Edgar Filing: CONSUMERS BANCORP INC /OH/

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, 2015

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 15, 2015
	2,731,612 Common Shares

CONSUMERS BANCORP, INC.

FORM 10-Q

QUARTER ENDED March 31, 2015

Table of Contents

	Page Number (s)
Part I – Financial Information

Item 1 – Financial Statements (Unaudited)
Consolidated Balance Sheets at March 31, 2015 and June 30, 2014	1

Consolidated Statements of Income for the three and nine months ended March 31, 2015 and 2014	2

Consolidated Statements of Comprehensive Income for the three and nine months ended March 31, 2015 and 2014	3

Consolidated Statements of Changes in Shareholders’ Equity for the three and nine months ended March 31, 2015 and 2014	4

Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 2015 and 2014	5

Notes to the Consolidated Financial Statements	6-30

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations	31-42

Item 3 – Not Applicable for Smaller Reporting Companies

Item 4 – Controls and Procedures	43

Part II – Other Information

Item 1 – Legal Proceedings	44

Item 1A – Not Applicable for Smaller Reporting Companies

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds	44

Item 3 – Defaults Upon Senior Securities	44

Item 4 – Mine Safety Disclosure	44

Item 5 – Other Information	44

Item 6 – Exhibits	44

Signatures	45

PART I – FINANCIAL INFORMATION

Item 1 – Financial Statements

CONSUMERS BANCORP, INC.

CONSOLIDATED BALANCE SHEETS (Unaudited)

(Dollars in thousands, except per share data)	March 31, 2015			June 30, 2014
ASSETS
Cash on hand and noninterest-bearing deposits in financial institutions	$	6,909		$	9,049
Federal funds sold and interest-bearing deposits in financial institutions		9,002			2,076
Total cash and cash equivalents		15,911			11,125
Certificates of deposit in other financial institutions		4,217			2,703
Securities, available-for-sale		128,220			126,393
Securities, held-to-maturity (fair value of $3,725 at March 31, 2015 and $3,040 at June 30, 2014)		3,690			3,000
Federal bank and other restricted stocks, at cost		1,396			1,396
Loans held for sale		583			559
Total loans		231,207			224,966
Less allowance for loan losses		(2,425	)		(2,405	)
Net loans		228,782			222,561
Cash surrender value of life insurance		6,578			5,967
Premises and equipment, net		10,473			6,713
Other real estate owned		54			204
Accrued interest receivable and other assets		1,737			1,856
Total assets	$	401,641		$	382,477

LIABILITIES
Deposits
Non-interest bearing demand	$	83,393		$	75,353
Interest bearing demand		44,572			42,718
Savings		134,935			125,151
Time		67,919			70,675
Total deposits		330,819			313,897

Short-term borrowings		19,189			19,489
Federal Home Loan Bank advances		6,254			6,296
Accrued interest and other liabilities		3,405			2,592
Total liabilities		359,667			342,274
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, 2015 and June 30, 2014)		14,630			14,630
Retained earnings		27,154			25,940
Treasury stock, at cost (122,521 and 129,875 common shares as of March 31, 2015 and June 30, 2014, respectively)		(1,652	)		(1,650	)
Accumulated other comprehensive income		1,842			1,283
Total shareholders’ equity		41,974			40,203
Total liabilities and shareholders’ equity	$	401,641		$	382,477

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)	2015			2014			2015		2014

Interest income
Loans, including fees	$	2,714		$	2,610		$	8,146	$	7,922
Securities, taxable		470			459			1,429		1,153
Securities, tax-exempt		331			340			1,025		1,012
Federal funds sold and other interest bearing deposits		19			13			52		34
Total interest income		3,534			3,422			10,652		10,121
Interest expense
Deposits		181			190			553		588
Short-term borrowings		7			6			22		18
Federal Home Loan Bank advances		45			48			140		139
Total interest expense		233			244			715		745
Net interest income		3,301			3,178			9,937		9,376
Provision for loan losses		90			—			214		168
Net interest income after provision for loan losses		3,211			3,178			9,723		9,208

Non-interest income
Service charges on deposit accounts		286			302			926		1,001
Debit card interchange income		223			207			682		646
Bank owned life insurance income		47			44			135		135
Securities gains (losses), net		(4	)		4			118		36
Gain (Loss) on disposition of other real estate owned		—			(10	)		22		(10	)
Other		96			92			349		263
Total non-interest income		648			639			2,232		2,071

Non-interest expenses
Salaries and employee benefits		1,707			1,661			5,123		4,790
Occupancy and equipment		387			334			1,122		978
Data processing expenses		146			142			429		419
Professional and director fees		91			92			309		333
FDIC assessments		55			63			171		169
Franchise taxes		83			78			232		229
Marketing and advertising		70			53			190		185
Telephone and network communications		77			69			214		211
Debit card processing expenses		109			104			346		318
Other		375			398			1,097		1,135
Total non-interest expenses		3,100			2,994			9,233		8,767
Income before income taxes		759			823			2,722		2,512
Income tax expense		127			145			526		458
Net income	$	632		$	678		$	2,196	$	2,054

Basic and diluted earnings per share	$	0.23		$	0.25		$	0.80	$	0.76

See accompanying notes to consolidated financial statements

CONSUMERS BANCORP, INC.

Consolidated statements of comprehensive income

(Unaudited)

(Dollars in thousands)

	Three Months ended March 31,					Nine Months ended March 31,
	2015		2014			2015			2014

Net income	$	632	$	678		$	2,196		$	2,054

Other comprehensive income, net of tax:
Net change in unrealized gains:

Unrealized gains arising during the period		526		1,000			966			707
Reclassification adjustment for (gains) losses included in income		4		(4	)		(118	)		(36	)
Net unrealized gain		530		996			848			671
Income tax effect		181		339			289			228
Other comprehensive income		349		657			559			443

Total comprehensive income	$	981	$	1,335		$	2,755		$	2,497

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,
	2015			2014			2015			2014

Balance at beginning of period	$	41,321		$	37,886		$	40,203		$	28,143

Net income		632			678			2,196			2,054
Other comprehensive income		349			657			559			443
Issuance of 655,668 shares for rights and public offering, net of offering costs of $762		—			—			—			9,237
Common cash dividends		(328	)		(328	)		(984	)		(984	)

Balance at the end of the period	$	41,974		$	38,893		$	41,974		$	38,893

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,
	2015			2014
Cash flows from operating activities
Net cash from operating activities	$	3,962		$	2,578

Cash flow from investing activities
Securities available-for-sale
Purchases		(36,281	)		(44,539	)
Maturities, calls and principal pay downs		18,573			14,287
Proceeds from sales of available-for-sale securities		16,124			2,981
Securities held-to-maturity
Purchases		(780	)		—
Principal pay downs		90			—
Net (increase) decrease in certificates of deposits in other financial institutions		(1,514	)		1,227
Net increase in loans		(6,435	)		(1,929	)
Purchase of Bank owned life insurance		(476	)		—
Acquisition of premises and equipment		(4,202	)		(1,371	)
Disposal of premises and equipment		1			1
Proceeds from sale of other real estate owned		128			699
Net cash from investing activities		(14,772	)		(28,644	)

Cash flow from financing activities
Net increase in deposit accounts		16,922			15,549
Net change in short-term borrowings		(300	)		5,951
Net proceeds from rights and public offering		—			9,237
Proceeds from Federal Home Loan Bank advances		8,500			2,500
Repayments of Federal Home Loan Bank advances		(8,542	)		(2,555	)
Dividends paid		(984	)		(984	)
Net cash from financing activities		15,596			29,698

Increase in cash or cash equivalents		4,786			3,632

Cash and cash equivalents, beginning of period		11,125			9,356
Cash and cash equivalents, end of period	$	15,911		$	12,988

Supplemental disclosure of cash flow information:
Cash paid during the period:
Interest	$	714		$	745
Federal income taxes		610			685
Non-cash items:
Transfer from loans to repossessed assets		—			709
Expired and forfeited dividend reinvestment plan shares associated with restricted stock awards that were retired to treasury stock		2			—

See accompanying notes to consolidated financial statements.

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 Stark, Columbiana, Carroll 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, 2014. 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.

Recently Issued Accounting Pronouncements: In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (a new revenue recognition standard). The Update’s core principle is that a company will recognize revenue to depict the transfer of 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. In addition, this Update specifies the accounting for certain costs to obtain or fulfill a contract with a customer and expands disclosure requirements for revenue recognition. This Update is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. The Corporation is evaluating the effect of adopting this new accounting Update.

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, 2015
Obligations of U.S. government-sponsored entities and agencies	$	16,870	$	348	$	(6	)	$	17,212
Obligations of state and political subdivisions		45,196		1,152		(79	)		46,269
Mortgage-backed securities – residential		57,568		1,069		(52	)		58,585
Mortgage-backed securities – commercial		1,485		—		—			1,485
Collateralized mortgage obligations		4,119		24		(3	)		4,140
Trust preferred security		190		339		—			529
Total available-for-sale securities	$	125,428	$	2,932	$	(140	)	$	128,220

Held-to-Maturity	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses			Fair Value
March 31, 2015
Obligations of state and political subdivisions	$	3,690	$	35	$	—		$	3,725

Available–for-Sale	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
June 30, 2014
Obligations of U.S. government-sponsored entities and agencies	$	18,345	$	126	$	(35	)	$	18,436
Obligations of state and political subdivisions		44,645		1,124		(257	)		45,512
Mortgage-backed securities – residential		57,370		965		(231	)		58,104
Collateralized mortgage obligations		3,887		42		—			3,929
Trust preferred security		202		210		—			412
Total available-for-sale securities	$	124,449	$	2,467	$	(523	)	$	126,393

Held-to-Maturity	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses			Fair Value
June 30, 2014
Obligations of state and political subdivisions	$	3,000	$	40	$	—		$	3,040

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

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

	Three Months Ended March 31,				Nine Months Ended March 31,
	2015		2014		2015		2014
Proceeds	$	3,080	$	216	$	16,124	$	2,981
Gross realized gains		50		4		241		37
Gross realized losses		54		—		123		1

The income tax benefit applicable to the net realized losses was $1 for the three months ended March 31, 2015. The income tax provision applicable to these net realized gains was $39 for the nine months ended March 31, 2015, and $1 and $12 for the three and nine months ended March 31, 2014, respectively.

The amortized cost and fair values of debt securities at March 31, 2015, 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 trust preferred security are shown separately.

Available-for-Sale	Amortized Cost		Fair Value
Due in one year or less	$	2,639	$	2,649
Due after one year through five years		11,753		11,988
Due after five years through ten years		32,085		32,873
Due after ten years		15,589		15,971
Total		62,066		63,481

Mortgage-backed securities – residential		57,568		58,585
Mortgage-backed securities – commercial		1,485		1,485
Collateralized mortgage obligations		4,119		4,140
Trust preferred security		190		529
Total available-for-sale securities	$	125,428	$	128,220

Held-to-Maturity

Due after five years through ten years		780		785
Due after ten years		2,910		2,940
Total held-to-maturity securities	$	3,690	$	3,725

The following table summarizes the securities with unrealized losses at March 31, 2015 and June 30, 2014, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position:

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

	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, 2015
Obligations of U.S. government- sponsored entities and agencies	$	992	$	(6	)	$	—	$	—		$	992	$	(6	)
Obligations of states and political subdivisions		5,789		(45	)		2,171		(34	)		7,960		(79	)
Mortgage-backed securities - residential		9,262		(41	)		4,648		(11	)		13,910		(52	)
Collateralized mortgage obligations		1,968		(3	)		—		—			1,968		(3	)
Total temporarily impaired	$	18,011	$	(95	)	$	6,819	$	(45	)	$	24,830	$	(140	)

	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, 2014
Obligation of U.S. government- sponsored entities and agencies	$	1,492	$	(7	)	$	5,411	$	(28	)	$	6,903	$	(35	)
Obligations of states and political subdivisions		9,929		(223	)		3,719		(34	)		13,648		(257	)
Mortgage-backed securities - residential		10,403		(210	)		2,342		(21	)		12,745		(231	)
Total temporarily impaired	$	21,824	$	(440	)	$	11,472	$	(83	)	$	33,296	$	(523	)

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 certain point in time.

The unrealized losses within the securities portfolio as of March 31, 2015 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 residential mortgage-backed securities, obligations of state and political subdivisions and obligations of U.S. government-sponsored entities and agencies is largely due to changes in interest rates. The fair value is expected to recover as the securities approach maturity.

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

Note 3 – Loans

Major classifications of loans were as follows:

	March 31, 2015			June 30, 2014
Commercial	$	33,576		$	33,809
Commercial real estate:
Construction		7,500			3,688
Other		137,837			131,518
1 – 4 Family residential real estate:
Owner occupied		29,188			31,044
Non-owner occupied		14,870			16,505
Construction		1,217			186
Consumer		7,431			8,604
Subtotal		231,619			225,354
Less: Net deferred loan fees		(412	)		(388	)
Allowance for loan losses		(2,425	)		(2,405	)
Net Loans	$	228,782		$	222,561

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 activity in the allowance for loan losses by portfolio segment for the three months ending March 31, 2014:

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

Allowance for loan losses:
Beginning balance	$	159	$	1,501		$	451		$	376		$	2,487
Provision for loan losses		100		(26	)		(85	)		11			—
Loans charged-off		—		(48	)		(118	)		(38	)		(204	)
Recoveries		—		3			31			20			54
Total ending allowance balance	$	259	$	1,430		$	279		$	369		$	2,337

The following table presents the activity in the allowance for loan losses by portfolio segment for the nine months ending March 31, 2014:

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

Allowance for loan losses:
Beginning balance	$	161		$	1,471		$	614		$	250		$	2,496
Provision for loan losses		115			5			(194	)		242			168
Loans charged-off		(17	)		(49	)		(179	)		(191	)		(436	)
Recoveries		—			3			38			68			109
Total ending allowance balance	$	259		$	1,430		$	279		$	369		$	2,337

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, 2015. Included in the recorded investment in loans is $517 of accrued interest receivable net of deferred loan fees of $412.

					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	$	—	$	77	$	15	$	—	$	92
Collectively evaluated for impairment		361		1,414		271		287		2,333
Total ending allowance balance	$	361	$	1,491	$	286	$	287	$	2,425

Recorded investment in loans:
Loans individually evaluated for impairment	$	—	$	3,021	$	985	$	—	$	4,006
Loans collectively evaluated for impairment		33,644		142,264		44,380		7,430		227,718
Total ending loans balance	$	33,644	$	145,285	$	45,365	$	7,430	$	231,724

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, 2014. Included in the recorded investment in loans is $491 of accrued interest receivable net of deferred loan fees of $388.

					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	$	—	$	110	$	8	$	—	$	118
Collectively evaluated for impairment		307		1,330		286		364		2,287
Total ending allowance balance	$	307	$	1,440	$	294	$	364	$	2,405

Recorded investment in loans:
Loans individually evaluated for impairment	$	—	$	2,404	$	798	$	—	$	3,202
Loans collectively evaluated for impairment		33,855		132,760		47,019		8,621		222,255
Total ending loans balance	$	33,855	$	135,164	$	47,817	$	8,621	$	225,457

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, 2015 and for the nine months ended March 31, 2015:

	As of March 31, 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	$	2,308	$	2,313	$	—	$	1,735	$	25	$	25
1-4 Family residential real estate:
Owner occupied		336		329		—		190		—		—
Non-owner occupied		71		71		—		49		1		1
With an allowance recorded:
Commercial real estate:
Other		708		708		77		763		27		27
1-4 Family residential real estate:
Owner occupied		123		124		4		125		6		6
Non-owner occupied		461		461		11		490		14		14
Total	$	4,007	$	4,006	$	92	$	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 information related to loans individually evaluated for impairment by class of loans as of June 30, 2014 and for the nine months ended March 31, 2014:

	As of June 30, 2014						Nine Months ended March 31, 2014
	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	$	—	$	—	$	—	$	3	$	—	$	—
Commercial real estate:
Other		1,642		1,635		—		1,193		—		—
1-4 Family residential real estate:
Owner occupied		121		121		—		142		—		—
Non-owner occupied		472		472		—		94		2		2
With an allowance recorded:
Commercial		—		—		—		10		3		3
Commercial real estate:
Other		768		769		110		785		19		19
1-4 Family residential real estate:
Owner occupied		127		127		4		246		2		2
Non-owner occupied		78		78		4		652		12		12
Total	$	3,208	$	3,202	$	118	$	3,125	$	38	$	38

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	$	1	$	—	$	—
Commercial real estate:
Other		1,562		—		—
1-4 Family residential real estate:
Owner occupied		180		—		—
Non-owner occupied		19		—		—
With an allowance recorded:
Commercial		—		—		—
Commercial real estate:
Other		780		9		9
1-4 Family residential real estate:
Owner occupied		178		2		2
Non-owner occupied		575		3		3
Total	$	3,295	$	14	$	14

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, 2015 and June 30, 2014:

	March 31, 2015				June 30, 2014
			Loans Past Due				Loans Past Due
			Over 90 Days				Over 90 Days
			Still				Still
	Non-accrual		Accruing		Non-accrual		Accruing
Commercial	$	—	$	—	$	—	$	—
Commercial real estate:
Other		133		—		1,683		—
1 – 4 Family residential:
Owner occupied		495		—		276		—
Non-owner occupied		—		—		—		—
Consumer		—		20		—		—
Total	$	628	$	20	$	1,959	$	—

Non-accrual loans 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, 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	$	89	$	7	$	20	$	116	$	33,528	$	33,644
Commercial real estate:
Construction		—		—		—		—		7,469		7,469
Other		—		65		79		144		137,672		137,816
1-4 Family residential:
Owner occupied		238		—		432		670		28,605		29,275
Non-owner occupied		—		—		—		—		14,865		14,865
Construction		—		—		—		—		1,225		1,225
Consumer		—		—		—		—		7,430		7,430
Total	$	327	$	72	$	531	$	930	$	230,794	$	231,724

The above table of past due loans includes the recorded investment in non-accrual loans of $9 in the 30-59 days category, $511 in the 90 days or greater category and $108 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, 2014 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	$	66	$	—	$	—	$	66	$	33,789	$	33,855
Commercial real estate:
Construction		—		—		—		—		3,679		3,679
Other		—		—		1,625		1,625		129,860		131,485
1-4 Family residential:
Owner occupied		111		122		81		314		30,817		31,131
Non-owner occupied		—		39		—		39		16,462		16,501
Construction		—		—		—		—		185		185
Consumer		106		—		—		106		8,515		8,621
Total	$	283	$	161	$	1,706	$	2,150	$	223,307	$	225,457

The above table of past due loans includes the recorded investment in non-accrual loans of $40 in the 30-59 days past due category, $122 in the 60-90 days past due category, $1,706 in the 90 days or greater and $91 in the loans not past due category.

Troubled Debt Restructurings:

As of March 31, 2015, the recorded investment of loans classified as troubled debt restructurings was $1,497 with $92 of specific reserves allocated to these loans. As of June 30, 2014, the recorded investment of loans classified as troubled debt restructurings was $1,528 with $118 of specific reserves allocated to these loans. As of March 31, 2015 and June 30, 2014, 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, 2015 and 2014 there were no loan modifications completed that were classified as troubled debt restructurings. There were no charge offs from troubled debt restructurings during the three and nine month periods ended March 31, 2015 and 2014.

There were no loans classified as troubled debt restructurings for which there was a payment default during the three or nine month periods ending March 31, 2015 or 2014. 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.

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans. Loans listed as not rated are 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:

	As of March 31, 2015
			Special						Not
	Pass		Mention		Substandard		Doubtful		Rated
Commercial	$	27,549	$	5,158	$	105	$	—	$	832
Commercial real estate:
Construction		7,419		—		50		—		—
Other		128,300		3,274		5,087		85		1,070
1-4 Family residential real estate:
Owner occupied		3,988		223		—		329		24,735
Non-owner occupied		13,044		491		1,104		—		226
Construction		—		—		—		—		1,225
Consumer		—		—		—		—		7,430
Total	$	180,300	$	9,146	$	6,346	$	414	$	35,518

	As of June 30, 2014
			Special						Not
	Pass		Mention		Substandard		Doubtful		Rated
Commercial	$	29,337	$	3,503	$	62	$	—	$	953
Commercial real estate:
Construction		3,619		—		60		—		—
Other		121,659		3,040		3,526		2,404		856
1-4 Family residential real estate:
Owner occupied		3,959		—		—		248		26,924
Non-owner occupied		14,632		565		599		550		155
Construction		—		—		—		—		185
Consumer		—		—		—		—		8,621
Total	$	173,206	$	7,108	$	4,247	$	3,202	$	37,694

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, 2015 Using
	Balance at March 31, 2015		Level 1		Level 2		Level 3
Assets:
Obligations of U.S. government-sponsored entities and agencies	$	17,212	$	—	$	17,212	$	—
Obligations of states and political subdivisions		46,269		—		46,269		—
Mortgage-backed securities – residential		58,585		—		58,585		—
Mortgage-backed securities – commercial		1,485		—		1,485		—
Collateralized mortgage obligations		4,140		—		4,140		—
Trust preferred security		529		—		529		—

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

			Fair Value Measurements at June 30, 2014 Using
	Balance at June 30, 2014		Level 1		Level 2		Level 3
Assets:
Obligations of U.S. government-sponsored entities and agencies	$	18,436	$	—	$	18,436	$	—
Obligations of states and political subdivisions		45,512		—		45,512		—
Mortgage-backed securities - residential		58,104		—		58,104		—
Collateralized mortgage obligations		3,929		—		3,929		—
Trust preferred security		412		—		412		—

There were no transfers between Level 1 and Level 2 during the nine month periods ended March 31, 2015 or 2014.

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, 2015 Using
	Balance at March 31, 2015		Level 1		Level 2		Level 3
Impaired loans:
Commercial Real Estate - Other	$	30	$	—	$	—	$	30

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

			Fair Value Measurements at June 30, 2014 Using
	Balance at June 30, 2014		Level 1		Level 2		Level 3
Impaired loans:
Commercial Real Estate - Other	$	101	$	—	$	—	$	101

Impaired loans included in the tables above are measured for impairment using the fair value of the collateral and had a carrying amount of $30 and $101, with no valuation allowance at March 31, 2015 and June 30, 2014, respectively. The resulting impact to the provision for loan losses was an increase of $128 being recorded for the three and nine month periods ended March 31, 2014. The resulting impact to the provision for loan losses was a reduction of $52 being recorded for the three month period ended March 31, 2014 and a reduction of $115 being recorded for the nine month period ended March 31, 2014.

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, 2015:

	Fair Value		Valuation Technique	Unobservable Inputs	Range	Weighted Average
Impaired loans:

Commercial Real Estate - Other	$	26	Sales comparison approach	Adjustment for differences between comparable sales	-35.50% to -71.60%		-37.50	%

Commercial Real Estate - Other	$	4	Settlement Contract	Adjustment for difference between loan balance and settlement value	-91.80%		-91.80	%

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, 2014:

Fair
Value

Valuation
Technique

Unobservable
Inputs

Range

Weighted
Average

Impaired loans:

Commercial Real Estate - Other

101

Sales comparison approach

Adjustment for differences between comparable sales

-14.00% to -31.90%

-22.52

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

The valuation technique used by an independent third party appraiser in the fair value measurement of collateral for collateral-dependent commercial real estate impaired loans consisted of the sales comparison approach. The significant unobservable inputs used in the fair value measurement relate to any adjustment made to the value set forth in the appraisal due to a distressed sale situation.

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, 2015				June 30, 2014
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial Assets:
Level 1 inputs:
Cash and cash equivalents	$	15,911	$	15,911	$	11,125	$	11,125
Level 2 inputs:
Certificates of deposits in other financial institutions		4,217		4,199		2,703		2,703
Loans held for sale		583		605		559		570
Accrued interest receivable		1,260		1,260		1,048		1,048
Level 3 inputs:
Securities held-to-maturity		3,690		3,725		3,000		3,040
Loans, net		228,782		230,204		222,561		223,128
Financial Liabilities:
Level 2 inputs:
Demand and savings deposits		262,900		262,900		243,222		243,222
Time deposits		67,919		68,109		70,675		70,583
Short-term borrowings		19,189		19,189		19,489		19,489
Federal Home Loan Bank advances		6,254		6,558		6,296		6,655
Accrued interest payable		45		45		44		44

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 the rates offered at March 31, 2015 and June 30, 2014, for deposits of similar remaining maturities resulting in a Level 2 classification.

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

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 calculated using a spread to the applicable municipal fair market curve resulting in a Level 3 classification.

Time deposits: Fair value of fixed-maturity certificates of deposit was estimated using the rates offered at March 31, 2015 and June 30, 2014, for deposits of similar remaining maturities. Estimated fair value does not include the benefit that result 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, 2015 and June 30, 2014 for similar financing resulting in a Level 2 classification.

Federal bank and other restricted stocks, at cost: Federal bank and other restricted stocks include stock acquired for regulatory purposes, such as Federal Home Loan Bank stock and Federal Reserve Bank stock that are accounted for at cost due to restrictions placed on their transferability; and therefore, are not subject to the fair value disclosure requirements.

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

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. 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,
	2015		2014		2015		2014
Basic:
Net income available to common shareholders	$	632	$	678	$	2,196	$	2,054
Weighted average common shares outstanding		2,728,083		2,724,930		2,728,545		2,692,662
Basic income per share	$	0.23	$	0.25	$	0.80	$	0.76

Diluted:
Net income available to common shareholders	$	632	$	678	$	2,196	$	2,054
Weighted average common shares outstanding		2,728,083		2,724,930		2,728,545		2,692,662
Dilutive effect of restricted stock		217		492		302		356
Total common shares and dilutive potential common shares		2,728,300		2,725,422		2,728,847		2,693,018
Dilutive income per share	$	0.23	$	0.25	$	0.80	$	0.76

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, 2015 and 2014, were as follows:

	Pretax			Tax Affect			After-tax			Affected Line Item in Consolidated Statements of Income
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

Balance as of December 31, 2013	$	(349	)	$	119		$	(230	)
Unrealized holding gain on available-for-sale securities arising during the period		1,000			(340	)		660
Amounts reclassified from accumulated other comprehensive income		(4	)		1			(3	)	(a)(b)
Net current period other comprehensive gain		996			(339	)		657
Balance as of March 31, 2014	$	647		$	(220	)	$	427

(a) Securities (gains) losses, net

(b) Income tax expense (benefit)

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

	Pretax			Tax Affect			After-tax			Affected Line Item in Consolidated Statements of Income
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

Balance as of June 30, 2013	$	(24	)	$	8		$	(16	)
Unrealized holding gain on available-for-sale securities arising during the period		707			(240	)		467
Amounts reclassified from accumulated other comprehensive income		(36	)		12			(24	)	(a)(b)
Net current period other comprehensive gain		671			(228	)		443
Balance as of March 31, 2014	$	647		$	(220	)	$	427

(a) Securities (gains) losses, net

(b) Income tax expense (benefit)

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, 2015, compared to the same periods in 2014, and the consolidated balance sheet at March 31, 2015, compared to June 30, 2014. 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 Stark, Columbiana, Carroll, Summit 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, 2015 and March 31, 2014

In the third quarter of fiscal year 2015, net income was $632, or $0.23 per common share, compared with $678, or $0.25 per common share, in the prior year period. The following are key highlights of our results of operations for the three months ending March 31, 2015:

net interest income increased by $123, or by 3.9%, in the third quarter of fiscal year 2015 from the same prior year period;

loan loss provision expense totaled $90 in the third quarter of fiscal year 2015 and there was no loan loss provision expense recorded during the same prior year period;

noninterest income increased by $9 primarily as a result of an increases in debit card interchange income and gains from the sale of mortgage loans which was partially offset by a decrease in overdraft fee income; and

noninterest expenses increased by $106, or 3.5%, in the third quarter of fiscal year 2015 principally as a result of higher salary and employee benefits and occupancy expenses.

CONSUMERS BANCORP, INC.

Management's Discussion and Analysis of Financial Condition

and Results of Operations (continued)

(Dollars in thousands, except per share data)

In the first nine months of fiscal year 2015, net income was $2,196, or $0.80 per common share, compared with $2,054, or $0.76 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, 2015:

net interest income increased by $561, or 6.0%, in fiscal year 2015 from the same prior year period;

loan loss provision expense in fiscal year 2015 totaled $214 compared to $168 in the same prior year period;

noninterest income increased by $161, or 7.8%, in fiscal year 2015 from the same prior year period primarily as a result of increases in gains from the sale of mortgage loans and gains from the sale of securities; and

noninterest expenses increased by $466, or 5.3%, in fiscal year 2015 principally as a result of higher salary and employee benefits due to staff hired in the lending area and an increase in occupancy expenses.

Return on average equity and return on average assets were 7.11% and 0.75%, respectively, for the first nine months of fiscal year 2015 compared to 7.27% 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 3.79% for the three month period ended March 31, 2015 compared with 3.89% for the same prior year period. Net interest income for the three months ended March 31, 2015 increased by $123, or 3.9%, to $3,301 from $3,178 for the same year ago period. The increase in net interest income was primarily the result of an increase in average interest-earning assets.

Interest income for the three months ended March 31, 2015 increased by $112, or 3.3%, from the same year ago period. An increase of $23,622, or 6.7%, in average interest-earning assets from the same prior year period partially 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, 2015 decreased by $11, or 4.5%, from the same year ago period. The Corporation’s cost of funds decreased to 0.35% for the three month period ended March 31, 2015 from 0.38% 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)

The Corporation’s net interest margin for the nine months ended March 31, 2015 was 3.79%, compared to 3.85% for the same year ago period. Net interest income for the nine months ended March 31, 2015 increased by $561, or 6.0%, to $9,937 from $9,376 for the same year ago period. The increase in net interest income was primarily the result of an increase in average interest-earning assets.

Interest income for the nine months ended March 31, 2015 increased by $531, or 5.2%, from the same year ago period. An increase of $26,900, or 7.8%, in average interest-earning assets more than 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, 2015 decreased by $30, or 4.0%, from the same year ago period. The Corporation’s cost of funds decreased to 0.36% for the nine month period ended March 31, 2015 from 0.39% 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)

	2015								2014
	Average Balance			Interest		Yield/ Rate			Average Balance			Interest		Yield/ Rate
Interest-earning assets:
Taxable securities	$	85,195		$	470		2.28	%	$	79,777		$	459		2.34	%
Nontaxable securities (1)		48,915			496		4.21			45,280			509		4.57
Loans receivable (1)		230,873			2,725		4.79			216,490			2,621		4.91
Interest bearing deposits and federal funds sold		9,525			19		0.81			9,339			13		0.56
Total interest-earning assets		374,508			3,710		4.05	%		350,886			3,602		4.17	%

Noninterest-earning assets		22,450								20,239

Total Assets	$	396,958							$	371,125

Interest-bearing liabilities:
NOW	$	45,127		$	16		0.14	%	$	39,911		$	19		0.19	%
Savings		131,775			28		0.09			123,567			25		0.08
Time deposits		67,963			137		0.82			72,908			146		0.81
Short-term borrowings		16,152			7		0.18			15,208			6		0.16
Federal Home Loan Bank advances		8,742			45		2.09			6,485			48		3.00
Total interest-bearing liabilities		269,759			233		0.35	%		258,079			244		0.38	%

Noninterest-bearing liabilities:
Noninterest-bearing checking accounts		82,173								71,795
Other liabilities		3,249								2,602
Total liabilities		355,181								332,476
Shareholders’ equity		41,777								38,649

Total liabilities and shareholders’ equity	$	396,958							$	371,125

Net interest income, interest rate spread (1)				$	3,477		3.70	%				$	3,358		3.79	%

Net interest margin (net interest as a percent of average interest-earning assets) (1)							3.79	%							3.89	%

Federal tax exemption on non-taxable securities and loans included in interest income				$	176							$	180

Average interest-earning assets to interest-bearing liabilities		138.83	%							135.96	%

(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)

	2015								2014
	Average Balance			Interest		Yield/ Rate			Average Balance			Interest		Yield/ Rate
Interest-earning assets:
Taxable securities	$	85,034		$	1,429		2.27	%	$	73,683		$	1,153		2.09	%
Nontaxable securities (1)		48,555			1,534		4.30			44,064			1,512		4.56
Loans receivable (1)		226,965			8,178		4.80			216,333			7,955		4.90
Interest bearing deposits and federal funds sold		9,697			52		0.71			9,271			34		0.49
Total interest-earning assets		370,251			11,193		4.05	%		343,351			10,654		4.13	%

Noninterest-earning assets		21,379								19,777

Total Assets	$	391,630							$	363,128

Interest-bearing liabilities:
NOW	$	46,015		$	54		0.16	%	$	38,765		$	59		0.20	%
Savings		127,874			79		0.08			115,886			68		0.08
Time deposits		68,960			420		0.81			75,263			461		0.82
Short-term borrowings		17,466			22		0.17			14,888			18		0.16
Federal Home Loan Bank advances		7,401			140		2.52			6,477			139		2.86
Total interest-bearing liabilities		267,716			715		0.36	%		251,279			745		0.39	%

Noninterest-bearing liabilities:
Noninterest-bearing checking accounts		79,653								71,738
Other liabilities		3,098								2,501
Total liabilities		350,467								325,518
Shareholders’ equity		41,163								37,610

Total liabilities and shareholders’ equity	$	391,630							$	363,128

Net interest income, interest rate spread (1)				$	10,478		3.69	%				$	9,909		3.74	%

Net interest margin (net interest as a percent of average interest-earning assets) (1)							3.79	%							3.85	%

Federal tax exemption on non-taxable securities and loans included in interest income				$	541							$	533

Average interest-earning assets to interest-bearing liabilities		138.30	%							136.64	%

(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)

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, 2015, the provision for loan losses was $90 and there was no loan loss provision expense recorded during the same prior year period. For the nine month period ended March 31, 2015, the provision for loan losses was $214 compared to $168 for the same prior year period. For the nine month period ended March 31, 2015, net charge-offs totaled $194, or an annualized net charge-offs to total loan ratio of 0.11%, compared with $327, or 0.20% of total loans, for the same period last year. The allowance for loan losses as a percentage of loans was 1.05% at March 31, 2015 and 1.07% at June 30, 2014.

Non-performing loans were $648 as of March 31, 2015 and represented 0.28% of total loans. This compared with $1,959, or 0.87%, at June 30, 2014 and $1,896, or 0.87%, at March 31, 2014. Non-performing loans and loans past due 90 days or greater declined from June 30, 2014 as a result of receiving proceeds from the private sale of a portion of the collateral securing a commercial real estate credit that was placed on non-accrual during the first quarter of fiscal year 2014. This commercial real estate credit had no specific reserve allocation since it was well secured. The allowance for loan losses to total non-performing loans at March 31, 2015 was 374.23% compared with 122.77% at June 30, 2014 and 123.26% at March 31, 2014. Impaired loans increased from $3,202 at June 30, 2014 to $4,006 as of March 31, 2015 as a result of the downgrade of a commercial real estate credit with an unpaid principal balance of $2,177 that is secured by two commercial real estate properties and a residential real estate property. As of March 31, 2015 the loan was not past due and full payments have been received in April and May 2015. However, management is aware of legal difficulties the borrower is experiencing that could potentially result in foreclosure proceedings. In the event management pursues foreclosure, this credit will be placed on non-accrual which will result in the increase of non-performing loans. This commercial real estate credit has no specific reserve allocation since it appears to be well secured by underlying collateral comprised of residential real estate and two commercial business properties that remain operational.

The provision for loan losses for the period ending March 31, 2015 was considered sufficient by management for maintaining an appropriate allowance for loan losses for probable incurred credit losses.

Non-Interest Income

Non-interest income increased by $9 for the third quarter of fiscal year 2015 from the same period last year.

CONSUMERS BANCORP, INC.

Management's Discussion and Analysis of Financial Condition

and Results of Operations (continued)

(Dollars in thousands, except per share data)

Debit card interchange income increased by $16, or 7.7%, from the same period last year primarily as a result of an increase in the number of debit cards issued along with an increase in debit card usage by our customers.

Service charges on deposit accounts decreased by $16, or 5.3%, for the three month period ended March 31, 2015 compared to the same period last year primarily as a result of a decline in overdraft fee income.

Non-interest income increased by $161, or 7.8%, to $2,232 for the first nine months of fiscal year 2015, compared to $2,071 for the same period last year. Non-interest income for the first nine months of fiscal year 2015 included a net gain from the sale of securities of $118 compared with a net gain of $36 recognized during the same prior year period.

Service charges on deposit accounts decreased by $75, or 7.5%, for the nine month period ended March 31, 2015 compared to the same period last year primarily as a result of a decline in overdraft fee income.

Debit card interchange income increased by $36, or 5.6%, from the same period last year primarily as a result of an increase in the number of debit cards issued along with an increase in debit card usage by our customers.

Other income increased by $86, or 32.7%, from the same period last year primarily as a result of an $84 increase in gains from the sale of mortgage loans mainly from the addition of a mortgage loan originator in the Bank’s eastern markets.

Non-Interest Expenses

Total non-interest expenses increased to $3,100, or by 3.5%, during the third quarter of fiscal year 2015, compared with $2,994 during the same year ago period.

Occupancy and equipment expenses increased by $53, or 15.9%, during the third quarter of fiscal year 2015 from the same period last year primarily as a result of investments in new computer and communication equipment and additional lease expense associated with the new Stow, Ohio loan production office.

Total non-interest expenses increased to $9,233, or by 5.3%, during the first nine months of fiscal year 2015, compared with $8,767 during the same year ago period.

Salaries and employee benefits increased by $333, or 7.0%, during the first nine months of fiscal year 2015 due to additional staff hired in the lending area, due to annual merit increases that went into effect on August 1, 2014 and increased expenses associated with employee insurance due to a higher level of employee enrollment.

CONSUMERS BANCORP, INC.

Management's Discussion and Analysis of Financial Condition

and Results of Operations (continued)

(Dollars in thousands, except per share data)

Occupancy and equipment expenses increased by $144, or 14.7%, during the first nine months of fiscal year 2015 from the same period last year primarily as a result of depreciation from new computer and communication equipment and additional lease expense associated with the new loan production office that was opened in Stow, Ohio during the third quarter of fiscal year 2015. Also, a new facility is being constructed at the Minerva, Ohio location to replace the existing branch and corporate headquarters. The remaining book value of the Minerva facility is being expensed over the estimated remaining useful life. The new facility is anticipated to be completed during the 2016 fiscal year and upon being placed into service, it is expected that occupancy expenses will increase.

Professional and director fees decreased by $24 or 7.2%, during the first nine months of fiscal year 2015 from the same period last year primarily as a result of lower consulting fees.

Other expenses declined by $38, or 3.3%, to $1,097 for the nine months ended March 31, 2015. Included in other expenses was $103 of loan and collection expenses for the 2015 fiscal year compared with $164 for the previous fiscal year. The loan and collection expenses for the 2015 fiscal year included approximately $30 of legal expenses as a result of monitoring efforts for the $2,177 commercial real estate credit previously mentioned, but was still $61 below the previous fiscal year.

Income Taxes

Income tax expense for the three month period ended March 31, 2015 decreased by $18, to $127 from $145, compared to a year ago. The effective tax rate was 16.7% for the current quarter as compared to 17.6% for the same period last year.

Income tax expense for the nine month period ended March 31, 2015 increased by $68, to $526 from $458, compared to a year ago. The effective tax rate was 19.3% for the current period as compared to 18.2% 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, 2015 were $401,641 compared to $382,477 at June 30, 2014, an increase of $19,164, or an annualized 6.7%. Net premises and equipment increased by $3,760 from $6,713 at June 30, 2014 to $10,473 at March 31, 2015 as a result of progress related to the new facility that is being constructed at the Minerva, Ohio location to replace the existing branch and corporate headquarters.

CONSUMERS BANCORP, INC.

Management's Discussion and Analysis of Financial Condition

and Results of Operations (continued)

(Dollars in thousands, except per share data)

Available-for-sale securities increased by $1,827 from $126,393 at June 30, 2014 to $128,220 at March 31, 2015. Total deposits increased by $16,922, or an annualized 7.2%, and loans increased by $6,241, or an annualized 3.7%, from June 30, 2014. The increase in deposits is primarily from new business and public fund customer relationships stemming from increases in successful calling efforts.

Non-Performing Assets

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

	March 31, 2015			June 30, 2014			March 31, 2014
Non-accrual loans	$	628		$	1,959		$	1,896
Loans past due over 90 days and still accruing		20			—			—
Total non-performing loans		648			1,959			1,896
Other real estate owned		54			204			—
Total non-performing assets	$	702		$	2,163		$	1,896

Non-performing loans to total loans		0.28	%		0.87	%		0.87	%
Allowance for loan losses to total non-performing loans		374.23	%		122.77	%		123.26	%

As of March 31, 2015, impaired loans totaled $4,006, of which $415 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, 2015 was $3,962, net cash outflows from investing activities was $14,772 and net cash inflows from financing activities was $15,596. A major source of cash was $34,697 from sales, maturities, calls or principal pay downs on available-for-sale securities and a $16,922 increase in deposits. A major use of cash included the $36,281 purchase of securities, $6,435 increase in loans and $4,202 acquisition of premises and equipment. Total cash and cash equivalents was $15,911 as of March 31, 2015 compared to $11,125 at June 30, 2014 and $12,988 at March 31, 2014.

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 $330,819 at March 31, 2015 compared with $313,897 at June 30, 2014.

To provide an additional source of liquidity, the Corporation has entered into an agreement with the Federal Home Loan Bank of Cincinnati (FHLB). At March 31, 2015, FHLB advances totaled $6,254 as compared with $6,296 at June 30, 2014. As of March 31, 2015, the Bank had the ability to borrow an additional $18,192 from the FHLB based on a blanket pledge of qualifying first mortgage loans. The Corporation considers the FHLB 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. The Bank pledges securities as collateral for the repurchase agreements. Short-term borrowings decreased to $19,189 at March 31, 2015 from $19,489 at June 30, 2014.

Jumbo time deposits (those with balances of $100 and over) totaled $27,312 at March 31, 2015 and $28,224 at June 30, 2014. 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 and can foresee no dependence on these types of deposits in the near term. The Corporation had no brokered deposits at March 31, 2015 or June 30, 2014. 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 $1,771 to $41,974 as of March 31, 2015 from $40,203 as of June 30, 2014. The increase was primarily the result of $2,196 in net income for the current fiscal year which was partially offset by cash dividends paid of $984.

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, 2015 regulatory capital ratios were prepared under the Basel III capital requirements. Prior year ratios were prepared under Basel I requirements. The Bank’s leverage and total capital ratios as of March 31, 2015 were 9.7% and 15.2%, respectively. This compares to leverage and risk-based capital ratios of 9.8% and 15.3%, respectively, as of June 30, 2014. 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, 2015 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 2014 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, 2014.

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:

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;

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;

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, 2015.

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, 2015, 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 15, 2015	/s/ Ralph J. Lober
	Ralph J. Lober, II
	President & Chief Executive Officer
	(principal executive officer)

Date: May 15, 2015	/s/ Renee K. Wood
	Renee K. Wood
	Chief Financial Officer & Treasurer
	(principal financial officer)