CBKM 10-Q Quarterly Report March 31, 2016

CONSUMERS BANCORP INC /OH/

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10-Q 1 v438665_10q.htm 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2016

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

for the transition period from

Commission File No. 033-79130

CONSUMERS BANCORP, INC.

(Exact name of registrant as specified in its charter)

OHIO	34-1771400
(State or other jurisdiction	(I.R.S. Employer Identification No.)
of incorporation or organization)

614 East Lincoln Way, P.O. Box 256, Minerva, Ohio	44657
(Address of principal executive offices)	(Zip Code)

(330) 868-7701

(Registrant’s telephone number)

Not applicable

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

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

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

Large accelerated filer ¨	Accelerated filer ¨
Non-accelerated filer ¨ (Do not check if smaller reporting company)	Smaller reporting company x

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

	Common Stock, no par value	Outstanding at May 16, 2016
		2,727,383 Common Shares

CONSUMERS BANCORP, INC. FORM 10-Q QUARTER ENDED March 31, 2016

Table of Contents

	Page Number (s)
Part I – Financial Information

Item 1 – Financial Statements (Unaudited)	1

Consolidated Balance Sheets at March 31, 2016 and June 30, 2015	1

Consolidated Statements of Income for the three and nine months ended March 31, 2016 and 2015	2

Consolidated Statements of Comprehensive Income for the three and nine months ended March 31, 2016 and 2015	3

Consolidated Statements of Changes in Shareholders’ Equity for the three and nine months ended March 31, 2016 and 2015	4

Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 2016 and 2015	5

Notes to the Consolidated Financial Statements	6-30

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations	31-41

Item 3 – Not Applicable for Smaller Reporting Companies

Item 4 – Controls and Procedures	42
Part II – Other Information
Item 1 – Legal Proceedings	43

Item 1A – Not Applicable for Smaller Reporting Companies

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds	43

Item 3 – Defaults Upon Senior Securities	43

Item 4 – Mine Safety Disclosure	43

Item 5 – Other Information	43

Item 6 – Exhibits	43

Signatures	44

PART I – FINANCIAL INFORMATION
Item 1 – Financial Statements

CONSUMERS BANCORP, INC. CONSOLIDATED BALANCE SHEETS (Unaudited)

(Dollars in thousands, except per share data)	March 31, 2016			June 30, 2015
ASSETS
Cash on hand and noninterest-bearing deposits in financial institutions	$	7,761		$	8,028
Federal funds sold and interest-bearing deposits in financial institutions		6,377			2,516
Total cash and cash equivalents		14,138			10,544
Certificates of deposit in other financial institutions		5,170			4,470
Securities, available-for-sale		135,127			137,144
Securities, held-to-maturity (fair value of $3,651 at March 31, 2016 and $3,722 at June 30, 2015)		3,530			3,655
Federal bank and other restricted stocks, at cost		1,396			1,396
Loans held for sale		746			462
Total loans		246,194			228,519
Less allowance for loan losses		(2,663	)		(2,432	)
Net loans		243,531			226,087
Cash surrender value of life insurance		6,770			6,626
Premises and equipment, net		13,504			11,605
Other real estate owned		38			—
Accrued interest receivable and other assets		1,923			1,978
Total assets	$	425,873		$	403,967

LIABILITIES
Deposits
Non-interest bearing demand	$	95,039		$	86,651
Interest bearing demand		48,269			45,320
Savings		137,462			134,664
Time		65,539			66,361
Total deposits		346,309			332,996

Short-term borrowings		24,573			19,838
Federal Home Loan Bank advances		7,696			6,240
Accrued interest and other liabilities		3,702			3,427
Total liabilities		382,280			362,501
Commitments and contingent liabilities

SHAREHOLDERS’ EQUITY
Preferred stock (no par value, 350,000 shares authorized, none outstanding)		—			—
Common stock (no par value, 3,500,000 shares authorized; 2,854,133 shares issued as of March 31, 2016 and June 30, 2015)		14,630			14,630
Retained earnings		28,686			27,589
Treasury stock, at cost (130,369 and 130,064 common shares as of March 31, 2016 and June 30, 2015, respectively)		(1,658	)		(1,652	)
Accumulated other comprehensive income		1,935			899
Total shareholders’ equity		43,593			41,466
Total liabilities and shareholders’ equity	$	425,873		$	403,967

See accompanying notes to consolidated financial statements

CONSUMERS BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

	Three Months ended March 31,					Nine Months ended March 31,
(Dollars in thousands, except per share amounts)	2016		2015			2016		2015

Interest income
Loans, including fees	$	2,805	$	2,714		$	8,389	$	8,146
Securities, taxable		485		470			1,430		1,429
Securities, tax-exempt		352		331			1,047		1,025
Federal funds sold and other interest bearing deposits		30		19			84		52
Total interest income		3,672		3,534			10,950		10,652
Interest expense
Deposits		166		181			513		553
Short-term borrowings		9		7			27		22
Federal Home Loan Bank advances		48		45			131		140
Total interest expense		223		233			671		715
Net interest income		3,449		3,301			10,279		9,937
Provision for loan losses		130		90			414		214
Net interest income after provision for loan losses		3,319		3,211			9,865		9,723

Non-interest income
Service charges on deposit accounts		298		286			932		926
Debit card interchange income		233		223			707		682
Bank owned life insurance income		49		47			144		135
Securities gains (losses), net		87		(4	)		122		118
Gain on disposition of other real estate owned		—		—			—		22
Other		69		96			288		349
Total non-interest income		736		648			2,193		2,232

Non-interest expenses
Salaries and employee benefits		1,752		1,707			5,230		5,123
Occupancy and equipment		454		387			1,148		1,122
Data processing expenses		146		146			433		429
Professional and director fees		87		91			361		309
FDIC assessments		67		55			195		171
Franchise taxes		84		83			249		232
Marketing and advertising		60		70			232		190
Telephone and network communications		85		77			235		214
Debit card processing expenses		113		109			344		346
Other		343		375			1,107		1,097
Total non-interest expenses		3,191		3,100			9,534		9,233
Income before income taxes		864		759			2,524		2,722
Income tax expense		156		127			450		526
Net income	$	708	$	632		$	2,074	$	2,196

Basic and diluted earnings per share	$	0.26	$	0.23		$	0.76	$	0.80

See accompanying notes to consolidated financial statements

CONSUMERS BANCORP, INC.

Consolidated statements of comprehensive income (LOSS)

(Unaudited)

(Dollars in thousands)
	Three Months ended March 31,					Nine Months ended March 31,
	2016			2015		2016			2015

Net income	$	708		$	632	$	2,074		$	2,196

Other comprehensive income (loss), net of tax:
Net change in unrealized gains (losses) on securities available-for-sale:

Unrealized gains arising during the period		1,288			526		1,691			966
Reclassification adjustment for (gains) losses included in income		(87	)		4		(122	)		(118	)
Net unrealized gain		1,201			530		1,569			848
Income tax effect		408			181		533			289
Other comprehensive income		793			349		1,036			559

Total comprehensive income	$	1,501		$	981	$	3,110		$	2,755

See accompanying notes to consolidated financial statements.

CONSUMERS BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)

(Dollars in thousands, except per share data)
	Three Months ended March 31,						Nine Months ended March 31,
	2016			2015			2016			2015

Balance at beginning of period	$	42,420		$	41,321		$	41,466		$	40,203

Net income		708			632			2,074			2,196
Other comprehensive income		793			349			1,036			559
30 and 305 Dividend reinvestment plan shares associated with forfeited and expired restricted stock awards retired to treasury stock during the three and nine months ended March 31, 2016, respectively		—			—			—			—
Common cash dividends		(328	)		(328	)		(983	)		(984	)

Balance at the end of the period	$	43,593		$	41,974		$	43,593		$	41,974

Common cash dividends per share	$	0.12		$	0.12		$	0.36		$	0.36

See accompanying notes to consolidated financial statements.

CONSUMERS BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)	Nine Months Ended March 31,
	2016			2015
Cash flows from operating activities
Net cash from operating activities	$	3,262		$	3,962

Cash flow from investing activities
Securities available-for-sale
Purchases		(19,737	)		(36,281	)
Maturities, calls and principal pay downs		15,964			18,573
Proceeds from sales of available-for-sale securities		6,665			16,124
Securities held-to-maturity
Purchases		—			(780	)
Principal pay downs		125			90
Net increase in certificates of deposits in other financial institutions		(700	)		(1,514	)
Net increase in loans		(18,153	)		(6,435	)
Purchase of Bank owned life insurance		—			(476	)
Acquisition of premises and equipment		(2,353	)		(4,202	)
Disposal of premises and equipment		—			1
Proceeds from sale of other real estate owned		—			128
Net cash from investing activities		(18,189	)		(14,772	)

Cash flow from financing activities
Net increase in deposit accounts		13,313			16,922
Net change in short-term borrowings		4,735			(300	)
Proceeds from Federal Home Loan Bank advances		6,700			8,500
Repayments of Federal Home Loan Bank advances		(5,244	)		(8,542	)
Dividends paid		(983	)		(984	)
Net cash from financing activities		18,521			15,596

Increase in cash or cash equivalents		3,594			4,786

Cash and cash equivalents, beginning of period		10,544			11,125
Cash and cash equivalents, end of period	$	14,138		$	15,911

Supplemental disclosure of cash flow information:
Cash paid during the period:
Interest	$	670		$	714
Federal income taxes		575			610
Non-cash items:
Transfer from loans to repossessed assets		38			—
Expired and forfeited dividend reinvestment plan shares associated with restricted stock awards that were retired to treasury stock		5			2

See accompanying notes to consolidated financial statements.

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited)

(Dollars in thousands, except per share amounts)

Note 1 – Summary of Significant Accounting Policies :

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

Basis of Presentation : The consolidated financial statements for interim periods are unaudited and reflect all adjustments (consisting of only normal recurring adjustments), which, in the opinion of management, are necessary to present fairly the financial position and results of operations and cash flows for the periods presented. The unaudited financial statements are presented in accordance with the requirements of Form 10-Q and do not include all disclosures normally required by accounting principles generally accepted in the United States of America. The financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Corporation’s Form 10-K for the year ended June 30, 2015. The results of operations for the interim period disclosed herein are not necessarily indicative of the results that may be expected for a full year.

The consolidated financial statements include the accounts of the Corporation and the Bank. All significant inter-company transactions and accounts have been eliminated in consolidation.

Segment Information: The Corporation is a bank holding company engaged in the business of commercial and retail banking, which accounts for substantially all of the revenues, operating income, and assets. Accordingly, all of its operations are recorded in one segment, banking.

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

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

Note 2 – Securities

Available –for-Sale	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
March 31, 2016
Obligations of U.S. government-sponsored entities and agencies	$	13,186	$	311	$	—		$	13,497
Obligations of state and political subdivisions		52,037		1,509		(12	)		53,534
Mortgage-backed securities – residential		60,683		818		(39	)		61,462
Mortgage-backed securities– commercial		1,487		27		—			1,514
Collateralized mortgage obligations– residential		4,643		30		(8	)		4,665
Pooled trust preferred security		159		296		—			455
Total available-for-sale securities	$	132,195	$	2,991	$	(59	)	$	135,127

Held-to-Maturity	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
March 31, 2016
Obligations of state and political subdivisions	$	3,530	$	121	$	—	$	3,651

Available–for-Sale	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
June 30, 2015
Obligations of U.S. government-sponsored entities and agencies	$	16,411	$	178	$	(31	)	$	16,558
Obligations of state and political subdivisions		48,557		811		(405	)		48,963
Mortgage-backed securities – residential		64,441		699		(226	)		64,914
Mortgage-backed securities – commercial		1,485		1		—			1,486
Collateralized mortgage obligations - residential		4,703		14		(34	)		4,683
Pooled trust preferred security		184		356		—			540
Total available-for-sale securities	$	135,781	$	2,059	$	(696	)	$	137,144

Held-to-Maturity	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
June 30, 2015
Obligations of state and political subdivisions	$	3,655	$	67	$	—	$	3,722

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

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

	Three Months Ended March 31,				Nine Months Ended March 31,
	2016		2015		2016		2015
Proceeds from sales	$	4,675	$	3,080	$	6,665	$	16,124
Gross realized gains		87		50		122		241
Gross realized losses		—		54		—		123

The income tax provision applicable to these net realized gains amounted to $30 and $41 for the three and nine months ended March 31, 2016, respectively, and $39 for the nine month period ended March 31, 2015. The income tax benefit applicable to the net realized loss was $1 for the three month period ended March 31, 2015.

The amortized cost and fair values of debt securities at March 31, 2016, by expected maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date, primarily mortgage-backed securities, collateralized mortgage obligations and the pooled trust preferred security are shown separately.

Available-for-Sale	Amortized Cost		Estimated Fair Value
Due in one year or less	$	6,120	$	6,216
Due after one year through five years		15,868		16,371
Due after five years through ten years		26,880		27,669
Due after ten years		16,355		16,775
Total		65,223		67,031

U.S. Government-sponsored mortgage-backed and related securities		66,813		67,641
Pooled trust preferred security		159		455
Total available-for-sale securities	$	132,195	$	135,127

Held-to-Maturity

Due after five years through ten years		710		740
Due after ten years		2,820		2,911
Total held-to-maturity securities	$	3,530	$	3,651

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

The following table summarizes the securities with unrealized losses at March 31, 2016 and June 30, 2015, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position:

	Less than 12 Months					12 Months or more					Total
Available-for-sale	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
March 31, 2016
Obligations of states and political subdivisions	$	3,009	$	(10	)	$	279	$	(2	)	$	3,288	$	(12	)
Mortgage-backed securities - residential		9,630		(23	)		2,497		(16	)		12,127		(39	)
Collateralized mortgage obligations – residential		838		(7	)		462		(1	)		1,300		(8	)
Total temporarily impaired	$	13,477	$	(40	)	$	3,238	$	(19	)	$	16,715	$	(59	)

	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, 2015
Obligation of U.S. government- sponsored entities and agencies	$	3,719	$	(31	)	$	—	$	—		$	3,719	$	(31	)
Obligations of states and political subdivisions		18,796		(352	)		2,145		(53	)		20,941		(405	)
Mortgage-backed securities - residential		24,322		(200	)		2,031		(26	)		26,353		(226	)
Collateral mortgage obligation - residential		3,321		(34	)		—		—			3,321		(34	)
Total temporarily impaired	$	50,158	$	(617	)	$	4,176	$	(79	)	$	54,334	$	(696	)

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.

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

The unrealized losses within the securities portfolio as of March 31, 2016 have not been recognized into income because the decline in fair value is not attributed to credit quality, management does not intend to sell and it is likely that management will not be required to sell the securities prior to their anticipated recovery. The decline in fair value of the mortgage-backed securities, obligations of state and political subdivisions and collateralized mortgage obligations is largely due to changes in interest rates. The fair value is expected to recover as the securities approach maturity. The mortgage-backed securities and collateralized mortgage obligations were primarily issued by Fannie Mae, Freddie Mac and Ginnie Mae, institutions which the government has affirmed its commitment to support. The Corporation does not own any private label mortgage-backed securities.

Note 3 – Loans

Major classifications of loans were as follows:

	March 31, 2016			June 30, 2015
Commercial	$	43,115		$	32,127
Commercial real estate:
Construction		5,543			1,267
Other		145,062			143,375
1 – 4 Family residential real estate:
Owner occupied		30,932			30,050
Non-owner occupied		14,675			14,518
Construction		660			234
Consumer		6,207			6,948
Subtotal		246,194			228,519
Allowance for loan losses		(2,663	)		(2,432	)
Net Loans	$	243,531		$	226,087

Loans presented above are net of net deferred loan fees of $361 and $392 for March 31, 2016 and June 30, 2015, respectively.

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ending March 31, 2016:

					1-4 Family
			Commercial		Residential
			Real		Real
	Commercial		Estate		Estate			Consumer			Total

Allowance for loan losses:
Beginning balance	$	397	$	1,728	$	307		$	123		$	2,555
Provision for loan losses		61		52		17			—			130
Loans charged-off		—		—		(18	)		(7	)		(25	)
Recoveries		—		—		—			3			3
Total ending allowance balance	$	458	$	1,780	$	306		$	119		$	2,663

The following table presents the activity in the allowance for loan losses by portfolio segment for the nine months ending March 31, 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		142		125			155			(8	)		414
Loans charged-off		—		(5	)		(138	)		(58	)		(201	)
Recoveries		—		—			—			18			18
Total ending allowance balance	$	458	$	1,780		$	306		$	119		$	2,663

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ending March 31, 2015:

						1-4 Family
			Commercial			Residential
			Real			Real
	Commercial		Estate			Estate			Consumer			Total

Allowance for loan losses:
Beginning balance	$	311	$	1,493		$	288		$	360		$	2,452
Provision for loan losses		50		125			(2	)		(83	)		90
Loans charged-off		—		(128	)		—			(7	)		(135	)
Recoveries		—		1			—			17			18
Total ending allowance balance	$	361	$	1,491		$	286		$	287		$	2,425

The following table presents the activity in the allowance for loan losses by portfolio segment for the nine months ending March 31, 2015:

						1-4 Family
			Commercial			Residential
			Real			Real
	Commercial		Estate			Estate			Consumer			Total

Allowance for loan losses:
Beginning balance	$	307	$	1,440		$	294		$	364		$	2,405
Provision for loan losses		54		178			23			(41	)		214
Loans charged-off		—		(128	)		(33	)		(75	)		(236	)
Recoveries		—		1			2			39			42
Total ending allowance balance	$	361	$	1,491		$	286		$	287		$	2,425

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of March 31, 2016. Included in the recorded investment in loans is $552 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	$	—	$	164	$	3	$	—	$	167
Collectively evaluated for impairment		458		1,616		303		119		2,496
Total ending allowance balance	$	458	$	1,780	$	306	$	119	$	2,663

Recorded investment in loans:
Loans individually evaluated for impairment	$	—	$	3,228	$	1,041	$	—	$	4,269
Loans collectively evaluated for impairment		43,225		147,674		45,356		6,222		242,477
Total ending loans balance	$	43,225	$	150,902	$	46,397	$	6,222	$	246,746

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of June 30, 2015. Included in the recorded investment in loans is $501 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	$	—	$	58	$	12	$	—	$	70
Collectively evaluated for impairment		316		1,602		277		167		2,362
Total ending allowance balance	$	316	$	1,660	$	289	$	167	$	2,432

Recorded investment in loans:
Loans individually evaluated for impairment	$	—	$	2,786	$	615	$	—	$	3,401
Loans collectively evaluated for impairment		32,210		142,139		44,304		6,966		225,619
Total ending loans balance	$	32,210	$	144,925	$	44,919	$	6,966	$	229,020

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

The following table presents information related to average recorded investment and interest income associated with loans individually evaluated for impairment by class of loans as of March 31, 2016 and for the nine months ended March 31, 2016:

	As of March 31, 2016						Nine Months ended March 31, 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 real estate:
Construction	$	20	$	20	$	—	$	18	$	—	$	—
Other		2,294		2,105		—		2,164		—		—
1-4 Family residential real estate:
Owner occupied		409		382		—		280		1		1
Non-owner occupied		731		556		—		413		—		—
With an allowance recorded:
Commercial real estate:
Other		1,120		1,103		164		1,026		26		26
1-4 Family residential real estate:
Owner occupied		103		103		3		156		5		5
Non-owner occupied		—		—		—		153		4		4
Total	$	4,677	$	4,269	$	167	$	4,210	$	36	$	36

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

	Average		Interest		Cash Basis
	Recorded		Income		Interest
	Investment		Recognized		Recognized
With no related allowance recorded:
Commercial real estate:
Construction	$	20	$	—	$	—
Other		2,183		—		—
1-4 Family residential real estate:
Owner occupied		294		1		1
Non-owner occupied		557		—		—
With an allowance recorded:
Commercial real estate:
Other		1,111		8		8
1-4 Family residential real estate:
Owner occupied		159		1		1
Total	$	4,324	$	10	$	10

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

The following table presents information related to loans individually evaluated for impairment by class of loans as of June 30, 2015 and for the nine months ended March 31, 2015:

	As of June 30, 2015						Nine Months ended March 31, 2015
	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 real estate:
Other	$	2,432	$	2,082	$	—	$	1,735	$	25		25
1-4 Family residential real estate:
Owner occupied		58		35		—		190		—		—
Non-owner occupied		—		—		—		49		1		1
With an allowance recorded:
Commercial real estate:
Other		740		704		58		763		27		27
1-4 Family residential real estate:
Owner occupied		122		123		4		125		6		6
Non-owner occupied		512		457		8		490		14		14
Total	$	3,864	$	3,401	$	70	$	3,352	$	73	$	73

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

	Average		Interest		Cash Basis
	Recorded		Income		Interest
	Investment		Recognized		Recognized
With no related allowance recorded:
Commercial real estate:
Other	$	2,355	$	25	$	25
1-4 Family residential real estate:
Owner occupied		330		—		—
Non-owner occupied		72		1		1
With an allowance recorded:
Commercial real estate:
Other		762		9		9
1-4 Family residential real estate:
Owner occupied		124		2		2
Non-owner occupied		462		4		4
Total	$	4,105	$	41	$	41

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

The following table presents the recorded investment in non-accrual and loans past due over 90 days still on accrual by class of loans as of March 31, 2016 and June 30, 2015:

	March 31, 2016				June 30, 2015
			Loans Past Due				Loans Past Due
			Over 90 Days				Over 90 Days
			Still				Still
	Non-accrual		Accruing		Non-accrual		Accruing
Commercial real estate:
Construction	$	20	$	—	$	—	$	—
Other		2,554		—		2,079		—
1 – 4 Family residential:
Owner occupied		213		—		190		—
Non-owner occupied		556		—		—		—
Consumer		—		6		—		—
Total	$	3,343	$	6	$	2,269	$	—

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.

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

The following table presents the aging of the recorded investment in past due loans as of March 31, 2016 by class of loans:

	Days Past Due
	30 - 59		60 - 89		90 Days or		Total		Loans Not
	Days		Days		Greater		Past Due		Past Due		Total
Commercial	$	49	$	—	$	—	$	49	$	43,176	$	43,225
Commercial real estate:
Construction		—		—		—		—		5,555		5,555
Other		43		—		2,110		2,153		143,194		145,347
1-4 Family residential:
Owner occupied		131		—		196		327		30,697		31,024
Non-owner occupied		—		—		336		336		14,377		14,713
Construction		—		—		—		—		660		660
Consumer		—		—		6		6		6,216		6,222
Total	$	223	$	—	$	2,648	$	2,871	$	243,875	$	246,746

The above table of past due loans includes the recorded investment in non-accrual loans $43 in the 30-59 days category, $2,642 in the 90 days or greater category and $658 in the loans not past due category.

The following table presents the aging of the recorded investment in past due loans as of June 30, 2015 by class of loans:

	Days Past Due
	30 - 59		60 - 89		90 Days or		Total		Loans Not
	Days		Days		Greater		Past Due		Past Due		Total
Commercial	$	—	$	25	$	—	$	25	$	32,185	$	32,210
Commercial real estate:
Construction		—		—		—		—		1,270		1,270
Other		62		—		30		92		143,563		143,655
1-4 Family residential:
Owner occupied		268		68		139		475		29,654		30,129
Non-owner occupied		—		8		—		8		14,547		14,555
Construction		—		—		—		—		235		235
Consumer		17		—		—		17		6,949		6,966
Total	$	347	$	101	$	169	$	617	$	228,403	$	229,020

The above table of past due loans includes the recorded investment in non-accrual loans of $169 in the 90 days or greater category and $2,100 in the loans not past due category.

Troubled Debt Restructurings:

As of March 31, 2016, the recorded investment of loans classified as troubled debt restructurings was $1,156 with $78 of specific reserves allocated to these loans. As of June 30, 2015, the recorded investment of loans classified as troubled debt restructurings was $1,335 with $70 of specific reserves allocated to these loans. As of March 31, 2016 and June 30, 2015, the Corporation had not committed to lend any additional amounts to customers with outstanding loans that are classified as troubled debt restructurings.

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

During the three and nine months ended March 31, 2016 and 2015 there were no loan modifications completed that were classified as troubled debt restructurings. There were no charge offs from troubled debt restructurings that were completed during the three or nine month periods ended March 31, 2016 and 2015.

There were no loans classified as troubled debt restructurings for which there was a payment default within 12 months following the modification during the three and nine month periods ending March 31, 2016 and 2015. A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms.

Credit Quality Indicators:

The Corporation categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, current economic trends and other relevant information. The Corporation analyzes loans individually by classifying the loans as to credit risk. This analysis includes loans with a total outstanding loan relationship greater than $100 and non-homogeneous loans, such as commercial and commercial real estate loans. Management monitors the loans on an ongoing basis for any changes in the borrower’s ability to service their debt and affirm the risk ratings for the loans and leases in their respective portfolio on an annual basis. The Corporation uses the following definitions for risk ratings:

Special Mention. Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered 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 are disclosed in the previous table within this footnote. Based on the most recent analysis performed, the recorded investment by risk category of loans by class of loans was as follows:

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

	As of March 31, 2016
			Special						Not
	Pass		Mention		Substandard		Doubtful		Rated
Commercial	$	37,730	$	4,729	$	96	$	—	$	670
Commercial real estate:
Construction		5,535		—		20		—		—
Other		136,581		3,365		2,673		2,110		618
1-4 Family residential real estate:
Owner occupied		3,430		—		—		143		27,451
Non-owner occupied		13,397		422		498		336		60
Construction		350		—		—		—		310
Consumer		—		—		—		—		6,222
Total	$	197,023	$	8,516	$	3,287	$	2,589	$	35,331

	As of June 30, 2015
			Special						Not
	Pass		Mention		Substandard		Doubtful		Rated
Commercial	$	27,359	$	4,030	$	96	$	—	$	725
Commercial real estate:
Construction		1,224		—		46		—		—
Other		133,452		4,473		2,876		2,032		822
1-4 Family residential real estate:
Owner occupied		4,029		—		—		35		26,065
Non-owner occupied		12,602		475		1,025		—		453
Construction		235		—		—		—		—
Consumer		—		—		—		—		6,966
Total	$	178,901	$	8,978	$	4,043	$	2,067	$	35,031

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

Note 4 - 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: When available, the fair values of available-for-sale securities are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs). For securities where quoted market prices are not available, fair values are calculated based on market prices of similar securities (Level 2 inputs). For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (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 March 31, 2016 Using
	Balance at March 31, 2016		Level 1		Level 2		Level 3
Assets:
Obligations of U.S. government-sponsored entities and agencies	$	13,497	$	—	$	13,497	$	—
Obligations of states and political subdivisions		53,534		—		53,534		—
Mortgage-backed securities – residential		61,462		—		61,462		—
Mortgage-backed securities – commercial		1,514		—		1,514		—
Collateralized mortgage obligations - residential		4,665		—		4,665		—
Pooled trust preferred security		455		—		455		—

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

			Fair Value Measurements at June 30, 2015 Using
	Balance at June 30, 2015		Level 1		Level 2		Level 3
Assets:
Obligations of U.S. government-sponsored entities and agencies	$	16,558	$	—	$	16,558	$	—
Obligations of states and political subdivisions		48,963		—		48,963		—
Mortgage-backed securities - residential		64,914		—		64,914		—
Mortgage-backed securities - commercial		1,486		—		1,486		—
Collateralized mortgage obligations - residential		4,683		—		4,683		—
Pooled trust preferred security		540		—		540		—

There were no transfers between Level 1 and Level 2 during the three or nine month periods ended March 31, 2016 or 2015.

Certain financial assets and financial liabilities are measured at fair value on a non-recurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances. Financial assets and financial liabilities measured at fair value on a non-recurring basis include the following:

Impaired Loans: At the time a loan is considered impaired, it is valued at the lower of cost or fair value. Impaired loans carried at fair value generally receive specific allocations of the allowance for loan losses. 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.

Financial assets and financial liabilities measured at fair value on a non-recurring basis are summarized below:

			Fair Value Measurements at March 31, 2016 Using
	Balance at March 31, 2016		Level 1		Level 2		Level 3
Impaired loans:
Commercial Real Estate - Other	$	1,954	$	—	$	—	$	1,954
1-4 Family residential real estate
Non-owner occupied		336		—		—		336

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

			Fair Value Measurements at June 30, 2015 Using
	Balance at June 30, 2015		Level 1		Level 2		Level 3
Impaired loans:
Commercial Real Estate - Other	$	1,983	$	—	$	—	$	1,983

Impaired loans included in the tables above are measured for impairment using the fair value of the collateral and had a carrying amount of $2,290, with no valuation allowance at March 31, 2016. The resulting impact to the provision for loan losses was an increase of $123 being recorded for the nine month period ended March 31, 2016. As of June 30, 2015, the carrying amount of impaired loans was $1,983 with no valuation allowance. There was no provision for loan loss recorded related to impaired loans measured at fair value for the three month periods ended March 31, 2016 or 2015, or the nine month period ended March 31, 2015.

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at March 31, 2016:

	Fair Value		Valuation Technique	Unobservable Inputs	Range	Weighted Average
Impaired loans:
Commercial Real Estate – Other	$	733	Income approach	Liquidation adjustment for distressed sales	-40.0%		-40.0	%
Commercial Real Estate – Other	$	125	Cost approach	Liquidation adjustment for distressed sales	-40.0%		-40.0	%
Commercial Real Estate – Other	$	1,096	Sales comparison approach	Adjustment for differences between comparable sales	82.9% to -38.7%		-7.5	%
1-4 Family residential real estate non-owner occupied	$	336	Sales comparison approach	Adjustment for differences between comparable sales	38.6% to -4.7%		20.7	%

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at June 30, 2015:

	Fair Value		Valuation Technique	Unobservable Inputs	Range	Weighted Average
Impaired loans:
Commercial Real Estate – Other	$	733	Income approach	Liquidation adjustment for distressed sales	-40.0%		-40.0	%
Commercial Real Estate - Other	$	125	Cost approach	Liquidation adjustment for distressed sales	-40.0%		-40.0	%
Commercial Real Estate - Other	$	1,121	Sales comparison approach	Adjustment for differences between comparable sales	82.9% to -71.6%		-11.7	%

The valuation technique used by an independent third party appraiser in the fair value measurement of collateral for collateral-dependent impaired loans consisted of the income, cost and sales comparison approaches. The significant unobservable inputs used in the fair value measurement relate to any adjustments made to the value set forth in the appraisal due to a distressed sale situation and adjustments for differences between comparable sales.

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:

	March 31, 2016				June 30, 2015
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial Assets:
Level 1 inputs:
Cash and cash equivalents	$	14,138	$	14,138	$	10,544	$	10,544
Level 2 inputs:
Certificates of deposits in other financial institutions		5,170		5,172		4,470		4,456
Loans held for sale		746		761		462		468
Accrued interest receivable		1,338		1,338		1,035		1,035
Level 3 inputs:
Securities held-to-maturity		3,530		3,651		3,655		3,722
Loans, net		243,531		243,762		226,087		226,915
Financial Liabilities:
Level 2 inputs:
Demand and savings deposits		280,770		280,770		266,635		266,635
Time deposits		65,539		64,646		66,361		66,498
Short-term borrowings		24,573		24,573		19,838		19,838
Federal Home Loan Bank advances		7,696		7,893		6,240		6,537
Accrued interest payable		42		42		41		41

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

The assumptions used to estimate fair value are described as follows:

Cash and cash equivalents: The carrying value of cash, deposits in other financial institutions and federal funds sold were considered to approximate fair value resulting in a Level 1 classification.

Certificates of deposits in other financial institutions : Fair value of certificates of deposits in other financial institutions was estimated using current rates for deposits of similar remaining maturities resulting in a Level 2 classification.

Accrued interest receivable and payable, demand and savings deposits and short-term borrowings : The carrying value of accrued interest receivable and payable, demand and savings deposits and short-term borrowings were considered to approximate fair value due to their short-term duration resulting in a Level 2 classification.

Loans held for sale: The fair value of loans held for sale is estimated based upon binding contracts and quotes from third party investors resulting in a Level 2 classification.

Loans: Fair value for loans was estimated for portfolios of loans with similar financial characteristics. For adjustable rate loans that reprice at least annually and for fixed rate commercial loans with maturities of six months or less which possess normal risk characteristics, carrying value was determined to be fair value. Fair value of other types of loans (including adjustable rate loans which reprice less frequently than annually and fixed rate term loans or loans which possess higher risk characteristics) was estimated by discounting future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for similar anticipated maturities resulting in a Level 3 classification. The methods utilized to estimate the fair value of loans do not necessarily represent an exit price.

Securities held-to-maturity: The held-to-maturity securities are general obligation and revenue bonds made to local municipalities. The fair values of these securities are estimated using a spread to the applicable municipal fair market curve resulting in a Level 3 classification.

Time deposits: Fair value of fixed-maturity certificates of deposit was estimated using the rates offered at March 31, 2016 and June 30, 2015, for deposits of similar remaining maturities. 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 resulting in a Level 2 classification.

Federal Home Loan Bank advances: Fair value of Federal Home Loan Bank advances was estimated using current rates at March 31, 2016 and June 30, 2015 for similar financing resulting in a Level 2 classification.

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

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 5 – 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. There were no equity instruments that were anti-dilutive for the three or nine month periods ended March 31, 2016 and 2015. The following table details the calculation of basic and diluted earnings per share:

	For the Three Months Ended March 31,				For the Nine Months Ended March 31,
	2016		2015		2016		2015
Basic:
Net income available to common shareholders	$	708	$	632	$	2,074	$	2,196
Weighted average common shares outstanding		2,725,543		2,728,083		2,724,992		2,728,545
Basic income per share	$	0.26	$	0.23	$	0.76	$	0.80

Diluted:
Net income available to common shareholders	$	708	$	632	$	2,074	$	2,196
Weighted average common shares outstanding		2,725,543		2,728,083		2,724,992		2,728,545
Dilutive effect of restricted stock		83		217		137		302
Total common shares and dilutive potential common shares		2,725,626		2,728,300		2,725,129		2,728,847
Dilutive income per share	$	0.26	$	0.23	$	0.76	$	0.80

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

Note 6 –Accumulated Other Comprehensive Income

The components of other comprehensive income related to unrealized gains and losses on available-for-sale securities for the three and nine month periods ended March 31, 2016 and 2015, were as follows:

	Pretax			Tax Effect			After-tax			Affected Line Item in Consolidated Statements of Income
Balance as of December 31, 2015	$	1,731		$	(589	)	$	1,142
Unrealized holding loss on available-for-sale securities arising during the period		1,288			(438	)		850
Amounts reclassified from accumulated other comprehensive income		(87	)		30			(57	)	(a)(b)
Net current period other comprehensive income		1,201			(408	)		793
Balance as of March 31, 2016	$	2,932		$	(997	)	$	1,935

Balance as of December 31, 2014	$	2,262		$	(769	)	$	1,493
Unrealized holding gain on available-for-sale securities arising during the period		526			(180	)		346
Amounts reclassified from accumulated other comprehensive income		4			(1	)		3		(a)(b)
Net current period other comprehensive income		530			(181	)		349
Balance as of March 31, 2015	$	2,792		$	(950	)	$	1,842

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

	Pretax			Tax Effect			After-tax			Affected Line Item in Consolidated Statements of Income
Balance as of June 30, 2015	$	1,363		$	(464	)	$	899
Unrealized holding gain on available-for-sale securities arising during the period		1,691			(574	)		1,117
Amounts reclassified from accumulated other comprehensive income		(122	)		41			(81	)	(a)(b)
Net current period other comprehensive income		1,569			(533	)		1,036
Balance as of March 31, 2016	$	2,932		$	(997	)	$	1,935

Balance as of June 30, 2014	$	1,944		$	(661	)	$	1,283
Unrealized holding gain on available-for-sale securities arising during the period		966			(328	)		638
Amounts reclassified from accumulated other comprehensive income		(118	)		39			(79	)	(a)(b)
Net current period other comprehensive income		848			(289	)		559
Balance as of March 31, 2015	$	2,792		$	(950	)	$	1,842

(a) Securities gains, net

(b) Income tax expense

Item 2 – 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 results of operations for the three and nine month periods ended March 31, 2016, compared to the same periods in 2015, and the consolidated balance sheet at March 31, 2016, compared to June 30, 2015. This discussion is designed to provide a more comprehensive review of the operating results and financial condition than could be obtained from an examination of the financial statements alone. This analysis should be read in conjunction with the consolidated financial statements and related footnotes and the selected financial data included elsewhere in this report.

Overview

Consumers Bancorp, Inc., a bank holding company incorporated under the laws of the State of Ohio (the Corporation), owns all of the issued and outstanding common shares of Consumers National Bank, a bank chartered under the laws of the United States of America (the Bank). The Corporation’s activities have been limited primarily to holding the common shares of the Bank. The Bank’s business involves attracting deposits from businesses and individual customers and using such deposits to originate commercial, mortgage and consumer loans in its market area, consisting primarily of Carroll, Columbiana, Stark, Summit, Wayne and contiguous counties in Ohio. 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.

Results of Operations

Three and Nine Months Ended March 31, 2016 and March 31, 2015

In the third quarter of fiscal year 2016, net income was $708, or $0.26 per common share, or an increase of $76, or 12.0%, from the same prior year period. The following are key highlights of our results of operations for the three months ending March 31, 2016:

net interest income increased to $3,449, or by 4.5%, in the third quarter of fiscal year 2016 from the same prior year period;

loan loss provision expense in the third quarter of fiscal year 2016 totaled $130 compared to $90 in the same prior year period;

non-interest income increased by $88 primarily as a result of an increase in security gains from the same prior year period; and

non-interest expenses increased by $91, or 2.9%, in the third quarter of fiscal year 2016 compared to the same prior year period principally as a result of higher occupancy and equipment and salaries and employee benefit expenses .

In the first nine months of fiscal year 2016, net income was $2,074, or $0.76 per common share, compared with $2,196, or $0.80 per common share, in the prior year period. The following are key highlights of our results of operations for the nine months ending March 31, 2016:

•

net interest income increased by $342, or 3.4%, in the first nine months of fiscal year 2016 from the same prior year period;

•

loan loss provision expense in the first nine months of fiscal year 2016 totaled $414 compared to $214 in the same prior year period;

•

non-interest income decreased by $39 in the first nine months of fiscal year 2016 from the same prior year period mainly as a result of a $33 decrease from the gains on sale of mortgage loans and a $22 decrease from the gains on sale of other real estate owned; and

•

non-interest expenses increased by $301, or 3.3%, in the first nine months of fiscal year 2016 principally as a result of higher sala ry and employee benefit expenses and professional fees .

Return on average equity and return on average assets were 6.47% and 0.66%, respectively, for the first nine months of fiscal year 2016 compared to 7.11% and 0.75%, respectively, for the same prior year period.

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. Net interest margin is calculated by dividing net interest income on a fully tax equivalent basis (FTE) by total average interest-earning assets. FTE income includes tax-exempt income, restated to a pre-tax equivalent, based on the statutory federal income tax rate. All average balances are daily average balances. Non-accruing loans are included in average loan balances.

The Corporation’s net interest margin was 3.73% for the three month period ended March 31, 2016, compared with 3.79% for the same period in 2015. FTE net interest income for the three months ended March 31, 2016 increased by $158, or 4.5%, to $3,635 from $3,477 for the same year ago period. The increase in net interest income was primarily the result of an increase in average interest-earning assets.

FTE interest income for the three months ended March 31, 2016 increased by $148, or 4.0%, from the same year ago period. An increase of $18,632, or 5.0%, in average interest-earning assets from the same prior year period offset the impact the low interest rate environment has had on the yield of average interest-earning assets. Interest expense for the three months ended March 31, 2016 decreased by $10, or 4.3%, from the same year ago period. The Corporation’s cost of funds decreased to 0.32% for the three month period ended March 31, 2016 from 0.35% for the same year ago period.

The Corporation’s net interest margin was 3.70% for the nine month period ended March 31, 2016, compared with 3.79% for the same period in 2015. FTE net interest income for the nine months ended March 31, 2016 increased by $353, or 3.4%, to $10,831 from $10,478 for the same year ago period. The increase in net interest income was primarily the result of an increase in average interest-earning assets.

CONSUMERS BANCORP, INC.

Management's Discussion and Analysis of Financial Condition

and Results of Operations (continued)

(Dollars in thousands, except per share data)

FTE interest income for the nine months ended March 31, 2016 increased by $309, or 2.8%, from the same year ago period. An increase of $20,105, or 5.4%, in average interest-earning assets from the same prior year period offset the impact the low interest rate environment has had on the yield of average interest-earning assets. Interest expense for the nine months ended March 31, 2016 decreased by $44, or 6.2%, from the same year ago period. The Corporation’s cost of funds decreased to 0.32% for the three month period ended March 31, 2016 from 0.36% for the same year ago period.

CONSUMERS BANCORP, INC.

Management's Discussion and Analysis of Financial Condition

and Results of Operations (continued)

(Dollars in thousands, except per share data)

Average Balance Sheets and Analysis of Net Interest Income for the Three Months Ended March 31 (In thousands, except percentages)

	2016								2015
	Average Balance			Interest		Yield/ Rate			Average Balance			Interest		Yield/ Rate
Interest-earning assets:
Taxable securities	$	82,839		$	485		2.38	%	$	85,195		$	470		2.28	%
Nontaxable securities (1)		56,172			530		3.89			48,915			496		4.21
Loans receivable (1)		243,692			2,813		4.63			230,873			2,725		4.79
Interest bearing deposits and federal funds sold		10,437			30		1.15			9,525			19		0.81
Total interest-earning assets		393,140			3,858		3.96	%		374,508			3,710		4.05	%

Noninterest-earning assets		27,003								22,450

Total Assets	$	420,143							$	396,958

Interest-bearing liabilities:
NOW	$	46,405		$	17		0.15	%	$	45,127		$	16		0.14	%
Savings		136,148			30		0.09			131,775			28		0.09
Time deposits		65,689			119		0.73			67,963			137		0.82
Short-term borrowings		20,233			9		0.18			16,152			7		0.18
FHLB advances		10,237			48		1.88			8,742			45		2.09
Total interest-bearing liabilities		278,712			223		0.32	%		269,759			233		0.35	%

Noninterest-bearing liabilities:
Noninterest-bearing checking accounts		94,740								82,173
Other liabilities		3,369								3,249
Total liabilities		376,821								355,181
Shareholders’ equity		43,322								41,777

Total liabilities and shareholders’ equity	$	420,143							$	396,958

Net interest income, interest rate spread (1)				$	3,635		3.64	%				$	3,477		3.70	%

Net interest margin (net interest as a percent of average interest-earning assets) (1)							3.73	%							3.79	%

Federal tax exemption on non-taxable securities and loans included in interest income				$	186							$	176

Average interest-earning assets to interest-bearing liabilities		141.06	%							138.83	%

(1) calculated on a fully taxable equivalent basis

CONSUMERS BANCORP, INC.

Management's Discussion and Analysis of Financial Condition

and Results of Operations (continued)

(Dollars in thousands, except per share data)

Average Balance Sheets and Analysis of Net Interest Income for the Nine Months Ended March 31 (In thousands, except percentages)

	2016								2015
	Average Balance			Interest		Yield/ Rate			Average Balance			Interest		Yield/ Rate
Interest-earning assets:
Taxable securities	$	86,095		$	1,430		2.23	%	$	85,034		$	1,429		2.27	%
Nontaxable securities (1)		55,065			1,575		3.86			48,555			1,534		4.30
Loans receivable (1)		237,668			8,413		4.70			226,965			8,178		4.80
Interest bearing deposits and federal funds sold		11,528			84		0.97			9,697			52		0.71
Total interest-earning assets		390,356			11,502		3.93	%		370,251			11,193		4.05	%

Noninterest-earning assets		26,689								21,379

Total Assets	$	417,045							$	391,630

Interest-bearing liabilities:
NOW	$	47,160		$	52		0.15	%	$	46,015		$	54		0.16	%
Savings		136,154			90		0.09			127,874			79		0.08
Time deposits		65,296			371		0.75			68,960			420		0.81
Short-term borrowings		20,629			27		0.17			17,466			22		0.17
FHLB advances		7,433			131		2.34			7,401			140		2.52
Total interest-bearing liabilities		276,672			671		0.32	%		267,716			715		0.36	%

Noninterest-bearing liabilities:
Noninterest-bearing checking accounts		94,400								79,653
Other liabilities		3,336								3,098
Total liabilities		374,408								350,467
Shareholders’ equity		42,637								41,163

Total liabilities and shareholders’ equity	$	417,045							$	391,630

Net interest income, interest rate spread (1)				$	10,831		3.61	%				$	10,478		3.69	%

Net interest margin (net interest as a percent of average interest-earning assets) (1)							3.70	%							3.79	%

Federal tax exemption on non-taxable securities and loans included in interest income				$	552							$	541

Average interest-earning assets to interest-bearing liabilities		141.09	%							138.30	%

CONSUMERS BANCORP, INC.

Management's Discussion and Analysis of Financial Condition

and Results of Operations (continued)

(Dollars in thousands, except per share data)

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 incurred credit losses in the Bank’s loan portfolio that have been incurred at each balance sheet date. For the three month period ended March 31, 2016, the provision for loan losses was $130 compared to $90 for the same prior year period. For the nine month period ended March 31, 2016, the provision for loan losses was $414 compared to $214 for the same prior year period.

For the nine month period ended March 31, 2016, net charge-offs totaled $183, or an annualized net charge-off to total loan ratio of 0.10%, compared with $194, or 0.11% of total loans, for the same period last year. The provision for loan losses and net charge-offs for the nine month period ended March 31, 2016 were impacted by a loan secured by 1-4 family non-owner occupied residential real estate properties that defaulted and was subsequently adjusted by $120 to the current appraised value. The allowance for loan losses as a percentage of loans was 1.08% at March 31, 2016 and 1.05% at June 30, 2015.

The provision for loan losses for the period ending March 31, 2016 was considered sufficient by management for maintaining an appropriate allowance for probable incurred credit losses.

Non-Interest Income

Non-interest income increased by $88 for the third quarter of fiscal year 2016 from the same period last year. In the third quarter of fiscal year 2016, an $87 net gain was recognized from the sale of securities compared with a $4 net loss in the same prior year period.

Non-interest income decreased by $39 for the first nine months of fiscal year 2016 from the same period last year. Other non-interest income declined by $61 during the third quarter of fiscal year 2016 primarily as a result of declines in gains from the sale of mortgage loans and alternative investment income. Also, in the third quarter of the prior fiscal year period a $22 gain was recognized from the sale of other real estate acquired through loan foreclosure. These declines were partially offset by a $25, or 3.7%, increase in debit card interchange income from the same prior year period.

Non-Interest Expenses

Total non-interest expenses increased to $3,191, or by 2.9%, during the third quarter of fiscal year 2016, compared with $3,100 during the same year ago period. Occupancy and equipment expenses increased by $67, or 17.3%, during the third quarter of fiscal year 2016 from the same period last year primarily as a result of an increase in building, furniture and equipment depreciation expense since the new branch and corporate office facility in Minerva, Ohio was completed during the third fiscal quarter of 2016.

CONSUMERS BANCORP, INC.

Management's Discussion and Analysis of Financial Condition

and Results of Operations (continued)

(Dollars in thousands, except per share data)

Total non-interest expenses increased to $9,534, or by 3.3%, during the first nine months of fiscal year 2016, compared with $9,233 during the same year ago period. Salaries and employee benefit expenses increased by $107 or 2.1%, during the first nine months of fiscal year 2016 from the same period last year primarily as a result of higher salary expenses within the human resources and lending areas. Salary expense increased within lending with the addition of business development officers in the Stow and Wooster, Ohio loan production offices.

Income Taxes

Income tax expense for the three month period ended March 31, 2016 increased by $29, to $156 compared to a year ago. The effective tax rate was 18.1% for the current quarter as compared to 16.7% for the same period last year.

Income tax expense for the first nine months ended March 31, 2016 decreased by $76, to $450 from $526, compared to a year ago. The effective tax rate was 17.8% for the current period as compared to 19.3% for the same period last year.

The effective tax rate differed from the federal statutory rate principally as a result of tax-exempt income from obligations of states and political subdivisions, loans and earnings on bank owned life insurance.

Financial Condition

Total assets at March 31, 2016 were $425,873 compared to $403,967 at June 30, 2015, an increase of $21,906, or an annualized 7.2%.

Total loans increased by $17,675, or an annualized 10.3%, from $228,519 at June 30, 2015 to $246,194 at March 31, 2016. The growth in loans was primarily attributed to the investments in two newer loan production offices in the Stow and Wooster, Ohio markets as well as additions in commercial loan staff. The loan growth was primarily funded by an increase of $13,313, or an annualized 5.3%, in total deposits.

Non-Performing Assets

The following table presents the aggregate amounts of non-performing assets and respective ratios as of the dates indicated.

CONSUMERS BANCORP, INC.

Management's Discussion and Analysis of Financial Condition

and Results of Operations (continued)

(Dollars in thousands, except per share data)

	March 31, 2016			June 30, 2015			March 31, 2015
Non-accrual loans	$	3,343		$	2,269		$	628
Loans past due over 90 days and still accruing		6			—			20
Total non-performing loans		3,349			2,269			648
Other real estate owned		38			—			54
Total non-performing assets	$	3,387		$	2,269		$	702

Non-performing loans to total loans		1.38	%		0.99	%		0.28	%
Allowance for loan losses to total non-performing loans		79.52	%		107.18	%		374.23	%

Non-performing loans increased from June 30, 2015 primarily as a result of placing a commercial credit with a recorded investment of $641 and a 1-4 family non-owner occupied credit with a recorded investment of $336 on non-accrual. The commercial credit is primarily secured by an owner-occupied commercial real estate property and two multi-family real estate properties.

As of March 31, 2016, impaired loans totaled $4,269, of which $3,336 are included in non-accrual loans. Commercial and commercial real estate loans are classified as impaired if management determines that full collection of principal and interest, in accordance with the terms of the loan documents, is not probable. Impaired loans and non-performing loans have been considered in management’s analysis of the appropriateness of the allowance for loan losses. Management and the Board of Directors are closely monitoring these loans and believe that the prospects for recovery of principal and interest, less identified specific reserves, are favorable.

Contractual Obligations, Commitments, Contingent Liabilities and Off-Balance Sheet Arrangements

Liquidity

The objective of liquidity management is to ensure adequate cash flows to accommodate the demands of our customers and provide adequate flexibility for the Corporation to take advantage of market opportunities under both normal operating conditions and under unpredictable circumstances of industry or market stress. Cash is used to fund loans, purchase investments, fund the maturity of liabilities, and at times to fund deposit outflows and operating activities. The Corporation’s principal sources of funds are deposits; amortization and prepayments of loans; maturities, sales and principal receipts from securities; borrowings; and operations. Management considers the asset position of the Corporation to be sufficiently liquid to meet normal operating needs and conditions. The Corporation’s earning assets are mainly comprised of loans and investment securities. Management continually strives to obtain the best mix of loans and investments to both maximize yield and insure the soundness of the portfolio, as well as to provide funding for loan demand as needed.

CONSUMERS BANCORP, INC.

Management's Discussion and Analysis of Financial Condition

and Results of Operations (continued)

(Dollars in thousands, except per share data)

Net cash inflow from operating activities for the nine month period ended March 31, 2016 was $3,262, net cash outflows from investing activities was $18,189 and net cash inflows from financing activities was $18,521. A major source of cash was $22,629 from sales, maturities, calls or principal pay downs on available-for-sale securities, a $13,313 increase in deposits and a net increase of $1,456 in Federal Home Loan Bank (FHLB) advances. A major use of cash included the $19,737 purchase of securities and $18,153 increase in loans. Total cash and cash equivalents was $14,138 as of March 31, 2016 compared to $10,544 at June 30, 2015 and $15,911 at March 31, 2015.

The Bank offers several types of deposit products to its customers. The rates offered by the Bank and the fees charged for them are competitive with others currently available in the market area. Deposits totaled $346,309 at March 31, 2016 compared with $332,996 at June 30, 2015.

To provide an additional source of liquidity, the Corporation has entered into an agreement with the FHLB of Cincinnati. At March 31, 2016, advances from the FHLB of Cincinnati totaled $7,696 as compared with $6,240 at June 30, 2015. As of March 31, 2016, t he Bank had the ability to borrow an additional $12,430 from the FHLB of Cincinnati based on a blanket pledge of qualifying first mortgage loans. The Corporation considers the FHLB of Cincinnati to be a reliable source of liquidity funding, secondary to its deposit base.

Short-term borrowings consisted of repurchase agreements, which is a financing arrangement that matures daily, and federal funds purchased from correspondent banks. The Bank pledges securities as collateral for the repurchase agreements. Short-term borrowings increased to $24,573 at March 31, 2016 from $19,838 at June 30, 2015.

Jumbo time deposits (those with balances of $100 and over) totaled $27,045 at March 31, 2016 and $26,862 at June 30 , 2015 . These deposits are monitored closely by the Corporation and are mainly priced on an individual basis. When these deposits are from a municipality, certain bank-owned securities are pledged to guarantee the safety of these public fund deposits as required by Ohio law. The Corporation has the option to use a fee-paid broker to obtain deposits from outside its normal service area as an additional source of funding. The Corporation, however, does not rely upon these deposits as a primary source of funding. The Corporation had brokered deposits totaling $1,000 as of March 31, 2016 and there were no brokered deposits as of June 30, 2015. Although management monitors interest rates on an ongoing basis, a quarterly rate sensitivity report is used to determine the effect of interest rate changes on the financial statements. In the opinion of management, enough assets or liabilities could be repriced over the near term (up to three years) to compensate for such changes. The spread on interest rates, or the difference between the average earning assets and the average interest-bearing liabilities, is monitored quarterly.

CONSUMERS BANCORP, INC.

Management's Discussion and Analysis of Financial Condition

and Results of Operations (continued)

(Dollars in thousands, except per share data)

Capital Resources

Total shareholders’ equity increased by $2,127 to $43,593 as of March 31, 2016 from $41,466 as of June 30, 2015. The increase was primarily the result of $2,074 in net income during the first nine months of the 2016 fiscal year and a net increase of $1,036 in accumulated other comprehensive income from unrealized gains on available-for-sale securities. These increases were partially offset by cash dividends of $983 that were paid during the first nine months of the 2016 fiscal year.

The Bank is subject to various regulatory capital requirements administered by federal regulatory agencies. Capital adequacy guidelines and prompt corrective-action regulations involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Failure to meet various capital requirements can initiate regulatory action that could have a direct material effect on the Corporation’s financial statements.

On January 1, 2015, rules to implement Basel III capital requirements became effective for community banks. The March 31, 2016 regulatory capital ratios were prepared under the Basel III capital requirements. The Bank’s leverage, common equity tier 1 capital and total capital ratios as of March 31, 2016 were 9.5%, 14.0% and 14.9%, respectively. This compares to leverage, common equity tier 1 capital and risk-based capital ratios of 9.5%, 14.4% and 15.3%, respectively, as of June 30, 2015. The Bank exceeded minimum regulatory capital requirements to be considered well-capitalized for both periods. Management is not aware of any matters occurring subsequent to March 31, 2016 that would cause the Bank’s capital category to change.

Critical Accounting Policies

The financial condition and results of operations for the Corporation presented in the Consolidated Financial Statements, accompanying notes to the Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations are, to a large degree, dependent upon the Corporation’s accounting policies. The selection and application of these accounting policies involve judgments, estimates and uncertainties that are susceptible to change .

The Corporation has identified the appropriateness of the allowance for loan losses and the valuation of securities as critical accounting policies and an understanding of these policies are necessary to understand the financial statements. Critical accounting policies are those policies that require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Note one (Summary of Significant Accounting Policies - Securities and Allowance for Loan Losses), note two (Securities), note three (Loans) and Management’s Discussion and Analysis of Financial Condition and Results of Operation (Critical Accounting Policies and Use of Significant Estimates) of the 2015 Form 10-K provide detail with regard to the Corporation’s accounting for the allowance for loan losses and valuation of securities and other-than-temporary impairment. There have been no significant changes in the application of accounting policies since June 30, 2015.

CONSUMERS BANCORP, INC.

Management's Discussion and Analysis of Financial Condition

and Results of Operations (continued)

(Dollars in thousands, except per share data)

Forward-Looking Statements

When used in this report (including information incorporated by reference in this report), the words or phrases “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “believe” or similar expressions are intended to identify “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements may involve risks and uncertainties that are difficult to predict, may be beyond the Corporation’s control, and could cause actual results to differ materially from those described in such statements. Any such forward-looking statements are made only as of the date of this report or the respective dates of the relevant incorporated documents, as the case may be, and, except as required by law, the Corporation undertakes no obligation to update these forward-looking statements to reflect subsequent events or circumstances. Factors that could cause actual results for future periods to differ materially from those anticipated or projected include, but are not limited to:

material unforeseen changes in the financial condition or results of Consumers National Bank’s customers;

the economic impact from the oil and gas activity in the region could be less than expected or the timeline for development could be longer than anticipated;

regional and national economic conditions becoming less favorable than expected, resulting in, among other things, a deterioration in credit quality of assets and the underlying value of collateral could prove to be less valuable than otherwise assumed or debtors being unable to meet their obligations;

an extended period in which market levels of interest rates remain at historical low levels which could reduce, or put pressure on our ability to maintain, anticipated or actual margins;

competitive pressures on product pricing and services;

pricing and liquidity pressures that may result in a rising market rate environment; and

the nature, extent, and timing of government and regulatory actions.

The risks and uncertainties identified above are not the only risks the Corporation faces. Additional risks and uncertainties not presently known to the Corporation or that the Corporation currently believes to be immaterial also may adversely affect the Corporation. Should any known or unknown risks and uncertainties develop into actual events, those developments could have material adverse effects on the Corporation’s business, financial condition and results of operations.

CONSUMERS BANCORP, INC.

Item 4 – Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by the report, an evaluation was performed under the supervision and with the participation of the Corporation’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Corporation’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15e. Based on the evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Corporation’s disclosure controls and procedures were effective as of March 31, 2016.

Changes in Internal Controls Over Financial Reporting

There have not been any changes in the Corporation’s internal control over financial reporting that occurred during the Corporation’s last quarter that have materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

CONSUMERS BANCORP, INC.

PART II – OTHER INFORMATION

Item 1 – Legal Proceedings

None

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

None

Item 3 – Defaults Upon Senior Securities

None

Item 4 – Mine Safety Disclosures

Not Applicable

Item 5 – Other Information

None

Item 6 – Exhibits

Exhibit
Number		Description
Exhibit 11		Statement regarding Computation of Per Share Earnings (included in Note 5 to the Consolidated Financial Statements).

Exhibit 31.1		Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer

Exhibit 31.2		Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer

Exhibit 32.1		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.

Exhibit 101		The following materials from Consumers Bancorp, Inc.’s Form 10-Q Report for the quarterly period ended March 31, 2016, formatted in XBRL (Extensible Business Reporting Language) include: (1) Unaudited Consolidated Balance Sheets, (2) Unaudited Consolidated Statements of Income, (3) Unaudited Consolidated Statements of Comprehensive Income, (4) Unaudited Consolidated Statement of Changes in Shareholders’ Equity, (5) Unaudited Condensed Consolidated Statements of Cash Flows, and (6) the Notes to Unaudited Condensed Consolidated Financial Statements.

CONSUMERS BANCORP, INC.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	CONSUMERS BANCORP, INC.
	(Registrant)

Date: May 16, 2016	/s/ Ralph J. Lober
	Ralph J. Lober, II
	President & Chief Executive Officer
	(principal executive officer)

Date: May 16, 2016	/s/ Renee K. Wood
	Renee K. Wood
	Chief Financial Officer & Treasurer
	(principal financial officer)

TABLE OF CONTENTS

Part I Financial Information Item 1 Financial Statements Note 1 Summary Of Significant Accounting Policies :Note 1 Summary Of Significant Accounting Policies Note 2 Securities Note 3 Loans Note 4 - Fair Value Note 5 Earnings Per Share Note 6 Accumulated Other Comprehensive Income Item 2 Management S Discussion and Analysis Of Financial Condition and Results Of Operations Item 4 Controls and Procedures Part II Other Information Item 1 Legal Proceedings Item 2 Unregistered Sales Of Equity Securities and Use Of Proceeds Item 3 Defaults Upon Senior Securities Item 4 Mine Safety Disclosures Item 5 Other Information Item 6 Exhibits

CBKM 10-Q Quarter ended March 31, 2016