined.
Management views critical accounting policies to be those which are highly dependent on subjective or complex judgments,
estimates and assumptions, and where changes in those estimates and assumptions could have a significant impact on the financial
statements. In the event different assumptions or conditions were to prevail, and depending upon the severity of such changes, the
possibility of materially different financial condition or results of operations is a reasonable likelihood. Management has identified
the following as critical accounting policies:
Allowance for Loan Losses. The determination of the allowance for loan losses involves considerable subjective judgment
and estimation by management. The allowance for loan losses is a reserve established through a provision for loan losses charged to
expense, which represents management’s best estimate of probable losses that have been incurred within the existing portfolio of
loans. The balance in the allowance for loan losses is determined based on management’s review and evaluation of the loan portfolio
in relation to past loss experience, the size and composition of the portfolio, current economic events and conditions and other
pertinent factors, including management’s assumptions as to future delinquencies, recoveries, and losses. All these factors may be
susceptible to significant change. Among the many factors affecting the allowance for loan losses, some are quantitative while others
require qualitative judgment. Although management believes its process for determining the allowance adequately considers all the
potential factors that could potentially result in credit losses, the process includes subjective elements and may be susceptible to
significant change. To the extent actual outcomes differ from management’s estimates, additional provisions for loan losses may be
required that would adversely impact the Corporation’s financial condition or earnings in future periods.
Goodwill. The Corporation accounts for business combinations using the acquisition method of accounting. Accordingly, the
identifiable assets acquired and the liabilities assumed are recorded at their estimated fair values as of the date of acquisition with
any excess of the cost of the acquisition over the fair value recorded as goodwill. The carrying value of goodwill is tested annually
for impairment, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The evaluation
for impairment involves comparing the current estimated fair value of a reporting unit to its carrying value. If the current estimated
fair value of a reporting unit exceeds the carrying value, no additional testing is required, and an impairment loss is not recorded. If
the estimated fair value is less than the carrying value, further valuation procedures are performed that could result in impairment of
goodwill being recorded. Further valuation procedures would include allocating the estimated fair value to all assets and liabilities
of the reporting unit to determine an implied goodwill value. If the implied value of goodwill of a reporting unit is less than the
carrying amount of that goodwill, an impairment loss is recognized in an amount equal to that excess.
Management evaluated goodwill as of April 30, 2023, the measurement date, utilizing an income approach that incorporated
a discounted cash flow model that involved management assumptions based upon future growth and earnings projections. The
estimated fair value of the reporting unit was then compared to the current carrying value to determine if impairment had occurred.
It is our opinion that, as of the measurement date, the aggregate fair value of the reporting unit exceeded the carrying value of the
22
reporting unit. Therefore, management concluded that goodwill was not impaired. Although we believe our assumptions are
reasonable, actual results may vary significantly and it is impossible to know the future impact of evolving economic conditions. If
for any future period it is determined that there has been impairment in the carrying value of our goodwill balances, the Corporation
will record a charge to earnings, which could have a material adverse effect on net income, but not risk based capital ratios.
Contractual Obligations, Commitments and Contingent Liabilities
The following table presents, as of June 30, 2023, the Corporation’s significant fixed and determinable contractual obligations
by payment date. The payment amounts represent those amounts contractually due to the recipient and do not include any
unamortized premiums or discounts. Further discussion of the nature of each obligation is included in the referenced note to the
consolidated financial statements.
Certificates of deposit
Short-term borrowings
Federal Home Loan
advances
Salary continuation plan
Operating leases
Deposits without maturity
Note
Reference
7
8
2024
2025
2026
2027
2028
Thereafter Total
$ 193,381 $ 16,089 $
—
26,367
2,890 $
—
1,373 $
—
434 $
—
176 $ 214,343
26,367
—
9
10
5
671
142
177
—
4,056
141
145
—
46
141
125
—
3
141
115
—
—
253
115
—
4,000
2,869
342
8,776
3,687
1,019
— 738,190
Note 14-Commitments with Off-Balance Sheet Risk to the Consolidated Financial Statements discusses in greater detail other
commitments and contingencies and the various obligations that exist under those agreements. These commitments and
contingencies consist primarily of commitments to extend credit to borrowers under lines of credit.
Item 7A— Quantitative and Qualitative Disclosures About Market Risk
Not applicable for Smaller Reporting Companies.
23
Item 8— Financial Statements and Supplementary Data
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors
Consumers Bancorp, Inc.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Consumers Bancorp, Inc and subsidiaries (the “Company”)
as of June 30, 2023 and 2022; the related consolidated statements of income, comprehensive income, changes in shareholders'
equity, and cash flows for the years then ended; and the related notes (collectively referred to as the “financial statements”). In
our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the
Company as of June 30, 2023 and 2022, and the results of its operations and its cash flows for each of the years then ended in
conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
The Company's management is responsible for these financial statements. Our responsibility is to express an opinion on the
Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement,
whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting in accordance with the standards of the PCAOB. As part of our audits, we are required to obtain
an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness
of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due
to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that
was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are
material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and
we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the
accounts or disclosures to which it relates.
Allowance for Loan Losses - Significant Assumptions in General Reserves - Refer to Notes 1 and 4 to the Financial
Statements
Critical Audit Matter Description
The allowance for loan losses (allowance) represents management’s best estimate of probable losses that have been incurred
within the existing portfolio of loans. The allowance consists of specific and general components. The specific component relates
to loans that are individually classified as impaired. The general component covers nonimpaired loans and is based on historical
loss experience adjusted for current factors based on the risks present for each portfolio segment. These factors include
consideration of the following: levels of and trends in volume and terms of loans; effects of any changes in risk selection and
underwriting standards; other changes in lending policies, procedures and practices; experience, ability and depth of lending
management and other relevant staff; volume and severity of past-due loans and other similar conditions; quality of the loan
review system; value of underlying collateral for collateral dependent loans; national and local economic trends and conditions;
industry conditions; and effects of changes in credit concentrations.
24
We identified the Company’s significant assumptions in general reserves in the allowance for loan losses as a critical audit matter.
Given the significant estimates and assumptions management makes to estimate the current factor adjustments of the allowance
for loan losses, performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions required
a high degree of auditor judgment and an increased extent of effort.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the qualitative factors within the allowance included the following, among others:
• We obtained an understanding of management’s process for determining the need for qualitative factor adjustments,
identifying appropriate factors, and measuring the direction and magnitude of the adjustments.
• We evaluated the reasonableness of management’s judgments and tests of accuracy of underlying support related to
the qualitative factors.
• We evaluated the design of controls over the application of management’s qualitative factor methodology in the
estimate of general reserves.
• We evaluated management's rationale for determining qualitative adjustments were relevant and warranted for each
loan segment and assessed the measurement of qualitative factor adjustments applied by management.
• Where applicable, we tested the accuracy and completeness of data used by management in the measurement of
qualitative factor adjustments or vouched factors to relevant external data sources.
• We assessed changes in qualitative factors year over year against overall trends in credit quality within the Company
and broader trends within the industry and local and national economies to evaluate reasonableness of management’s
qualitative factor adjustments.
/s/ Plante & Moran, PLLC
We have served as the Company’s auditor since 2020.
Auburn Hills, Michigan
September 7, 2023
25
CONSOLIDATED BALANCE SHEETS
As of June 30, 2023 and 2022
(Dollar amounts in thousands, except per share data)
ASSETS:
Cash on hand and noninterest-bearing deposits in financial institutions
Federal funds sold and interest-bearing deposits in financial institutions
Total cash and cash equivalents
Certificates of deposit in financial institutions
Securities, available-for-sale
Securities, held-to-maturity (fair value 2023 $6,294 and 2022 $7,831)
Equity securities, at fair value
Federal bank and other restricted stocks, at cost
Loans held for sale
Total loans
Less allowance for loan losses
Net loans
Cash surrender value of life insurance
Premises and equipment, net
Goodwill
Core deposit intangible, net
Accrued interest receivable and other assets
Total assets
LIABILITIES:
Deposits:
Noninterest-bearing demand
Interest bearing demand
Savings
Time
Total deposits
Short-term borrowings
Federal Home Loan Bank advances
Accrued interest payable and other liabilities
Total liabilities
Commitments and contingent liabilities (Note 14)
SHAREHOLDERS’ EQUITY:
Preferred stock, no par value; 350,000 shares authorized
Common shares, no par value; 8,500,000 shares authorized; 3,144,739 and 3,132,056 shares
issued as of June 30, 2023 and June 30, 2022, respectively
Retained earnings
Treasury stock, at cost (48,639 and 75,382 common shares at June 30, 2023 and 2022,
respectively)
Accumulated other comprehensive loss
Total shareholders’ equity
Total liabilities and shareholders’ equity
2023
2022
11,734 $
21
11,755
2,501
279,605
6,970
386
2,168
764
710,362
(7,724 )
702,638
10,222
17,182
2,452
414
22,967
1,060,024 $
250,906 $
152,053
335,231
214,343
952,533
26,367
8,776
16,864
1,004,540
11,254
9,698
20,952
3,781
296,347
7,874
400
2,525
1,165
611,843
(7,160 )
604,683
9,959
16,521
2,452
470
10,184
977,313
257,665
157,462
369,054
102,381
886,562
21,295
8,256
7,230
923,343
—
—
20,769
65,485
(809 )
(29,961 )
55,484
1,060,024 $
20,287
56,906
(1,117 )
(22,106 )
53,970
977,313
$
$
$
$
See accompanying notes to consolidated financial statements.
26
CONSOLIDATED STATEMENTS OF INCOME
Years Ended June 30, 2023 and 2022
(Dollar amounts in thousands, except per share data)
2023
2022
Interest and dividend income:
Loans, including fees
Securities, taxable
Securities, tax-exempt
Equity securities
Federal bank and other restricted stocks
Federal funds sold and interest-bearing deposits
Total interest and dividend income
Interest expense:
Deposits
Short-term borrowings
Federal Home Loan Bank advances
Total interest expense
Net interest income
Provision for loan losses
Net interest income after provision for loan losses
Other income:
Service charges on deposit accounts
Debit card interchange income
Bank owned life insurance income
Mortgage banking activity
Securities gains, net
Net change in market value of equity securities
Other
Total other income
Other expenses:
Salaries and employee benefits
Occupancy and equipment
Data processing expenses
Debit card processing expenses
Professional and director fees
Federal Deposit Insurance Corporation assessments
Financial institutions tax
Marketing and advertising
Loan and collection expenses
Telephone and communications
Amortization of intangible
Other
Total other expenses
Income before income taxes
Income tax expense
Net income
Basic and diluted earnings per share
$
$
$
32,754 $
5,338
2,258
33
149
407
40,939
6,660
397
167
7,224
33,715
855
32,860
1,598
2,181
263
345
14
(14 )
360
4,747
14,020
3,186
775
1,124
1,065
608
478
740
211
362
56
2,060
24,685
12,922
2,248
10,674 $
3.45 $
28,207
3,572
2,076
33
82
190
34,160
1,122
47
245
1,414
32,746
735
32,011
1,460
2,069
257
632
6
(24 )
335
4,735
13,260
3,028
795
1,025
878
580
542
663
174
375
54
1,841
23,215
13,531
2,339
11,192
3.68
See accompanying notes to consolidated financial statements.
27
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Years Ended June 30, 2023 and 2022
(Dollar amounts in thousands, except per share data)
Net income
Other comprehensive income (loss), net of tax:
Net change in unrealized gains:
Unrealized losses arising during the period
Reclassification adjustment for gains included in income
Net unrealized loss
Income tax effect
Other comprehensive loss
Total comprehensive income (loss)
2023
2022
$
10,674 $
11,192
(9,929 )
(14 )
(9,943 )
2,088
(7,855 )
2,819 $
(32,469 )
(6 )
(32,475 )
6,819
(25,656 )
(14,464 )
$
See accompanying notes to consolidated financial statements.
28
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
Years Ended June 30, 2023 and 2022
(Dollar amounts in thousands, except per share data)
Common
Shares
Retained
Earnings
Treasury
Stock
Accumulated
Other
Comprehensive
Income (Loss)
Total
Shareholders’
Equity
Balance, June 30, 2021
Net income
Other comprehensive loss
8,003 shares issued associated with dividend
reinvestment plan and stock purchase plan
20,571 shares associated with vested stock awards
Cash dividends declared ($0.64 per share)
Balance, June 30, 2022
Net income
Other comprehensive loss
12,683 shares issued associated with dividend
reinvestment plan and stock purchase plan
26,743 shares associated with vested stock awards
Restricted stock expense
Cash dividends declared ($0.68 per share)
Balance, June 30, 2023
$
$
$
20,011 $
—
—
47,663 $
11,192
—
174
102
—
20,287 $
—
—
238
85
159
—
20,769 $
—
—
(1,949 )
56,906 $
10,674
—
—
—
—
(2,095 )
65,485 $
(1,324 ) $
—
—
—
207
—
(1,117 ) $
—
—
—
308
—
—
(809 ) $
3,550 $
—
(25,656 )
—
—
—
(22,106 ) $
—
(7,855 )
—
—
—
—
(29,961 ) $
69,900
11,192
(25,656 )
174
309
(1,949 )
53,970
10,674
(7,855 )
238
393
159
(2,095 )
55,484
See accompanying notes to consolidated financial statements.
29
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended June 30, 2023 and 2022
(Dollar amounts in thousands, except per share data)
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation
Securities amortization and accretion, net
Provision for loan losses
Loss on disposal of fixed assets
Loss on disposition of other real estate and repossessed assets owned
Mortgage banking activity
Deferred income tax (benefit) expense
Gain on sale of securities
Net change in market value of equity securities
Amortization of intangibles
Origination of loans held for sale
Proceeds from loans held for sale
Increase in cash surrender value of life insurance
Change in other assets and other liabilities
Net cash flows from operating activities
Cash flows from investing activities:
Securities available-for-sale:
Purchases
Maturities, calls and principal pay downs
Proceeds from sales of available-for-sale securities
Securities held-to-maturity:
Purchases
Principal pay downs
Net decrease in certificates of deposit with other financial institutions
Purchase of Federal Reserve Bank stock, at cost
Net increase in loans
Acquisition, net of cash received
Acquisition of premises and equipment
Disposal of premises and equipment
Proceeds from sale of other real estate and repossessed assets owned
Net cash flows from investing activities
Cash flows from financing activities:
Net increase in deposit accounts
Proceeds from Federal Home Loan Bank advances
Repayments of Federal Home Loan Bank advances
Change in short-term borrowings
Proceeds from dividend reinvestment and stock purchase plan
Dividends paid
Net cash flows from financing activities
(Decrease) increase in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Supplemental disclosure of cash flow information:
Cash paid during the period:
Interest
Federal income taxes
Non-cash items:
Transfer from loans to other repossessed assets
Transfer from loans to other real estate owned
30
2023
2022
$
10,674 $
11,192
1,051
818
855
—
—
(345 )
(96 )
(14 )
14
56
(20,762 )
21,508
(263 )
(180 )
13,316
(31,799 )
21,322
16,472
—
904
1,280
357
(98,945 )
—
(1,821 )
—
11
(92,219 )
65,971
17,000
(16,480 )
5,072
238
(2,095 )
69,706
(9,197 )
20,952
11,755 $
6,929 $
2,495
11
124
991
1,449
735
6
5
(632 )
146
(6 )
24
54
(45,758 )
46,682
(257 )
316
14,947
(141,210 )
31,584
2,722
(3,450 )
3,572
2,044
(53 )
(25,602 )
66,552
(1,477 )
18
78
(65,222 )
55,175
—
(9,794 )
9,092
174
(1,949 )
52,698
2,423
18,529
20,952
1,416
1,850
83
—
$
$
Issuance of treasury stock for stock awards
Branch acquisition:
Noncash assets acquired:
Securities, available-for-sale
Loans
Premises and equipment
Goodwill
Core deposit intangible
Accrued interest receivable and other assets
Total noncash assets acquired
Liabilities assumed:
Deposits
Other liabilities
Total liabilities assumed
Net noncash liabilities assumed
393
309
—
—
—
—
—
—
—
—
—
—
—
15,602
19,943
413
1,616
295
216
38,085
104,538
99
104,637
(66,552 )
See accompanying notes to consolidated financial statements.
31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2023 and 2022
(Dollar amounts in thousands, except per share data)
NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial statements include the accounts of Consumers Bancorp, Inc.
(Corporation) and its wholly owned subsidiary, Consumers National Bank (Bank), together referred to as the Corporation. All
significant intercompany transactions have been eliminated in the consolidation.
Nature of Operations: Consumers Bancorp, Inc. is a bank holding company headquartered in Minerva, Ohio that provides,
through its banking subsidiary, a broad array of products and services throughout its primary market area of Carroll, Columbiana,
Jefferson, Mahoning, Stark, Summit and Wayne counties in Ohio. Its market includes these counties as well as the contiguous
counties in northeast Ohio, western Pennsylvania, and northern 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.
Business Segment Information: The Corporation is engaged in the business of commercial and retail banking, which
accounts for substantially all its revenues, operating income, and assets. Accordingly, all its operations are reported in one segment,
banking.
Acquisition: At the date of acquisition the Corporation records the assets and liabilities of acquired companies on the
Consolidated Balance Sheet at their fair value. The results of operations for acquired companies are included in the Corporation’s
Consolidated Statements of Income beginning at the acquisition date. Expenses arising from acquisition activities are recorded in
the Consolidated Statements of Income during the periods incurred.
Use of Estimates: To prepare financial statements in conformity with U.S. generally accepted accounting principles,
management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts
reported in the financial statements and the disclosures provided, and actual results could differ.
Cash and Cash Equivalents: Cash and cash equivalents include cash, deposits with other financial institutions with original
maturities of less than 90 days and federal funds sold. Cash flows are reported on a net basis for customer loan and deposit
transactions, interest bearing deposits in other financial institutions and short-term borrowings.
Interest–Bearing Deposits in Other Financial Institutions: Interest-bearing deposits in other financial institutions mature
within one year and are carried at cost.
Certificates of Deposit in Financial Institutions: Certificates of deposit in other financial institutions are carried at cost.
Cash Reserves: The Bank is required to maintain cash on hand and noninterest-bearing balances on deposit with the Federal
Reserve Bank to meet regulatory reserve and clearing requirements. The required reserve balance was zero at June 30, 2023 and
2022.
Securities: Securities are generally classified into either held-to-maturity or available-for-sale categories. Held-to-maturity
securities are carried at amortized cost and are those the Corporation has the positive intent and ability to hold to maturity. Available-
for-sale securities are those the Corporation may decide to sell before maturity if needed for liquidity, asset-liability management,
or other reasons. Available-for-sale securities are reported at fair value, with unrealized gains or losses included in other
comprehensive income (loss) as a separate component of equity, net of tax.
Interest income includes amortization of purchase premiums and accretion of discounts. Premiums and discounts on securities
are amortized on the level-yield method without anticipating prepayments, except for mortgage-backed securities and collateralized
mortgage obligations where prepayments are anticipated. Gains and losses on sales are recorded on the trade date and determined
using the specific identification method.
Management evaluates securities for other-than-temporary impairment (OTTI) on a quarterly basis, and more frequently when
economic or market conditions warrant such an evaluation. The evaluation of securities includes consideration given to the length
of time and the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer,
whether the market decline was affected by macroeconomic conditions and whether the Corporation has the intent to sell the security
or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis. In analyzing an issuer's
financial condition, management may consider whether the securities are issued by the federal government or its agencies, or U.S.
Government sponsored enterprises, whether downgrades by bond rating agencies have occurred, and the results of reviews of the
32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
issuer's financial condition. 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.
When OTTI occurs, the amount of the OTTI recognized in earnings depends on whether the Corporation intends to sell the
security, or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis. If the
Corporation intends to sell or it is more likely than not it will be required to sell the security before recovery of its amortized cost
basis, the OTTI will be recognized in earnings equal to the entire difference between the security's amortized cost basis and its fair
value at the balance sheet date. The previous amortized cost basis less the OTTI recognized in earnings becomes the new amortized
cost basis of the security. If a security is determined to be other-than-temporarily impaired, but the Corporation does not intend to
sell the security, only the credit portion of the estimated loss is recognized in earnings, with the other portion of the loss recognized
in other comprehensive income.
Equity Securities: Equity securities are carried at fair value, with changes in fair value reported in net income. Equity
securities without readily determinable fair values are carried at cost, minus impairment, if any, plus or minus changes resulting
from observable price changes in orderly transactions for the identical or a similar investment.
Federal Bank and Other Restricted Stocks: The Bank is a member of the FHLB system. Members are required to own a
certain amount of stock based on the level of borrowings and other factors and may invest in additional amounts. FHLB stock,
included with Federal bank and other restricted stocks on the Consolidated Balance Sheet, is carried at cost, classified as a restricted
security and periodically evaluated for impairment based on ultimate recovery of par value. Federal Reserve Bank stock is also
carried at cost. Since these stocks are viewed as a long-term investment, impairment is based on ultimate recovery of par value. Both
cash and stock dividends are reported as income.
Loans Held for Sale: Mortgage loans originated and intended for sale in the secondary market are carried at the lower of
aggregate cost or fair value, as determined by outstanding commitments from investors. Mortgage loans held for sale are generally
sold with servicing rights released. Net unrealized losses, if any, are recorded as a valuation allowance and charged to earnings.
Gains and losses on sales of mortgage loans are based on the difference between the selling price and the carrying value of the related
loan sold.
Mortgage Banking Derivatives: Commitments to fund mortgage loans (interest rate locks) to be sold into the secondary
market are accounted for as free-standing derivatives. The fair value of the interest rate lock is recorded at the time the commitment
to fund the mortgage loan is executed and is adjusted for the expected exercise of the commitment before the loan is funded. Changes
in the fair values of these derivatives are included in net gains on sales of loans.
Loans: Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are
reported at the principal balance outstanding, net of deferred loan fees and costs, and an allowance for loan losses. Interest income
is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized
in interest income using the level-yield method without anticipating prepayments. The recorded investment in loans includes accrued
interest receivable.
Interest income on commercial, commercial real estate and 1-4 family residential loans is discontinued at the time the loan is
90 days delinquent unless the loan is well-secured and in the process of collection. Consumer loans are typically charged off no later
than 120 days past due. Past due status is determined by the contractual terms of the loan. In all cases, loans are placed on non-
accrual or charged-off at an earlier date if collection of principal or interest is considered doubtful.
All interest accrued but not received on loans placed on non-accrual is reversed against interest income. Interest received on
such loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to
accrual status when the customer has exhibited the ability to repay and demonstrated this ability over at least a consecutive six-
month period and future payments are reasonably assured.
Loan Commitments and Related Financial Instruments: Financial instruments include off-balance sheet credit
instruments, such as commitments to make loans and commercial letters of credit, issued to meet customer financing needs. The
face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial
instruments are recorded when funded.
Concentrations of Credit Risk: The Bank grants consumer, real estate, and commercial loans primarily to borrowers in
Carroll, Columbiana, Jefferson, Mahoning, Stark, Summit, Wayne, and contiguous counties. Therefore, the Corporation’s exposure
to credit risk is significantly affected by changes in the economy in these counties. Automobiles and other consumer assets, business
assets and residential and commercial real estate secure most loans.
33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Allowance for Loan Losses: The allowance for loan losses is a valuation allowance for probable incurred credit losses. Loan
losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed. Subsequent
recoveries, if any, are credited to the allowance. Management estimates the allowance balance required based on past loan loss
experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values,
economic conditions, and other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is
available for any loan that, in management’s judgment, should be charged-off.
The allowance consists of specific and general components. The specific component relates to loans that are individually
classified as impaired. The general component covers non-classified loans and is based on historical loss experience adjusted for
current factors.
A loan is considered impaired when, based on current information and events, it is probable that the Corporation will be unable
to collect all amounts due according to the contractual terms of the loan agreement. Loans, for which the terms have been modified,
resulting in a concession, and for which the borrower is experiencing financial difficulties, are considered troubled debt
restructurings, and classified as impaired. Factors considered by management in determining impairment include payment status,
collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience
insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the
significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all the circumstances
surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment
record, and the amount of the shortfall in relation to the principal and interest owed.
Impairment is evaluated collectively for smaller-balance loans of similar nature such as residential mortgage, consumer loans
and on an individual loan basis for other loans. If a loan is impaired, a portion of the allowance is allocated so the loan is reported,
net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is
expected from the collateral. Loans are evaluated for impairment when payments are delayed, typically 90 days or more, or when it
is probable that not all principal and interest amounts will be collected according to the original terms of the loan. Troubled debt
restructurings are separately identified for impairment disclosures and are measured at the present value of estimated future cash
flows using the loan’s effective interest rate at inception. If a troubled debt restructuring is considered to be a collateral dependent
loan, the loan is reported, net, at the fair value of the collateral. For troubled debt restructurings that subsequently default, the
Corporation determines the amount of reserve in accordance with the accounting policy for the allowance for loan losses.
The general component covers non-impaired loans and is based on historical loss experience adjusted for current factors based
on the risks present for each portfolio segment. The historical loss experience is determined by portfolio segment and is based on
the actual loss history experienced by the Corporation over the most recent three-year period, depending on loan segment. This
actual loss experience is supplemented with economic and other factors based on the risks present for each portfolio segment. These
factors include consideration of the following: levels of and trends in volume and terms of loans; effects of any changes in risk
selection and underwriting standards; other changes in lending policies, procedures, and practices; experience, ability and depth of
lending management and other relevant staff; volume and severity of past due loans and other similar conditions; quality of the loan
review system; value of underlying collateral for collateral dependent loans; national and local economic trends and conditions;
industry conditions; and effects of changes in credit concentrations. The following portfolio segments have been identified:
Commercial: Commercial loans are made for a wide variety of general business purposes, including financing for equipment,
inventories and accounts receivable. The term of each commercial loan varies by its purpose. Commercial loans are underwritten
after evaluating and understanding the borrower’s ability to operate profitably and prudently expand its business. Current and
projected cash flows are evaluated to determine the ability of the borrower to repay their obligations as agreed. Commercial loans
are primarily made based on the identified cash flows of the borrower and secondarily made based on the underlying collateral
provided by the borrower. The cash flows of borrowers, however, may not be as expected and the collateral securing these loans
may fluctuate in value. Most commercial loans are secured by the assets being financed or other business assets such as accounts
receivable or inventory and usually incorporate a personal guarantee; however, some short-term loans may be made on an unsecured
basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be
substantially dependent on the ability of the borrower to collect amounts due from its customers. The commercial loan portfolio
includes loans to a wide variety of corporations and businesses across many industrial classifications in the areas where the Bank
operates.
Commercial Real Estate: Commercial real estate loans include mortgage loans to farmers, owners of multi-family investment
properties, developers and owners of commercial real estate. Commercial real estate lending typically involves higher loan principal
amounts and the repayment of these loans is generally largely dependent on the successful operation of the property securing the
loan, the business conducted on the property securing the loan or, in the case of loans to farmers, management and operation of the
34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
farm. Commercial real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy.
The properties securing the Corporation’s commercial real estate portfolio are diverse in terms of type and geographic location. This
diversity helps reduce the Corporation’s exposure to adverse economic events that affect any single market or industry. Management
monitors and evaluates commercial real estate loans based on collateral, geography and risk grade criteria. In addition, management
tracks the level of owner-occupied commercial real estate loans versus nonowner-occupied loans.
1-4 Family Residential Real Estate: Residential real estate loans are secured by one to four family residential properties and
include both owner occupied, non-owner occupied and home equity loans. Credit approval for residential real estate loans requires
demonstration of sufficient income to repay the principal and interest and the real estate taxes and insurance, stability of employment,
an established credit record and an appropriately appraised value of the real estate securing the loan that generally requires that the
residential real estate loan amount be no more than 85% of the purchase price or the appraised value of the real estate securing the
loan unless the borrower provides private mortgage insurance.
Consumer: The Corporation originates direct and indirect consumer loans, primarily automobile loans, personal lines of credit,
and unsecured consumer loans in its primary market areas. Credit approval for consumer loans requires income sufficient to repay
principal and interest due, stability of employment, an established credit record and sufficient collateral for secured loans. Consumer
loans typically have shorter terms and lower balances with higher yields as compared to real estate mortgage loans, but generally
carry higher risks of default. Consumer loan collections are dependent on the borrower’s continuing financial stability, and thus are
more likely to be affected by adverse personal circumstances.
Low Income Housing Tax Credits (LIHTC): The Corporation has invested in LIHTCs through funds that assist corporations
in investing in limited partnerships and limited liability companies that own, develop and operate low income residential rental
properties for purposes of qualifying for the LIHTCs. These investments are accounted for under the proportional amortization
method which recognizes the amortization of the investment in proportion to the tax credit and other tax benefits received.
Other Real Estate and Repossessed Assets Owned: Real estate properties and other repossessed assets, which are primarily
vehicles, acquired through, or in lieu of, loan foreclosure are initially recorded at fair value less costs to sell at the date of acquisition,
establishing a new cost basis. Any reduction to fair value from the carrying value of the related loan at the time of acquisition is
accounted for as a loan loss. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. If
the fair value declines after acquisition, a valuation allowance is recorded as a charge to income. Operating costs after acquisition
are expensed. Gains and losses on disposition are reported as a charge to income.
Transfers of Financial Assets: Transfers of financial assets are accounted for as sales when control over the assets has been
relinquished. Control over transferred assets is deemed to be surrendered when the assets have been isolated from the Corporation,
the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the
transferred assets, and the Corporation does not maintain effective control over the transferred assets through an agreement to
repurchase them before their maturity.
Premises and Equipment: Land is carried at cost. Premises and equipment are stated at cost less accumulated depreciation.
Depreciation is computed primarily using the straight-line method over the estimated useful life of the owned asset and, for leasehold
improvements, generally over the lesser of the remaining term of the lease facility or the estimated economic life of the improvement.
Useful lives range from three years for software to thirty-nine and one-half years for buildings.
Cash Surrender Value of Life Insurance: The Bank has purchased single-premium life insurance policies to insure the lives
of current and former participants in the salary continuation plan. As of June 30, 2023, the Bank had policies with total death benefits
of $19,167 and total cash surrender values of $10,222. As of June 30, 2022, the Bank had policies with total death benefits of $19,128
and total cash surrender values of $9,959. Bank owned life insurance is recorded at the amount that can be realized under the
insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that
are probable at settlement. Tax-exempt income is recognized from the periodic increases in cash surrender value of these policies.
Goodwill and Other Intangible Assets: Goodwill results from business acquisitions and represents the excess of the purchase
price over the fair value of acquired assets and liabilities. Core deposit intangible assets arise from whole bank or branch acquisitions
and are measured at fair value and then are amortized over their estimated useful lives. Goodwill is not amortized but is assessed at
least annually for impairment. Any such impairment will be recognized in the period identified. The Corporation has selected April
30 as the date to perform the annual impairment test. Goodwill is the only intangible asset with an indefinite life on the Corporation’s
balance sheet.
Long-Term Assets: Premises, equipment and other long-term assets are reviewed for impairment when events indicate their
carrying amount may not be recoverable from future undiscounted cash flows. If impaired, the assets are recorded at fair value.
35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Repurchase Agreements: Substantially all repurchase agreement liabilities, which are classified as short-term borrowings,
represent amounts advanced by various customers. Securities are pledged to cover these liabilities, which are not covered by federal
deposit insurance.
Retirement Plans: The Bank maintains a 401(k) savings and retirement plan covering all eligible employees and matching
contributions are expensed as made. Salary continuation plan expense allocates the benefits over years of service.
Income Taxes: The Corporation files a consolidated federal income tax return. Income tax expense is the sum of the current-
year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the
expected future tax consequences of temporary differences between the carrying amounts and tax basis of assets and liabilities,
computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized.
The Corporation applies a more likely than not recognition threshold for all tax uncertainties in accordance with U.S. generally
accepted accounting principles. A tax position is recognized as a benefit only if it is more likely than not that the position would be
sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax
benefit greater than 50% likely of being realized on examination. The Corporation recognizes interest and/or penalties related to
income tax matters in income tax expense.
Earnings per Common Share: Basic earnings per common share is net income divided by the weighted average number of
common shares outstanding during the period. Diluted earnings per common share includes the dilutive effect of additional potential
common shares issuable upon the vesting of restricted stock awards.
Stock-Based Compensation: Compensation cost is recognized for restricted stock awards issued to employees over the
required service period, generally defined as the vesting period. The fair value of restricted stock awards is estimated by using the
market price of the Corporation’s common stock at the date of grant. For awards with graded vesting, compensation cost is
recognized on a straight-line basis over the requisite service period for the entire award. Forfeitures are recognized as incurred.
Comprehensive Income: Comprehensive income consists of net income and other comprehensive income (loss). Other
comprehensive income (loss) includes unrealized gains and losses on securities available-for-sale, which are also recognized as a
separate component of equity, net of tax.
Loss Contingencies: Loss contingencies, including claims and legal actions arising in the ordinary course of business, are
recorded as liabilities when the likelihood of loss is probable, and an amount or range of loss can be reasonably estimated.
Management does not believe there are such matters that will have a material effect on the Corporation’s financial statements.
Fair Value of Financial Instruments: Fair value of financial instruments are estimated using relevant market information
and other assumptions, as more fully disclosed in Note 15 of the Consolidated Financial Statements. Fair value estimates involve
uncertainties and matters of significant judgment regarding interest rates, credit risk, discounted cash flows, prepayments, and other
factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could
significantly affect these estimates.
Dividend Restrictions: Banking regulations require maintaining certain capital levels and may limit the dividends paid by
the Bank to the holding company or by the holding company to shareholders.
Reclassifications: Certain reclassifications have been made to the June 30, 2022 financial statements to be comparable to the
June 30, 2023 presentation. The reclassifications had no impact on prior year net income or shareholders’ equity.
Recently Issued Accounting Pronouncements Not Yet Effective: In June 2016, Financial Accounting Standards Board
(FASB) issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial
Instruments. This ASU added a new Topic 326 to the codification and removed 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 U.S. generally accepted accounting principles, companies generally recognized credit losses when it is probable that the loss
had been incurred. ASU 2016-13 removes all current loss recognition thresholds and requires 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. The new guidance also amended the credit loss measurement
guidance for available-for-sale debt securities and beneficial interests in securitized financial assets. The guidance in ASU 2016-13
was effective for “public business entities,” as defined in the guidance, that are SEC filers for fiscal years and for interim periods
within those fiscal years beginning after December 15, 2019. Early adoption of the guidance was permitted for fiscal years beginning
after December 15, 2018, including interim periods within those fiscal years. However, during July 2019, FASB unanimously voted
36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
for a proposal to delay this ASU to January 2023 for smaller reporting companies. On October 16, 2019, FASB approved a final
ASU delaying the effective date. The new guidance is effective for annual and interim periods beginning after December 15, 2022
for certain entities, including smaller reporting companies. The Corporation is a smaller reporting company.
The Corporation adopted this new guidance on July 1, 2023. Management analyzed and finalized its pool segmentation,
established the peer group that will be used as the source of loss experience data, and completed parallel calculations in preparation
for adoption of the new methodology. The Net Present Value of Discounted Cash Flow methodology is being used for all loan pools
and the implementation of ASU No. 2016-13 is expected to increase the balance of the allowance for loan losses by less than $250.
In addition, a reserve for unfunded commitments that are not unconditionally cancellable will be established and is expected to be
between $275 and $350. Upon adoption of the new guidance, a one-time adjustment to the allowance for loan losses and reserve for
unfunded commitments will be made with an offsetting decrease to retained earnings, net of tax. The Corporation is also developing
disclosure documentation related to adoption of this standard.
In March 2022, FASB issued ASU 2022-02, Financial Instruments – Credit Losses (ASC 326): Troubled Debt Restructurings
(TDRs) and Vintage Disclosures. The guidance amends ASC 326 to eliminate the accounting guidance for TDRs by creditors, while
enhancing disclosure requirements for certain loan refinancing and restructuring activities by creditors when a borrower is
experiencing financial difficulty. Specifically, rather than applying TDR recognition and measurement guidance, creditors will be
required to determine whether a modification results in a new loan or continuation of existing loan. These amendments are intended
to enhance existing disclosure requirements and introduce new requirements related to certain modifications of receivables made to
borrowers experiencing financial difficulty. Additionally, the amendments in ASC 326 require that an entity disclose current-period
gross write-offs by year of origination within the vintage disclosures, which require that an entity disclose the amortized cost basis
of financing receivables by credit quality indicator and class of financing receivable by year of origination. The guidance is only for
entities that have adopted the amendments in Update 2016-13 for fiscal years, and interim periods within those fiscal years, beginning
after December 15, 2022. This update is not expected to have a significant impact on the Corporation’s financial statements.
NOTE 2—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 branch 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
Securities, available-for-sale
Loans
Premises and equipment
Core deposit intangible
Accrued interest receivable
Total assets acquired
Liabilities assumed:
Noninterest-bearing deposits
Interest-bearing deposits
Other liabilities
Total liabilities assumed
Fair value of net liabilities assumed
Cash received
Goodwill
$
$
515
15,602
19,943
413
295
216
36,984
10,535
94,003
99
104,637
(67,653 )
66,037
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
37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 fiscal year 2022.
NOTE 3—SECURITIES
The following table summarizes the amortized cost and fair value of securities available-for-sale and held-to-maturity at June
30, 2023 and 2022 and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other
comprehensive income (loss) and gross unrecognized gains and losses:
Available-for-sale
June 30, 2023
Obligation of U.S Treasury
Obligations of U.S. government-sponsored entities and agencies
Obligations of state and political subdivisions
U.S. Government-sponsored mortgage-backed securities - residential
U.S. Government-sponsored mortgage-backed securities - commercial
U.S. Government-sponsored collateralized mortgage obligations –
residential
Other debt securities
Total available-for-sale securities
$
$
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
8,941 $
29,430
92,891
104,689
8,604
55,800
17,175
317,530 $
— $
7
63
12
—
8
—
90 $
(533 ) $
(3,745 )
(8,982 )
(15,066 )
(1,809 )
8,408
25,692
83,972
89,635
6,795
(5,738 )
(2,142 )
(38,015 ) $
50,070
15,033
279,605
Held-to-maturity
June 30, 2023
Obligations of state and political subdivisions
Amortized
Cost
Gross
Unrecognized
Gains
Gross
Unrecognized
Losses
Fair
Value
$
6,970 $
— $
(676 ) $
6,294
Available-for-sale
June 30, 2022
Obligation of U.S Treasury
Obligations of U.S. government-sponsored entities and agencies
Obligations of state and political subdivisions
U.S. Government-sponsored mortgage-backed securities - residential
U.S. Government-sponsored mortgage-backed securities - commercial
U.S. Government-sponsored collateralized mortgage obligations –
residential
Other debt securities
Total available-for-sale securities
$
$
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
8,909 $
28,689
105,977
113,812
8,623
40,952
17,367
324,329 $
— $
—
129
13
—
1
—
143 $
(462 ) $
(2,424 )
(8,749 )
(11,642 )
(1,322 )
8,447
26,265
97,357
102,183
7,301
(2,774 )
(752 )
(28,125 ) $
38,179
16,615
296,347
Held-to-maturity
June 30, 2022
Obligations of state and political subdivisions
Amortized
Cost
Gross
Unrecognized
Gains
Gross
Unrecognized
Losses
Fair
Value
$
7,874 $
47 $
(90 ) $
7,831
Proceeds from sales of available-for-sale securities during fiscal year 2023 and fiscal year 2022 were as follows:
Proceeds from sales
Gross realized gains
Gross realized losses
2023
2022
16,472 $
87
(73 )
2,722
8
(2 )
$
38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The income tax provision related to the net realized gains amounted to $3 in fiscal year 2023 and $1 in fiscal year 2022.
The amortized cost and fair values of debt securities at June 30, 2023 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 and collateralized
mortgage obligations are shown separately.
Available-for-sale
Due in one year or less
Due after one year through five years
Due after five years through ten years
Due after ten years
Total
U.S. Government-sponsored mortgage-backed and related securities
Total
Held-to-maturity
Due after one year through five years
Due after five years through ten years
Due after ten years
Total
Amortized
Cost
Fair Value
4,997 $
29,105
51,133
63,202
148,437
169,093
317,530 $
4,899
27,640
44,817
55,749
133,105
146,500
279,605
Amortized
Cost
Fair Value
3,092 $
533
3,345
6,970 $
2,988
488
2,818
6,294
$
$
$
$
Securities with a carrying value of approximately $137,896 and $126,679 were pledged at June 30, 2023 and 2022,
respectively, to secure public deposits and commitments as required or permitted by law. At June 30, 2023 and 2022, there were no
holdings of securities of any one issuer, other than obligations of U.S. government-sponsored entities and agencies, with an aggregate
book value greater than 10% of shareholders’ equity.
The following table summarizes the securities with unrealized and unrecognized losses at June 30, 2023 and 2022, aggregated
by investment category and length of time that the individual securities have been in a continuous unrealized loss position:
June 30, 2023
Available-for-sale
Obligations of U.S Treasury
Obligations of U.S. government-
Less than 12 Months
Fair
Value
Unrealized
Loss
12 Months or more
Fair
Value
Unrealized
Loss
Total
Fair
Value
Unrealized
Loss
$
—
$
— $
8,408
$
(533 ) $
8,408
$
(533 )
sponsored entities and agencies
1,008
(10 )
23,551
(3,735 )
24,559
Obligations of state and political
subdivisions
Mortgage-backed securities –
residential
Mortgage-backed securities –
commercial
Collateralized mortgage
obligations - residential
Other debt securities
Total temporarily impaired
June 30, 2023
Held-to-maturity
Obligations of state and political
(3,745 )
(8,982 )
16,009
(344 )
62,492
(8,638 )
78,501
3,334
(84 )
85,096
(14,982 )
88,430
(15,066 )
—
—
6,795
(1,809 )
6,795
(1,809 )
22,039
—
$ 42,390
$
(638 )
—
27,023
15,033
(1,076 ) $ 228,398
$
(5,100 )
(2,142 )
49,062
15,033
(36,939 ) $ 270,788
$
(5,738 )
(2,142 )
(38,015 )
Less than 12 Months
Fair
Value
Unrecognized
Loss
12 Months or more
Total
Fair
Value
Unrecognized
Loss
Fair
Value
Unrecognized
Loss
subdivisions
$
—
$
6,294
$
(676 ) $
6,294
$
(676 )
— $
39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022
Available-for-sale
Obligations of U.S Treasury
Obligations of U.S. government-
sponsored entities and agencies
Obligations of state and political
subdivisions
Mortgage-backed securities –
residential
Mortgage-backed securities –
commercial
Collateralized mortgage obligations –
Less than 12 Months
Fair
Value
Unrealized
Loss
12 Months or more
Fair
Value
Unrealized
Loss
Total
Fair
Value
Unrealized
Loss
$
8,447 $
(462 ) $
— $
— $
8,447 $
(462 )
26,265
(2,424 )
—
—
26,265
(2,424 )
80,445
(8,331 )
2,047
(418 )
82,492
(8,749 )
76,526
(7,586 )
24,569
(4,056 )
101,095
(11,642 )
7,301
(1,322 )
—
—
7,301
(1,322 )
residential
Other debt securities
Total temporarily impaired
30,729
16,156
245,869 $
(2,308 )
(711 )
(23,144 ) $
2,713
459
29,788 $
$
(466 )
(41 )
(4,981 ) $
33,442
16,615
275,657 $
(2,774 )
(752 )
(28,125 )
June 30, 2022
Held-to-maturity
Obligations of state and political
Less than 12 Months
Fair
Value
Unrecognized
Loss
12 Months or more
Total
Fair
Value
Unrecognized
Loss
Fair
Value
Unrecognized
Loss
subdivisions
$
3,522
$
(90 ) $
—
$
— $
3,522
$
(90 )
Management evaluates securities for other-than-temporary impairment (OTTI) on a quarterly basis, and more frequently when
economic or market conditions warrant such an evaluation. The securities portfolio is evaluated for OTTI by segregating the portfolio
into two general segments and applying the appropriate OTTI model. Investment securities are generally evaluated for OTTI under
FASB ASC Topic 320, Accounting for Certain Investments in Debt and Equity Securities.
In determining OTTI under the ASC Topic 320 model, management considers many factors, including: (1) the length of time
and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer,
(3) whether the market decline was affected by macroeconomic conditions, and (4) whether the entity has the intent to sell the debt
security or more likely than not will be required to sell the debt security before its anticipated recovery. The assessment of whether
an other-than-temporary decline exists involves a high degree of subjectivity and judgment and is based on the information available
to management at a point in time.
As of June 30, 2023, the Corporation’s securities portfolio consisted of 414 available-for-sale and four held-to-maturity
securities. There were 400 available-for-sale securities in an unrealized loss position at June 30, 2023, 333 of which were in a
continuous loss position for twelve or more months. There were four held-to-maturity securities in an unrealized loss position at
June 30, 2023. The unrealized losses within the available-for-sale and held-to-maturity security portfolios in fiscal year 2023 was
primarily attributed to a change in rates. 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. Also, management monitors the financial condition of
the individual municipal securities to ensure they meet minimum credit standards, all are paying as agreed, and there have been no
missed payments. Since the Corporation does not intend to sell these securities and it is not likely the Corporation will be required
to sell these securities at an unrealized loss position prior to any anticipated recovery in fair value, which may be maturity,
management does not believe there is any OTTI related to these securities at June 30, 2023. Also, there was no OTTI recognized at
June 30, 2022.
As of June 30, 2023, the Corporation owned equity securities with an amortized cost of $400. The following table presents the
net unrealized gains and losses on equity securities recognized in earnings for the twelve months ended June 30, 2023 and 2022.
There were no realized gains or losses on the sale of equity securities during the periods presented.
Unrealized loss recognized on equity securities held at the
end of the period
$
(14 ) $
(24 )
2023
2022
40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4—LOANS
Major classifications of loans were as follows as of June 30:
Commercial
Commercial real estate:
Construction
Other
1 – 4 Family residential real estate:
Owner occupied
Non-owner occupied
Construction
Consumer
Subtotal
Net deferred loan fees and costs
Allowance for loan losses
Net loans
2023
2022
$
112,558 $
87,008
23,981
318,636
156,989
23,880
8,443
65,617
710,104
258
(7,724 )
702,638 $
15,158
291,847
142,244
26,029
4,317
44,964
611,567
276
(7,160 )
604,683
$
The following table presents the activity in the allowance for loan losses by portfolio segment for the year ended June 30, 2023:
Allowance for loan losses:
Beginning balance
Provision for loan losses
Loans charged-off
Recoveries
Total ending allowance balance
1-4 Family
Commercial Residential
Commercial
Real
Estate
Real
Estate
Consumer
Total
$
$
960 $
348
—
—
1,308 $
3,927 $
15
—
1
3,943 $
1,645 $
(72 )
(6 )
4
1,571 $
628 $
564
(441 )
151
902 $
7,160
855
(447 )
156
7,724
The following table presents the activity in the allowance for loan losses by portfolio segment for the year ended June 30, 2022:
Allowance for loan losses:
Beginning balance
Provision for loan losses
Loans charged-off
Recoveries
Total ending allowance balance
1-4 Family
Commercial Residential
Commercial
Real
Estate
Real
Estate
Consumer
Total
$
$
904 $
33
—
23
960 $
3,949 $
(24 )
—
2
3,927 $
1,307 $
359
(41 )
20
1,645 $
311 $
367
(132 )
82
628 $
6,471
735
(173 )
127
7,160
41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio
segment and based on impairment method as of June 30, 2023. Included in the recorded investment in loans is $1,598 of accrued
interest receivable.
1-4 Family
Commercial Residential
Commercial
Real
Estate
Real
Estate
Consumer
Total
Allowance for loan losses:
Ending allowance balance attributable to
loans:
Individually evaluated for impairment
Acquired loans collectively evaluated
for impairment
$
— $
— $
— $
— $
—
40
74
—
—
114
Originated loans collectively evaluated
for impairment
Total ending allowance balance
$
Recorded investment in loans:
Loans individually evaluated for
1,308
1,308 $
3,903
3,943 $
1,497
1,571 $
902
902 $
7,610
7,724
impairment
$
314 $
88 $
3 $
— $
405
Acquired loans collectively evaluated
for impairment
Originated loans collectively evaluated
for impairment
Total ending loans balance
$
622
6,953
23,038
1,230
31,843
111,890
112,826 $
335,660
342,701 $
167,798
190,839 $
64,364
65,594 $
679,712
711,960
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, 2022. Included in the recorded investment in loans is $1,214 of accrued
interest receivable.
1-4 Family
Commercial Residential
Commercial
Real
Estate
Real
Estate
Consumer
Total
Allowance for loan losses:
Ending allowance balance attributable to
loans:
Individually evaluated for impairment
Acquired loans collectively evaluated
for impairment
$
— $
— $
— $
— $
1
62
85
—
—
148
Originated loans collectively evaluated
for impairment
Total ending allowance balance
$
Recorded investment in loans:
Loans individually evaluated for
959
960 $
3,865
3,927 $
1,560
1,645 $
628
628 $
7,012
7,160
impairment
$
276 $
42 $
155 $
— $
473
Acquired loans collectively evaluated
for impairment
Originated loans collectively evaluated
for impairment
Total ending loans balance
$
665
10,095
27,731
3,051
41,542
86,310
87,251 $
296,776
306,913 $
146,058
173,944 $
41,898
44,949 $
571,042
613,057
42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table presents information related to loans individually evaluated for impairment by class of loans as of and for
the year ended June 30, 2023:
Unpaid
Principal
Balance
Allowance
for
Recorded
Investment Allocated
Average
Loan Losses Recorded
Interest
Income
Investment Recognized Recognized
Cash Basis
Interest
With no related allowance recorded:
$
Commercial
Commercial real estate:
Other
1-4 Family residential real
estate:
Owner occupied
Non-owner occupied
Total
404 $
314 $
— $
306 $
37 $
127
88
—
52
6
24
3
558 $
—
3
405 $
—
—
— $
38
29
425 $
2
—
45 $
$
37
6
2
—
45
The following table presents information related to loans individually evaluated for impairment by class of loans as of and for
the year ended June 30, 2022:
Unpaid
Principal
Balance
With no related allowance recorded:
Allowance
for
Average
Loan Losses Recorded
Recorded
Investment Allocated Investment Recognized Recognized
Interest
Income
Cash Basis
Interest
Commercial
Commercial real estate:
Other
1-4 Family residential real
estate:
Owner occupied
Non-owner occupied
With an allowance recorded:
Commercial
Total
$
414 $
276 $
— $
291 $
— $
83
42
—
518
193
48
193
—
738 $
22
133
—
473 $
—
—
—
— $
187
93
113
1,202 $
8
75
6
282 $
$
—
193
8
75
6
282
43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table presents the recorded investment in non-accrual and loans past due over 90 days still on accrual by class
of loans as of June 30, 2023 and 2022:
June 30, 2023
June 30, 2022
Loans Past
Due
Over 90 Days
Still
Loans Past
Due
Over 90 Days
Still
Commercial
Commercial real estate:
Other
1 – 4 Family residential:
Owner occupied
Non-owner occupied
Consumer
Total
Non-accrual Accruing
$
— $
— $
Non-accrual Accruing
51
—
3
—
54 $
—
—
—
50
50 $
$
276 $
—
22
133
—
431 $
9
—
—
—
—
9
Non-accrual loans and loans past due 90 days still on accrual include both smaller balance homogeneous loans that are
collectively evaluated for impairment and individually classified impaired loans.
The following table presents the aging of the recorded investment in past due loans as of June 30, 2023 by class of loans:
30 – 59
Days
Days Past Due
60 - 89
Days
90 Days or
Greater
Total
Past Due
Loans Not
Past Due
Total
Commercial
Commercial real estate:
Construction
Other
1-4 Family residential:
Owner occupied
Non-owner occupied
Construction
Consumer
Total
$
— $
— $
— $
— $
112,826 $
112,826
—
—
17
—
—
438
455 $
—
—
124
—
—
120
244 $
—
51
—
3
—
50
104 $
—
51
23,996
318,654
23,996
318,705
141
3
—
608
803 $
158,296
23,885
8,514
64,986
711,157 $
158,437
23,888
8,514
65,594
711,960
$
The above table of past due loans includes the recorded investment in non-accrual loans of $54 in the 90 days or greater
category.
The following table presents the aging of the recorded investment in past due loans as of June 30, 2022 by class of loans:
30 – 59
Days
Days Past Due
60 - 89
Days
90 Days or
Greater
Total
Past Due
Loans Not
Past Due
Total
Commercial
Commercial real estate:
Construction
Other
1-4 Family residential:
Owner occupied
Non-owner occupied
Construction
Consumer
Total
$
— $
— $
—
52
125
—
—
381
558 $
—
—
—
—
—
79
79 $
$
9 $
—
—
—
27
—
—
36 $
9 $
87,242 $
87,251
—
52
15,138
291,723
15,138
291,775
125
27
—
460
673 $
143,381
26,036
4,375
44,489
612,384 $
143,506
26,063
4,375
44,949
613,057
The above table of past due loans includes the recorded investment in non-accrual loans of $27 in the 90 days or greater
category and $404 in the loans not past due category.
44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Troubled Debt Restructurings (TDR):
The Corporation has certain loans that have been modified in order to maximize collection of loan balances that are classified
as TDRs. A modified loan is usually classified as a TDR if, for economic reasons, management grants a concession to the original
terms and conditions of the loan to a borrower who is experiencing financial difficulties that it would not have otherwise considered.
The Corporation had $351 and $318 of loans classified as TDRs as of June 30, 2023 and 2022, respectively. There were no
specific reserves allocated to these loans and TDRs are also included as impaired loans that are listed above. For the years ended
June 30, 2023 and 2022, there were no loans modified that were classified as a troubled debt restructuring.
There were no loans classified as troubled debt restructurings for which there was a payment default within 12 months
following the modification during the twelve-month periods ended June 30, 2023 and 2022. A loan is considered in payment default
once it is 90 days contractually past due under the modified terms.
Credit Quality Indicators:
The Corporation categorizes loans into risk categories based on relevant information about the ability of borrowers to service
their debt such as: current financial information, historical payment experience, credit documentation, public information, and
current economic trends, among other factors. The Corporation analyzes loans individually by classifying the loans as to credit risk.
This analysis includes loans with a total outstanding loan relationship greater than $100 and non-homogeneous loans, such as
commercial and commercial real estate loans. This analysis is performed monthly. 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, based on currently existing facts, conditions, and values,
highly questionable and improbable.
Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be
pass rated loans. Loans listed as not rated are either less than $100 or are included in groups of homogeneous loans. These loans are
evaluated based on delinquency status, which was discussed previously.
45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2023, and based on the most recent analysis performed, the recorded investment by risk category of loans by
class of loans is as follows:
Pass
Special
Mention
Substandard Doubtful
Commercial
Commercial real estate:
Construction
Other
1-4 Family residential real estate:
Owner occupied
Non-owner occupied
Construction
Consumer
Total
$
110,928 $
1,174 $
573 $
23,996
310,427
2,013
23,474
3,227
597
474,662 $
—
7,097
—
50
—
—
8,321 $
—
468
17
105
—
—
1,163 $
$
— $
—
51
—
3
—
—
54 $
Not
Rated
151
—
662
156,407
256
5,287
64,997
227,760
As of June 30, 2022, and based on the most recent analysis performed, the recorded investment by risk category of loans by
class of loans is as follows:
Commercial
Commercial real estate:
Construction
Other
1-4 Family residential real estate:
Owner occupied
Non-owner occupied
Construction
Consumer
Total
Pass
Special
Mention
Substandard Doubtful
$
86,265 $
350 $
178 $
276 $
15,138
283,877
1,321
25,606
1,234
605
414,046 $
—
2,500
—
59
—
—
2,909 $
—
4,711
—
—
—
—
4,889 $
$
—
—
22
133
—
—
431 $
Not
Rated
182
—
687
142,163
265
3,141
44,344
190,782
NOTE 5—PREMISES AND EQUIPMENT
Major classifications of premises and equipment were as follows as of June 30:
Land
Land improvements
Building and leasehold improvements
Furniture, fixture and equipment
Total premises and equipment
Accumulated depreciation and amortization
Premises and equipment, net
2023
2022
2,417 $
414
15,973
7,600
26,404
(9,222 )
17,182 $
1,685
318
15,608
7,206
24,816
(8,296 )
16,521
$
$
Depreciation expenses were $1,051 and $991 for the years ended June 30, 2023 and 2022, respectively.
As of June 30, 2023, the Corporation leased real estate for seven office locations and various equipment under operating lease
agreements. The lease agreements have maturity dates ranging from one year or less to May 31, 2035, including extension periods.
Lease agreements for two locations have a lease term of 12 months or less and are therefore considered short-term leases. Most
leases include one or more options to renew. The exercise of lease renewal options is typically at our sole discretion. The majority
of renewals to extend the lease terms are included in our right-of-use assets and lease liabilities as they are reasonably certain of
exercise. As most of our leases do not provide an implicit rate, we use the fully collateralized FHLB borrowing rate, commensurate
with the lease terms based on the information available at the lease commencement date in determining the present value of the lease
payments. The weighted average remaining life of the lease term for the leases with a term over 12 months was 7.87 years as of June
30, 2023 and the weighted-average discount rate was 1.95%.
46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Rent expense for all the operating leases was $254 and $228 for the twelve-month periods ended June 30, 2023 and 2022,
respectively. The right-of-use asset, included in premises and equipment, and the lease liability, included in other liabilities, were
$921 and $951 as of June 30, 2023.
Total estimated rental commitments for the operating leases with a term over 12 months were as follows as of June 30, 2023:
Period Ending June 30
2024
2025
2026
2027
2028
Thereafter
Total undiscounted cash flows
Less: present value discount
Total lease liabilities
$
177
145
125
115
115
342
$ 1,019
(68 )
$
951
$
NOTE 6 – GOODWILL AND ACQUIRED INTANGIBLE ASSETS
The change in goodwill was as follows:
Beginning of year
Acquired goodwill
Ending balance as of June 30,
2023
2022
$
$
2,452 $
—
2,452 $
836
1,616
2,452
The following table summarizes the Corporation’s acquired intangible assets as of June 30, 2023 and 2022.
June 30, 2023
June 30, 2022
Core deposit intangible
Gross Carrying
Amount
565
$
Accumulated
Amortization
151
Gross Carrying
Amount
565
$
$
Accumulated
Amortization
95
$
Goodwill and the core deposit intangible assets resulted from the acquisition of Peoples Bancorp of Mt. Pleasant, Inc. that was
completed on January 1, 2020, and the branch acquisition that was completed on July 16, 2021. Goodwill is not amortized but is
evaluated for impairment on an annual basis or whenever events or changes in circumstances indicate the asset might be impaired.
Impairment exists when a reporting unit’s carrying amount exceeds its fair value. For the goodwill impairment analysis, the
Corporation is the only reporting unit. Management performed a quantitative impairment assessment at April 30, 2023. The
assessment estimated fair value on an income approach that incorporated a discounted cash flow model that involved management
assumptions based upon future growth and earnings projections. The results of the assessment indicated no impairment as of the
measurement date. Goodwill is the only intangible asset on the Corporation’s balance sheet with an indefinite life. Management will
continue to monitor its goodwill for possible impairment.
The core deposit intangible asset is amortized on a straight-line basis over ten years. The Corporation recorded intangible
amortization expense of $56 in 2023 and $54 in 2022. The intangible amortization expense is expected to be $57 per year for each
of the next four fiscal years and $186 thereafter.
NOTE 7—DEPOSITS
Interest-bearing deposits as of June 30, 2023 and 2022 were as follows:
Demand
Savings and money market
Time:
$250 and over
Other
Total
2023
2022
152,053 $
335,231
46,822
167,521
701,627
$
157,462
369,054
18,164
84,217
628,897
$
$
47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Scheduled maturities of time deposits at June 30, 2023 were as follows:
Twelve Months Ending June 30
2024
2025
2026
2027
2028
Thereafter
NOTE 8—SHORT-TERM BORROWINGS
$
$
193,381
16,089
2,890
1,373
434
176
214,343
Short-term borrowings consisted of federal funds purchased, repurchase agreements, and a line of credit for the Corporation.
Information concerning all short-term borrowings at June 30, 2023 and 2022, maturing in less than one year is summarized as
follows:
Balance at June 30
Average balance during the year
Maximum month-end balance
Average interest rate during the year
Weighted average rate, June 30
$
2023
2022
26,367 $
22,603
26,367
1.76 %
2.20 %
21,295
12,960
21,878
0.36 %
0.61 %
In fiscal year 2022, the Corporation obtained an unsecured $5,000 line of credit to provide capital support to the Bank and for
other general corporate purposes. The outstanding balance on the line of credit was $1,200 and $1,270 as of June 30, 2023 and 2022,
respectively. Repurchase agreements are financing arrangements that mature daily and are used to facilitate the needs of our
customers. Physical control of all the securities is maintained for all securities pledged to secure repurchase agreements. Available-
for-sale securities pledged for repurchase agreements as of June 30, 2023 and 2022 are presented in the following table:
U.S. government-sponsored entities and agencies pledged
Residential mortgage-backed securities pledged
Commercial mortgage-backed securities
Total pledged
Repurchase agreements
$
$
$
3,730 $
19,648
3,641
27,019 $
23,783 $
3,331
11,954
6,682
21,967
20,025
Overnight and Continuous
2023
2022
Total interest expense on short-term borrowings was $397 and $47 for the years ended June 30, 2023 and 2022, respectively.
48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9—FEDERAL HOME LOAN BANK ADVANCES
A summary of Federal Home Loan Bank (FHLB) advances were as follows:
Stated Interest Rate
Range
Advance Type
From
To
Amount
Weighted
Average
Rate
Amount
Weighted
Average
Rate
June 30, 2023
June 30, 2022
Fixed rate,
amortizing
Fixed rate
Variable rate
1.37 %
0.90
5.19
1.37 % $
1.18
5.19
176
8,000
600
1.37 % $
1.04
5.19
256
8,000
—
1.37 %
1.04
—
Each fixed rate advance has a prepayment penalty equal to the present value of 100% of the lost cash flow based upon the
difference between the contract rate on the advance and the current rate on a comparable new advance. The following table is a
summary of the scheduled principal payments for all advances as of June 30, 2023:
Twelve Months Ending June 30
2024
2025
2026
2027
2028
Thereafter
Total
Principal
Payments
671
4,056
46
3
—
4,000
8,776
$
$
Pursuant to collateral agreements with the FHLB, advances are secured by all the stock invested in the FHLB and certain
qualifying first mortgage and multi-family loans. The advances were collateralized by $169,993 and $152,868 of first mortgage and
multi-family loans under a blanket lien arrangement at June 30, 2023 and 2022, respectively. Based on this collateral, the Bank was
eligible to borrow up to a total of $109,442 in additional advances at June 30, 2023.
NOTE 10—EMPLOYEE BENEFIT PLANS
The Bank maintains a 401(k) savings and retirement plan that permits eligible employees to make before- or after-tax
contributions to the plan, subject to the dollar limits from Internal Revenue Service regulations. The Bank matches 100% of the
employee’s voluntary contributions to the plan based on the amount of each participant’s contributions up to a maximum of 4% of
eligible compensation. All regular full-time and part-time employees who complete six months of service and are at least 21 years
of age are eligible to participate. Amounts charged to operations were $390 and $364 for the years ended June 30, 2023 and 2022,
respectively.
The Bank maintains a nonqualified Salary Continuation Plan (SCP) to reward and encourage certain Bank executives to remain
employees of the Bank. The SCP is considered an unfunded plan for tax and Employee Retirement Income Security Act (ERISA)
purposes and all obligations arising under the SCP are payable from the general assets of the Corporation. The estimated present
value of future benefits to be paid to certain current and former executives totaled $3,687 as of June 30, 2023 and $3,564 as of
June 30, 2022 and is included in other liabilities. For purposes of calculating the present value of future benefits, a discount rate of
5.75% was used to project the liability through June 30, 2023 and 3.0% was used at June 30, 2022. For the years ended June 30,
2023 and 2022, $256 and $534, respectively, have been charged to expense in connection with the SCP. Distributions to participants
were $133 for the fiscal year ended June 30, 2023 and $110 for the fiscal year ended June 30, 2022.
The Amended and Restated 2010 Omnibus Incentive Plan (2010 Plan) is a nonqualified share-based compensation plan. The
2010 Plan was established to promote alignment between key employees’ performance and the Corporation’s shareholder interests
by motivating performance through the award of stock-based compensation. The purpose of the 2010 Plan was to attract, retain, and
motivate talented employees and compensate outside directors for their service to the Corporation. The 2010 Plan was approved by
the Corporation’s shareholders. The Compensation Committee of the Corporation’s Board of Directors has sole authority to select
the employees, establish the awards to be issued, and approve the terms and conditions of each award contract.
49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Under the 2010 Plan, the Corporation could grant, among other things, nonqualified stock options, incentive stock options,
stock appreciation rights, restricted stock, restricted stock units, or any combination thereof to any employee and outside director.
Each award was evidenced by an award agreement that specifies the number of shares awarded, the vesting period, the performance
requirements, and such other provisions as the Compensation Committee determines. Upon a change-in-control of the Corporation,
as defined in the 2010 Plan, all outstanding awards immediately vest.
The Corporation has granted restricted stock awards and restricted stock units to certain employees and directors. Restricted
stock units and awards are issued at no cost to the recipient and can be settled in shares or cash at the end of the vesting period
depending on the type of award. Restricted stock awards are made at the end of the measurement period once certain specified
performance targets as established by the Compensation Committee are achieved with some awards fully vesting on the date of grant
and others vesting 25% on the grant date, with the remaining vesting 25% per year over a three-year period. Restricted stock awards
provide the holder with dividends during the vesting period. Cash dividends are reinvested into shares of stock and are subject to the
same restrictions and vesting as the initial award. Restricted stock units begin to vest at the end of the measurement period once
certain specified performance targets as established by the Compensation Committee are achieved. Some units, primarily the awards
made to directors and senior management, are 100% vested at the end of the measurement period. For other unit awards, primarily
the awards made to executive management, 25% vest at the end of the performance period, with the remaining vesting 25% per year
over a three-year period. The fair value of the restricted stock units and awards, which is used to measure compensation expense, is
the closing market price of the Corporation’s common stock on the date of the grant and compensation expense is recognized over
the vesting period. All dividends are forfeitable in the event the shares do not vest.
The following table summarizes the status of the restricted stock awards and restricted stock units:
Outstanding at June 30, 2022
Granted
Vested
Non-vested at June 30, 2023
Weighted-
Average
Grant Date
Fair
Value Per
Share
Weighted-
Average
Grant
Date Fair
Value Per
Share
Restricted
Stock
Units
Restricted
Stock
Awards
17,069 $
26,743
(20,768 )
23,044 $
19.95
18.74
18.93
19.46
— $
17,578
(8,500 )
9,078 $
—
18.74
18.74
18.74
There was $579 in expense recognized in fiscal year 2023 and $361 in expense recognized in fiscal year 2022 in connection
with the restricted stock units and awards. As of June 30, 2023, there was $473 of total unrecognized compensation expense related
to non-vested shares and a weighted-average expense recognition period of 1.7 years.
NOTE 11—INCOME TAXES
The provision for income taxes consisted of the following for the years ended June 30, calculated utilizing a statutory federal
income tax rate of 21.0%:
Current income taxes
Deferred income tax expense (benefit)
Total income tax expense
2023
2022
$
$
2,344 $
(96 )
2,248 $
2,193
146
2,339
50
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The net deferred income tax asset (liability) consisted of the following components at June 30:
Deferred tax assets:
Allowance for loan losses
Deferred compensation
Deferred income
Non-accrual loan interest income
Net unrealized securities loss
Other
Gross deferred tax asset
Deferred tax liabilities:
Depreciation
Loan fees
FHLB stock dividends
Prepaid expenses
Intangible assets
Gross deferred tax liabilities
Net deferred asset
2023
2022
$
$
1,622 $
986
31
20
7,964
3
10,626
(783 )
(640 )
(102 )
(150 )
(199 )
(1,874 )
8,752 $
1,504
999
18
29
5,876
6
8,432
(821 )
(582 )
(102 )
(150 )
(209 )
(1,864 )
6,568
The difference between the provision for income taxes and amounts computed by applying the statutory income tax rate of
21.0% to income before taxes consisted of the following for the years ended June 30:
Income taxes computed at the statutory rate on pretax income
Tax exempt income
Cash surrender value income
Tax credit
Other non-deductible expenses
Total income tax expense
$
$
2,714 $
(400 )
(55 )
(17 )
6
2,248 $
2,842
(431 )
(54 )
(22 )
4
2,339
2023
2022
The effective tax rate was 17.4% for the year ended June 30, 2023 compared to 17.3% for the year ended June 30, 2022. At
June 30, 2023 and June 30, 2022, the Corporation had no unrecognized tax benefits recorded. The Corporation does not expect the
total amount of unrecognized tax benefits to significantly increase within the next twelve months. There were no interest or penalties
recorded for the years ended June 30, 2023 and 2022 and there were no amounts accrued for interest and penalties at June 30, 2023
and 2022.
The Corporation and the Bank are subject to U.S. federal income tax as an income-based tax and a capital-based financial
institutions tax in the State of Ohio. The Corporation and the Bank are no longer subject to examination by taxing authorities for
years before 2019.
NOTE 12—RELATED PARTY TRANSACTIONS
In the ordinary course of business, the Bank has granted loans to certain executive officers, directors, and their affiliates. A
summary of activity during the year ended June 30, 2023 of related party loans were as follows:
Principal balance, July 1
New loans, net of refinancing
Repayments
Principal balance, June 30
$
$
2,546
210
(99 )
2,657
Deposits from executive officers, directors and their affiliates totaled $6,100 at June 30, 2023 and $6,781 at June 30, 2022.
51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13—REGULATORY MATTERS
Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies.
Capital adequacy guidelines and prompt corrective-action regulations involve quantitative measures of assets, liabilities, and certain
off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to
qualitative judgments by regulators about components, risk weightings, and other factors and the regulators can lower classifications
in certain cases. Failure to meet various capital requirements can initiate regulatory action that could have a direct material effect on
the financial statements.
The prompt corrective action regulations provide five classifications, including well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall
financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital
distributions are limited, as is asset growth and expansion, and plans for capital restoration are required.
As of fiscal year-end 2023 and 2022, the Corporation met the definition of a Small Bank Holding Company and, therefore,
was exempt from maintaining consolidated regulatory capital ratios. Instead, regulatory capital ratios only apply at the subsidiary
bank level. The Basel III Capital Rules include a capital conservation buffer of 2.5% that is designed to absorb losses during periods
of economic stress. Banking institutions with a ratio of Common Equity Tier 1 capital to risk-weighted assets above the minimum
but below the conservation buffer will face constraints on dividends, equity repurchases, and compensation based on the amount of
the shortfall. The net unrealized gain or loss on available for sale securities is not included in computing regulatory capital.
Management believes as of June 30, 2023, the Bank met all capital adequacy requirements to which it was subject.
The following table presents actual and required capital ratios as of June 30, 2023 and June 30, 2022 for the Bank:
Actual
Minimum Capital
Required – Basel III
(1)
Minimum Required
To Be Considered Well
Capitalized
Amount Ratio Amount Ratio
Amount Ratio
June 30, 2023
Common equity Tier 1 to risk-weighted assets $ 83.5
83.5
Tier 1 capital to risk weighted assets
91.2
Total capital to risk weighted assets
83.5
Tier 1 capital to average assets
11.05 % $
11.05
12.07
7.72
34.0
45.4
60.5
43.3
4.50 % $
6.00
8.00
4.00
49.1
60.5
75.6
54.1
6.50 %
8.00
10.00
5.00
Actual
Minimum Capital
Required -
Basel III (1)
Minimum Required
To Be Considered Well
Capitalized
Amount Ratio Amount Ratio
Amount Ratio
June 30, 2022
Common equity Tier 1 to risk-weighted assets $
Tier 1 capital to risk weighted assets
Total capital to risk weighted assets
Tier 1 capital to average assets
74.1
74.1
81.3
74.1
11.39 % $
11.39
12.49
7.39
29.3
39.0
52.1
40.1
4.50 % $
6.00
8.00
4.00
42.3
52.1
65.1
50.1
6.50 %
8.00
10.00
5.00
(1) These amounts exclude the capital conservation buffer.
As of the latest regulatory examination, the Bank was categorized as well capitalized. There are no conditions or events since
that examination that management believes may have changed the Bank’s category.
The Corporation’s principal source of funds for dividend payment is dividends received from the Bank. Banking regulations
limit the amount of dividends that may be paid without prior approval of regulatory agencies. Under these regulations, the amount
of dividends that may be paid in any calendar year is limited to the current year’s net profits, combined with the retained net profits
of the preceding two years, subject to the capital requirements described above. As of June 30, 2023 the Bank could, without prior
approval, declare a dividend of approximately $21,811.
52
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14—COMMITMENTS WITH OFF-BALANCE SHEET RISK
The Bank is a party to commitments to extend credit in the normal course of business to meet the financing needs of its
customers. Commitments are agreements to lend to customers providing that there are no violations of any condition established in
the contract. Commitments to extend credit have a fixed expiration date or other termination clause. These instruments involve
elements of credit and interest rate risk more than the amount recognized in the statements of financial position. The Bank uses the
same credit policies in making commitments to extend credit as it does for on-balance sheet instruments.
The Bank evaluates each customer’s credit on a case-by-case basis. The amount of collateral obtained is based on
management’s credit evaluation of the customer. The amount of commitments to extend credit and the exposure to credit loss for
non-performance by the customer (before considering collateral) was $142,767 and $148,390 as of June 30, 2023 and 2022,
respectively. As of June 30, 2023, $126,698 of the commitments carried variable rates and $16,069 carried fixed rates with interest
rates ranging from 3.05% to 11.00% with maturity dates from July 2023 to August 2060. As of June 30, 2022, $119,637 of the
commitments carried variable rates and $28,753 carried fixed rates with interest rates ranging from 2.62% to 8.25% with maturity
dates from July 2022 to December 2053. Financial standby letters of credit were $1,178 and $1,110 as of June 30, 2023 and 2022,
respectively. In addition, commitments to extend credit of $11,834 and $11,621 as of June 30, 2023 and 2022, respectively, were
available to checking account customers related to the overdraft protection program. Since some loan commitments expire without
being used, the amount does not necessarily represent future cash commitments.
NOTE 15—FAIR VALUE
Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal
or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement
date. There are three levels of inputs that may be used to measure fair values:
Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access
as of the measurement date.
Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities;
quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3: Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market
participants would use in pricing an asset or liability.
Financial assets and financial liabilities measured at fair value on a recurring basis include the following:
Securities available-for-sale and equity securities: When available, the fair values of available-for-sale and equity 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 measure fair value:
Fair Value Measurements at
June 30, 2023 Using
Balance at
Assets:
Obligations of U.S. treasury
Obligations of U.S. government-sponsored entities and agencies
Obligations of states and political subdivisions
U.S. government-sponsored mortgage-backed securities - residential
U.S. government-sponsored mortgage-backed securities - commercial
U.S. government-sponsored collateralized mortgage obligations
Other debt securities
Equity securities
June 30, 2023 Level 1 Level 2
8,408
$
25,692
83,972
89,635
6,795
50,070
15,033
386
8,408
25,692
83,972
89,635
6,795
50,070
15,033
386
—
—
—
—
—
—
—
$
Level 3
—
—
—
—
—
—
—
53
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Balance at
Assets:
Obligations of U.S. treasury
Obligations of U.S. government-sponsored entities and agencies
Obligations of states and political subdivisions
U.S. government-sponsored mortgage-backed securities - residential
U.S. government-sponsored mortgage-backed securities –
commercial
U.S. government-sponsored collateralized mortgage obligations
Other debt securities
Equity securities
8,447
26,265
97,357
102,183
7,301
38,179
16,615
400
Level 2
8,447
26,265
97,357
102,183
7,301
38,179
16,615
400
Level 3
—
—
—
—
—
—
—
—
—
—
—
—
—
June 30, 2022 Level 1
$
— $
There were no transfers between Level 1 and Level 2 during the 2023 or the 2022 fiscal year.
Certain assets and 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. Assets and 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.
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. There was no other real estate owned
or other repossessed assets being carried at fair value as of June 30, 2023 or June 30, 2022. As of June 30, 2023, the balance of other
real estate owned was $124.
There were no assets measured at fair value on a non-recurring basis at June 30, 2023 or 2022 and there was no impact to the
provision for loan losses for the twelve months ended June 30, 2023 or 2022.
The following table shows the estimated fair values of financial instruments that are reported at amortized cost in the
Corporation’s consolidated balance sheets, segregated by the level of the valuation inputs within the fair value hierarchy utilized to
measure fair value:
Financial Assets:
Level 1 inputs:
Cash and cash equivalents
Level 2 inputs:
2023
2022
Carrying
Amount
Estimated
Fair
Value
Carrying
Amount
Estimated
Fair
Value
$
11,755 $
11,755 $
20,952 $
20,952
Certificates of deposit in other financial institutions
Loans held for sale
Accrued interest receivable
2,501
764
3,024
2,450
774
3,024
3,781
1,165
2,703
3,847
1,188
2,703
Level 3 inputs:
Securities held-to-maturity
Loans, net
Financial Liabilities:
Level 2 inputs:
Demand and savings deposits
Time deposits
Short-term borrowings
Federal Home Loan Bank advances
Accrued interest payable
6,970
702,638
6,294
656,737
7,874
604,683
7,831
577,708
738,190
214,343
26,367
8,776
344
54
738,190
211,856
26,367
7,678
344
784,181
102,381
21,295
8,256
49
784,181
102,622
21,295
7,215
49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The assumptions used to estimate fair value are described as follows:
Cash and cash equivalents: The carrying value of cash and deposits in other financial institutions 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. The estimated fair value
approximates carrying value for variable-rate loans that reprice frequently and with no significant change in credit risk. The fair
value of fixed-rate loans and variable-rate loans which reprice on an infrequent basis is estimated by discounting future cash flows
using the current interest rates at which similar loans with similar terms would be made to borrowers of similar credit quality resulting
in a Level 3 classification. An overall valuation adjustment is made for specific credit risks as well as general portfolio credit risk.
The methods utilized to estimate the fair value of loans do not necessarily represent an exit price.
Securities held-to-maturity: The held-to-maturity securities are general obligation and revenue bonds issued by local
municipalities. The fair value of these securities are calculated 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 June 30, 2023 and 2022
for deposits of similar remaining maturities, resulting in 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 June
30, 2023 and 2022 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.
NOTE 16—AFFORDABLE TAX CREDIT PARTNERSHIP
In April 2023, the Corporation invested in a limited partnership that will in turn invest in qualified affordable housing projects
that will generate tax benefits for the limited partner investors, including federal low-income housing tax credits pursuant to Section
42 of the Internal Revenue Code. This partnership investment is an unconsolidated Variable Interest Entity (VIE) for which the
Corporation holds an interest in but is not the primary beneficiary of the VIE. The purpose of this investment is to achieve a
satisfactory return on capital, to facilitate the sale of additional affordable housing product offerings, and to assist in achieving goals
associated with the Community Reinvestment Act. The primary activities of the limited partnership include the identification,
development, and operation of multi-family housing that is leased to qualifying residential tenants. Generally, these types of
investments are funded through a combination of debt and equity.
The Corporation uses the proportional amortization method to account for its investment. The investment is included in other
assets and the unfunded commitment is included in other liabilities. As of June 30, 2023, the balance of the affordable housing tax
credit investment was $10,250 and the balance of the associated unfunded commitment was $9,668. As a limited partner, there is no
recourse to the Corporation by the creditors of the limited partnership, however, the tax credits are generally subject to recapture
should the partnership fail to comply with the applicable government regulations.
55
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17—PARENT COMPANY FINANCIAL STATEMENTS
The condensed financial information of Consumers Bancorp. Inc. (parent company only) follows:
Condensed Balance Sheets
Assets:
Cash
Equity securities, at fair value
Other assets
Investment in subsidiary
Total assets
Liabilities and Shareholders’ Equity:
Short-term borrowings
Other liabilities
Shareholders’ equity
Total liabilities & shareholders’ equity
Condensed Statements of Income and Comprehensive Income
Cash dividends from Bank subsidiary
Dividend income
Net change in market value of equity securities
Other income
Interest expense
Other expense
Income (loss) before income taxes and equity in undistributed net income of
subsidiary
Income tax benefit
Income (loss) before equity in undistributed net income of Bank subsidiary
Equity in undistributed net income of subsidiary
Net income
Comprehensive income (loss)
Condensed Statements of Cash Flows
Cash flows from operating activities:
Net income
Equity in undistributed net income of Bank subsidiary
Net change in market value of equity securities
Change in other assets and liabilities
Net cash flows from operating activities
Cash flows from investing activities:
Disposal of premises and equipment
Net cash flows from investing activities
Cash flows from financing activities:
Dividend paid
Restricted stock units
Net change in short-term borrowings
Proceeds from dividend reinvestment and stock purchase plan
Issuance of treasury stock for stock awards
Net cash flows from financing activities
Change in cash and cash equivalents
Beginning cash and cash equivalents
Ending cash and cash equivalents
56
June 30,
2023
June 30,
2022
$
$
$
$
26
386
22
56,328
56,762
1,200
78
55,484
56,762
$
$
$
$
76
400
17
54,823
55,316
1,270
76
53,970
55,316
Year Ended
June 30, 2023
1,575
$
33
(14 )
14
(75 )
(295 )
Year Ended
June 30, 2022
195
$
33
(24 )
2
(31 )
(258 )
1,238
(76 )
1,314
9,360
10,674
2,819
$
$
(83 )
(63 )
(20 )
11,212
11,192
(14,464 )
$
$
Year Ended
June 30, 2023
Year Ended
June 30, 2022
$
$
10,674 $
(9,360 )
14
(3 )
1,325
—
—
(2,095 )
159
(70 )
238
393
(1,375 )
(50 )
76
26 $
11,192
(11,212 )
24
24
28
18
18
(1,949 )
—
1,270
174
309
(196 )
(150 )
226
76
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18—EARNINGS PER SHARE
Basic earnings per share is the amount of earnings available to each share of common stock outstanding during the reporting
period and is equal to net income divided by the weighted average number of shares outstanding during the period. Diluted earnings
per share is the amount of earnings available to each share of common stock outstanding during the reporting period adjusted to
include the effect of potentially dilutive common shares that may be issued upon the vesting of restricted stock awards and restricted
stock units. There were 14,800 shares of restricted stock and 9,078 restricted stock units that were anti-dilutive for the year ending
June 30, 2023. There were 7,911 shares of restricted stock that were anti-dilutive for the year ending June 30, 2022. The following
table details the calculation of basic and diluted earnings per share:
Basic:
Net income available to common shareholders
Weighted average common shares outstanding
Basic income per share
For the year Ended June 30,
2023
2022
$
$
10,674 $
3,090,187
3.45 $
11,192
3,039,607
3.68
Diluted:
Net income available to common shareholders
Weighted average common shares outstanding
Dilutive effect of restricted stock
Total common shares and dilutive potential common shares
$
10,674 $
3,090,187
—
3,090,187
Dilutive income per share
$
3.45 $
11,192
3,039,607
246
3,039,853
3.68
NOTE 19–ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The components of other comprehensive income related to unrealized gains (losses) on available-for-sale securities for the
periods ended June 30, 2023 and June 30, 2022, were as follows:
Pretax
Tax
Effect
After-tax
$
4,493 $
(943 ) $
3,550
(32,469 )
6,818
(25,651 )
Affected Line
Item
in Consolidated
Statements of
Income
(6 )
(32,475 )
(27,982 ) $
1
6,819
5,876 $
(5 )
(a)(b)
(25,656 )
(22,106 )
(9,929 ) $
2,085 $
(7,844 )
(14 )
(9,943 )
(37,925 ) $
3
2,088
7,964 $
(11 )
(7,855 )
(29,961 )
(a)(b)
$
$
$
Balance as of June 30, 2021
Unrealized holding loss on available-for-sale
securities arising during the period
Amounts reclassified from accumulated other
comprehensive income
Net current period other comprehensive loss
Balance as of June 30, 2022
Unrealized holding loss on available-for-sale
securities arising during the period
Amounts reclassified from accumulated other
comprehensive income
Net current period other comprehensive loss
Balance as of June 30, 2023
(a) Securities gain, net
(b) Income tax expense
57
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 20 – REVENUE RECOGNITION
The Corporation accounts for revenues from contracts with customers under ASC 606, Revenue from Contracts with Customers.
Interest income, net securities gains (losses), gains from the sale of mortgage loans and bank-owned life insurance are not included
within the scope of ASC 606. For the revenue streams in the scope of ASC 606, service charges on deposits and electronic banking fees,
there are no significant judgments related to the amount and timing of revenue recognition. All the Corporation's revenue from contracts
with customers is recognized within noninterest income.
Service charges on deposit accounts: The Corporation earns fees from its deposit customers for transaction-based, account
maintenance and overdraft services. Transaction-based fees, which include services such as stop payment charges, statement rendering
and other fees, are recognized at the time the transaction is executed as that is the point in time the Corporation fulfills the customer's
request. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing
the period over which the Corporation satisfies the performance obligation. Overdraft fees are recognized at the point in time that the
overdraft occurs. Service charges on deposits are withdrawn from the customer's account balance.
Interchange income: The Corporation earns interchange income from cardholder transactions conducted through the various
payment networks. Interchange income from cardholder transactions represent a percentage of the underlying transaction value and are
recognized daily, concurrently with the transaction processing services provided to the cardholder. The gross amount of these fees are
processed through noninterest income.
Other income: Other noninterest income consists of other recurring revenue streams such as check order fees, wire transfer fees,
and other miscellaneous revenue streams. Check order income mainly represents fees charged to customers for checks. Wire transfer
fees represent revenue from processing wire transfers.
The following table presents the Corporation's sources of noninterest income for the years ended June 30, 2023 and 2022.
Noninterest income
In scope of Topic 606:
Service charges on deposit accounts
Debit card interchange income
Other income
Noninterest income (in scope of Topic 606)
Noninterest income (out-of-scope of Topic 606)
For the year Ended June 30,
2023
2022
$
1,598 $
2,181
360
4,139
608
1,460
2,069
335
3,864
871
Total noninterest income
$
4,747 $
4,735
58
Item 9—Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None.
Item 9A—Controls and Procedures
Evaluation of Disclosure Controls and Procedures
With the participation of the Corporation’s management, including the Chief Executive Officer and Chief Financial Officer, an
evaluation of the effectiveness of the Corporation’s disclosure controls and procedures (as defined under Rule 13a-15(e) of the
Securities Exchange Act of 1934) was performed, as of the end of the period covered by this Annual Report on Form 10-K. Based
on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Corporation’s disclosure controls and
procedures were effective.
Management’s Report on Internal Control Over Financial Reporting
The management of Consumers Bancorp, Inc. is responsible for establishing and maintaining adequate internal control over
financial reporting. Internal control over financial reporting is a process designed by, or under the supervision of, our principal
executive and principal financial officers and effected by the board of directors, management, and other personnel to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes
in accordance with U.S. generally accepted accounting principles.
Management assessed the effectiveness of our internal control over financial reporting as of June 30, 2023 based on the criteria
for effective internal control over financial reporting established in “Internal Control-Integrated Framework,” issued by the
Committee of Sponsoring Organizations (COSO) of the Treadway Commission in 2013. Based on that assessment, we have
concluded that, as of June 30, 2023, our internal control over financial reporting is effective based on those criteria.
This annual report does not include an attestation report of the Corporation’s registered public accounting firm regarding internal
control over financial reporting. Management’s report was not subject to attestation by the Corporation’s registered public
accounting firm pursuant to rules of the SEC that permit the Corporation to provide only management’s report in this annual report.
Changes In Internal Control Over Financial Reporting
There were no changes in the Corporation’s internal controls over financial reporting that occurred during the fourth quarter of
fiscal year 2023 that have materially affected, or are reasonably likely to materially affect, the Corporation’s internal controls over
financial reporting.
Item 9B—Other Information
None.
Item 9C—Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not Applicable.
59
Item 10— Directors, Executive Officers and Corporate Governance
PART III
The information required by this item is set forth in the Corporation’s Proxy Statement dated September 7, 2023, under the
captions “Election of Directors,” “Directors and Executive Officers,” “The Board of Directors and its Committees,” “Delinquent
Section 16(a) Reports,” and “Certain Transactions and Relationships and Legal Proceedings,” and is incorporated herein by
reference.
The Corporation’s Code of Ethics Policy, which is applicable to all directors, officers and employees of the Corporation, and
its Code of Ethics for Principal Financial Officers, which is applicable to the principal executive officer and the principal financial
officer, are each available on the Investor Relations section under Governance Documents of the Corporation’s website
(www.consumers.bank). Copies of either of the Code of Ethics Policies are also available in print to shareholders upon request,
addressed to the Corporate Secretary at Consumers Bancorp, Inc., 614 East Lincoln Way, Minerva, Ohio 44657. The Corporation
intends to post amendments to or waivers from either of its Code of Ethics Policies on its website.
Item 11—Executive Compensation
The information required by this item is set forth in the Corporation’s Proxy Statement dated September 7, 2023 under the
captions “Director Compensation,” “Executive Compensation,” “Defined Contribution Plan,” “Outstanding Equity Awards at Fiscal
Year-End,” and “Salary Continuation Program,” and is incorporated herein by reference.
Item 12—Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Equity Compensation Plan Information
The following table sets forth information about common stock authorized for issuance, segregated between stock-based
compensation plans approved by shareholders and stock-based compensation plans not approved by shareholders, as of June 30,
2023. Additional information regarding stock-based compensation plans is presented in Note 10 - Employee Benefit Plans to the
Consolidated Financial Statements located elsewhere in this report.
Number of securities
to
be issued upon
exercise of
outstanding options,
warrants, and rights
Weighted-average
exercise price of
outstanding options,
warrants and rights
—
—
—
—
—
—
Number of securities
remaining
available for future issuance
under
equity compensation plans
(excluding
securities issuable under
outstanding
options, warrants and rights)
199,560
—
199,560
Plan Category
Plans approved by shareholders
Plans not approved by shareholders
Total
The remaining information required by this item is set forth in the Corporation’s Proxy Statement, dated September 7, 2023,
under the caption “Security Ownership of Certain Beneficial Owners,” and is incorporated herein by reference.
Item 13—Certain Relationships and Related Transactions, and Director Independence
The information required by this item is set forth in the Corporation’s Proxy Statement, dated September 7, 2023, under the
caption “Certain Transactions and Relationships and Legal Proceedings,” and is incorporated herein by reference.
Item 14— Principal Accounting Fees and Services
Our independent registered public accounting firm is Plante & Moran, PLLC, Auburn Hills, MI (PCAOB ID: 00166).
The information required by this item is set forth in the Corporation’s Proxy Statement, dated September 7, 2023, under the
caption “Principal Accounting Fees and Services,” and is incorporated herein by reference.
60
Item 15— Exhibit and Financial Statement Schedules
(a)
The following documents are filed as part of this report:
PART IV
(1) The report of independent registered accounting firm and the consolidated financial statements appearing in Item 8.
(2) Financial statement schedules are omitted as they are not required or are not applicable, or the required information is
included in the financial statements.
(3) The exhibits required by this item are listed in the Exhibit Index of this Form 10-K.
(b)
The exhibits to this Form 10-K begin on page 62 of this report.
(c)
See Item 15(a)(2) above.
Item 16—Form 10-K Summary
Not applicable.
61
EXHIBIT INDEX
Number Description of Document
2.1
Agreement and Plan of Merger by and among Consumers Bancorp, Inc., Consumers National Bank, Peoples
Bancorp of Mt. Pleasant, Inc., and The Peoples National Bank of Mount Pleasant, dated June 14, 2019. Reference
is made to the Registration Statement on S-4 (File No. 333-233306) filed on August 15, 2019.
3.1
Amended and Restated Articles of Incorporation of the Corporation. Reference is made to Form 10-Q (File No. 033-
79130) of the Corporation filed November 8, 2019, which is incorporated herein by reference.
3.2
Amended and Restated Code of Regulations of the Corporation. Reference is made to Form 10-K (File No. 033-79130)
of the Corporation filed September 15, 2008, which is incorporated herein by reference.
4
Form of Certificate of Common Shares. Reference is made to Form 10-KSB (File No. 033-79130) of the Corporation filed
September 30, 2002, which is incorporated herein by reference.
4.1
Description of Securities of Consumers Bancorp, Inc. Reference is made to Form 10-K of the Corporation filed September
23, 2020, which is incorporated herein by reference.
10.3
Lease Agreement entered into between Furey Holdings, LLC and Consumers National Bank on December 23, 2005.
Reference is made to Form 10-Q (File No. 033-79130) of the Corporation filed February 14, 2006, which is incorporated
herein by reference.
10.8
Consumers Bancorp 2010 Omnibus Incentive Plan Form of Restricted Stock Award Agreement. Reference is made to
Form 8-K (File No. 033-79130) of the Corporation filed September 16, 2011, which is incorporated herein by reference.
10.10
10.11
First Amendment dated June 13, 2018, to Lease Agreement entered into between Furey Holdings, LLC and Consumers
National Bank on December 23, 2005. Reference is made to Form 8-K (File No. 033-79130) of the Corporation filed June
15, 2018, which is incorporated herein by reference.
Form of Salary Continuation Agreement. Reference is made to Form 8-K (File No. 033-79130) of the Corporation filed
December 29, 2020, which is incorporated herein by reference.
10.12
Branch Purchase and Assumption Agreement entered into with CFBank National Association on December 29, 2020.
Reference is made to Form 10-Q (File No. 033-79130) of the Corporation filed February 12, 2021, which is incorporated
herein by reference.
10.13
Consumers Bancorp Amended and Restated 2010 Omnibus Incentive Plan. Reference is made to the Definitive Proxy
Statement for the 2022 Annual Meeting of Shareholders (File No. 033-79130) of the Corporation filed September 15,
2022, which is incorporated herein by reference.
19
21
23
Consumers Bancorp, Inc. Insider Trading and Section 16 Reporting Policy
Subsidiaries of Consumers Bancorp, Inc. Filed with this Annual Report on Form 10-K.
Consent of Plante & Moran, PLLC
31.1
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
Certification of Chief Financial Officer and Treasurer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS
Inline XBRL Instance Document (The instance document does not appear in the interactive data file because its XBRL
tags are embedded within the Inline XBRL document) (1)
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 Securities Act of 1933, as
amended, or Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under those
sections.
62
Pursuant to the requirements of Section 13 or 15(d) 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.
SIGNATURES
Date: September 7, 2023
CONSUMERS BANCORP, INC.
By:
By:
/s/ Ralph J. Lober, II
President and Chief Executive Officer
(principal executive officer)
/s/ Renee K. Wood
Chief Financial Officer and Treasurer
(principal financial officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities indicated on September 7, 2023.
Signatures
Signatures
/s/ Laurie L. McClellan
Laurie L. McClellan
Chairman of the Board of Directors
/s/ Ralph J. Lober, II
Ralph J. Lober, II
President, Chief Executive Officer and Director
(principal executive officer)
/s/ Renee K. Wood
Renee K. Wood
Chief Financial Officer and Treasurer
(principal financial officer)
/s/ Ann Gano
Ann Gano
Director
/s/ Richard T. Kiko, Jr.
Richard T. Kiko, Jr.
Director
/s/ Frank L. Paden
Frank L. Paden
Director
/s/ Harry W. Schmuck, Jr.
Harry W. Schmuck, Jr.
Director
/s/ John P. Furey
John P. Furey
Director
/s/ Bradley Goris
Bradley Goris
Director
/s/ Shawna L’Italien
Shawna L’Italien
Director
/s/ John W. Parkinson
John W. Parkinson
Director
/s/ Michael A. Wheeler
Michael A. Wheeler
Director
63
General Information
Independent Registered Public Accounting Firm
Plante & Moran, PLLC
2601 Cambridge Court, Ste. 500
Auburn Hills, Michigan 48236
Dividend Payments
Subject to the approval of the Board of Directors, quarterly
cash dividends are typically paid on or about the 15th day
of September, December, March, and June.
Direct Deposit of Cash Dividends
Shareholders may elect to have their cash dividends
deposited directly into their savings or checking account.
Shareholders should contact Computershare Shareholder
Services at www-us.computershare.com or (800) 368-5948
or a participating broker.
Shareholder Relations
shareholderrelations@consumers.bank
Website
www.consumersbancorp.com
Annual Meeting
The 2023 Annual Meeting of shareholders will be held
at 10:00 a.m. on Thursday, October 19, 2023. This year’s
Annual Meeting will be a virtual meeting of Stockholders
conducted solely online via live webcast. Shareholders will
be able to attend and participate in the Annual Meeting
online, vote your shares electronically and submit questions
prior to and during the meeting. Website and password
information for joining the meeting online are provided in
the accompanying proxy statement.
Annual Report on Form 10-K
A copy of the Company’s Annual Report on Form 10-K for the
fiscal year ended June 30, 2023, as filed with the Securities
and Exchange Commission, will be furnished without charge
to shareholders upon written request to Renee Wood,
Corporate Secretary, at 614 East Lincoln Way, P.O. Box 256,
Minerva, Ohio 44657. An electronic version is also available
on our website at www.consumersbancorp.com.
Directors Emeriti
James V. Hanna
James R. Kiko, Sr
Thomas M. Kishman
John E. Tonti
Legal Counsel
Squire Patton Boggs (US) LLP
1000 Key Tower
127 Public Square
Cleveland, Ohio 44114
(216) 479-8500
Stock Transfer Agent and Registrar
Computershare Shareholder Services
PO Box 505005
Louisville, KY 40233-5005
(800) 522-6645
Market Makers
D.A. Davidson & Co.
Thomas L. Dooley
Nick Bicking
Powell:
(614) 710-7061
(800) 394-9230
Raymond James Financial, Inc.
The Wealth Advisory Group of DiLauro
Wracher & Thomas
Akron: (330) 564-1700
Boardman: (330) 965-0980
Common Stock Listing
Consumers Bancorp, Inc. common stock trades on the
OTCQX Bulletin Board under the symbol CBKM. The CUSIP
is 210509105. As of June 30, 2023, there were 3,096,100
shares outstanding with 730 shareholders of record and
an estimated 816 additional beneficial holders whose stock
was held in nominee name.
Dividend Reinvestment and Stock Purchase Plan
Existing holders of common stock may elect to have all
or a portion of cash dividends automatically invested in
additional shares of common stock without payment of any
brokerage or service charge. Additionally, shareholders may
elect to purchase shares of common stock with optional
cash payments of $100 to $5,000 per quarter without
payment of any brokerage commission or service charge.
Shareholders should contact Computershare to execute
these convenient options at www-us.computershare.com
or (800) 368-5948 or a participating broker.
Branch Locations
Adena
9 E. Main St.
Alliance
610 W. State St.
Bergholz
256 Second St.
Brewster
210 Wabash Ave. S.
Calcutta
49028 Foulks Dr.
Hartville
1215 W. Maple St.
Jackson-Belden
4026 Dressler Rd. NW
Lisbon
7985 Dickey Dr.
Louisville
1111 N. Chapel St.
Malvern
4070 Alliance Rd. NW
Carrollton
1017 Canton Rd. NW
Minerva
614 E. Lincoln Way
Dillonvale
44 Smithfield St.
East Canton
440 W. Noble St.
Mount Pleasant
298 Union St.
Salem
141 S. Ellsworth Ave.
Fairlawn
3680 Embassy Pkwy.
Waynesburg
8607 Waynesburg Dr. SE
Green
4086 Massillon Rd.
Hanoverton
30034 Canal St.
Wellsville
200 Lisbon St.
Boardman Loan Center
725 Boardman Canfield Rd.
www.Consumers.Bank | 330-868-7701