CONDENSED CONSOLIDATED STATEMENTS OF ~~CHANGES IN SHAREHOLDERS’ EQUITY~~CASH FLOWS

(Unaudited)

(Dollars in thousands)	Six Months Ended December 31,
	2017			2016
Cash flows from operating activities
Net cash from operating activities	$	3,484		$	2,152

Cash flow from investing activities
Securities available-for-sale
Purchases		(5,101	)		(17,368	)
Maturities, calls and principal pay downs		8,848			11,753
Proceeds from sales		1,586			3,383
Securities held-to-maturity
Purchases		—			(1,000	)
Principal pay downs		198			198
Net decrease in certificates of deposits in other financial institutions		—			990
Net increase in loans		(20,967	)		(9,255	)
Purchase of Bank owned life insurance		—			(2,000	)
Acquisition of premises and equipment		(129	)		(252	)
Sale of other real estate owned		71			7
Net cash from investing activities		(15,494	)		(13,544	)

Cash flow from financing activities
Net increase in deposit accounts		8,518			8,797
Net change in short-term borrowings		(1,479	)		223
Proceeds from Federal Home Loan Bank advances		5,400			18,325
Repayments of Federal Home Loan Bank advances		(532	)		(14,630	)
Dividends paid		(668	)		(654	)
Net cash from financing activities		11,239			12,061

Increase (decrease) in cash or cash equivalents		(771	)		669

Cash and cash equivalents, beginning of period		9,912			10,181
Cash and cash equivalents, end of period	$	9,141		$	10,850

Supplemental disclosure of cash flow information:
Cash paid during the period:
Interest	$	709		$	484
Federal income taxes		405			150
Non-cash items:
Transfer from loans to other real estate owned		57			10
Transfer from loans held for sale to portfolio		172			—
Issuance of treasury stock for stock awards		90			—
Expired and forfeited dividend reinvestment plan shares associated with restricted stock awards that were retired to treasury stock		4			4

~~(Unaudited)~~

(Dollars in thousands, except per share data)

Three Months ended
September 30,

2017

2016

Balance at beginning of period
$ 43,535 $ 43,793

Net income
929 901
Other comprehensive income (loss)
44 (347 )
6,321 shares associated with stock awards during the three months ended September 30, 2017
90 —
204 and 231 Dividend reinvestment plan shares associated with forfeited and expired restricted stock awards retired to treasury stock during the three months ended September 30, 2017 and 2016, respectively
— —
Common cash dividends
(327 ) (327 )

Balance at the end of the period
$ 44,271 $ 44,020

Common cash dividends per share
$ 0.12 $ 0.12

See accompanying notes to consolidated financial statements.

~~CONSUMERS BANCORP, INC.~~

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(Unaudited)~~

(Dollars in thousands)

Three Months Ended
September 30,

2017

2016

Cash flows from operating activities

Net cash from operating activities
$ 503 $ 581

Cash flow from investing activities

Securities available-for-sale

Purchases
(426 ) (3,229 )
Maturities, calls and principal pay downs
4,412 5,796
Proceeds from sales
1,586 1,789
Securities held-to-maturity

Purchases
— (1,000 )
Principal pay downs
95 95
Net decrease in certificates of deposits in other financial institutions
— 250
Net increase in loans
(14,833 ) (4,237 )
Acquisition of premises and equipment
(86 ) (191 )
Sale of other real estate owned
71 —
Net cash from investing activities
(9,181 ) (727 )

Cash flow from financing activities

Net increase in deposit accounts
9,369 6,323
Net change in short-term borrowings
3,919 1,417
Proceeds from Federal Home Loan Bank advances
— 9,700
Repayments of Federal Home Loan Bank advances
(16 ) (14,615 )
Dividends paid
(327 ) (327 )
Net cash from financing activities
12,945 2,498

Increase in cash or cash equivalents
4,267 2,352

Cash and cash equivalents, beginning of period
9,912 10,181
Cash and cash equivalents, end of period
$ 14,179 $ 12,533

Supplemental disclosure of cash flow information:

Cash paid during the period:

Interest
$ 347 $ 242
Federal income taxes
— —
Non-cash items:

Transfer from loans to other real estate owned
— 10
Expired and forfeited dividend reinvestment plan shares associated with restricted stock awards that were retired to treasury stock
4 4

~~See accompanying notes to consolidated financial statements.~~

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) ~~(continued)~~

(Dollars in thousands, except per share amounts)

Note 1 – Summary of Significant Accounting Policies:

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

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~~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~~10-K for the year ended June 30, 2017. 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.~~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 Not Yet Effective: In May 2014, FASB issued Accounting Standards Update (ASU) ~~2014-09,~~2014-09, Revenue from Contracts with Customers (Topic ~~606)~~606). The ASU creates a new topic, Topic 606, to provide guidance on revenue recognition for entities that enter into contracts with customers to transfer goods or services or enter into contracts for the transfer of nonfinancial assets. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additional disclosures are required to provide quantitative and qualitative information regarding the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The new guidance is effective for annual reporting periods, and interim reporting periods within those annual periods, beginning after December 15, 2017. Most of the Corporation’s revenue is derived from loans and financial instruments, which is not part of the scope of this ASU.The adoption of ASU ~~2014-09~~2014-09 as it relates to non-interest income, such as service charges and debit card interchange income, is not expected to have a material effect on the Corporation’s financial statements.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. The main provisions of ASU 2016-01 address the valuation and impairment of certain equity investments along with simplified disclosures about those investments. Equity securities with readily determinable fair values will be treated in the same manner as other financial instruments. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The adoption of ASU 2016-01 is not expected to have a material impact on the Corporation's financial statements.

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

In June 2016, FASB ~~Issued~~Issued ASU ~~2016-13,~~2016-13, Financial ~~Instruments~~—Instruments—Credit Losses (Topic ~~326)~~326): Measurement of Credit Losses on Financial Instruments. This ASU adds a new Topic 326 to the ~~Codification~~codification and removes the thresholds that companies apply to measure credit losses on financial instruments measured at amortized cost, such as loans, receivables, and held-to-maturity debt securities. Under current U.S. GAAP, companies generally recognize credit losses when it is probable that the loss has been incurred. The revised guidance will remove all current loss recognition thresholds and will require companies to recognize an allowance for credit losses for the difference between the amortized cost basis of a financial instrument and the amount of amortized cost that the corporation expects to collect over the instrument’s contractual life. ASU ~~2016-13~~2016-13 also amends the credit loss measurement guidance for available-for-sale debt securities and beneficial interests in securitized financial assets. The guidance in ASU ~~2016-13~~2016-13 is effective for “public business entities,” as defined, that are SEC filers for fiscal years and for interim periods with those fiscal years beginning after December 15, 2019. Early adoption of the guidance is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Management is currently evaluating the impact of the adoption of this guidance on the Corporation’s consolidated financial statements, and are in the midst of gathering critical data to evaluate the impact. However, it is too early to estimate the impact.

In February 2016, the FASB issued ASU ~~2016-02~~2016-02 - Leases (Topic ~~842)~~842). The ASU will require all organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. Additional qualitative and quantitative disclosures will be required so that users can understand more about the nature of an entity’s leasing activities. The new guidance is effective for annual reporting periods and interim reporting periods within those annual periods, beginning after December 15, 2018. Early adoption is permitted. Management is currently evaluating the impact of the adoption of this guidance on the Corporation’s consolidated financial statements and expects to recognize an increase in other assets and other liabilities for the rights and obligations created by leasing of branch offices. Management also expects minimal impact in the income statement with respect to occupancy expense related to leases.

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		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
September 30, 2017
December 31, 2017
Obligations of U.S. government-sponsored entities and agencies	$	12,503	$	89	$	(73	)	$	12,519	$	13,752	$	30	$	(146	)	$	13,636
Obligations of state and political subdivisions		56,231		872		(217	)		56,886		56,718		746		(283	)		57,181
Mortgage-backed securities – residential		59,536		164		(356	)		59,344		58,051		98		(631	)		57,518
Mortgage-backed securities– commercial		1,452		—		(4	)		1,448		1,446		—		(10	)		1,436
Collateralized mortgage obligations– residential		5,738		—		(100	)		5,638		5,483		—		(137	)		5,346
Pooled trust preferred security		181		366		—			547
Pooled trust preferred security											178		443		—			621
Total available-for-sale securities	$	135,641	$	1,491	$	(750	)	$	136,382	$	135,628	$	1,317	$	(1,207	)	$	135,738

Held-to-Maturity	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value		Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
September 30, 2017
December 31, 2017
Obligations of state and political subdivisions	$	4,164	$	94	$	—	$	4,258	$	4,061	$	22	$	—	$	4,083

Available–for-Sale

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair
Value

June 30, 2017

Obligations of U.S. government-sponsored entities and agencies

12,571

(74

)

12,587

Obligations of state and political subdivisions

56,824

890

(254

)

��

57,460

Mortgage-backed securities – residential

64,092

184

(438

)

63,838

Mortgage-backed securities – commercial

1,459

—

)

1,458

Collateralized mortgage obligations - residential

6,310

(100

)

6,211

Pooled trust preferred security

155

377

—

532

Total available-for-sale securities

141,411

1,542

(867

)

142,086

Held-to-Maturity	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses			Fair Value
June 30, 2017
Obligations of state and political subdivisions	$	4,259	$	73	$	(3	)	$	4,329

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

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

	Three Months Ended September 30,				Three Months Ended December 31				Six Months Ended December 31,
	2017		2016		2017		2016		2017		2016
Proceeds from sales	$	1,586	$	1,789	$	—	$	1,594	$	1,586	$	3,383
Gross realized gains		39		103		—		24		39		127
Gross realized losses		1		—
Gross realized losses						—		2		1		2

The ~~income~~income tax provision related to these net realized gains and losses amounted to ~~$13~~$13 for the ~~three~~six months ended ~~September 30,~~December 31, 2017 and ~~$35~~$8 and $43 for the three and six months ended ~~September 30,~~December 31, 2016.

The amortized cost and fair values of debt securities at ~~September 30,~~December 31, 2017, by expected maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date, primarily mortgage-backed securities, collateralized mortgage obligations and the pooled trust preferred security are shown separately.

Available-for-Sale	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due in one year or less	$	2,839	$	2,854	$	2,170	$	2,192
Due after one year through five years		16,018		16,314		18,053		18,167
Due after five years through ten years		27,350		27,664		28,838		28,992
Due after ten years		22,527		22,573		21,409		21,466
Total		68,734		69,405		70,470		70,817

U.S. Government-sponsored mortgage-backed and related securities		66,726		66,430
Pooled trust preferred security		181		547
U.S. Government-sponsored mortgage-backed and related securities						64,980		64,300
Pooled trust preferred security						178		621
Total available-for-sale securities	$	135,641	$	136,382	$	135,628	$	135,738

Held-to-Maturity

Due after five years through ten years		601		626		564		579
Due after ten years		3,563		3,632		3,497		3,504
Total held-to-maturity securities	$	4,164	$	4,258	$	4,061	$	4,083

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

The following table summarizes the s~~ecurities~~securities with unrealized losses at ~~September 30,~~December 31, 2017 and June 30,2017, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position:

(Dollars in thousands, except per share amounts)

	Less than 12 Months					12 Months or more					Total					Less than 12 Months					12 Months or more					Total
Available-for-sale	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
September 30, 2017
December 31, 2017
Obligations of US government-sponsored entities and agencies	$	3,921	$	(73	)	$	—	$	—		$	3,921	$	(73	)	$	9,901	$	(146	)	$	—	$	—		$	9,901	$	(146	)
Obligations of states and political subdivisions		12,984		(198	)		1,740		(19	)		14,724		(217	)		11,862		(93	)		8,179		(190	)		20,041		(283	)
Mortgage-backed securities - residential		43,781		(307	)		3,381		(49	)		47,162		(356	)		27,316		(243	)		22,415		(388	)		49,731		(631	)
Mortgage-backed securities - commercial		1,448		(4	)		—		—			1,448		(4	)		1,435		(10	)		—		—			1,435		(10	)
Collateralized mortgage obligations – residential		5,036		(89	)		602		(11	)		5,638		(100	)		—		—			5,346		(137	)		5,346		(137	)
Total temporarily impaired	$	67,170	$	(671	)	$	5,723	$	(79	)	$	72,893	$	(750	)	$	50,514	$	(492	)	$	35,940	$	(715	)	$	86,454	$	(1,207	)

	Less than 12 Months					12 Months or more					Total
Available-for-sale	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
June 30, 2017
Obligations of US government-sponsored entities and agencies	$	4,336	$	(74	)	$	—	$	—		$	4,336	$	(74	)
Obligations of states and political subdivisions		13,881		(241	)		834		(13	)		14,715		(254	)
Mortgage-backed securities - residential		42,071		(391	)		2,805		(47	)		44,876		(438	)
Mortgage-backed securities - commercial		1,458		(1	)		—		—			1,458		(1	)
Collateral mortgage obligation - residential		5,417		(88	)		654		(12	)		6,071		(100	)
Total temporarily impaired	$	67,163	$	(795	)	$	4,293	$	(72	)	$	71,456	$	(867	)

Management evaluates securities for other-than-temporary ~~impairment~~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)~~(1) the length of time and the extent to which the fair value has been less than cost, ~~(2)~~(2) the financial condition and near-term prospects of the issuer, ~~(3)~~(3) whether the market decline was affected by macroeconomic conditions, and ~~(4)~~(4) whether the entity has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery. The assessment of whether an other-than-temporary decline exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time.

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

The unrealized losses within the securities portfolio as of ~~September 30,~~December 31, 2017 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 not likely that management will be required to sell the securities prior to their anticipated recovery. The decline in fair value within the securities portfolio is largely due to changes in interest rates and the fair value is expected to recover as the securities approach maturity. The mortgage-backed securities and collateralized mortgage obligations were primarily issued by Fannie Mae, Freddie Mac and Ginnie Mae, institutions which the government has affirmed its commitment to support. The Corporation does not own any private label mortgage-backed securities.

Note 3– Loans

Major classifications of loans were as follows:

	September 30, 2017			June 30, 2017			December 31, 2017			June 30, 2017
Commercial	$	51,479		$	46,336		$	49,561		$	46,336
Commercial real estate:
Construction		7,437			5,588			5,936			5,588
Other		163,991			157,861			169,692			157,861
1 – 4 Family residential real estate:
Owner occupied		42,861			41,581			45,351			41,581
Non-owner occupied		14,072			14,377			16,163			14,377
Construction		2,725			1,993			1,931			1,993
Consumer		5,153			5,131			4,960			5,131
Subtotal		287,718			272,867			293,594			272,867
Allowance for loan losses		(3,194	)		(3,086	)		(3,225	)		(3,086	)
Net Loans	$	284,524		$	269,781		$	290,369		$	269,781

Loans presented above are net of deferred loan fees and costs of ~~$299~~$313 and ~~$294~~$294 for ~~September 30,~~December 31, 2017 and June 30, 2017, respectively.

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ~~end~~ended ~~ed September 30,~~December 31, 2017:

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

Allowance for loan losses:
Beginning balance	$	518	$	2,038	$	473	$	57		$	3,086		$	572		$	2,081	$	473		$	68		$	3,194
Provision for loan losses		52		25		—		13			90			(17	)		57		20			—			60
Loans charged-off		—		—		—		(3	)		(3	)		—			—		(33	)		(5	)		(38	)
Recoveries		2		18		—		1			21			—			6		1			2			9
Total ending allowance balance	$	572	$	2,081	$	473	$	68		$	3,194		$	555		$	2,144	$	461		$	65		$	3,225

The following table presents the activity in the allowance for loan losses by portfolio segment for the ~~three~~six months ended ~~September 30, 2016:~~December 31, 2017:

					1-4 Family													1-4 Family
			Commercial		Residential											Commercial		Residential
			Real		Real											Real		Real
	Commercial		Estate		Estate			Consumer			Total			Commercial		Estate		Estate			Consumer			Total
Allowance for loan losses:
Beginning balance	$	505	$	2,518	$	402		$	141		$	3,566		$	518	$	2,038	$	473		$	57		$	3,086
Provision for loan losses		5		125		27			(21	)		136			35		82		20			13			150
Loans charged-off		—		—		(21	)		(4	)		(25	)		—		—		(33	)		(8	)		(41	)
Recoveries		—		—		3			4			7			2		24		1			3			30
Total ending allowance balance	$	510	$	2,643	$	411		$	120		$	3,684		$	555	$	2,144	$	461		$	65		$	3,225

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

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

Allowance for loan losses:
Beginning balance	$	510		$	2,643		$	411		$	120		$	3,684
Provision for loan losses		(14	)		157			51			(54	)		140
Loans charged-off		—			(700	)		(23	)		(8	)		(731	)
Recoveries		1			—			26			3			30
Total ending allowance balance	$	497		$	2,100		$	465		$	61		$	3,123

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 six months ended December 31, 2016:

							1-4 Family
				Commercial			Residential
				Real			Real
	Commercial			Estate			Estate			Consumer			Total
Allowance for loan losses:
Beginning balance	$	505		$	2,518		$	402		$	141		$	3,566
Provision for loan losses		(9	)		282			78			(75	)		276
Loans charged-off		—			(700	)		(44	)		(12	)		(756	)
Recoveries		1			—			29			7			37
Total ending allowance balance	$	497		$	2,100		$	465		$	61		$	3,123

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 December 31, 2017. Included in the recorded investment in loans is $695 of accrued interest receivable.

					1-4 Family
			Commercial		Residential
			Real		Real
	Commercial		Estate		Estate		Consumer		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	—	$	30	$	—	$	—	$	30
Collectively evaluated for impairment		555		2,114		461		65		3,195
Total ending allowance balance	$	555	$	2,144	$	461	$	65	$	3,225

Recorded investment in loans:
Loans individually evaluated for impairment	$	122	$	1,303	$	340	$	—	$	1,765
Loans collectively evaluated for impairment		49,553		174,707		63,293		4,971		292,524
Total ending loans balance	$	49,675	$	176,010	$	63,633	$	4,971	$	294,289

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 o~~f September~~of June 30, 2017. Included in the recorded investment in loans is ~~$679~~$581 of accrued ~~interest~~interest receivable.

					1-4 Family										1-4 Family
			Commercial		Residential								Commercial		Residential
			Real		Real								Real		Real
	Commercial		Estate		Estate		Consumer		Total		Commercial		Estate		Estate		Consumer		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	—	$	33	$	—	$	—	$	33	$	—	$	42	$	2	$	—	$	44
Collectively evaluated for impairment		572		2,048		473		68		3,161		518		1,996		471		57		3,042
Total ending allowance balance	$	572	$	2,081	$	473	$	68	$	3,194	$	518	$	2,038	$	473	$	57	$	3,086

Recorded investment in loans:
Loans individually evaluated for impairment	$	125	$	1,462	$	425	$	—	$	2,012	$	444	$	1,587	$	203	$	—	$	2,234
Loans collectively evaluated for impairment		51,463		170,356		59,400		5,166		286,385		45,993		162,176		57,901		5,144		271,214
Total ending loans balance	$	51,588	$	171,818	$	59,825	$	5,166	$	288,397	$	46,437	$	163,763	$	58,104	$	5,144	$	273,448

The following table presents information related to unpaid principal balance, recorded investment and interest income associated with loans individually evaluated for impairment by class of loans as of December 31, 2017 and for the six months ended December 31, 2017:

	As of December 31, 2017						Six Months ended December 31, 2017
	Unpaid				Allowance for Loan		Average		Interest		Cash Basis
	Principal		Recorded		Losses		Recorded		Income		Interest
	Balance		Investment		Allocated		Investment		Recognized		Recognized
With no related allowance recorded:
Commercial	$	122	$	122	$	—	$	117	$	3	$	3
Commercial real estate:
Other		973		976		—		1,057		16		16
1-4 Family residential real estate:
Owner occupied		25		25		—		80		—		—
Non-owner occupied		315		315		—		322		—		—
With an allowance recorded:
Commercial real estate:
Other		327		327		30		337		5		5
Total	$	1,762	$	1,765	$	30	$	1,913	$	24	$	24

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, 2017. Included in the recorded investment in loans is $581 of accrued interest receivable.~~

1-4 Family
Commercial Residential
Real Real

Commercial

Estate

Estate

Consumer

Total

Allowance for loan losses:

Ending allowance balance attributable to loans:

Individually evaluated for impairment
$ — $ 42 $ 2 $ — $ 44
Collectively evaluated for impairment
518 1,996 471 57 3,042
Total ending allowance balance
$ 518 $ 2,038 $ 473 $ 57 $ 3,086

Recorded investment in loans:

Loans individually evaluated for impairment
$ 444 $ 1,587 $ 203 $ — $ 2,234
Loans collectively evaluated for impairment
45,993 162,176 57,901 5,144 271,214
Total ending loans balance
$ 46,437 $ 163,763 $ 58,104 $ 5,144 $ 273,448

~~The following table presents information related to average recorded investment and interest income associated with loans individually evaluated for impairment by class of loans as of~~ ~~September 30, 2017 and for the three months ended September 30, 2017:~~

As of September 30, 2017
Three Months ended September 30, 2017

Unpaid
Allowance for
Average
Interest
Cash Basis

Principal

Recorded

Loan Losses

Recorded

Income

Interest

Balance

Investment
Allocated
Investment

Recognized

Recognized

With no related allowance recorded:

Commercial
$ 124 $ 125 $ — $ 114 $ 2 $ 2
Commercial real estate:

Other
1,121 1,123 — 1,053 10 10
1-4 Family residential real estate:

Owner occupied
102 101 — 102 — —
Non-owner occupied
324 324 — 327 — —
With an allowance recorded:

Commercial real estate:

Other
338 339 33 343 — —
Total
$ 2,009 $ 2,012 $ 33 $ 1,939 $ 12 $ 12

~~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 for the three months ended December 31,2017:

	Average		Interest		Cash Basis
	Recorded		Income		Interest
	Investment		Recognized		Recognized
With no related allowance recorded:
Commercial	$	120	$	1	$	1
Commercial real estate:
Other		1,061		6		6
1-4 Family residential real estate:
Owner occupied		318		—		—
Non-owner occupied		58		—		—
With an allowance recorded:
Commercial real estate:
Other		330		5		5
Total	$	1,887	$	12	$	12

The following table presents information related to unpaid principal balance, recorded investment and interest income associated with loans individually evaluated for impairment by class of loans as of June 30, 2017 and for the ~~three~~six months ended ~~September 30,~~December 31, 2016:

	As of June 30, 2017						Three Months ended September 30, 2016						As of June 30, 2017						Six Months ended December 31, 2016
	Unpaid				Allowance for		Average		Interest		Cash Basis		Unpaid				Allowance for Loan		Average		Interest		Cash Basis
	Principal		Recorded		Loan Losses		Recorded		Income		Interest		Principal		Recorded		Losses		Recorded		Income		Interest
	Balance		Investment		Allocated		Investment		Recognized		Recognized		Balance		Investment		Allocated		Investment		Recognized		Recognized
With no related allowance recorded:
Commercial	$	482	$	444	$	—	$	660	$	80	$	80	$	482	$	444	$	—	$	330	$	80	$	80
Commercial real estate:
Construction		—		—		—		329		6		6		—		—		—		170		6		6
Other		1,928		1,039		—		1,555		105		105		1,928		1,039		—		1,081		105		105
1-4 Family residential real estate:
Owner occupied		104		103		—		127		—		—		104		103		—		127		—		—
Non-owner occupied		—		—		—		208		—		—		—		—		—		205		—		—
With an allowance recorded:
Commercial														—		—		—		7		—		—
Commercial real estate:
Other		548		548		42		2,449		8		8		548		548		42		2,030		15		15
1-4 Family residential real estate:
Owner occupied		99		100		2		177		2		2		99		100		2		139		3		3
Total	$	3,161	$	2,234	$	44	$	5,505	$	201	$	201	$	3,161	$	2,234	$	44	$	4,089	$	209	$	209

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

	Average		Interest		Cash Basis
	Recorded		Income		Interest
	Investment		Recognized		Recognized
With no related allowance recorded:
Commercial real estate:
Construction	$	10	$	—	$	—
Other		607		—		—
1-4 Family residential real estate:
Owner occupied		127		—		—
Non-owner occupied		202		—		—
With an allowance recorded:
Commercial		14		—		—
Commercial real estate:
Other		1,612		7		7
1-4 Family residential real estate:
Owner occupied		101		1		1
Total	$	2,673	$	8	$	8

The ~~following~~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 ~~September 30,~~December 31, 2017 and June 30, 2017:

	September 30, 2017				June 30, 2017				December 31, 2017				June 30, 2017
			Loans Past Due				Loans Past Due				Loans Past Due				Loans Past Due
			Over 90 Days				Over 90 Days				Over 90 Days				Over 90 Days
			Still				Still				Still				Still
	Non-accrual		Accruing		Non-accrual		Accruing		Non-accrual		Accruing		Non-accrual		Accruing
Commercial	$	—	$	—	$	368	$	—
Commercial									$	—	$	—	$	368	$	—
Commercial real estate:
Other		565		—		729		—		537		—		729		—
1 – 4 Family residential:
Owner occupied		89		—		90		—		13		—		90		—
Non-owner occupied		324		—		—		—		315		—		—		—
Total	$	978	$	—	$	1,187	$	—	$	865	$	—	$	1,187	$	—

Non-accrual loans and loans past due 90 days still on accrual include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

The following table presents the aging of the recorded investment in past due loans as of ~~September 30,~~December 31, 2017 by class of loans:

	Days Past Due												Days Past Due
	30 - 59		60 - 89		90 Days or		Total		Loans Not				30 - 59		60 - 89		90 Days or		Total		Loans Not
	Days		Days		Greater		Past Due		Past Due		Total		Days		Days		Greater		Past Due		Past Due		Total
Commercial	$	—	$	—	$	—	$	—	$	51,588	$	51,588	$	—	$	—	$	—	$	—	$	49,675	$	49,675
Commercial real estate:
Construction		—		—		—		—		7,452		7,452		—		—		—		—		5,943		5,943
Other		—		—		—		—		164,366		164,366		230		—		—		230		169,837		170,067
1-4 Family residential:
Owner occupied		23		—		74		97		42,885		42,982		12		—		—		12		45,477		45,489
Non-owner occupied		—		—		—		—		14,112		14,112		—		—		—		—		16,210		16,210
Construction		—		—		—		—		2,731		2,731		—		—		—		—		1,934		1,934
Consumer		18		—		—		18		5,148		5,166		4		2		—		6		4,965		4,971
Total	$	41	$	—	$	74	$	115	$	288,282	$	288,397	$	246	$	2	$	—	$	248	$	294,041	$	294,289

The above table of past due loans includes the recorded investment in ~~non-accrual~~non-accrual loans of ~~$74 in the 90 days or greater category and $904~~$865 in the loans not past due category.

The following table presents the aging of the recorded investment in pastpast due loans as of June 30, 2017 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	$	—	$	—	$	35	$	35	$	46,402	$	46,437
Commercial real estate:
Construction		—		—		—		—		5,596		5,596
Other		—		—		130		130		158,037		158,167
1-4 Family residential:
Owner occupied		13		—		74		87		41,605		41,692
Non-owner occupied		—		—		—		—		14,416		14,416
Construction		—		—		—		—		1,996		1,996
Consumer		22		—		—		22		5,122		5,144
Total	$	35	$	—	$	239	$	274	$	273,174	$	273,448

The above table of past due loans includes the recorded ~~investment~~investment in non-accrual loans of ~~$239~~$239 in the 90 days or greater category and ~~$948~~$948 in the loans not past due category.

Troubled Debt Restructurings:

As of ~~September 30,~~December 31, 2017, the recorded investment of loans classified as troubled debt restructurings was ~~$1,732~~$1,582 with ~~$30~~$30 of specific reserves allocated to these loans. As of ~~September 30,~~December 31, 2017, the Corporation had committed to lend an additional ~~$57~~$192 to customers with outstanding loans that were classified as troubled debt restructurings. As of June 30, 2017, the recorded investment of loans classified as troubled debt restructurings was ~~$1,740~~$1,740 with ~~$33~~$33 of specific reserves allocated to these loans. As of June 30, 2017, the Corporation had committed to lend an additional ~~$175~~$175 to customers with outstanding loans that were 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~~three~~ and six months ended ~~September 30,~~December 31, 2017 and 2016, there were no loan modifications completed that were classified as troubled debt restructurings. There were no charge offs from troubled debt restructurings that were completed during the three and six month periods ended ~~September 30,~~December 31, 2017 and 2016.

~~There w~~The~~ere~~ re were no loans classified as troubled debt restructurings for which there was a payment default within 12 months following the modification during the three and six month periods ended ~~September 30,~~December 31, 2017 and 2016. 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~~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~~$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~~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 September 30, 2017										As of December 31, 2017
			Special						Not				Special						Not
	Pass		Mention		Substandard		Doubtful		Rated		Pass		Mention		Substandard		Doubtful		Rated
Commercial	$	50,091	$	808	$	303	$	—	$	386	$	48,091	$	883	$	339	$	—	$	362
Commercial real estate:
Construction		6,221		1,186		4		—		41		5,941		—		2		—		—
Other		154,075		7,072		1,915		566		738		156,415		10,365		1,772		537		978
1-4 Family residential real estate:
Owner occupied		2,420		—		25		15		40,522		2,661		58		14		13		42,743
Non-owner occupied		12,958		206		440		324		184		14,669		203		433		315		590
Construction		1,154		—		—		—		1,577		765		—		—		—		1,169
Consumer		131		—		—		—		5,035		119		—		—		—		4,852
Total	$	227,050	$	9,272	$	2,687	$	905	$	48,483	$	228,661	$	11,509	$	2,560	$	865	$	50,694

As of June 30, 2017

Special

Not

Pass

Mention

Substandard

Doubtful

Rated

Commercial

44,435

907

642

—

453

Commercial real estate:

Construction

4,514

1,035

—

Other

150,460

5,110

1,566

470

561

1-4 Family residential real estate:

Owner occupied

2,668

—

38,983

Non-owner occupied

13,633

210

261

187

125

Construction

1,223

—

773

Consumer

145

—

4,999

Total

217,078

7,262

2,480

691

45,937

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~~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~~ 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~~recurring basis include the following:

Securities available-for-sale: ~~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 unobservable inputs (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~~measure fair value:

			Fair Value Measurements at September 30, 2017 Using								Fair Value Measurements at December 31, 2017 Using
	Balance at September 30, 2017		Level 1		Level 2		Level 3		Balance at December 31, 2017		Level 1		Level 2		Level 3
Assets:
Assets:
Obligations of U.S. government-sponsored entities and agencies	$	12,519	$	—	$	12,519	$	—	$	13,636	$	—	$	13,636	$	—
Obligations of states and political subdivisions		56,886		—		56,886		—		57,181		—		57,181		—
Mortgage-backed securities – residential		59,344		—		59,344		—		57,518		—		57,518		—
Mortgage-backed securities – commercial		1,448		—		1,448		—		1,436		—		1,436		—
Collateralized mortgage obligations - residential		5,638		—		5,638		—		5,346		—		5,346		—
Pooled trust preferred security		547		—		547		—
Pooled trust preferred security										621		—		621		—

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

			Fair Value Measurements at June 30, 2017 Using								Fair Value Measurements at June 30, 2017 Using
	Balance at June 30, 2017		Level 1		Level 2		Level 3		Balance at June 30, 2017		Level 1		Level 2		Level 3
Assets:
Assets:
Obligations of U.S. government-sponsored entities and agencies	$	12,587	$	—	$	12,587	$	—	$	12,587	$	—	$	12,587	$	—
Obligations of states and political subdivisions		57,460		—		57,460		—		57,460		—		57,460		—
Mortgage-backed securities - residential		63,838		—		63,838		—		63,838		—		63,838		—
Mortgage-backed securities - commercial		1,458		—		1,458		—		1,458		—		1,458		—
Collateralized mortgage obligations - residential		6,211		—		6,211		—		6,211		—		6,211		—
Pooled trust preferred security		532		—		532		—		532		—		532		—

There were no transfers between Level 1 and Level 2 during the three or six month periods ended ~~September 30,~~December 31, 2017 or 2016.

Certain financial assets and financial liabilities are measured at fair value on a ~~non-recurring~~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 or are charged down to their fair value. 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.

Other Real Estate Owned: Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. Real estate owned properties are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

There were no f~~inancial~~ financial assets measured at fair value on a non-recurring basis at ~~September 30,~~December 31, 2017. Financial assets measured at fair value on a non-recurring basis at June 30, 2017 are summarized below:

			Fair Value Measurements at June 30, 2017 Using
	Balance at June 30, 2017		Level 1		Level 2		Level 3
Impaired loans:
Commercial Real Estate - Other	$	130	$	—	$	—	$	130
Other Real Estate Owned:
1-4 Family residential real estate		71		—		—		71

There were no impaired loans measured at fair value on a non-recurring basis at ~~September 30,~~December 31, 2017 and there was no impact to the provision for loan losses for the three months ended December 31, 2017. The resulting impact to the provision for loan losses was a decrease of ~~$17~~$17 being recorded for the ~~three~~six months ended ~~September 30,~~December 31, 2017. Impaired loans, measured for impairment using the fair value of the collateral, had a recorded investment of ~~$130,~~$130, with no valuation allowance at June 30, 2017. The resulting impact to the provision for loan losses was ~~an increase~~a decrease of ~~$41~~$87 and $47 being recorded for the three and six months ended ~~September 30, 2016.~~December 31, 2016, respectively.

Other real estate owned, which is measured at the lower of carrying or fair value less costs to sell, had a net carrying amount of ~~$71,~~$71, which was made up of the outstanding balance of ~~$103,~~$103, net of a valuation allowance of ~~$32~~$32 at June 30, 2017. There were no other real estate owned being carried at fair value as of ~~September 30,~~December 31, 2017.

The following ~~table~~stables present quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at June 30, 2017:

June 30, 2017

Fair

Value

Valuation

Technique

Unobservable

Inputs

Range

Weighted

Average

Impaired loans:

Commercial Real Estate – Other

130

Bid Indications

N/A

0.0

Other Real Estate Owned:

1-4 Family residential real estate

Bid Indications

N/A

0.0

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

The following table shows the estimated fair ~~value~~svalues of financial instruments that are reported at amortized cost in the ~~Corporation’s~~Corporation’s consolidated balance sheets, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

	September 30, 2017				June 30, 2017				December 31, 2017				June 30, 2017
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial Assets:
Financial Assets:
Level 1 inputs:
Cash and cash equivalents	$	14,179	$	14,179	$	9,912	$	9,912	$	9,141	$	9,141	$	9,912	$	9,912
Level 2 inputs:
Certificates of deposits in other financial institutions		3,921		3,924		3,921		3,927		3,921		3,924		3,921		3,927
Loans held for sale		2,061		2,102		1,252		1,286		814		833		1,252		1,286
Accrued interest receivable		1,442		1,442		1,212		1,212		1,310		1,310		1,212		1,212
Level 3 inputs:
Securities held-to-maturity		4,164		4,258		4,259		4,329		4,061		4,083		4,259		4,329
Loans, net		284,524		284,618		269,781		266,041		290,369		284,618		269,781		266,041
Financial Liabilities:
Level 2 inputs:
Demand and savings deposits		317,211		317,211		307,960		307,960		316,218		316,218		307,960		307,960
Time deposits		66,629		66,620		66,511		66,535		66,771		66,676		66,511		66,535
Short-term borrowings		27,905		27,905		23,986		23,986		22,507		22,507		23,986		23,986
Federal Home Loan Bank advances		12,304		12,038		12,320		12,054		17,188		16,796		12,320		12,054
Accrued interest payable		50		50		40		40		74		74		40		40

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

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

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

A~~ccrued~~Accrued interest receivable and payable, demand and savings deposits and short-term ~~borrowings~~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.

~~CONSUMERS BANCORP, INC.~~

~~Notes to the Consolidated Financial Statements~~

~~(Unaudited) (continued)~~

~~(Dollars in thousands, except per share amounts)~~

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.

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

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

Time deposits: Fair value of fixed-maturity certificates of deposit was estimated using the rates offered at ~~September 30,~~December 31, 2017 and June 30, 2017, for deposits of similar remaining maturities, resulting in a Level 2 classification. 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.

Federal Home Loan Bank advances: Fair value of Federal Home Loan Bank advances was estimated using current rates at ~~September 30,~~December 31, 2017 and June 30, 2017 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.

Off-balance sheet ~~commitment~~s: 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.

Basic earnings per share is the amount of earnings available to each share of common stock outstanding during the reporting period and is equal to net income divided by the weighted average number of shares outstanding during the period. Diluted earnings per share is the amount of earnings available to each share of common stock outstanding during the reporting period adjusted to include the effect of potentially dilutive common shares that may be issued upon the vesting of restricted stock awards. There were 2,062 shares of restricted stock that were anti-dilutive for the three and six months ended ~~September 30,~~December 31, 2017. There were no equity instruments that were anti-dilutive for the three and six months ended ~~September 30,~~December 31, 2016. The following table details the calculation of basic and diluted earnings per share:

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

The following is management’s analysis of the Corporation’s results of operations for the three and six months ended ~~September 30,~~December 31, 2017, compared to the same period in 2016, and the consolidated balance sheet at ~~September 30,~~December 31, 2017, compared to June 30, 2017. 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.

Consumers Bancorp, Inc., a bank holding company incorporated under the laws of the State of Ohio (the Corporation), owns all of ~~the~~the issued and outstanding common shares of Consumers National Bank, a bank chartered under the laws of the United States of America (the Bank). The Corporation’s activities have been limited primarily to holding the common shares of the Bank. The Bank’s business involves attracting deposits from businesses and individual customers and using such deposits to originate commercial, mortgage and consumer loans in its market area, consisting primarily of Carroll, Columbiana, Jefferson, Stark, Summit, Wayne and contiguous counties in Ohio. The Bank also invests in securities consisting primarily of U.S. government sponsored entities, municipal obligations, mortgage-backed and collateralized mortgage obligations issued by Fannie Mae, Freddie Mac and Ginnie Mae.

Threeand Six Months Ended ~~September 30~~December 31, 2017and ~~September~~ 30December 31, 2016

In the ~~first~~second quarter of fiscal year 2018, ~~net~~pre-tax income increased by $279, or 32.2% from the same period last year. Net income for the second quarter of fiscal year 2018 was ~~$929,~~$657, or ~~$0.34~~$0.24 per common share, compared to ~~$901,~~$722, or ~~$0.33~~$0.27 per common share for the three months ended ~~September 30,~~December 31, 2016. The following are key highlights of our results of operations for the three months ended ~~September 30,~~December 31, 2017:

In the first six months of fiscal year 2018, pre-tax income increased by $301, or 14.9% from the same period last year. Net income for the six months ended December 31, 2017 was $1,586, or $0.58 per common share, compared to $1,623, or $0.60 per common share for the six months ended December 31, 2016. The following are key highlights of our results of operations for the six months ended December 31, 2017:

Return on average equity and return on average assets were 7.09% and 0.67%, respectively, for the first six months of fiscal year 2018 compared to 7.34% and 0.74%, respectively, for the same prior year period.

~~Return on average equity and return on average assets were 8.35% and 0.79%, respectively, for the first three months of fiscal year 2018 compared to 8.12% and 0.83%, respectively, for the same prior year period.~~

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. The federal income tax rate in effect for the 2018 fiscal year was 27.55% and for the 2017 fiscal year was 34.0%. With the enactment of the Tax Act, the statutory tax rate was changed in the second quarter of fiscal year 2018 to 27.55% by using a blended rate of the new 21.0% federal rate that went into effect on January 1, 2018 and the previous federal rate of 34.0%. All average balances are daily average balances. Non-accruing loans are included in average loan balances.

The Corporation’s net interest margin was ~~3.63%~~3.61% for the three months ended ~~September 30,~~December 31, 2017, compared with ~~3.87%~~3.62% for the same period in 2016. FTE net interest income for the three months ended ~~September 30,~~December 31, 2017 increased by ~~$66,~~$290, or ~~1.7%~~7.8%, to ~~$3,974~~$4,011 from ~~$3,908~~$3,721 for the same year ago period. The net interest margin for the three months ended September 30, 2016 was positively impacted by $191 recognized in interest income as a result of the full payoff of two loan relationships that were on non-accrual. Excluding the interest income recognized on the non-accrual loans, the net interest margin would have been 3.68% for the quarter ended September 30, 2016.

~~FTE i~~Tax-equivalent~~nterest~~ interest income for the three months ended ~~September 30,~~December 31, 2017 increased by ~~$183,~~$404, or ~~4.4%~~10.2%, from the same year ago period. ~~The increase in FTE interest~~Interest income was ~~primarily the result of an~~positively impacted by a $31,513, or 7.7%, increase ~~of $30,491, or 7.5%,~~ in average interest-earning assets from the same prior year period. The Corporation’s yield on average interest-earning assets ~~was 3.96%~~increased to 3.94% for the three months ended ~~September 30,~~December 31, 2017 ~~a decrease~~ from ~~4.10%~~3.86% for the same period last year. ~~For~~The yield on average interest-earning assets increased despite a decline in the ~~quarter ended September 30, 2016,~~tax-equivalent yield on nontaxable securities which occurred as a result of the decline in the statutory federal tax rate. The increase in the yield on average interest-earning assets ~~would have been 3.92% excluding~~was primarily a result of a positive change in the earning asset mix with higher yielding loans increasing faster than lower yielding securities as well as an increase in interest ~~income of $191 recognized on the non-accrual loans.~~ rates.

Interest expense for the three months ended ~~September 30,~~December 31, 2017 increased by ~~$117~~$114 from the same year ago period. The Corporation’s cost of funds was 0.46% for the three months ended ~~September 30,~~December 31, 2017 compared with 0.34% for the same year ago period. The increase in short term market interest rates has impacted the rates paid on money market accounts, short-term borrowings and time deposits.

The Corporation’s net interest margin was 3.62% for the six months ended December 31, 2017 compared with 3.74% for the same period in 2016. FTE net interest income for the six months ended December 31, 2017 increased by $356, or 4.7%, to $7,985 from $7,629 for the same year ago period.

Tax-equivalent interest income for the six months ended December 31, 2017 increased by $587, or 7.2%, from the same year ago period. The Corporation’s yield on average interest-earning assets declined to 3.95% for the six months ended December 31, 2017 from 3.98% for the same period last year. For the six months ended December 31, 2017, the tax-equivalent yield on nontaxable securities was negatively impacted by 0.36% due to the enactment of the Tax Act and the resulting decline in the statutory federal tax rate. Interest expense for the six months ended December 31, 2017 increased by $231 from the same year ago period. The Corporation’s cost of funds was 0.46% for the six months ended December 31, 2017 compared with 0.34% for the same year ago period.

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)

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☐ (Do not check if smaller reporting company)	Smaller reporting company ☒
Emerging growth company☐

Part I – Financial Information

Item 1 – Financial Statements (Unaudited)
~~Consolidate~~dConsolidated Balance Sheets at ~~September 30,~~December 31, 2017 and June 30, 2017	1

Consolidated Statements of Income for the three and six months ended ~~September 30,~~December 31, 2017 and 2016	2

Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended ~~September 30,~~December 31, 2017 and 2016	3

Condensed Consolidated Statements of Changes in ~~Shareholders’~~Shareholders’ Equity for the three and six months ended ~~September 30,~~December 31, 2017 and 2016	4

Condensed Consolidated ~~Statements~~Statements of Cash Flows for the ~~three~~six months ended ~~September 30,~~December 31, 2017 and 2016	5

Notes to the Consolidated Financial Statements	6-6-2266

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations	27-35

Item 3 – Not Applicable for Smaller Reporting Companies

Item 4 – Controls and Procedures	36
Part II – Other Information
Item 1 – Legal Proceedings	37

Item 1A – Not Applicable for Smaller Reporting Companies	37

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds	37

Item 3 – Defaults Upon Senior Securities	37

Item 4 – Mine Safety Disclosure	37

Item 5 – Other Information	37

Item 6 – Exhibits	37

Signatures	38

(Dollars in thousands, except per share data)	September 30, 2017			June 30, 2017
ASSETS
Cash on hand and noninterest-bearing deposits in financial institutions	$	9,896		$	9,439
Federal funds sold and interest-bearing deposits in financial institutions		4,283			473
Total cash and cash equivalents		14,179			9,912
Certificates of deposit in other financial institutions		3,921			3,921
Securities, available-for-sale		136,382			142,086
Securities, held-to-maturity (fair value of $4,258 at September 30, 2017 and $4,329 at June 30, 2017)		4,164			4,259
Federal bank and other restricted stocks, at cost		1,425			1,425
Loans held for sale		2,061			1,252
Total loans		287,718			272,867
Less allowance for loan losses		(3,194	)		(3,086	)
Net loans		284,524			269,781
Cash surrender value of life insurance		9,133			9,065
Premises and equipment, net		13,287			13,398
Other real estate owned		—			71
Accrued interest receivable and other assets		2,571			2,713
Total assets	$	471,647		$	457,883

LIABILITIES
Deposits
Non-interest bearing demand	$	110,407		$	102,683
Interest bearing demand		54,289			54,123
Savings		152,515			151,154
Time		66,629			66,511
Total deposits		383,840			374,471

Short-term borrowings		27,905			23,986
Federal Home Loan Bank advances		12,304			12,320
Accrued interest and other liabilities		3,327			3,571
Total liabilities		427,376			414,348
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 September 30, 2017 and June 30, 2017)		14,630			14,630
Retained earnings		30,728			30,122
Treasury stock, at cost (124,489 and 130,606 common shares as of September 30, 2017 and June 30, 2017, respectively)		(1,576	)		(1,662	)
Accumulated other comprehensive income		489			445
Total shareholders’ equity		44,271			43,535
Total liabilities and shareholders’ equity	$	471,647		$	457,883

(Dollars in thousands, except per share data)
	Three Months ended December 31,						Six Months ended December 31,
	2017			2016			2017			2016

Balance at beginning of period	$	44,271		$	44,020		$	43,535		$	43,793

Net income		657			722			1,586			1,623
Other comprehensive loss		(416	)		(2,205	)		(372	)		(2,552	)
6,321 shares issued associated with stock awards during the six months ended December 31, 2017		—			—			90			—
204 and 231 Dividend reinvestment plan shares associated with forfeited and expired restricted stock awards retired to treasury stock during the six months ended December 31, 2017 and 2016, respectively		—			—			—			—
Common cash dividends		(341	)		(327	)		(668	)		(654	)

Balance at the end of the period	$	44,171		$	42,210		$	44,171		$	42,210

Common cash dividends per share	$	0.125		$	0.12		$	0.245		$	0.24

	As of September 30, 2017						Three Months ended September 30, 2017
	Unpaid				Allowance for		Average		Interest		Cash Basis
	Principal		Recorded		Loan Losses		Recorded		Income		Interest
	Balance		Investment		Allocated		Investment		Recognized		Recognized
With no related allowance recorded:
Commercial	$	124	$	125	$	—	$	114	$	2	$	2
Commercial real estate:
Other		1,121		1,123		—		1,053		10		10
1-4 Family residential real estate:
Owner occupied		102		101		—		102		—		—
Non-owner occupied		324		324		—		327		—		—
With an allowance recorded:
Commercial real estate:
Other		338		339		33		343		—		—
Total	$	2,009	$	2,012	$	33	$	1,939	$	12	$	12

	For the Three Months Ended September 30,				For the Three Months Ended December 31,				For the Six Months Ended December 31,
	2017		2016		2017		2016		2017		2016
Basic:
Net income available to common shareholders	$	929	$	901	$	657	$	722	$	1,586	$	1,623
Weighted average common shares outstanding		2,724,997		2,723,915		2,727,666		2,724,061		2,725,859		2,723,988
Basic income per share	$	0.34	$	0.33	$	0.24	$	0.27	$	0.58	$	0.60

Diluted:
Net income available to common shareholders	$	929	$	901	$	657	$	722	$	1,586	$	1,623
Weighted average common shares outstanding		2,724,997		2,723,915		2,727,666		2,724,061		2,725,859		2,723,988
Dilutive effect of restricted stock		—		4		—		19		—		13
Total common shares and dilutive potential common shares		2,724,997		2,723,919		2,727,666		2,724,080		2,725,859		2,724,001
Dilutive income per share	$	0.34	$	0.33	$	0.24	$	0.27	$	0.58	$	0.60

	Pretax			Tax Effect			After-tax			Affected Line Item in Consolidated Statements of Income
Balance as of June 30, 2017	$	675		$	(230	)	$	445
Unrealized holding gain on available-for-sale securities arising during the period		104			(35	)		69
Amounts reclassified from accumulated other comprehensive income		(38	)		13			(25	)	(a)(b)
Net current period other comprehensive income		66			(22	)		44
Balance as of September 30, 2017	$	741		$	(252	)	$	489

Balance as of June 30, 2016	$	3,621		$	(1,232	)	$	2,389
Unrealized holding gain on available-for-sale securities arising during the period		(423	)		144			(279	)
Amounts reclassified from accumulated other comprehensive income		(103	)		35			(68	)	(a)(b)
Net current period other comprehensive income		(526	)		179			(347	)
Balance as of September 30, 2016	$	3,095		$	(1,053	)	$	2,042

	●	the estimated impact of the enactment of the Tax Act resulted in a net increase of $253 in income tax expense;
	●	net interest income increased by ~~$59~~$391 to ~~$3,786,~~$3,927, or by ~~1.6%~~11.1%, in the ~~first~~second quarter of fiscal year 2018 from the same prior year period;

	●	net interest income increased by $450, or 6.2%, in fiscal year 2018 from the same prior year period;
	●	the provision for loan losses totaled $150 in fiscal year 2018 compared to $276 in the same prior year period;
	●	non-interest income increased by $66, or 4.0% in fiscal year 2018 from the same prior year period;
	●	non-interest expenses increased by $341, or 5.2% in fiscal year 2018 from the same prior year period; and
	●	the estimated impact of the enactment of the Tax Act resulted in a net increase of $253 in income tax expense in fiscal year 2018.

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

	2017								2016
	Average Balance			Interest		Yield/ Rate			Average Balance			Interest		Yield/ Rate
Interest-earning assets:
Taxable securities	$	81,941		$	459		2.22	%	$	75,524		$	377		2.01	%
Nontaxable securities (1)		60,556			448		2.97			60,326			535		3.58
Loans receivable (1)		292,149			3,440		4.67			263,909			3,029		4.55
Interest bearing deposits and federal funds sold		6,533			28		1.70			9,907			30		1.20
Total interest-earning assets		441,179			4,375		3.94	%		409,666			3,971		3.86	%

Noninterest-earning assets		31,646								29,148

Total Assets	$	472,825							$	438,814

Interest-bearing liabilities:
NOW	$	53,913		$	20		0.15	%	$	48,960		$	19		0.15	%
Savings		152,502			78		0.20			138,402			36		0.10
Time deposits		66,770			155		0.92			66,425			128		0.76
Short-term borrowings		26,249			57		0.86			20,481			11		0.21
FHLB advances		12,829			54		1.67			14,042			56		1.58
Total interest-bearing liabilities		312,263			364		0.46	%		288,310			250		0.34	%

Noninterest-bearing liabilities:
Noninterest-bearing checking accounts		112,039								103,143
Other liabilities		3,956								3,695
Total liabilities		428,258								395,148
Shareholders’ equity		44,567								43,666

Total liabilities and shareholders’ equity	$	472,825							$	438,814

Net interest income, interest rate spread (1)				$	4,011		3.48	%				$	3,721		3.52	%

Net interest margin (net interest as a percent of average interest-earning assets) (1)							3.61	%							3.62	%

Federal tax exemption on non-taxable securities and loans included in interest income				$	84							$	185

Average interest-earning assets to interest-bearing liabilities		141.28	%							142.09	%

	September 30, 2017			June 30, 2017			September 30, 2016			December 31, 2017			June 30, 2017			December 31, 2016
Non-accrual loans	$	978		$	1,187		$	2,354
Non-accrual loans										$	865		$	1,187		$	1,589
Loans past due over 90 days and still accruing		—			—			—			—			—			—
Total non-performing loans		978			1,187			2,354
Total non-performing loans											865			1,187			1,589
Other real estate owned		—			71			10			57			71			—
Total non-performing assets	$	978		$	1,258		$	2,364
Total non-performing assets										$	922		$	1,258		$	1,589

Non-performing loans to total loans		0.34	%		0.44	%		0.90	%		0.29	%		0.44	%		0.60	%
Allowance for loan losses to total non-performing loans		326.58	%		259.98	%		156.50	%		372.83	%		259.98	%		196.54	%

	●	rapid fluctuations in market interest rates could result in changes in fair market valuations and net interest income;
	●	pricing and liquidity pressures that may result in a rising market rate environment;


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.

	CONSUMERS BANCORP, INC. (Registrant)

Date: ~~November~~7February 14, 20178	/s/ Ralph J. Lober Ralph J. Lober,, II President & Chief Executive Officer (principal executive officer)

Date: ~~November~~7February 14, 20178	/s/ Renee K. Wood Renee K. Wood Chief Financial Officer & Treasurer (principal financial officer)