$37.03
$76.31
bear $37.03
base $64.63
bull $76.31
margin of safety $34.00
market price* $31.89
Consumers Bancorp is the holding company for Consumers National Bank, a community bank that takes deposits and lends to households, farmers and small businesses in northeast Ohio, chiefly Carroll, Columbiana, Jefferson, Mahoning, Stark and Summit counties. It earns the spread between what it charges on loans and securities and what it pays depositors, plus modest fees from mortgage banking, debit cards and service charges. At June 30, 2026 (its fiscal year end) it had $1.28 billion of assets, $937.5 million of loans and $1.12 billion of deposits. Residential mortgages, owner-occupied and investor commercial real estate, commercial and industrial loans, farmland and a fast-growing consumer book (mostly indirect auto, $147.7 million) make up the loan book. Credit quality has been very clean: net charge-offs were 0.02% of loans in fiscal 2026 and 0.07% in fiscal 2025, non-performing loans were $696 thousand (0.07% of loans), and the worst year of the last decade (fiscal 2017) saw charge-offs of 0.40%. Almost all recent charge-offs came from the consumer book ($199 thousand net in fiscal 2026, $347 thousand in fiscal 2025). One item deserves attention: $16.4 million of loans (1.7% of the book, roughly 15% of the bank's equity capital before bond losses) are rated special mention ($4.1 million) or substandard ($12.4 million), and the bank says they relate mainly to one commercial borrower whose construction project was delayed. The project is now complete and operating, part of the property is leased, the real estate was recently appraised above the loan balance, and SBA 504 financing is approved or pending. The loans are not past due enough to be non-performing, but a single relationship of this size is the largest named credit risk in the book, and we carry it in the bear case. How we measure earnings. For a bank we start from net income, add back depreciation and intangible amortization and the part of the loan-loss provision that exceeded actual charge-offs (so real losses are charged but reserve building is not), and subtract all spending on branches and equipment. We deduct the growth-related part of that spending too (about $0.08 per share in fiscal 2026) because our cases credit loan and deposit growth, and growth should not be counted for free. Stock-based pay (about $314 thousand) is already deducted in net income. Earlier-year figures were rebuilt so that depreciation is treated the same way in every year; our previous figures were prepared on a different basis for fiscal 2022-2024 and are not comparable. On this basis owner earnings per share were $3.77 in fiscal 2022, $3.41 in 2023, $2.86 in 2024, $2.35 in 2025 and $3.71 in 2026. The 2025 figure was held down by a $3.1 million outlay on premises and equipment that we could not tie to a specific project; it fell back to $1.6 million in 2026. Net income rose 29% in fiscal 2026 to $11.2 million as interest income grew 12% to $59.4 million while cash interest paid rose only 3% to $19.8 million, partly offset by a 12% rise in noninterest expense (staff additions in retail and lending). Net income was about $2.7 million a quarter in the first half of fiscal 2026, $2.8 million in the March quarter and $3.0 million in the June quarter, so the recovery has held for two further quarters. The normal earnings level. We anchor on the median of fiscal 2022 through 2026, $3.41 per share. That span covers the whole recent rate cycle at roughly today's size: the early benefit of rising rates, the 2024-2025 squeeze when deposit costs caught up, and the 2026 recovery. We left out 2016-2019, when the bank was less than half its size, and 2020-2021, which were flattered by fees on Paycheck Protection Program loans and near-zero deposit costs. We kept fiscal 2025 in the window at its reported $2.35 even though the equipment spike probably depressed it; adjusting it to about $2.83 would leave the median unchanged. We start from $3.41 rather than the $3.71 just reported because the last two quarters are encouraging but not yet enough to lift the level. Growth, and what it costs. Deposits have grown in each of the last five fiscal years, including through the 2023 deposit outflows, and assets and deposits have compounded at about 9% a year since fiscal 2021. That growth was funded from the bank's own earnings: equity capital (before bond losses) rose from 8.0% to 8.4% of assets over the period, with the bank paying out about a fifth of its earnings as dividends. The only acquisition was the small purchase of Peoples Bancorp of Mt. Pleasant on January 1, 2020. We credit that repeatable growth at well below its record and charge for it: every dollar of asset growth requires retaining capital (roughly $34 of equity per share today), which therefore cannot be paid out. Left out of every case: growth beyond the demonstrated pace, further margin widening as the bond portfolio (whose $17.9 million of unrealised losses show it yields less than current rates) reinvests, fee growth, new products beyond those already running, the mortgage warehouse line and any acquisition. Growth check: owner earnings grew 58% in fiscal 2026 (largely the reversal of the equipment spike plus the margin recovery). Our base case assumes just 4% growth in year one, from the lower $3.41 normal level. Base case ($64.63 per share): earnings start at $3.41 and grow 4% a year for five years and 3% for the next five, with the capital needed for that growth retained rather than paid out, reaching $4.80 in year ten. Credit losses stay near the bank's own record. No full credit cycle is assumed in this case because the filings contain no evidence of one; that risk is carried in the bear case and the margin-of-safety price. After year ten growth stops and the bank earns a flat $4.80 per share indefinitely, which we credit because a local deposit franchise whose branches and systems are already maintained out of spending we charge keeps producing what it produced in year ten; its deposits have grown every year of the last five and it has earned a profit in each of the last eleven. Of the $64.63, $19.93 comes from the ten years of distributable earnings and $44.70 from the years after. Bear case ($37.03 per share): two things happen. First, the margin squeeze of 2024-2025 returns and stays: normalised owner earnings settle at $2.80 (fiscal 2024 was $2.86 and fiscal 2025 about $2.83 once the equipment spike is removed) with no growth. Second, the bank goes through a full credit cycle like 2008-2011, sized from FDIC industry data: industry charge-offs reached 2.5% of loans in 2009, with category rates of roughly 1.5-2.0% on commercial and industrial, about 1.0% on non-owner-occupied commercial property, 3.7-5.3% on construction and land and 2.4% on consumer loans. Applied to this bank's mix (about 1.2% on residential and 0.5% on farmland, our judgement within the industry range), the peak loss rate is about 1.45% of loans a year, following the industry's shape over five years: 0.9%, 1.45%, 1.45%, 0.9% and 0.6%. That is about $45 million of losses above normal before tax, or $11.29 per share after tax. The single criticized commercial relationship is inside that loss pool, which is about four times its size. Owner earnings fall to $0.92 in year one, turn slightly negative (-$0.38) in years two and three, recover to $0.92 and $1.62, and return to $2.80 from year six. Dividends would be suspended, but earnings absorb the losses (five-year earnings still exceed five-year losses by $2.71 per share), so capital is not breached and no shares need to be issued at depressed prices. The bear value is above tangible book value of $27.70 per share ($33.37 before unrealised bond losses) because afterwards the deposit franchise is still earning $2.80 per share on about $34 of capital, roughly an 8% return, on funding that stayed in place. Of the $37.03, $10.97 comes from the first ten years and $26.06 from the years after. Bull case ($76.31 per share): the fiscal 2026 level of $3.71, reached under today's rates and costs, holds as the starting point, and growth continues at 6% a year for five years and 4% for five more, still below the 9% pace the balance sheet has delivered, reaching $6.03 per share before flattening. Debt. For a bank, deposits and borrowings are the raw material of lending, and their interest cost is already deducted in the earnings we value, so nothing further is subtracted. The holding company has no debt of its own; the bank's Federal Home Loan Bank advances ($27.0 million) and short-term borrowings ($29.2 million) are part of its funding. In each case the business is worth the full figure and owes nothing further ahead of shareholders: bear $37.03 worth, $0 owed, $37.03 per share; base $64.63 worth, $0 owed, $64.63; bull $76.31 worth, $0 owed, $76.31. Leverage is carried in the bear case through the credit losses and margin squeeze. The $17.9 million (about $5.67 per share) of unrealised bond losses does not reduce the values because the bonds repay at par as they mature and their low yield is already in current earnings. Funding is a watch item: uninsured deposits were $370.2 million (33.0% of deposits, up from 29.9%), of which $105.6 million is fully collateralised public-fund money. Uninsured deposits that are not collateralised public funds grew from about $200 million to about $265 million in a year. Margin-of-safety price: about $34 per share. We are fairly sure of the earnings level: five years of audited results on a small, mostly clean loan book put it near $3.40, and the last two quarters ran above that. We are less sure of the margin, since owner earnings have moved from $3.77 to $2.35 and back to $3.71 in four years. The worst plausible outcome is the 2009-2010-style cycle in the bear case, in which about 5% of loans are lost over five years; that would consume roughly four years of earnings but not the capital base, and the bank has no holding-company debt and almost no brokered funding. Outcomes no case models: the loss of a large depositor, or a run on uninsured balances forcing the sale of bonds and crystallising the $5.67 per share of unrealised losses (which would reduce the bear value to about $31); and a thinly traded stock that stays illiquid for years. If we are wrong about the margin, earnings of $2.80 with base-case growth would be worth about $51; if growth fails and earnings stay at $3.41, about $57; if both, about $47; and with the credit cycle on top, about $37. The price assumes a five-year holding period: the bank pays $0.84 per share a year (about 23% of earnings, raised from $0.76) and retains the rest, building roughly $2.50 per share a year of capital. A 20% annual return from $34 implies the shares plus dividends being worth about $85 in five years, which is what the base path produces once five years of earnings of about $4.14 per share and the capital retained along the way are recognised. At materially higher prices the estimate would rely on the margin holding, growth continuing and no credit cycle at once. One minor item we could not reconcile: the filing's text puts consumer loan growth at 28.5% ($35.3 million), while its loan table implies about 31%; we used the table. What would make this wrong: a credit cycle markedly worse than 2009-2010, especially in the newly enlarged indirect auto book or the single criticized commercial relationship; a sustained return to the deposit-cost squeeze of 2024-2025 beyond the $2.80 level; a funding shock among the uninsured deposits; or growth that stalls because local deposits stop expanding.