CONSUMERS BANCORP INC /OH/, 10-K filed on 9/21/2017
Annual Report
v3.7.0.1
Document And Entity Information - USD ($)
12 Months Ended
Jun. 30, 2017
Sep. 13, 2017
Dec. 31, 2016
Document Information [Line Items]      
Entity Registrant Name CONSUMERS BANCORP INC /OH/    
Entity Central Index Key 0001006830    
Trading Symbol cbkm    
Current Fiscal Year End Date --06-30    
Entity Filer Category Smaller Reporting Company    
Entity Current Reporting Status Yes    
Entity Voluntary Filers No    
Entity Well-known Seasoned Issuer No    
Entity Common Stock, Shares Outstanding (in shares)   2,724,956  
Entity Public Float     $ 31,272,639
Document Type 10-K    
Document Period End Date Jun. 30, 2017    
Document Fiscal Year Focus 2017    
Document Fiscal Period Focus FY    
Amendment Flag false    
v3.7.0.1
Consolidated Balance Sheets - USD ($)
$ in Thousands
Jun. 30, 2017
Jun. 30, 2016
ASSETS:    
Cash on hand and noninterest-bearing deposits in financial institutions $ 9,439 $ 8,164
Federal funds sold and interest-bearing deposits in financial institutions 473 2,017
Total cash and cash equivalents 9,912 10,181
Certificate of deposits in financial institutions 3,921 5,906
Securities, available-for-sale 142,086 133,369
Securities, held-to-maturity (fair value 2017 $4,329 and 2016 $3,619) 4,259 3,494
Federal bank and other restricted stocks, at cost 1,425 1,396
Loans held for sale 1,252 1,048
Total loans 272,867 256,278
Less allowance for loan losses (3,086) (3,566)
Net loans 269,781 252,712
Cash surrender value of life insurance 9,065 6,819
Premises and equipment, net 13,398 13,585
Other real estate owned 71
Accrued interest receivable and other assets 2,713 1,880
Total assets 457,883 430,390
LIABILITIES:    
Non-interest bearing demand 102,683 98,224
Interest bearing demand 54,123 48,810
Savings 151,154 134,606
Time 66,511 65,008
Total deposits 374,471 346,648
Short-term borrowings 23,986 19,129
Federal Home Loan Bank advances 12,320 17,281
Accrued interest payable and other liabilities 3,571 3,539
Total liabilities 414,348 386,597
Commitments and contingent liabilities (Note 11)
SHAREHOLDERS’ EQUITY:    
Preferred stock, no par value; 350,000 shares authorized 0 0
Common shares, no par value; 3,500,000 shares authorized; 2,854,133 shares issued as of June 30, 2017 and 2016 14,630 14,630
Retained earnings 30,122 28,432
Treasury stock, at cost (130,606 and 130,375 common shares at June 30, 2017 and 2016, respectively) (1,662) (1,658)
Accumulated other comprehensive income 445 2,389
Total shareholders’ equity 43,535 43,793
Total liabilities and shareholders’ equity $ 457,883 $ 430,390
v3.7.0.1
Consolidated Balance Sheets (Parentheticals) - USD ($)
$ / shares in Thousands, $ in Thousands
Jun. 30, 2017
Jun. 30, 2016
Held-to-maturity securities, fair value $ 4,329 $ 3,619
Preferred stock, par value (in dollars per share) $ 0 $ 0
Preferred stock, shares authorized (in shares) 350,000 350,000
Common stock, par value (in dollars per share) $ 0 $ 0
Common stock, shares authorized (in shares) 3,500,000 3,500,000
Common stock, shares issued (in shares) 2,854,133 2,854,133
Treasury stock, shares (in shares) 130,606 130,375
v3.7.0.1
Consolidated Statements of Income - USD ($)
$ in Thousands
12 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Interest income:    
Loans, including fees $ 12,333 $ 11,211
Federal funds sold and interest-bearing deposits in financial institutions 122 117
Securities, taxable 1,678 1,880
Securities, tax-exempt 1,434 1,399
Total interest and dividend income 15,567 14,607
Interest expense:    
Deposits 792 679
Interest Expense, Short-term Borrowings 90 39
Federal Home Loan Bank advances 226 184
Total interest expense 1,108 902
Net interest income 14,459 13,705
Provision for loan losses 596 1,498
Net interest income after provision for loan losses 13,863 12,207
Other income:    
Service charges on deposit accounts 1,245 1,269
Debit card interchange income 1,161 948
Bank owned life insurance income 246 193
Gain on sale of mortgage loans 258 186
Securities gains, net 209 202
Gain (loss) on disposition or write-down of other real estate owned (35) 2
Other 166 188
Total other income 3,250 2,988
Other expenses:    
Salaries and employee benefits 7,136 6,933
Occupancy and equipment 1,888 1,612
Data processing expenses 583 578
Professional and director fees 608 447
Federal Deposit Insurance Corporation assessments 175 268
Franchise taxes 336 334
Marketing and advertising 267 302
Loan and collection expenses 155 197
Telephone and communications 305 321
Debit card processing expenses 636 463
Other 1,389 1,314
Total other expenses 13,478 12,769
Income before income taxes 3,635 2,426
Income tax expense 641 279
Net income $ 2,994 $ 2,147
Basic and diluted earnings per share (in dollars per share) $ 1.10 $ 0.79
v3.7.0.1
Consolidated Statements of Comprehensive Income - USD ($)
$ in Thousands
12 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Net income $ 2,994 $ 2,147
Other comprehensive income, net of tax:    
Unrealized gains (loss) arising during the period (2,737) 2,460
Reclassification adjustment for gains included in income [1],[2] (209) (202)
Net unrealized gain (loss) (2,946) 2,258
Income tax effect 1,002 (768)
Other comprehensive income (loss) (1,944) 1,490
Total comprehensive income $ 1,050 $ 3,637
[1] Income tax expense
[2] Securities gain, net
v3.7.0.1
Consolidated Statements of Changes in Shareholders' Equity - USD ($)
$ in Thousands
Common Stock [Member]
Retained Earnings [Member]
Treasury Stock [Member]
AOCI Attributable to Parent [Member]
Total
Balance at Jun. 30, 2015 $ 14,630 $ 27,589 $ (1,652) $ 899 $ 41,466
Net income   2,147     2,147
Other comprehensive income       1,490 1,490
Dividend reinvestment plan shares associated with expired and forfeited restricted stock awards retired to treasury   6 (6)    
Cash dividends declared ($0.48 per share)   (1,310)     (1,310)
Balance at Jun. 30, 2016 14,630 28,432 (1,658) 2,389 43,793
Net income   2,994     2,994
Other comprehensive income       (1,944) (1,944)
Dividend reinvestment plan shares associated with expired and forfeited restricted stock awards retired to treasury   4 (4)    
Cash dividends declared ($0.48 per share)   (1,308)     (1,308)
Balance at Jun. 30, 2017 $ 14,630 $ 30,122 $ (1,662) $ 445 $ 43,535
v3.7.0.1
Consolidated Statements of Changes in Shareholders' Equity (Parentheticals) - $ / shares
12 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Common Stock [Member]    
Dividend Reinvestment Plan and Restricted Award Forfeited and Expired (in shares) 231 311
Retained Earnings [Member]    
Common Stock, Dividends, Per Share, Declared (in dollars per share) $ 0.48 $ 0.48
v3.7.0.1
Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
12 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Cash flows from operating activities:    
Net income $ 2,994 $ 2,147
Adjustments to reconcile net income to net cash flows from operating activities:    
Depreciation 781 647
Securities amortization and accretion, net 1,087 1,092
Provision for loan losses 596 1,498
Loss on disposal of fixed assets 2 7
(Gain) loss on disposition or direct write-down of other real estate owned 35 (2)
Net gain on sale of loans (258) (186)
Deferred income tax expense (benefit) 128 (142)
Gain on sale of securities (209) (202)
Origination of loans held for sale (24,379) (13,495)
Proceeds from loans held for sale 24,775 13,095
Increase in cash surrender value of life insurance (246) (193)
Change in other assets and other liabilities 73 (415)
Net cash flows from operating activities 5,379 3,851
Cash flows from investing activities:    
Purchases (41,752) (29,739)
Maturities, calls and principal pay downs 21,869 24,285
Proceeds from sales of available-for-sale securities 7,342 10,596
Purchases (1,000)
Principal pay downs 235 161
Net (increase) decrease in certificates of deposit with other financial institutions 1,985 (1,436)
Purchase of Federal Home Loan Stock (29)
Net increase in loans (18,120) (28,161)
Purchase of Bank owned life insurance (2,000)
Acquisition of premises and equipment (598) (2,634)
Disposal of premises and equipment 2
Proceeds from sale of other real estate owned 7 40
Net cash flows from investing activities (32,059) (26,888)
Cash flows from financing activities:    
Net increase in deposit accounts 27,823 13,652
Proceeds from Federal Home Loan Bank advances 19,325 16,300
Repayments of Federal Home Loan Bank advances (24,286) (5,259)
Change in short-term borrowings 4,857 (709)
Dividends paid (1,308) (1,310)
Net cash flows from financing activities 26,411 22,674
Decrease in cash and cash equivalents (269) (363)
Cash and cash equivalents, beginning of year 10,181 10,544
Cash and cash equivalents, end of year $ 9,912 $ 10,181
v3.7.0.1
Note 1 - Summary of Significant Accounting Policies
12 Months Ended
Jun. 30, 2017
Notes to Financial Statements  
Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies [Text Block]
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, Stark, Summit, Wayne and contiguous counties in Ohio.
The Bank’s business involves attracting deposits from businesses and individual customers and using such deposits to originate commercial, mortgage and consumer loans in its primary market area.
 
Business Segment Information:
The Corporation is engaged in the business of commercial and retail banking, which accounts for substantially all of its revenues, operating income, and assets. Accordingly, all of its operations are reported in
one
segment, banking.
 
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 Flows:
Cash and cash equivalents include cash, deposits with other financial institutions with original maturities of less than
90
days and federal funds sold.  Net cash flows are reported for customer loan and deposit transactions, interest bearing deposits in other financial institutions and short-term borrowings. Additional cash flow information was as follows:
 
 
 
Year Ended June 30,
 
 
 
2017
 
 
2016
 
Cash paid for interest
  $
1,108
    $
903
 
Cash paid for Federal income taxes
   
300
     
725
 
Non-cash transactions:
               
Transfer from loans to repossessed assets
   
113
     
38
 
Transfer from loans held for sale to portfolio
   
342
     
 
Expired and forfeited dividend reinvestment plan shares associated
with restricted stock awards that were retired to treasury stock
   
4
     
6
 
 
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 non-interest bearing balances on deposit with the Federal Reserve Bank to meet regulatory reserve and clearing requirements. The required reserve balance at
June 30, 2017
and
2016
was
$304
and
$5,652,
respectively.
 
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 that the Corporation has the positive intent and ability to hold to maturity. Available-for-sale securities are those that 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 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) at least on a quarterly basis and more frequently when economic or market conditions warrant such an evaluation. For securities in an unrealized loss position, management considers the extent and duration of the unrealized loss, and the financial condition and near-term prospects of the issuer. Management also assesses whether it intends to sell, or it is more likely than
not
that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings. For debt securities that do
not
meet the aforementioned criteria, the amount of impairment is split into
two
components as follows:
1
) OTTI related to credit loss, which must be recognized in the income statement and
2
) OTTI related to other factors, which is recognized in other comprehensive income. The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. For equity securities, the entire amount of impairment is recognized through earnings.
 
Federal Bank and Other Restricted Stocks:
The Bank is a member of the Federal Home Loan Bank (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.
 
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, Stark, Summit and Wayne 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.
 
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 of 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. 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
two
-year period. 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; 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 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 or the business conducted on the property securing the loan. 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 non-owner 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
80%
of the purchase price or the appraised value of the real estate securing the loan unless the borrower provides private mortgage insurance. Underwriting standards for home equity loans are heavily influenced by statutory requirements, which include, but are
not
limited to, a maximum loan-to-value percentage of
80%,
collection remedies, the number of such loans a borrower can have at
one
time and documentation requirements.
 
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.
 
Other Real Estate Owned:
Real estate properties 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,
2017,
the Bank had policies with total death benefits of
$19,728
and total cash surrender values of
$9,065.
As of
June 
30,
2016,
the Bank had policies with total death benefits of
$14,106
and total cash surrender values of
$6,819.
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.
 
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.
 
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
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.
 
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 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
12
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 the 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,
2016
financial statements to be comparable to the
June 
30,
2017
presentation. The reclassifications had
no
impact on prior year net income or shareholders’ equity.
 
Recently Issued Accounting Pronouncements
Not
Yet Effective:
In
May 2014,
FASB issued Accounting Standards Update (ASU)
2014
-
09,
Revenue from Contracts with Customers (Topic
606
)
. The ASU creates a new topic, Topic
606,
to provide guidance on revenue recognition for entities that enter into contracts with customers to transfer goods or services or enter into contracts for the transfer of nonfinancial assets. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additional disclosures are required to provide quantitative and qualitative information regarding the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The new guidance is effective for annual reporting periods, and interim reporting periods within those annual periods, beginning after
December 15, 2017.
The adoption of ASU
2014
-
09
as it relates to non-interest income, such as service charges and debit card interchange income, is
not
expected to have a material effect on the Corporation’s financial statements.
 
In
June 2016,
FASB Issued ASU
2016
-
13,
Financial Instruments—Credit Losses (Topic
326
): Measurement of Credit Losses on Financial Instruments. 
 This ASU adds a new Topic
326
to the Codification and removes the thresholds that companies apply to measure credit losses on financial instruments measured at amortized cost, such as loans, receivables, and held-to-maturity debt securities. Under current U.S. GAAP, companies generally recognize credit losses when it is probable that the loss has been incurred. The revised guidance will remove all current loss recognition thresholds and will require companies to recognize an allowance for credit losses for the difference between the amortized cost basis of a financial instrument and the amount of amortized cost that the corporation expects to collect over the instrument’s contractual life. ASU
2016
-
13
also amends the credit loss measurement guidance for available-for-sale debt securities and beneficial interests in securitized financial assets. The guidance in ASU
2016
-
13
is effective for “public business entities,” as defined, that are SEC filers for fiscal years and for interim periods with those fiscal years beginning after
December 15, 2019.
Early adoption of the guidance is permitted for fiscal years beginning after
December 15, 2018,
including interim periods within those fiscal years. Management is currently evaluating the impact of the adoption of this guidance on the Corporation’s consolidated financial statements, and are in the midst of gathering critical data to evaluate the impact. However, it is too early to estimate the impact.
 
In
March 2017,
FASB issued ASU
2017
-
08,
Receivables-Nonrefundable Fees and Oher Costs
:
Premium Amortization on Purchased Callable Debt Securities
. The ASU amends the guidance related to amortization for certain callable debt securities held at a premium, requiring the premium to be amortized to the earliest call date. The adoption of ASU
2017
-
08
will
not
have a material impact on the Corporation’s financial statements.
v3.7.0.1
Note 2 - Securities
12 Months Ended
Jun. 30, 2017
Notes to Financial Statements  
Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]
NOTE
2—SECURITIES
 
The following table summarizes the amortized cost and fair value of securities available-for-sale and securities held-to-maturity at
June 30, 2017
and
2016
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
 
Amortized
Cost
   
Gross
Unrealized

Gains
   
Gross
Unrealized

Losses
   
Fair
Value
 
June 30, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Obligations of U.S. government-sponsored entities and agencies
  $
12,571
    $
90
    $
(74
)   $
12,587
 
Obligations of state and political subdivisions
   
56,824
     
890
     
(254
)    
57,460
 
U.S. Government-sponsored mortgage-backed securities - residential
   
64,092
     
184
     
(438
)    
63,838
 
U.S. Government-sponsored mortgage-backed securities - commercial
   
1,459
     
     
(1
)    
1,458
 
U.S. Government-sponsored collateralized mortgage obligations - residential
   
6,310
     
1
     
(100
)    
6,211
 
Pooled trust preferred security
   
155
     
377
     
     
532
 
Total available-for-sale securities
  $
141,411
    $
1,542
    $
(867
)   $
142,086
 
 
Held-to-maturity
 
Amortized
Cost
   
Gross
Unrecognized

Gains
   
Gross
Unrecognized
Losses
   
Fair
Value
 
June 30, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Obligations of state and political subdivisions
  $
4,259
    $
73
    $
(3
)   $
4,329
 
Total held-to-maturity securities
  $
4,259
    $
73
    $
(3
)   $
4,329
 
 
Available-for-sale
 
Amortized
Cost
   
Gross
Unrealized

Gains
   
Gross
Unrealized

Losses
   
Fair
Value
 
June 30, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Obligations of U.S. government-sponsored entities and agencies
  $
9,682
    $
362
    $
    $
10,044
 
Obligations of state and political subdivisions
   
53,952
     
2,010
     
(8
)    
55,954
 
U.S. Government-sponsored mortgage-backed securities - residential
   
58,702
     
920
     
(26
)    
59,596
 
U.S. Government-sponsored mortgage-backed securities - commercial
   
1,485
     
41
     
     
1,526
 
U.S. Government-sponsored collateralized mortgage obligations - residential
   
5,774
     
49
     
(3
)    
5,820
 
Pooled trust preferred security
   
153
     
276
     
     
429
 
Total available-for-sale securities
  $
129,748
    $
3,658
    $
(37
)   $
133,369
 
 
Held-to-maturity
 
Amortized
Cost
   
Gross
Unrecognized

Gains
   
Gross
Unrecognized
Losses
   
Fair
Value
 
June 30, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Obligations of state and political subdivisions
  $
3,494
    $
125
    $
    $
3,619
 
Total held-to-maturity securities
  $
3,494
    $
125
    $
    $
3,619
 
 
Proceeds from sales and calls of available-for-sale securities during fiscal year
2017
and fiscal year
2016
were as follows:
 
 
 
2017
 
 
2016
 
Proceeds from sales and calls
$
14,255
    $
10,596
 
Gross realized gains
   
213
     
202
 
Gross realized losses
   
4
     
 
     
The income tax provision related to these net realized gains and losses amounted to
$71
in fiscal year
2017
and
$69
in fiscal year
2016.
 
The amortized cost and fair values of debt securities at
June 
30,
2017
by expected maturity are shown below. Expected maturities will differ from contractual maturities because borrowers
may
have the right to call or prepay obligations with or without call or prepayment penalties. Securities
not
due at a single maturity date, primarily mortgage-backed securities, collateralized mortgage obligations and the pooled trust preferred security are shown separately.
 
Available-for-sale
 
Amortized
Cost
   
Fair Value
 
Due in one year or less
  $
1,552
    $
1,555
 
Due after one year through five years
   
17,428
     
17,727
 
Due after five years through ten years
   
28,024
     
28,367
 
Due after ten years
   
22,391
     
22,398
 
Total
   
69,395
     
70,047
 
U.S. Government-sponsored mortgage-backed and related securities
   
71,861
     
71,507
 
Pooled trust preferred security
   
155
     
532
 
Total
  $
141,411
    $
142,086
 
 
Held-to-maturity
 
Amortized
Cost
   
Fair Value
 
Due after five years through ten years
  $
601
    $
620
 
Due after ten years
   
3,658
     
3,709
 
Total
  $
4,259
    $
4,329
 
 
Securities with a carrying value of approximately
$55,932
and
$55,140
were pledged at
June 30, 2017
and
2016,
respectively, to secure public deposits and commitments as required or permitted by law. At
June 30, 2017
and
2016,
there were
no
holdings of securities of any
one
issuer, other than the U.S. government and its 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, 2017
and
2016,
aggregated by investment category and length of time the individual securities have been in a continuous unrealized loss position:
 
 
 
Less than 12 Months
   
12 Months or more
   
Total
 
Available-for-sale
 
Fair
Value
   
Unrealized
Loss
   
Fair
Value
   
Unrealized
Loss
   
Fair
Value
   
Unrealized
Loss
 
June 30, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Obligations of US government-sponsored entities and agencies
  $
4,336
    $
(74
)   $
    $
    $
4,336
    $
(74
)
Obligations of states and political subdivisions
   
13,881
     
(241
)    
834
     
(13
)    
14,715
     
(254
)
Mortgage-backed securities - residential
   
42,071
     
(391
)    
2,805
     
(47
)    
44,876
     
(438
)
Mortgage-backed securities - commercial
   
1,458
     
(1
)    
     
     
1,458
     
(1
)
Collateralized mortgage obligations - residential
   
5,417
     
(88
)    
654
     
(12
)    
6,071
     
(100
)
Total available-for-sale
  $
67,163
    $
(795
)   $
4,293
    $
(72
)   $
71,456
    $
(867
)
 
 
 
Less than 12 Months
   
12 Months or more
   
Total
 
Held-to-Maturity
 
Fair
Value
   
Unrealized
Loss
   
Fair
Value
   
Unrealized
Loss
   
Fair
Value
   
Unrealized
Loss
 
June 30, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Obligations of states and political subdivisions
  $
933
    $
(3
)   $
    $
    $
933
    $
(3
)
 
 
 
 
Less than 12 Months
   
12 Months or more
   
Total
 
Available-for-sale
 
Fair
Value
   
Unrealized
Loss
   
Fair
Value
   
Unrealized
Loss
   
Fair
Value
   
Unrealized
Loss
 
                                                 
June 30, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Obligations of states and political subdivisions
  $
572
    $
(6
)   $
641
    $
(2
)   $
1,213
    $
(8
)
Mortgage-backed securities - residential
   
4,899
     
(12
)    
4,836
     
(14
)    
9,735
     
(26
)
Collateralized mortgage obligations - residential
   
     
     
1,212
     
(3
)    
1,212
     
(3
)
Total available-for-sale
  $
5,471
    $
(18
)   $
6,689
    $
(19
)   $
12,160
    $
(37
)
 
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, 2017,
the Corporation’s securities portfolio consisted of
252
available-for-sale securities. There were
100
securities in an unrealized loss position at
June 30, 2017,
seven
of which were in a continuous loss position for
twelve
or more months. The unrealized losses within the securities portfolio were primarily attributed to a change in market rates. At
June 30, 2017,
all of the mortgage-backed securities and collateralized mortgage obligations held by the Corporation were issued by U.S. government-sponsored entities and agencies, primarily Fannie Mae and Freddie Mac, institutions which the government has affirmed its commitment to support. Also, management monitors the financial condition of the individual municipal securities to ensure they meet minimum credit standards. 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 other-than-temporary impairment related to these securities at
June 30, 2017.
Also, there was
no
other-than-temporary impairment recognized at
June 30, 2016.
v3.7.0.1
Note 3 - Loans
12 Months Ended
Jun. 30, 2017
Notes to Financial Statements  
Loans, Notes, Trade and Other Receivables Disclosure [Text Block]
NOTE
3—LOANS
 
Major classifications of loans were as follows as of
June 
30:
 
 
 
2017
 
 
2016
 
Commercial
  $
46,380
    $
43,207
 
Commercial real estate:
               
Construction
   
5,604
     
7,783
 
Other
   
158,225
     
153,097
 
1 – 4 Family residential real estate:
               
Owner occupied
   
41,411
     
31,012
 
Non-owner occupied
   
14,415
     
14,471
 
Construction
   
1,988
     
1,256
 
Consumer
   
5,138
     
5,812
 
Subtotal
   
273,161
     
256,638
 
Less: Deferred loan fees and costs
   
(294
)    
(360
)
Allowance for loan losses
   
(3,086
)    
(3,566
)
Net loans
  $
269,781
    $
252,712
 
 
 
The following table presents the activity in the allowance for loan losses by portfolio segment for the year ending
June 30, 2017:
 
               
  1-4 Family                  
            Commercial     Residential                  
            Real     Real                  
   
Commercial
   
Estate
   
Estate
   
Consumer
    Total  
                                         
Allowance for loan losses:
                                       
Beginning balance
  $
505
    $
2,518
    $
402
    $
141
    $
3,566
 
Provision for loan losses
   
18
     
581
     
77
     
(80
)    
596
 
Loans charged-off
   
(6
)    
(1,061
)    
(44
)    
(37
)    
(1,148
)
Recoveries
   
1
     
     
38
     
33
     
72
 
Total ending allowance balance
  $
518
    $
2,038
    $
473
    $
57
    $
3,086
 
 
The following table presents the activity in the allowance for loan losses by portfolio segment for the year ending
June 30, 2016:
 
                    1-4 Family                  
            Commercial     Residential                  
            Real     Real                  
   
Commercial
   
Estate
   
Estate
   
Consumer
    Total  
                                         
Allowance for loan losses:
                                       
Beginning balance
  $
316
    $
1,660
    $
289
    $
167
    $
2,432
 
Provision for loan losses
   
189
     
862
     
414
     
33
     
1,498
 
Loans charged-off
   
     
(4
)    
(311
)    
(80
)    
(395
)
Recoveries
   
     
     
10
     
21
     
31
 
Total ending allowance balance
  $
505
    $
2,518
    $
402
    $
141
    $
3,566
 
 
 
The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of
June 30, 2017.
Included in the recorded investment in loans is
$581
of accrued interest receivable.
 
                    1-4 Family                  
            Commercial     Residential                  
            Real     Real                  
   
Commercial
   
Estate
   
Estate
   
Consumer
    Total  
Allowance for loan losses:
                                       
Ending allowance balance attributable to loans:
                                       
Individually evaluated for impairment
  $
    $
42
    $
2
    $
    $
44
 
Collectively evaluated for impairment
   
518
     
1,996
     
471
     
57
     
3,042
 
                                         
Total ending allowance balance
  $
518
    $
2,038
    $
473
    $
57
    $
3,086
 
                                         
Recorded investment in loans:
                                       
Loans individually evaluated for impairment
  $
444
    $
1,587
    $
203
    $
    $
2,234
 
Loans collectively evaluated for impairment
   
45,993
     
162,176
     
57,901
     
5,144
     
271,214
 
                                         
Total ending loans balance
  $
46,437
    $
163,763
    $
58,104
    $
5,144
    $
273,448
 
 
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, 2016.
Included in the recorded investment in loans is
$549
of accrued interest receivable.
 
                    1-4 Family                  
            Commercial     Residential                  
            Real     Real                  
   
Commercial
   
Estate
   
Estate
   
Consumer
    Total  
Allowance for loan losses:
                                       
Ending allowance balance attributable to loans:
                                       
Individually evaluated for impairment
  $
    $
868
    $
6
    $
    $
874
 
Collectively evaluated for impairment
   
505
     
1,650
     
396
     
141
     
2,692
 
                                         
Total ending allowance balance
  $
505
    $
2,518
    $
402
    $
141
    $
3,566
 
                                         
Recorded investment in loans:
                                       
Loans individually evaluated for impairment
  $
1,029
    $
5,105
    $
758
    $
    $
6,892
 
Loans collectively evaluated for impairment
   
42,219
     
155,734
     
46,166
     
5,816
     
249,935
 
                                         
Total ending loans balance
  $
43,248
    $
160,839
    $
46,924
    $
5,816
    $
256,827
 
 
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, 2017:
 
   
Unpaid
           
Allowance for
   
Average
   
Interest
    Cash Basis  
   
Principal
   
Recorded
   
Loan Losses
   
Recorded
   
Income
    Interest  
   
Balance
   
Investment
   
Allocated
   
Investment
   
Recognized
    Recognized  
                                                 
With no related allowance recorded:
                                               
Commercial
  $
482
    $
444
    $
    $
207
    $
80
    $
80
 
Commercial real estate:
                                               
Construction
   
     
     
     
87
     
6
     
6
 
Other
   
1,928
     
1,039
     
     
951
     
105
     
105
 
1-4 Family residential real estate:
                                               
Owner occupied
   
104
     
103
     
     
119
     
     
 
Non-owner occupied
   
     
     
     
183
     
     
 
With an allowance recorded:
                                               
Commercial real estate:
                                               
Other
   
548
     
548
     
42
     
1,884
     
21
     
21
 
1-4 Family residential real estate:
                                               
Owner occupied
   
99
     
100
     
2
     
120
     
6
     
6
 
Total
  $
3,161
    $
2,234
    $
44
    $
3,551
    $
218
    $
218
 
     
 
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, 2016:
 
   
Unpaid
           
Allowance for
   
Average
   
Interest
    Cash Basis  
   
Principal
   
Recorded
   
Loan Losses
   
Recorded
   
Income
    Interest  
   
Balance
   
Investment
   
Allocated
   
Investment
   
Recognized
    Recognized  
                                                 
With no related allowance recorded:
                                               
Commercial
  $
1,033
    $
1,029
    $
    $
95
    $
    $
 
Commercial real estate:
                                               
Construction
   
386
     
384
     
     
52
     
     
 
Other
   
2,121
     
2,106
     
     
2,344
     
     
 
1-4 Family residential real estate:
                                               
Owner occupied
   
175
     
174
     
     
357
     
2
     
2
 
Non-owner occupied
   
722
     
407
     
     
435
     
     
 
With an allowance recorded:
                                               
Commercial real estate:
                                               
Other
   
2,802
     
2,615
     
868
     
1,103
     
8
     
8
 
1-4 Family residential real estate:
                                               
Owner occupied
   
177
     
177
     
6
     
149
     
     
 
Non-owner occupied
   
     
     
     
115
     
     
 
Total
  $
7,416
    $
6,892
    $
874
    $
4,650
    $
10
    $
10
 
 
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, 2017
and
2016:
 
   
June 30, 2017
    June 30, 2016  
            Loans Past Due             Loans Past Due  
            Over 90 Days