<PAGE> 1
Exhibit 13
Financial Highlights
<TABLE>
<CAPTION>
June 30, June 30, Percent
2000 1999 Change
---- ---- ------
<S> <C> <C> <C>
Total interest income $ 11,816 $ 10,769 9.72%
Total interest expense 4,011 4,106 (2.31)
Net income 1,894 1,821 4.01
Assets $154,531 $134,635 14.78%
Deposits 136,831 119,105 14.88
Loans, net 116,326 95,597 21.68
Securities available for sale 22,179 24,067 (7.84)
Shareholders' equity 12,261 11,135 10.11
Net income per share $ 2.65 $ 2.54 4.33%
Cash dividends paid per share .87 .83 4.82
Book value per share 17.12 15.56 10.03
Weighted average number of
shares outstanding 716,031 715,315
</TABLE>
<PAGE> 2
BUSINESS OF CONSUMERS BANCORP
FINANCIAL CORPORATION
Consumers Bancorp, Inc. (the "Corporation"), a financial holding company
incorporated under the laws of the State of Ohio, owns all of the issued and
outstanding capital stock of Consumers National Bank (the "Bank"), a bank
chartered under the laws of the United States. The Corporation's activities have
been limited primarily to holding the common shares of the Bank.
Serving the Minerva, Ohio area since 1965, the Bank's main office is located at
614 E. Lincoln Way, Minerva, Ohio. The Bank's business involves attracting
deposits from business and individual customer and using such deposits to
originate commercial, mortgage and consumer loans in its market area, consisting
primarily of Stark, Columbiana, Carroll and contiguous counties in Ohio. The
Bank also invests in securities consisting primarily of U.S. government and
government agency obligations, municipal obligations, mortgage-backed securities
and other securities.
As a financial holding company, the Corporation is subject to regulation,
supervision and examination by the Federal Reserve Bank (the "FRB"). As a
nationally chartered commercial bank, the Bank is subject to regulation,
supervision and examination by the Office of the Comptroller of the Currency
(the "OCC"). Deposits in the Bank are insured up to applicable limits by the
FDIC. The Bank is also a member of the Federal Home Loan Bank of Cincinnati (the
"FHLB").
The Corporation is not aware of any current recommendations by regulatory
authorities that, if they were to be implemented, would have a material effect
on the Corporation. In addition, the Corporation is not aware of any exposure to
material costs associated with environmental hazardous waste cleanup. Bank loan
procedures require EPA studies be obtained by Bank management prior to approving
any commercial real estate loan with such potential risk.
As of June 30, 2000, the Bank employed 97 full-time and 20 part-time employees.
<PAGE> 3
MARKET PRICE OF THE CORPORATION'S
COMMON SHARES AND RELATED
SHAREHOLDER MATTERS
The Corporation had 716,117 common shares outstanding on June 30, 2000 held by
approximately 709 shareholders.
The shares of Common Stock of Consumers Bancorp, Inc. are traded on the
over-the-counter market primarily with brokers in the Corporation's service
area. The following quoted market prices reflect inter-dealer prices, without
adjustments for retail markups, markdowns, or commissions and may not represent
actual transactions.
<TABLE>
<CAPTION>
September 30, December 31, March 31, June 30,
1999 1999 2000 2000
-------------- ------------- -------------- ----------
<S> <C> <C> <C> <C>
High $ 47.00 $ 53.00 $ 53.00 $ 55.00
Low 47.00 47.00 52.00 53.00
Cash Dividends .20 .25 .21 .21
September 30, December 31, March 31, June 30,
1998 1998 1999 1999
-------------- ------------- -------------- ----------
<S> <C> <C> <C> <C>
High $ 42.88 $ 43.00 $ 47.00 $ 50.00
Low 41.63 41.63 42.00 47.00
Cash Dividends .23 .20 .20 .20
</TABLE>
Management does not have knowledge of the prices paid in all transactions and
has not verified the accuracy of those prices that have been reported. Because
of the lack of an established market for the Corporation's stock, these prices
may not reflect the prices at which the stock would trade in an active market.
<PAGE> 4
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Consumers Bancorp, Inc.
Minerva, Ohio
We have audited the accompanying consolidated balance sheets of Consumers
Bancorp, Inc. as of June 30, 2000 and 1999 and the related consolidated
statements of income, changes in shareholders' equity, and cash flows for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Consumers Bancorp,
Inc. as of June 30, 2000 and 1999 and the consolidated results of its operations
and its cash flows for the years then ended, in conformity with generally
accepted accounting principles.
Crowe, Chizek and Company LLP
Cleveland, Ohio
July 20, 2000
1.
<PAGE> 5
CONSUMERS BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
June 30, 2000 and 1999
(Dollars in thousands, except share data)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999
--------- ---------
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 5,629 $ 4,773
Federal funds sold -- 3,235
Securities available for sale 22,179 24,067
Loans, net 116,326 95,597
Cash surrender value of life insurance 2,106 2,007
Premises and equipment, net 4,908 3,530
Intangible asset 1,930 --
Accrued interest and other assets 1,453 1,426
--------- ---------
Total assets $ 154,531 $ 134,635
========= =========
LIABILITIES
Deposits
Non-interest bearing demand $ 23,514 $ 18,235
Interest bearing demand 12,143 10,106
Savings 53,988 44,595
Time 47,186 46,169
--------- ---------
Total deposits 136,831 119,105
--------- ---------
Securities sold under agreements to repurchase 1,101 --
FHLB advances 3,244 2,959
Accrued interest and other liabilities 1,094 1,436
--------- ---------
Total liabilities 142,270 123,500
SHAREHOLDERS' EQUITY
Common stock, $3.33 stated value, 720,000
shares authorized and issued 2,400 2,400
Capital surplus 2,438 2,427
Retained earnings 7,887 6,616
Treasury stock, at cost (3,883 and 4,255 shares
at June 30, 2000 and 1999) (129) (136)
Accumulated other comprehensive losses (335) (172)
--------- ---------
Total shareholders' equity 12,261 11,135
--------- ---------
Total liabilities and shareholders' equity $ 154,531 $ 134,635
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
2.
<PAGE> 6
CONSUMERS BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
Years ended June 30, 2000 and 1999
(Dollars in thousands)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999
------- -------
<S> <C> <C>
INTEREST INCOME
Loans, including fees $10,313 $ 9,147
Federal funds sold 127 304
Investment and mortgage-backed securities:
Taxable 1,247 1,193
Tax-exempt 129 125
------- -------
Total interest income 11,816 10,769
INTEREST EXPENSE
Deposits 3,727 3,909
Federal Home Loan Bank advances 189 197
Other 95
------- -------
Total interest expense 4,011 4,106
Net interest income 7,805 6,663
Provision for possible loan losses 447 278
------- -------
Net interest income after provision
for possible loan losses 7,358 6,385
OTHER INCOME
Service charges on deposit accounts 633 532
Gain on securities sold 5 --
Other 414 395
------- -------
Total other income 1,052 927
OTHER EXPENSES
Salaries and employee benefits 2,868 2,505
Occupancy 887 719
Directors fees 156 175
Professional fees 131 74
Franchise taxes 141 112
Printing and supplies 256 228
Amortization of intangible 70 --
Other 1,145 848
------- -------
Total other expenses 5,654 4,661
------- -------
Income before income taxes 2,756 2,651
Income tax expense 862 830
------- -------
Net income $ 1,894 $ 1,821
======= =======
Basic earnings per share $ 2.65 $ 2.54
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
3.
<PAGE> 7
<TABLE>
<CAPTION>
CONSUMERS BANCORP, INC.
CONSOLIDATEDSTATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Years ended June 30, 2000 and 1999
(Dollars in thousands, except share data)
----------------------------------------------------------------------------------------------------------------------
Accumulated
Other Total
Common Capital Retained Treasury Comprehensive Shareholders'
Stock Surplus Earnings Stock Losses Equity
----- ------- -------- ----- --------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance, July 1, 1998 $ 2,400 $ 2,400 $ 5,389 $ (108) $ 50 $ 10,131
Comprehensive income:
Net income 1,821 1,821
Unrealized loss on
securities available
for sale (222) (222)
---------
Total comprehensive income 1,599
Cash dividends declared
($.83 per share) (594) (594)
Purchase of 1,155
treasury shares (49) (49)
Sale of 1,150
treasury shares 27 21 48
--------- --------- --------- -------- -------- ---------
Balance, June 30, 1999 2,400 2,427 6,616 (136) (172) 11,135
Comprehensive income:
Net income 1,894 1,894
Unrealized loss on
securities available
for sale (163) (163)
---------
Total comprehensive income 1,731
Cash dividends declared
($.87 per share) (623) (623)
Sale of 372
treasury shares 11 7 18
--------- --------- --------- -------- -------- ---------
Balance, June 30, 2000 $ 2,400 $ 2,438 $ 7,887 $ (129) $ (335) $ 12,261
========= ========= ========= ======== ======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
4.
<PAGE> 8
CONSUMERS BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended June 30, 2000 and 1999
(Dollars in thousands)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income $ 1,894 $ 1,821
Adjustments to reconcile net income to net cash from
operating activities
Depreciation 365 288
Securities amortization, net 115 135
Provision for loan losses 447 278
Deferred income taxes 372 143
Gain on sale of investment securities (5) --
Stock dividend on FHLB stock (43) (43)
Change in
Cash surrender value (99) (86)
Income taxes payable -- (40)
Accrued interest receivable (83) 1
Accrued interest payable (269) (237)
Other assets and other liabilities (2,230) 325
-------- --------
Net cash from operating activities 464 2,585
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Securities available for sale
Purchases (5,352) (11,479)
Sales 3,001 --
Maturities and principal paydowns 3,920 6,232
Net decrease in federal funds sold 3,235 4,490
Net increase in loans (21,176) (1,969)
Acquisition of premises and equipment (1,743) (1,037)
Purchase of life insurance policies -- (445)
-------- --------
Net cash from investing activities (18,115) (4,208)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposit accounts 1,062 2,355
Purchases of branch deposits, net 16,664 --
Repayments of FHLB advances (286) (154)
Change in other borrowings 1,672 --
Dividends paid (623) (594)
Sale of treasury stock 18 48
Purchase of treasury stock -- (49)
-------- --------
Net cash from financing activities 18,507 1,606
-------- --------
Change in cash and cash equivalents 856 (17)
Cash and cash equivalents, beginning of year 4,773 4,790
-------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 5,629 $ 4,773
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
5.
<PAGE> 9
CONSUMERS BANCORP, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2000 and 1999
(Dollars in thousands, except share data)
--------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Unless otherwise indicated, amounts are in thousands, except per share data.
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the
accounts of Consumers Bancorp, Inc. (Corporation) and its wholly-owned
subsidiary, Consumers National Bank (Bank). The Bank has a finance company,
Community Finance as part of their business. All significant intercompany
transactions have been eliminated in the consolidation.
INDUSTRY SEGMENT INFORMATION: Consumers Bancorp, Inc. is a financial holding
company engaged in the business of commercial and retail banking, which accounts
for substantially all of its revenues, operating income, and assets.
USE OF ESTIMATES: To prepare financial statements in conformity with generally
accepted accounting principles, management makes estimates and assumptions based
on available information. These estimates and assumptions affect the amounts
reported in the financial statements and the disclosures provided, and future
results could differ. The allowance for loan losses, fair values of financial
instruments, and status of contingencies are particularly subject to change.
CASH RESERVES: Consumers National Bank is required by the Federal Reserve to
maintain reserves consisting of cash on hand and noninterest-bearing balances on
deposit with the Federal Reserve Bank. The required reserve balance at June 30,
2000 and 1999, was $1,070 and $841.
SECURITIES: Securities are generally classified into either held to maturity or
available for sale categories. Held-to-maturity securities are those that the
Bank has the positive intent and ability to hold to maturity, and are reported
at amortized cost. Available-for-sale securities are those that the Bank may
decide to sell if needed for liquidity, asset-liability management, or other
reasons. Available-for-sale securities are reported at fair value, with
unrealized gains or losses included as a separate component of equity, net of
tax.
Realized gains or losses on sales are determined based on the amortized cost of
the specific security sold. Amortization of premiums and accretion of discounts
are computed under a system materially consistent with the level yield method
and are recognized as adjustments to interest income. Prepayment activity on
mortgage-backed securities is affected primarily by changes in interest rates.
Yields on mortgage-backed securities are adjusted as prepayments occur through
changes to premium amortization or discount accretion.
(Continued)
6.
<PAGE> 10
CONSUMERS BANCORP, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2000 and 1999
(Dollars in thousands, except share data)
--------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
LOANS: Loans are reported at the principal balance outstanding, net of deferred
loan fees. Interest income is reported on the interest method and includes
amortization of net deferred loan fees and costs over the loan term.
Interest income is not reported when full loan repayment is in doubt, typically
when payments are past due over 90 days. Payments received on such loans are
reported as principal reductions.
CONCENTRATIONS OF CREDIT RISK: The Bank grants consumer, real estate and
commercial loans primarily to borrowers in Stark, Columbiana and Carroll
counties. Automobiles and other consumer assets, business assets and residential
and commercial real estate secure most loans.
ALLOWANCE FOR LOAN LOSSES: The allowance for loan losses is a valuation
allowance, increased by the provision for loan losses and decreased by
charge-offs less recoveries. Management estimates the allowance balance required
based on past loan loss experience, known and inherent risks in the portfolio,
information about specific borrower situations and estimated collateral values,
economic conditions and other factors. Allocations of the allowance may be made
for specific loans, but the entire allowance is available for any loan that, in
management's judgment, should be charged-off.
Loan impairment is reported when full payment under the loan terms is not
expected. Impairment is evaluated in total for smaller-balance loans of similar
nature such as residential mortgage, consumer, and credit card loans, and on an
individual loan basis for other loans. If a loan is impaired, a portion of the
allowance is allocated so the loan is reported, net, at the present value of
estimated future cash flows using the loan's existing rate or at the fair value
of collateral if repayment is expected from the collateral. Loans are evaluated
for impairment when payments are delayed, typically 90 days or more, or when it
is probable that not all principal and interest amounts will be collected
according to the original terms of the loan. No loans were determined to be
impaired, as of and for the years ended June 30, 2000 and 1999.
CASH SURRENDER VALUE OF LIFE INSURANCE: The Bank has purchased single-premium
life insurance policies to insure the lives of the participants in the salary
continuation plan. As of June 30, 2000, the Bank has total purchased policies of
$1,795 (total death benefit $5,165) with a cash surrender value of $2,106. As of
June 30, 1999, the Bank has total purchased policies of $1,795 (total death
benefit $5,165) with a cash surrender value of $2,007. The amount included in
income (net of policy commissions and mortality costs) was approximately $99 and
$86 for the years ended June 30, 2000 and 1999.
(Continued)
7.
<PAGE> 11
CONSUMERS BANCORP, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2000 and 1999
(Dollars in thousands, except share data)
--------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
PREMISES AND EQUIPMENT: Premises and equipment are stated at cost less
accumulated depreciation. Depreciation is computed over the assets' useful lives
on an accelerated basis, except for buildings for which the straight-line basis
is used.
INTANGIBLE ASSETS: Purchased intangible, core deposit value, is recorded at cost
and amortized over the estimated life. Core deposit value amortization is
straight-line over 15 years.
OTHER REAL ESTATE OWNED: Real estate properties, other than Company premises,
acquired through, or in lieu of, loan foreclosure are initially recorded at fair
value at the date of acquisition. Any reduction to fair value from the carrying
value of the related loan at the time of acquisition is accounted for as a loan
loss. After acquisition, a valuation allowance reduces the reported amount to
the lower of the initial amount or fair value less costs to sell. Expenses,
gains and losses on disposition, and changes in the valuation allowance are
reported in other expenses. There were no properties held as other real estate
owned at June 30, 2000 and 1999.
REPURCHASE AGREEMENTS: Substantially all repurchase agreement liabilities
represent amounts advanced by various customers. Securities are pledged to cover
these liabilities, which are not covered by federal deposit insurance.
PROFIT SHARING PLAN: The Company maintains a 401(k) profit sharing plan covering
substantially all employees. Contributions are made and expensed annually.
INCOME TAXES: The Company files a consolidated federal income tax return. Income
tax expense is the sum of the current-year income tax due or refundable and the
change in deferred tax assets and liabilities. Deferred tax assets and
liabilities are the expected future tax consequences of temporary differences
between the carrying amounts and tax bases of assets and liabilities, computed
using enacted tax rates. A valuation allowance, if needed, reduces deferred tax
assets to the amount expected to be realized.
LOSS CONTINGENCIES: Loss contingencies, including claims and legal actions
arising in the ordinary course of business, are recorded as liabilities when the
likelihood of loss is probable and an amount or range of loss can be reasonably
estimated. Management does not believe there now are such matters that will have
a material effect on the financial statements.
EARNINGS AND DIVIDENDS DECLARED PER SHARE: Earnings per common share are
computed based on the weighted average common shares outstanding. The number of
outstanding shares used was 716,031 and 715,315 for the years ended June 30,
2000 and 1999. The Company's capital structure contains no dilutive securities.
As of June 30, 2000 the Company has 720,000 shares of common stock authorized
and issued.
(Continued)
8.
<PAGE> 12
CONSUMERS BANCORP, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2000 and 1999
(Dollars in thousands, except share data)
--------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
STATEMENT OF CASH FLOWS: For purposes of reporting cash flows, cash and cash
equivalents include the Company's cash on hand and due from banks. The Company
reports net cash flows for customer loan transactions and deposit transactions.
For the years ended June 30, 2000 and 1999, the Bank paid $4,294 and $4,329 in
interest and $884 and $866 in income taxes.
FAIR VALUE OF FINANCIAL INSTRUMENTS: Fair values of financial instruments are
estimated using relevant market information and other assumptions, as more fully
disclosed in a separate note. Fair value estimates involve uncertainties and
matters of significant judgment regarding interest rates, credit risk,
prepayments, and other factors, especially in the absence of broad markets for
particular items. Changes in assumptions or in market conditions could
significantly affect the estimates.
RECLASSIFICATIONS: Certain reclassifications have been made to the June 30, 1999
financial statements to be comparable to the June 30, 2000 presentation.
NOTE 2 - ACQUISITION AND INTANGIBLE ASSET
After the close of business January 14, 2000, the bank acquired the Lisbon, Ohio
branches of Firstar Bank, National Association. In the transaction, Consumers
acquired $226 of loans, $220 real estate, and assumed $19,100 in deposit
liabilities. Consumers paid a premium of $2,000 in the transaction, which is
reflected in intangible assets and is being amortized over a twelve year life.
Intangible assets are amortized on accelerated methods over periods ranging from
10 to 15 years. Amortization of the intangible asset totaled $70 in 2000.
(Continued)
9.
<PAGE> 13
CONSUMERS BANCORP, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2000 and 1999
(Dollars in thousands, except share data)
--------------------------------------------------------------------------------
NOTE 3 - SECURITIES
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------- -------- -------- --------
<S> <C> <C> <C> <C>
JUNE 30, 2000
Securities available for sale:
U.S. Treasury and Federal
agencies $ 9,525 $ 3 $ (168) $ 9,360
Obligations of states and political
subdivisions 2,562 14 (85) 2,491
Mortgage-backed securities 9,597 (269) 9,328
Other securities 1,003 -- (3) 1,000
-------- -------- -------- --------
$ 22,687 $ 17 $ (525) $ 22,179
======== ======== ======== ========
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------- -------- -------- --------
<S> <C> <C> <C> <C>
JUNE 30, 1999
Securities available for sale:
U.S. Treasury and Federal
agencies $ 13,090 $ 44 $ (100) $ 13,034
Obligations of states and political
subdivisions 3,091 38 (70) 3,059
Mortgage-backed securities 7,359 1 (173) 7,187
Other securities 787 -- -- 787
-------- -------- -------- --------
$ 24,327 $ 83 $ (343) $ 24,067
======== ======== ======== ========
</TABLE>
Securities with a carrying value of approximately $11,872 and $9,182 were
pledged at June 30, 2000 and 1999 to secure public deposits and commitments as
required or permitted by law.
Proceeds from sales of mortgage-backed and debt securities during 2000 was
$3,001. Gross gains were $6 and gross losses were $1 for 2000. No securities
were sold during 1999.
(Continued)
10.
<PAGE> 14
CONSUMERS BANCORP, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2000 and 1999
(Dollars in thousands, except share data)
--------------------------------------------------------------------------------
NOTE 3 -SECURITIES (Continued)
The amortized cost and fair values of debt and mortgage-backed securities
available for sale at June 30, 2000, by contractual 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.
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
--------- ---------
<S> <C> <C>
Due in one year or less $ 4,478 $ 4,466
Due after one year through five years 5,374 5,286
Due after five years through ten years 2,235 2,099
After ten years 80 77
--------- ---------
12,167 11,928
Mortgage-backed securities 9,597 9,328
Equity securities 923 923
--------- ---------
$ 22,687 $ 22,179
========= =========
</TABLE>
NOTE 4 - LOANS
Major classifications of loans are as follows as of June 30:
<TABLE>
<CAPTION>
2000 1999
--------- ---------
<S> <C> <C>
Real estate - mortgage $ 43,769 $ 40,258
Real estate - construction 878 785
Commercial, financial and agricultural 54,542 40,564
Installment loans to individuals 18,810 15,415
--------- ---------
117,999 97,022
Unearned discount (19) (26)
Deferred loan fees (241) (206)
Allowance for possible loan losses (1,413) (1,193)
--------- ---------
$ 116,326 $ 95,597
========= =========
</TABLE>
No loans were determined to be impaired at June 30, 2000 and 1999, nor were
there any such loans during the years then ended. If interest had been accrued
on non-accrual loans, interest income would have increased by $6 and $14 for the
years ended June 30, 2000 and 1999.
(Continued)
11.
<PAGE> 15
CONSUMERS BANCORP, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2000 and 1999
(Dollars in thousands, except share data)
--------------------------------------------------------------------------------
NOTE 4 - LOANS (Continued)
The changes in the allowance for possible loan losses consists of the following
for the years ended June 30:
<TABLE>
<CAPTION>
2000 1999
------- -------
<S> <C> <C>
Balance at beginning of year $ 1,193 $ 1,145
Loan charged off (319) (295)
Recoveries of loans previously charged off 92 65
Provision 447 278
------- -------
Balance at end of year $ 1,413 $ 1,193
======= =======
</TABLE>
The Bank has granted loans to certain of its executive officers and directors
and their related business interests. A summary of activity during the year
ended June 30, 2000 on related party loans aggregating $60,000 or more to any
one related party is as follows:
<TABLE>
<CAPTION>
2000
----
<S> <C>
Principal balance at beginning of year $ 1,603
New loans 104
Repayments (175)
--------------
Principal balance at end of year $ 1,532
==============
</TABLE>
NOTE 5 - PREMISES AND EQUIPMENT
Major classifications of premises and equipment are as follows as of June 30:
<TABLE>
<CAPTION>
2000 1999
------------ ----------
<S> <C> <C>
Premises and equipment, at cost
Land $ 540 $ 515
Land improvements 255 159
Buildings and leasehold improvements 3,023 2,279
Furniture, fixtures, and equipment 3,584 2,706
------------ ----------
7,402 5,659
Accumulated depreciation and amortization (2,494) (2,129)
------------ ----------
$ 4,908 $ 3,530
============ ==========
</TABLE>
(Continued)
12.
<PAGE> 16
CONSUMERS BANCORP, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2000 and 1999
(Dollars in thousands, except share data)
--------------------------------------------------------------------------------
NOTE 6 - DEPOSITS
The aggregate amount of time deposits, each with a minimum denomination of $100,
was $9,495 and $9,415 in 2000 and 1999.
Scheduled maturities of time deposits at June 30, 2000 are as follows:
2001 $ 31,712
2002 12,702
2003 2,542
2004 54
2005 129
Thereafter 47
------------
$ 47,186
============
Included in time deposits at June 30, 2000, is a $1,000 brokered time deposit at
a rate of 5.55% maturing on February 12, 2001. Related party deposits totaled
$1,125 at June 30, 2000.
NOTE 7 - REPURCHASE AGREEMENTS
Repurchase
Agreements
----------
Balance at June 30, 2000 $ 1,101
Average balance during the year 105
Maximum month-end balance 1,101
Average interest rate during the year 4.76%
Weighted average rate at June 30 5.19
Securities sold under agreements to repurchase mature daily. The Bank has
pledged U.S. Treasury securities with a carrying value of $2,287 at June 30,
2000, as collateral for the repurchase agreements.
(Continued)
13.
<PAGE> 17
CONSUMERS BANCORP, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2000 and 1999
(Dollars in thousands, except share data)
--------------------------------------------------------------------------------
NOTE 8 -FEDERAL HOME LOAN BANKADVANCES
A summary of Federal Home Loan Bank (FHLB) advances at June 30, 2000 is as
follows:
<TABLE>
<CAPTION>
Interest Balance Balance
Maturity Rate June 30, 2000 June 30, 1999
-------- ---- ------------- -------------
<S> <C> <C> <C>
Overnight $ 450 $ -
7/1/2000 6.50% 873 920
10/1/2000 6.16% 574 604
7/1/2010 6.90% 466 497
10/1/2010 7.00% 435 463
12/1/2010 6.10% 446 475
------------ ------------
$ 3,244 $ 2,959
============ ============
</TABLE>
The following table is a summary of the scheduled principal payments for these
advances:
<TABLE>
<CAPTION>
Twelve Months Principal
Ending June 30, Payments
-------------- --------
<S> <C>
2001 $ 1,991
2002 101
2003 107
2004 138
2005 125
Thereafter 782
--------------
$ 3,244
==============
</TABLE>
Pursuant to collateral agreements with the FHLB, advances are secured by all
stock invested in the FHLB and certain qualifying first mortgage loans. As of
June 30, 2000, the Bank could borrow a total of $13,350 in cash management
advances based on the amount of FHLB stock owned. Qualifying first mortgage
loans pledged to secure FHLB advances totaled approximately $36,592 at June 30,
2000.
(Continued)
14.
<PAGE> 18
CONSUMERS BANCORP, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2000 and 1999
(Dollars in thousands, except share data)
--------------------------------------------------------------------------------
NOTE 9 - EMPLOYEE BENEFIT PLANS
The Bank has a 401(k) savings and retirement plan available for substantially
all eligible employees. Under the plan, the Bank is required to match each
participant's voluntary contribution to the plan but not to exceed four percent
of the individual compensation. The plan was submitted and approved by the
Internal Revenue Service. Amounts charged to operations were $72 and $63, for
the years ended June 30, 2000 and 1999.
During September 1995, the Board of Directors adopted a Salary Continuation Plan
(the Plan) to encourage Bank Executives (Assistant Vice-Presidents and above) to
remain employees of the Bank. The Plan provides additional retirement and
spousal survivorship benefits for those Executives who have attained age 40 and
have at least five years of service. The Plan provides a participant or a
surviving spouse upon retirement or death with fifteen years of income payments
equal to 70% of the employee's base pay at the time of termination. The amount
of base pay is limited to the lesser of the preceding year's annual base salary
before termination or the annual base salary at the inception of the agreement
with the employee plus 3.5% annual inflation. Plan benefits are reduced for
primary social security benefits, other Bank benefit programs, and the maximum
annuitized benefits from Bank contributions made under the Bank's 401(k) plan,
which assumes that the Executive had been contributing an amount sufficient to
maximize the Bank's matching provisions of the 401(k) plan. Vesting in the Plan
commences at age 50 and is prorated until age 65, however, vesting is 100% upon
the death of the Executive, if they were insurable, otherwise, benefits cease at
death. The benefit amount is determined using a 8.5% discount factor, compounded
monthly. For the years ended June 30, 2000 and 1999, approximately $62 and $75
have been charged to expense.
(Continued)
15.
<PAGE> 19
CONSUMERS BANCORP, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2000 and 1999
(Dollars in thousands, except share data)
--------------------------------------------------------------------------------
NOTE 10 - INCOME TAXES
The provision for income taxes consists of the following for the years ended
June 30:
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Current incomes taxes $ 780 $ 687
Deferred income taxes 82 143
------------ -----------
$ 862 $ 830
============ ===========
</TABLE>
The deferred income taxes consist of the following for the years ended June 30:
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Deferred tax assets
Allowance for possible loan losses $ 415 $ 352
Net unrealized securities losses 167 89
Deferred compensation 144 109
Other 14 -
Deferred tax liabilities
Depreciation (204) (137)
Loan fees (239) (152)
FHLB Stock dividends (52) (12)
------------ -----------
Net deferred tax asset $ 245 $ 249
============ ===========
</TABLE>
The difference between the provision for income taxes and amounts computed by
applying the statutory income tax rate of 34% to statutory income before taxes
consists of the following for the years ended June 30:
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Income taxes computed at the
Tax rate on pretax income $ 937 $ 901
Add (subtract) tax effect of
Tax exempt income (51) (55)
Increase in cash surrender value life insurance (38) (34)
Other 14 18
------------ -----------
$ 862 $ 830
============ ===========
</TABLE>
(Continued)
16.
<PAGE> 20
CONSUMERS BANCORP, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2000 and 1999
(Dollars in thousands, except share data)
--------------------------------------------------------------------------------
NOTE 11 - REGULATORY MATTERS
The Bank is subject to regulatory capital requirements administered by federal
banking agencies. Capital adequacy guidelines and prompt corrective-action
regulations involve quantitative measures of assets, liabilities, and certain
off-balance-sheet items calculated under regulatory accounting practices.
Capital amounts and classifications are also subject to qualitative judgments by
regulators about components, risk weightings, and other factors, and the
regulators can lower classifications in certain cases. Failure to meet various
capital requirements can initiate regulatory action that could have a direct
material effect on the financial statements.
The prompt corrective action regulations provide five classifications, including
well capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized, and critically undercapitalized, although these terms are not
used to represent overall financial condition. If adequately capitalized,
regulatory approval is required to accept brokered deposits. If
undercapitalized, capital distributions are limited, as is asset growth and
expansion, and plans for capital restoration are required. The minimum
requirements are:
<TABLE>
<CAPTION>
Capital to risk-
weighted assets
--------------- Tier 1 capital
Total Tier 1 to average assets
----- ------ -----------------
<S> <C> <C> <C>
Well capitalized 10% 6% 5%
Adequately capitalized 8 4 4
Undercapitalized 6 3 3
</TABLE>
At year-end, actual Bank capital levels (in millions) and minimum required
levels were:
<TABLE>
<CAPTION>
Minimum Required
To Be Well
Minimum Required Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Regulations
------ ----------------- ------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
June 30, 2000
-------------
Total capital (to risk weighted assets)
Consolidated Bank $ 11.94 11.1% $ 8.64 8.0% $ 10.80 10.0%
Tier 1 capital (to risk weighted assets)
Consolidated Bank 10.59 9.8 4.32 4.0 6.48 6.0
Tier 1 capital (to average assets)
Consolidated Bank 10.59 7.0 6.06 4.0 7.58 5.0
June 30, 1999
-------------
Total capital (to risk weighted assets) $ 12.46 13.4% $ 7.44 8.0% $ 9.30 10.0%
Tier 1 capital (to risk weighted assets) 11.30 12.1 3.72 4.0 5.58 6.0
Tier 1 capital (to average assets) 11.30 8.4 5.39 4.0 6.73 5.0
</TABLE>
(Continued)
17.
<PAGE> 21
CONSUMERS BANCORP, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2000 and 1999
(Dollars in thousands, except share data)
--------------------------------------------------------------------------------
NOTE 11 - REGULATORY MATTERS (Continued)
As of latest regulatory examination, the Bank was categorized as well
capitalized. There are no conditions or events since that examination that
management believes may have changed the Bank's category.
Dividends paid by the Bank are the primary source of funds available to the
Corporation for payment of dividends to shareholders and for other working
capital needs. Applicable state statutes and regulations impose restrictions on
the amount of dividends that may be declared by the Bank. Dividends, which may
be paid by the Bank to the Corporation without obtaining prior approval from
bank regulatory agencies, approximated $3,635 at June 30, 2000. The Corporation
may not pay dividends more than retained earnings.
NOTE 12 - COMMITMENTS WITH OFF-BALANCE SHEET RISK
The Bank is a party to commitments to extend credit in the normal course of
business to meet the financing needs of its customers. Commitments are
agreements to lend to customers providing there are no violations of any
condition established in the contract. Commitments to extend credit have a fixed
expiration date or other termination clause. These instruments involve elements
of credit and interest rate risk more than the amount recognized in the
statements of financial position. The Bank uses the same credit policies in
making commitments to extend credit as it does for on-balance sheet instruments.
The Bank evaluates each customer's credit on a case by case basis. The amount of
collateral obtained is based on management's credit evaluation of the customer.
The amount of commitments to extend credit and the exposure to credit loss for
non-performance by the customer was $10,127 and $14,677 as of June 30, 2000 and
1999. Of the June 30, 2000 commitments, $2,624 carried variable rates and $7,503
carried fixed rates of interest ranging from 9.50% to 12.50%. Since some
commitments to make loans expire without being used, the amount does not
necessarily represent future cash commitments.
(Continued)
18.
<PAGE> 22
CONSUMERS BANCORP, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2000 and 1999
(Dollars in thousands, except share data)
--------------------------------------------------------------------------------
NOTE 13 - FAIR VALUE DISCLOSURES OF FINANCIAL INSTRUMENTS
The following table shows the estimated fair value at June 30, 2000 and 1999,
and the related carrying value of financial instruments:
<TABLE>
<CAPTION>
2000 1999
---- ----
Estimated Estimated
Carrying Fair Carrying Fair
Amount Value Amount Value
------ ----- ------ -----
<S> <C> <C> <C> <C>
Financial assets;
Cash and cash equivalents $ 5,629 $ 5,629 $ 4,773 $ 4,773
Federal funds sold - - 3,235 3,235
Securities available for sale 22,179 22,179 24,067 24,067
Loans, net 116,326 - 95,597 95,370
Cash surrender value of
life insurance 2,106 2,106 2,007 2,007
Accrued interest receivable 983 983 900 900
Financial liabilities
Demand and savings deposits (89,645) (89,645) (72,936) (72,936)
Time deposits (47,186) (47,375) (46,169) (46,324)
Federal Home Loan Bank
advance (3,244) (3,238) (2,959) (2,667)
Accrued interest payable (617) (617) (886) (886)
</TABLE>
For purposes of the above disclosures of estimated fair value, the following
assumptions were used. Estimated fair value for cash and due from banks and
federal funds sold is considered to approximate cost. Estimated fair value of
securities is based on quoted market values for the individual securities or
equivalent securities. 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 is
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) is 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. Fair value for nonaccrual loans is based on recent
appraisals of the collateral or, if appropriate, using estimated discounted cash
flows. Fair value of core deposits, including demand deposits, savings accounts
and certain money market deposits, is the amount payable on demand. Fair value
of fixed-maturity certificates of deposit is estimated using the rates offered
at June 30, 2000 and 1999, 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. Fair value of accrued interest is determined to be the
carrying amount since these financial instruments generally represent
obligations which are due on demand. The fair value of unrecorded commitments at
June 30, 2000 and 1999, is not material.
(Continued)
19.
<PAGE> 23
CONSUMERS BANCORP, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2000 and 1999
(Dollars in thousands, except share data)
--------------------------------------------------------------------------------
NOTE 13 - FAIR VALUE DISCLOSURES OF FINANCIAL INSTRUMENTS (Continued)
While the estimates of fair value are based on management's judgment of the most
appropriate factors, no assurance can be made that were the Bank to have
disposed of such items at June 30, 2000 and 1999, estimated fair values would
necessarily have been achieved at these dates, since market values may differ
depending on various circumstances. Estimated fair values at, June 30, 2000 and
1999, should not necessarily be considered to apply at subsequent dates.
Other assets and liabilities of the Bank may have value but are not included in
the above disclosures. In addition, nonfinancial instruments typically not
recognized in these financial statements nevertheless may have value, but are
not included in the above disclosures. These include, among other items, the
estimated earnings power of core deposit accounts, the value of a trained work
force, customer goodwill and similar items.
NOTE 14 - PARENT COMPANY FINANCIAL STATEMENTS
Condensed financial information of Consumers Bancorp. Inc. (parent company only)
follows:
<TABLE>
<CAPTION>
CONDENSED BALANCE SHEETS
June 30, 2000 June 30, 1999
------------- -------------
<S> <C> <C>
Assets
Cash $ 16 $ -
Organizational fee, net of amortization 6
Securities 100
Investment in subsidiary 12,145 11,129
---------------- ----------------
Total assets $ 12,261 $ 11,135
================ ================
Shareholders' equity $ 12,261 $ 11,135
================ ================
</TABLE>
<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF INCOME Year Ended Year Ended
June 30, 2000 June 30, 1999
<S> <C> <C>
Cash dividends from subsidiary $ 723 $ 610
Amortization expense 6 6
---------------- ----------------
Income before equity in undistributed
net income of subsidiary 729 616
Equity in undistributed net income
of subsidiary 1,165 1,205
---------------- ----------------
Net income $ 1,894 $ 1,821
================ ================
</TABLE>
(Continued)
20.
<PAGE> 24
CONSUMERS BANCORP, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2000 and 1999
(Dollars in thousands, except share data)
--------------------------------------------------------------------------------
NOTE 14 - PARENT COMPANY FINANCIAL STATEMENTS (Continued)
<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, 2000 June 30, 1999
---------------- ---------------
CONDENSED STATEMENTS OF CASH FLOWS
<S> <C> <C>
Cash flows from operating activities
Net income $ 1,894 $ 1,821
Equity in undistributed net income of subsidiary (1,179) (1,205)
Amortization of organizational fees 6 6
---------------- ----------------
Net cash provided by operating activities 721 622
Cash flows from investing activities
Purchases of investments available for sale (100)
Cash flows from financing activities
Cash dividends (623) (594)
Sale of treasury stock 18 21
Purchase of treasury stock - (49)
---------------- -----------------
Net cash used by financing activities (605) (622)
Change in cash and cash equivalents 16 -
---------------- ----------------
Cash and cash equivalents, end of year $ 16 $ -
================ ================
</TABLE>
21.
<PAGE> 25
GENERAL INFORMATION
EXTERNAL INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Crowe, Chizek and Company LLP
Landerbrook Corporate Center One
5900 Landerbrook Drive, Suite 205
Cleveland, Ohio 44124-4043
CORPORATE COUNSEL
Dinsmore & Shohl
1900 Chemed Center
255 East Fifth Street
Cincinnati, Ohio 45202
TRANSFER AGENT AND REGISTRAR
Consumers Bancorp, Inc.
C/o Theresa J. Gill, Corporate Secretary
614 East Lincoln Way
Minerva, Ohio 44657
MARKET MARKERS
McDonald & Company Securities, Inc. Sweney Cartwright & Co.
United Bank Plaza 17 South High Street
200 Market Ave. South, Suite 410 Suite 300
Canton, Ohio 44702 Columbus, Ohio 43215
800-962-0537 800-334-7481
Parker/Hunter Incorporated
340 East State Street
P.O. Box 620
Salem, Ohio 44460
800-624-1965
ANNUAL MEETING
The 2000 annual meeting of stockholders will be held on October 18, 2000 at 9:00
AM at the main offices of Consumers National Bank, 614 East Lincoln Way,
Minerva, Ohio 44657.
ANNUAL REPORT ON FORM 10-KSB
A copy of the Bank's Annual Report on Form 10-KSB for the fiscal year ended June
30, 2000 as filed with the Securities and Exchange Commission will be furnished
without charge to stockholders upon written request to Theresa J. Gill,
Administrative Officer.
22.
<PAGE> 26
CONSUMERS BANCORP, INC.
FINANCIAL STATEMENTS
June 30, 2000 and 1999
