UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

~~[X]~~☒

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

For the quarterly period ended ~~December 31, 2017~~September 30, 2022

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

Commission File No. 033-79130

CONSUMERS BANCORP, INC.

(Exact name of registrant as specified in its charter)

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

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

(330) 868-7701

(~~Registrant~~’sRegistrant’s telephone number)

Not applicable

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

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

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

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

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the ~~Securities~~Exchange Act. ☐

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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
None

There were ~~2,729,644~~3,059,739 shares of ~~Registrant~~’sRegistrant’s common stock, no par value, outstanding as of ~~February~~November 9, ~~2018.~~2022.

CONSUMERS BANCORP, INC.

FORM 10-Q

QUARTER ENDED ~~December 31~~~~, 2017~~September 30, 2022

Table of Contents

Page

Number (s)

Part I – Financial Information

Item 1 – Financial Statements ~~(Unaudited)~~
Consolidated Balance Sheets at ~~December 31, 2017~~September 30, 2022 and June 30, ~~2017~~2022	1

Consolidated Statements of Income for the three ~~and six~~ months ended ~~December 31, 2017~~September 30, 2022 and ~~2016~~2021 (unaudited)	2

Consolidated Statements of Comprehensive Income ~~(Loss)~~ for the three ~~and six~~ months ended ~~December 31, 2017~~September 30, 2022 and ~~2016~~2021 (unaudited)	3

Condensed Consolidated Statements of Changes in ~~Shareholders~~’Shareholders’ Equity for the three ~~and six~~ months ended ~~December 31, 2017~~September 30, 2022 and ~~2016~~2021 (unaudited)	4

Condensed Consolidated Statements of Cash Flows for the ~~six~~three months ended ~~December 31, 2017~~September 30, 2022 and ~~2016~~2021 (unaudited)	5

Notes to the Consolidated Financial Statements (unaudited)	~~6-2~~66-21

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations	2~~7-35~~22-29

Item 3 – Not Applicable for Smaller Reporting Companies

Item 4 – Controls and Procedures	3630
Part II – Other Information
Item 1 – Legal Proceedings	3731

Item 1A – Not Applicable for Smaller Reporting Companies	3731

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds	3731

Item 3 – Defaults Upon Senior Securities	3731

Item 4 – Mine Safety Disclosure	3731

Item 5 – Other Information	3731

Item 6 – Exhibits	3731

Signatures	3832

PART I – FINANCIAL INFORMATION

Item 1 – Financial Statements

CONSUMERS BANCORP, INC.

CONSOLIDATED BALANCE SHEETS ~~(Unaudited)~~

(Dollars in thousands, except per share data)

December 31,
2017

June 30,
2017

ASSETS

Cash on hand and noninterest-bearing deposits in financial institutions
$ 8,910 $ 9,439
Federal funds sold and interest-bearing deposits in financial institutions
231 473
Total cash and cash equivalents
9,141 9,912
Certificates of deposit in other financial institutions
3,921 3,921
Securities, available-for-sale
135,738 142,086
Securities, held-to-maturity (fair value of $4,083 at December 31, 2017 and $4,329 at June 30, 2017)
4,061 4,259
Federal bank and other restricted stocks, at cost
1,425 1,425
Loans held for sale
814 1,252
Total loans
293,594 272,867
Less allowance for loan losses
(3,225
)
(3,086
)
Net loans
290,369 269,781
Cash surrender value of life insurance
9,201 9,065
Premises and equipment, net
13,137 13,398
Other real estate owned
57 71
Accrued interest receivable and other assets
2,418 2,713
Total assets
$ 470,282 $ 457,883

LIABILITIES

Deposits

Non-interest bearing demand
$ 108,503 $ 102,683
Interest bearing demand
55,056 54,123
Savings
152,659 151,154
Time
66,771 66,511
Total deposits
382,989 374,471

Short-term borrowings
22,507 23,986
Federal Home Loan Bank advances
17,188 12,320
Accrued interest and other liabilities
3,427 3,571
Total liabilities
426,111 414,348
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 December 31, 2017 and June 30, 2017)
14,630 14,630
Retained earnings
31,044 30,122
Treasury stock, at cost (124,489 and 130,606 common shares as of December 31, 2017 and June 30, 2017, respectively)
(1,576
)
(1,662
)
Accumulated other comprehensive income
73 445
Total shareholders’ equity
44,171 43,535
Total liabilities and shareholders’ equity
$ 470,282 $ 457,883

~~See accompanying notes to consolidated financial statements~~

~~CONSUMERS BANCORP, INC.~~

~~CONSOLIDATED STATEMENTS OF INCOME (Unaudited)~~

Three Months ended
December 31,

Six Months ended
December 31,

(Dollars in thousands, except per share amounts)

2017

2016

2017

2016

Interest income

Loans, including fees
$ 3,437 $ 3,022 $ 6,665 $ 6,206
Securities, taxable
459 377 970 779
Securities, tax-exempt
367 357 734 708
Federal funds sold and other interest bearing deposits
28 30 65 60
Total interest income
4,291 3,786 8,434 7,753
Interest expense

Deposits
253 183 501 353
Short-term borrowings
57 11 112 23
Federal Home Loan Bank advances
54 56 108 114
Total interest expense
364 250 721 490
Net interest income
3,927 3,536 7,713 7,263
Provision for loan losses
60 140 150 276
Net interest income after provision for loan losses
3,867 3,396 7,563 6,987

Non-interest income

Service charges on deposit accounts
301 314 609 644
Debit card interchange income
325 285 648 536
Bank owned life insurance income
68 63 136 112
Securities gains, net
— 22 38 125
Loss on disposition of other real estate owned
— (3
)
- (3
)
Other
145 116 280 231
Total non-interest income
839 797 1,711 1,645

Non-interest expenses

Salaries and employee benefits
1,966 1,790 3,776 3,528
Occupancy and equipment
465 478 920 930
Data processing expenses
147 145 295 290
Debit card processing expenses
188 149 368 282
Professional and director fees
122 146 239 278
FDIC assessments
46 46 92 101
Franchise taxes
84 84 168 168
Marketing and advertising
61 65 139 144
Telephone and network communications
75 76 157 157
Other
406 347 799 734
Total non-interest expenses
3,560 3,326 6,953 6,612
Income before income taxes
1,146 867 2,321 2,020
Income tax expense
489 145 735 397
Net income
$ 657 $ 722 $ 1,586 $ 1,623

Basic and diluted earnings per share
$ 0.24 $ 0.27 $ 0.58 $ 0.60

~~See accompanying notes to consolidated financial statements~~

~~CONSUMERS BANCORP, INC.~~

~~Consolidated statements of comprehensive income~~ ~~(Loss)~~

~~(Unaudited)~~

~~(Dollars in thousands)~~

Three Months ended
December 31

Six Months ended
December 31,

2017

2016

2017

2016

Net income
$ 657 $ 722 $ 1,586 $ 1,623

Other comprehensive income (loss), net of tax:

Net change in unrealized gains (losses) on securities available-for-sale:

Unrealized losses arising during the period
(631
)
(3,319
)
(527
)
(3,742
)
Reclassification adjustment for gains included in income
— (22
)
(38
)
(125
)
Net unrealized losses
(631
)
(3,341
)
(565
)
(3,867
)
Income tax effect
215 1,136 193 1,315
Other comprehensive loss
(416
)
(2,205
)
(372
)
(2,552
)

Total comprehensive income (loss)
$ 241 $ (1,483
)
$ 1,214 $ (929
)

(Dollars in thousands, except per share data)	September 30, 2022 (unaudited)			June 30, 2022
ASSETS
Cash on hand and noninterest-bearing deposits in financial institutions	$	12,507		$	11,254
Federal funds sold and interest-bearing deposits in financial institutions		13,008			9,698
Total cash and cash equivalents		25,515			20,952
Certificates of deposit in other financial institutions		3,769			3,781
Securities, available-for-sale		278,418			296,347
Securities, held-to-maturity (fair value of $7,122 at September 30, 2022 and $7,831 at June 30, 2022)		7,769			7,874
Equity securities, at fair value		376			400
Federal bank and other restricted stocks, at cost		2,267			2,525
Loans held for sale		433			1,165
Total loans		637,601			611,843
Less allowance for loan losses		(7,546	)		(7,160	)
Net loans		630,055			604,683
Cash surrender value of life insurance		10,024			9,959
Premises and equipment, net		16,413			16,521
Goodwill		2,452			2,452
Core deposit intangible, net		456			470
Accrued interest receivable and other assets		13,476			10,184
Total assets	$	991,423		$	977,313

LIABILITIES
Deposits
Noninterest-bearing demand	$	261,296		$	257,665
Interest bearing demand		165,338			157,462
Savings		365,906			369,054
Time		119,543			102,381
Total deposits		912,083			886,562

Short-term borrowings		20,946			21,295
Federal Home Loan Bank advances		8,217			8,256
Accrued interest and other liabilities		6,719			7,230
Total liabilities		947,965			923,343
Commitments and contingent liabilities

SHAREHOLDERS’ EQUITY
Preferred stock (no par value, 350,000 shares authorized, none outstanding)		—			—
Common stock (no par value, 8,500,000 shares authorized; 3,135,121 and 3,132,056 shares issued as of September 30, 2022 and June 30, 2022, respectively)		20,385			20,287
Retained earnings		58,922			56,906
Treasury stock, at cost (75,382 common shares as of September 30, 2022 and June 30, 2022)		(1,001	)		(1,117	)
Accumulated other comprehensive loss		(34,848	)		(22,106	)
Total shareholders’ equity		43,458			53,970
Total liabilities and shareholders’ equity	$	991,423		$	977,313

See accompanying notes to consolidated financial statements.

CONSUMERS BANCORP, INC.

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

INCOME (Unaudited)

(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

	Three Months ended September 30,
(Dollars in thousands, except per share amounts)	2022			2021

Interest and dividend income
Loans, including fees	$	7,130		$	7,068
Securities, taxable		1,248			711
Securities, tax-exempt		585			478
Equity securities		8			8
Federal bank and other restricted stocks		23			20
Federal funds sold and other interest-bearing deposits		80			50
Total interest and dividend income		9,074			8,335
Interest expense
Deposits		597			296
Short-term borrowings		59			2
Federal Home Loan Bank advances		22			64
Total interest expense		678			362
Net interest income		8,396			7,973
Provision for loan losses		410			190
Net interest income after provision for loan losses		7,986			7,783

Noninterest income
Service charges on deposit accounts		397			358
Debit card interchange income		541			509
Mortgage banking activity		82			258
Bank owned life insurance income		65			65
Securities losses, net		(11	)		—
Net change in market value of equity securities		(24	)		—
Other		81			83
Total noninterest income		1,131			1,273

Noninterest expenses
Salaries and employee benefits		3,439			3,247
Occupancy and equipment		788			708
Data processing expenses		192			214
Debit card processing expenses		274			268
Professional and director fees		235			344
FDIC assessments		152			84
Franchise taxes		141			133
Marketing and advertising		204			214
Telephone and network communications		87			114
Amortization of intangible		14			11
Other		552			495
Total noninterest expenses		6,078			5,832
Income before income taxes		3,039			3,224
Income tax expense		504			559
Net income	$	2,535		$	2,665

Basic and diluted earnings per share	$	0.83		$	0.88

See accompanying notes to consolidated financial statements.

CONSUMERS BANCORP, INC.

~~CONDENSED~~ CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~COMPREHENSIVE INCOME (LOSS)

(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

(Dollars in thousands)	Three Months ended September 30,
	2022			2021

Net income	$	2,535		$	2,665

Other comprehensive income (loss), net of tax:
Net change in unrealized losses on securities available-for-sale:
Unrealized losses arising during the period		(16,140	)		(1,566	)
Reclassification adjustment for losses included in income		11			—
Net unrealized losses		(16,129	)		(1,566	)
Income tax effect		3,387			328
Other comprehensive loss		(12,742	)		(1,238	)

Total comprehensive income (loss)	$	(10,207	)	$	1,427

See accompanying notes to consolidated financial statements.

CONSUMERS BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)

(Dollars in thousands, except per share data)	Common Stock		Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Loss			Total Shareholders’ Equity
Balance, June 30, 2022	$	20,287	$	56,906		$	(1,117	)	$	(22,106	)	$	53,970
Net income		—		2,535			—			—			2,535
Other comprehensive loss		—		—			—			(12,742	)		(12,742	)
7,840 shares associated with vested stock awards		35		—			116			—			151
3,065 shares issued associated with dividend reinvestment plan and stock purchase plan		63		—			—			—			63
Cash dividends declared ($0.17 per share)		—		(519	)		—			—			(519	)
Balance, September 30, 2022	$	20,385	$	58,922		$	(1,001	)	$	(34,848	)	$	43,458

(Dollars in thousands, except per share data)	Common Stock		Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Income (Loss)			Total Shareholders’ Equity
Balance, June 30, 2021	$	20,011	$	47,663		$	(1,324	)	$	3,550		$	69,900
Net income		—		2,665			—			—			2,665
Other comprehensive loss		—		—			—			(1,238	)		(1,238	)
14,963 shares associated with vested stock awards		102		—			207			—			309
Cash dividends declared ($0.16 per share)		—		(484	)		—			—			(484	)
Balance, September 30, 2021	$	20,113	$	49,844		$	(1,117	)	$	2,312		$	71,152

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,
	2022			2021
Cash flows from operating activities
Net cash from operating activities	$	3,957		$	2,778
Cash flow from investing activities
Purchases of securities, available-for-sale		(6,509	)		(31,123	)
Maturities, calls and principal pay downs of securities, available-for-sale		5,978			7,159
Sale of securities, available-for-sale		2,069			—
Principal pay downs of securities, held-to-maturity		105			100
Net decrease in certificate of deposit in other financial institutions		12			265
Repayment of Federal Home Loan Bank stock, at cost		258			—
Net decrease (increase) in loans		(25,793	)		9,225
Acquisition, net cash received		—			66,552
Premises and equipment purchases		(191	)		(528	)
Net cash from investing activities		(24,071	)		51,650
Cash flow from financing activities
Net increase in deposit accounts		25,521			17,799
Net change in short-term borrowings		(349	)		(1,430	)
Repayments of Federal Home Loan Bank advances		(39	)		(1,750	)
Proceeds from dividend reinvestment and stock purchase plan		63			—
Dividends paid		(519	)		(484	)
Net cash from financing activities		24,677			14,135
Increase in cash or cash equivalents		4,563			68,563
Cash and cash equivalents, beginning of period		20,952			18,529
Cash and cash equivalents, end of period	$	25,515		$	87,092

Supplemental disclosure of cash flow information:
Cash paid during the period:
Interest	$	652		$	347
Federal income taxes		350			—
Non-cash items:
Transfer from loans to repossessed assets		11			—
Issuance of treasury stock for vested stock awards		151			309
Branch acquisition:
Noncash assets acquired:
Securities, available-for-sale		—			15,602
Loans		—			19,943
Premises and equipment		—			413
Goodwill		—			1,616
Core deposit intangible		—			295
Accrued interest receivable and other assets		—			216
Total noncash assets acquired		—			38,085
Liabilities assumed:
Deposits		—			104,538
Other liabilities		—			99
Total liabilities assumed		—			104,637
Net noncash liabilities assumed		—			(66,552	)

See accompanying notes to consolidated financial statements.

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited)

(Dollars in thousands, except per share ~~amounts)~~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.~~Ohio, Pennsylvania, and West Virginia. The Bank’s business involves attracting deposits from businesses and individual customers and using such deposits to originate commercial, mortgage and consumer loans in its primary market area.

Basis of Presentation: The consolidated financial statements for interim periods are unaudited and reflect all adjustments (consisting of only normal recurring adjustments), which, in the opinion of management, are necessary to present fairly the financial position and results of operations and cash flows for the periods presented. The unaudited financial statements are presented in accordance with the requirements of Form 10-Q and do not include all disclosures normally required by accounting principles generally accepted in the United States of America. The financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Corporation’s Form 10-K for the year ended June 30, ~~2017.~~2022. 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 ~~Ban~~k.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~~the Corporation’s 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,~~ ~~Revenue from Contracts with Customers (Topic~~ ~~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 ~~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~~the Financial Accounting Standards Board (FASB) issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU adds a new Topic 326 to the 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,~~generally accepted accounting principles, 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 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 is effective for “public business entities,” as defined in the guidance, that are SEC filers for fiscal years and for interim periods ~~with~~within 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~~However, during July 2019, FASB unanimously voted for a proposal to delay this ASU to January 2023 for smaller reporting companies. On October 16, 2019, FASB approved a final ASU delaying 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 ~~- Leases (Topic~~ ~~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.~~effective date. The new guidance is effective for annual ~~reporting periods~~ and interim ~~reporting periods within those annual~~ periods beginning after December 15, ~~2018.~~2022 ~~Early adoption~~for certain entities, including smaller reporting companies. The Corporation is ~~permitted. Management~~a smaller reporting company. The Corporation is ~~currently~~ evaluating ~~the~~how adopting this new guidance will impact of the ~~adoption of this guidance on the Corporation’s~~ consolidated financial statements and ~~expects~~the Corporation’s current systems and processes. The Corporation is reviewing potential methodologies for estimating expected credit losses using reasonable and supportable forecast information and has identified certain data and system requirements. Once the new guidance is adopted, we expect our allowance for loan losses to ~~recognize an~~increase through a one-time adjustment to retained earnings; however, until our evaluation is complete, the estimated increase in ~~other assets and other liabilities for~~allowance will be unknown. The Corporation is planning to adopt this new guidance within 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.~~time frame noted above.

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

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

Note 2 – ~~Securities~~ Acquisition

On July 16, 2021, the Corporation completed its acquisition (branch acquisition) of two branches located in Calcutta and Wellsville, Ohio from CFBank, National Association. In connection with the branch acquisition, the Corporation assumed $104,538 in branch deposits for a deposit premium of 1.75%. In addition, the Corporation acquired $15,602 of subordinated debt securities issued by unrelated financial institutions and $19,943 of loans. This transaction qualifies as a business combination.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed by the Corporation at the date of the branch acquisition. The core deposit intangible will be amortized over ten years on a straight-line basis. Goodwill will not be amortized, but instead will be evaluated for impairment.

Assets acquired:
Cash and cash equivalents	$	515
Securities, available-for-sale		15,602
Loans		19,943
Premises and equipment		413
Core deposit intangible		295
Accrued interest receivable		216
Total assets acquired		36,984
Liabilities assumed:
Noninterest-bearing deposits		10,535
Interest-bearing deposits		94,003
Other liabilities		99
Total liabilities assumed		104,637
Fair value of net liabilities assumed		(67,653	)
Cash received		66,037
Goodwill	$	1,616

The acquired assets and liabilities were measured at estimated fair values. Management made certain estimates and exercised judgement in accounting for the branch acquisition. The fair value of loans was estimated using discounted contractual cash flows. The book balance of the loans at the time of the branch acquisition was $20,325. The fair value disclosed above reflects a credit-related adjustment of $(388) and an adjustment for other factors of $6. Loans evidencing credit deterioration since origination, purchased credit impaired loans, included in loans receivable were immaterial. Acquisition costs of $144 pre-tax, or $118 after-tax, were recorded during the first quarter of fiscal year 2022.

Available –for-Sale

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair
Value

December 31, 2017

Obligations of U.S. government-sponsored entities and agencies
$ 13,752 $ 30 $ (146
)
$ 13,636
Obligations of state and political subdivisions
56,718 746 (283
)
57,181
Mortgage-backed securities – residential
58,051 98 (631
)
57,518
Mortgage-backed securities– commercial
1,446 — (10
)
1,436
Collateralized mortgage obligations– residential
5,483 — (137
)
5,346
Pooled trust preferred security
178 443 — 621
Total available-for-sale securities
$ 135,628 $ 1,317 $ (1,207
)
$ 135,738
7

Held-to-Maturity

Amortized
Cost

Gross
Unrecognized
Gains

Gross
Unrecognized Losses

Fair
Value

December 31, 2017

Obligations of state and political subdivisions
$ 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 $ 90 $ (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
)
1,458
Collateralized mortgage obligations - residential
6,310 1 (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)~~amounts

Note 3– Securities

Debt securities

The following tables summarize the Corporation’s debt securities as of September 30, 2022 and June 30, 2022:

Available –for-Sale	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
September 30, 2022
Obligations of U.S. Treasury	$	8,917	$	—	$	(653	)	$	8,264
Obligations of U.S. government-sponsored entities and agencies		28,156		—		(3,780	)		24,376
Obligations of state and political subdivisions		107,004		5		(14,251	)		92,758
U.S. Government-sponsored mortgage-backed securities–residential		110,490		—		(17,411	)		93,079
U.S. Government-sponsored mortgage-backed securities– commercial		8,618		—		(1,892	)		6,726
U.S. Government-sponsored collateralized mortgage obligations– residential		42,025		—		(4,883	)		37,142
Other debt securities		17,319		—		(1,246	)		16,073
Total securities available-for-sale	$	322,529	$	5	$	(44,116	)	$	278,418

Held-to-Maturity	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses			Fair Value
September 30, 2022
Obligations of state and political subdivisions	$	7,769	$	—	$	(647	)	$	7,122

Available-for-sale	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
June 30, 2022
Obligation of U.S Treasury	$	8,909	$	—	$	(462	)	$	8,447
Obligations of U.S. government-sponsored entities and agencies		28,689		—		(2,424	)		26,265
Obligations of state and political subdivisions		105,977		129		(8,749	)		97,357
U.S. Government-sponsored mortgage-backed securities – residential		113,812		13		(11,642	)		102,183
U.S. Government-sponsored mortgage-backed securities – commercial		8,623		—		(1,322	)		7,301
U.S. Government-sponsored collateralized mortgage obligations – residential		40,952		1		(2,774	)		38,179
Other debt securities		17,367		—		(752	)		16,615
Total available-for-sale securities	$	324,329	$	143	$	(28,125	)	$	296,347

Held-to-maturity

Amortized
Cost

Gross
Unrecognized
Gains

Gross
Unrecognized

Losses

Fair
Value

June 30, 2022

Obligations of state and political subdivisions

7,874

(90

)

7,831

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 December 31				Six Months Ended December 31,				Three Months Ended September 30,
	2017		2016		2017		2016		2022		2021
Proceeds from sales	$	—	$	1,594	$	1,586	$	3,383	$	2,069	$	—
Gross realized gains		—		24		39		127		7		—
Gross realized losses		—		2		1		2
Gross realized losses										18		—

The i~~ncome~~income tax provision related to ~~these~~the net realized ~~gains and losses~~loss amounted to ~~$13~~ ~~for the~~ ~~six~~ ~~months ended~~ ~~December 31, 2017~~ ~~and~~ $8 ~~and~~ ~~$43~~$2 for the three ~~and~~ ~~six~~ ~~months~~-month period ended ~~December 31, 2016.~~September 30, 2022.

The amortized cost and fair values of debt securities at ~~December 31, 2017,~~September 30, 2022, by expected maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date, primarily mortgage-backed securities, ~~collateralized mortgage obligations and the pooled trust preferred security~~ are shown separately.

Available-for-Sale	Amortized Cost		Estimated Fair Value
Due in one year or less	$	1,851	$	1,821
Due after one year through five years		32,354		30,568
Due after five years through ten years		54,329		48,751
Due after ten years		72,862		60,331
Total		161,396		141,471

U.S. Government-sponsored mortgage-backed and related securities		161,133		136,947
Total securities available-for-sale	$	322,529	$	278,418

Held-to-Maturity
Due after one year through five years	$	212	$	209
Due after five years through ten years		4,212		3,454
Due after ten years		3,345		3,459
Total securities held-to-maturity	$	7,769	$	7,122

Securities with a carrying value of approximately $132,950 and $126,679 were pledged at September 30, 2022 and June 30, 2022, respectively, to secure public deposits and commitments as required or permitted by law.

Available-for-Sale

Amortized
Cost

Estimated Fair
Value

Due in one year or less
$ 2,170 $ 2,192
Due after one year through five years
18,053 18,167
Due after five years through ten years
28,838 28,992
Due after ten years
21,409 21,466
Total
70,470 70,817

U.S. Government-sponsored mortgage-backed and related securities
64,980 64,300
Pooled trust preferred security
178 621
Total available-for-sale securities
$ 135,628 $ 135,738

Held-to-Maturity

Due after five years through ten years
564 579
Due after ten years
3,497 3,504
Total held-to-maturity securities
$ 4,061 $ 4,083
9

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts

The following table summarizes the securities with unrealized losses at ~~December 31, 2017~~September 30, 2022 and June 30, 2022, ~~30,~~~~2017,~~aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position:

	Less than 12 Months					12 Months or more					Total
Available-for-sale	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
September 30, 2022
Obligation of U.S. Treasury	$	8,264	$	(653	)	$	—	$	—		$	8,264	$	(653	)
Obligations of U.S. government-sponsored entities and agencies		19,919		(2,842	)		4,457		(938	)		24,376		(3,780	)
Obligations of state and political subdivisions		83,601		(12,385	)		6,088		(1,866	)		89,689		(14,251	)
U.S. Government-sponsored mortgage-backed securities – residential		44,882		(6,608	)		46,694		(10,803	)		91,576		(17,411	)
U.S. Government-sponsored mortgage-backed securities – commercial		4,554		(1,261	)		2,172		(631	)		6,726		(1,892	)
Collateralized mortgage obligations - residential		27,449		(2,587	)		9,693		(2,296	)		37,142		(4,883	)
Other debt securities		7,098		(503	)		8,975		(743	)		16,073		(1,246	)
Total temporarily impaired	$	195,767	$	(26,839	)	$	78,079	$	(17,277	)	$	273,846	$	(44,116	)

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

	Less than 12 Months					12 Months or more					Total
Held to Maturity	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
September 30, 2022
Obligations of state and political subdivisions		3,688		(489	)		3,454		(158	)		7,122		(647	)
Total temporarily impaired	$	3,688	$	(489	)	$	—	$	(158	)	$	7,122	$	(647	)

	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, 2022
Obligations of U.S. Treasury	$	8,447	$	(462	)	$	—	$	—		$	8,447	$	(462	)
Obligations of U.S. government-sponsored entities and agencies		26,265		(2,424	)		—		—			26,265		(2,424	)
Obligations of state and political subdivisions		80,445		(8,331	)		2,047		(418	)		82,492		(8,749	)
Mortgage-backed securities – residential		76,526		(7,586	)		24,569		(4,056	)		101,095		(11,642	)
Mortgage-backed securities – commercial		7,301		(1,322	)		—		—			7,301		(1,322	)
Collateralized mortgage obligations - residential		30,729		(2,308	)		2,713		(466	)		33,442		(2,774	)
Other debt securities		16,156		(711	)		459		(41	)		16,615		(752	)
Total temporarily impaired	$	245,869	$	(23,144	)	$	29,788	$	(4,981	)	$	275,657	$	(28,125	)

Less than 12 Months

12 Months or more

Total

Available-for-sale

Fair
Value

Unrealized
Loss

Fair
Value

Unrealized
Loss

Fair
Value

Unrealized
Loss

December 31, 2017

Obligations of US government-sponsored entities and agencies
$ 9,901 $ (146
)
$ — $ — $ 9,901 $ (146
)
Obligations of states and political subdivisions
11,862 (93
)
8,179 (190
)
20,041 (283
)
Mortgage-backed securities - residential
27,316 (243
)
22,415 (388
)
49,731 (631
)
Mortgage-backed securities - commercial
1,435 (10
)
— — 1,435 (10
)
Collateralized mortgage obligations – residential
— — 5,346 (137
)
5,346 (137
)
Total temporarily impaired
$ 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
)

	Less than 12 Months					12 Months or more				Total
Held to Maturity	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
June 30, 2022
Obligations of state and political subdivisions		3,522		(90	)		—		—		3,522		(90	)
Total temporarily impaired	$	3,522	$	(90	)	$	—	$	—	$	3,522	$	(90	)

Management evaluates securities for other-than-temporary ~~impairme~~ntimpairment (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.

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts

In determining OTTI under the ASC Topic 320 model, management considers many factors, including: (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) whether the market decline was affected by macroeconomic conditions, and (4) whether the entity has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery. The assessment of whether an other-than-temporary decline exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time.

~~CONSUMERS BANCORP, INC.~~

~~Notes to the Consolidated Financial Statements~~

~~(Unaudited) (continued)~~

~~(Dollars~~At September 30 2022, there were a total of 418 available-for-sale and four held-to-maturity securities in ~~thousands, except per share amounts)~~

the portfolio with unrealized losses due to an increase in market interest rates when compared to the time of purchase. The unrealized losses within the securities portfolio as of ~~December 31, 2017~~September 30, 2022 have not been recognized into income because the decline in fair value is not attributed to credit quality and 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.

Equity Securities

The Corporation owned equity securities with an amortized cost of $400 as of September 30, 2022 and June 30, 2022. The following table presents the net unrealized losses on equity securities recognized in earnings for September 30, 2022 and 2021. There were no sales of equity securities during the three-month periods ended September 30, 2022 and 2021.

September 30,

2022

September 30,

2021

Unrealized loss recognized on equity securities held at the end of the period

(24

)

—

Note 34– – Loans

Major classifications of loans were as follows:

December 31,
2017

June 30,
2017

Commercial
$ 49,561 $ 46,336
Commercial real estate:

Construction
5,936 5,588
Other
169,692 157,861
1 – 4 Family residential real estate:

Owner occupied
45,351 41,581
Non-owner occupied
16,163 14,377
Construction
1,931 1,993
Consumer
4,960 5,131
Subtotal
293,594 272,867
Allowance for loan losses
(3,225
)
(3,086
)
Net Loans
$ 290,369 $ 269,781

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

	September 30, 2022			June 30, 2022
Commercial	$	91,340		$	87,008
Commercial real estate:
Construction		15,038			15,158
Other		299,758			291,847
1 – 4 Family residential real estate:
Owner occupied		145,359			142,244
Non-owner occupied		24,627			26,029
Construction		6,320			4,317
Consumer		54,876			44,964
Subtotal		637,318			611,567
Net deferred loan fees and costs		283			276
Allowance for loan losses		(7,546	)		(7,160	)
Net Loans	$	630,055		$	604,683

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

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

The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended ~~December 31, 2017:~~September 30, 2022:

1-4 Family

Commercial

Residential

Real

Real

Commercial

Estate

Estate

Consumer

Total

Allowance for loan losses:

Beginning balance
$ 572 $ 2,081 $ 473 $ 68 $ 3,194
Provision for loan losses
(17
)
57 20 — 60
Loans charged-off
— — (33
)
(5
)
(38
)
Recoveries
— 6 1 2 9
Total ending allowance balance
$ 555 $ 2,144 $ 461 $ 65 $ 3,225

~~The following table presents the activity in the allowance for loan losses by portfolio segment for the~~ ~~six~~ ~~months ended~~ ~~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		$	960	$	3,927	$	1,645		$	628		$	7,160
Provision for loan losses		35		82		20			13			150			61		145		35			169			410
Loans charged-off		—		—		(33	)		(8	)		(41	)		—		—		(6	)		(72	)		(78	)
Recoveries		2		24		1			3			30			—		—		2			52			54
Total ending allowance balance	$	555	$	2,144	$	461		$	65		$	3,225		$	1,021	$	4,072	$	1,676		$	777		$	7,546

The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended ~~December 31, 2016:~~September 30, 2021:

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
							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		$	904	$	3,949	$	1,307	$	311		$	6,471
Provision for loan losses		(9	)		282			78			(75	)		276			2		36		110		42			190
Loans charged-off		—			(700	)		(44	)		(12	)		(756	)		—		—		—		(34	)		(34	)
Recoveries		1			—			29			7			37			—		—		13		37			50
Total ending allowance balance	$	497		$	2,100		$	465		$	61		$	3,123		$	906	$	3,985	$	1,430	$	356		$	6,677

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.~~September 30, 2022. Included in the recorded investment in loans is ~~$695~~$1,311 of accrued 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:
Ending allowance for loan losses balance attributable to loans:
Individually evaluated for impairment	$	—	$	30	$	—	$	—	$	30	$	—	$	—	$	—	$	—	$	—
Collectively evaluated for impairment		555		2,114		461		65		3,195
Acquired loans collectively evaluated for impairment												1		62		85		—		148
Originated loans collectively evaluated for impairment												1,020		4,010		1,591		777		7,398
Total ending allowance balance	$	555	$	2,144	$	461	$	65	$	3,225	$	1,021	$	4,072	$	1,676	$	777	$	7,546

Recorded investment in loans:
Loans individually evaluated for impairment	$	122	$	1,303	$	340	$	—	$	1,765	$	295	$	41	$	47	$	—	$	383
Loans collectively evaluated for impairment		49,553		174,707		63,293		4,971		292,524
Acquired loans collectively evaluated for impairment												677		8,761		26,492		2,485		38,415
Originated loans collectively evaluated for impairment												90,603		305,984		151,153		52,374		600,114
Total ending loans balance	$	49,675	$	176,010	$	63,633	$	4,971	$	294,289	$	91,575	$	314,786	$	177,692	$	54,859	$	638,912

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share ~~amounts)~~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.~~2022. Included in the recorded investment in loans is ~~$581~~$1,214 of accrued ~~intere~~stinterest 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	$	—	$	42	$	2	$	—	$	44	$	—	$	—	$	—	$	—	$	—
Collectively evaluated for impairment		518		1,996		471		57		3,042
Acquired loans collectively evaluated for impairment												1		62		85		—		148
Originated loans collectively evaluated for impairment												959		3,865		1,560		628		7,012
Total ending allowance balance	$	518	$	2,038	$	473	$	57	$	3,086	$	960	$	3,927	$	1,645	$	628	$	7,160

Recorded investment in loans:
Loans individually evaluated for impairment	$	444	$	1,587	$	203	$	—	$	2,234	$	276	$	42	$	155	$	—	$	473
Loans collectively evaluated for impairment		45,993		162,176		57,901		5,144		271,214
Acquired loans collectively evaluated for impairment												665		10,095		27,731		3,051		41,542
Originated loans collectively evaluated for impairment												86,310		296,776		146,058		41,898		571,042
Total ending loans balance	$	46,437	$	163,763	$	58,104	$	5,144	$	273,448	$	87,251	$	306,913	$	173,944	$	44,949	$	613,057

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~~September 30, 2022 and for the ~~six~~three months ended ~~December 31, 2017:~~September 30, 2022:

													As of September 30, 2022						Three Months ended September 30, 2022
	As of December 31, 2017						Six Months ended December 31, 2017										Allowance
	Unpaid				Allowance for Loan		Average		Interest		Cash Basis		Unpaid				for Loan		Average		Interest		Cash Basis
	Principal		Recorded		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	$	122	$	122	$	—	$	117	$	3	$	3	$	411	$	295	$	—	$	286	$	10	$	10
Commercial real estate:
Other		973		976		—		1,057		16		16		81		41		—		41		3		3
1-4 Family residential real estate:
Owner occupied		25		25		—		80		—		—		46		20		—		21		1		1
Non-owner occupied		315		315		—		322		—		—		27		27		—		62		—		—
With an allowance recorded:
Commercial real estate:
Other		327		327		30		337		5		5
Total	$	1,762	$	1,765	$	30	$	1,913	$	24	$	24	$	565	$	383	$	—	$	410	$	14	$	14

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share ~~amounts)~~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~~2022 and for the ~~six~~three months ended ~~December 31, 2016:~~September 30, 2021:

As of June 30, 2017

Six Months ended December 31, 2016

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
$ 482 $ 444 $ — $ 330 $ 80 $ 80
Commercial real estate:

Construction
— — — 170 6 6
Other
1,928 1,039 — 1,081 105 105
1-4 Family residential real estate:

Owner occupied
104 103 — 127 — —
Non-owner occupied
— — — 205 — —
With an allowance recorded:

Commercial
— — — 7 — —
Commercial real estate:

Other
548 548 42 2,030 15 15
1-4 Family residential real estate:

Owner occupied
99 100 2 139 3 3
Total
$ 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)~~

~~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~~ m~~onths ended~~ ~~December 31, 2016:~~

							As of June 30, 2022						Three Months ended September 30, 2021
											Allowance
	Average		Interest		Cash Basis		Unpaid				for Loan		Average		Interest		Cash Basis
	Recorded		Income		Interest		Principal		Recorded		Losses		Recorded		Income		Interest
	Investment		Recognized		Recognized		Balance		Investment		Allocated		Investment		Recognized		Recognized
With no related allowance recorded:
Commercial							$	414	$	276	$	—	$	299	$	—	$	—
Commercial real estate:
Construction	$	10	$	—	$	—
Other		607		—		—		83		42		—		914		3		3
1-4 Family residential real estate:
Owner occupied		127		—		—		48		22		—		363		2		2
Non-owner occupied		202		—		—		193		133		—		200		—		—
With an allowance recorded:
Commercial		14		—		—		—		—		—		131		2		2
Commercial real estate:
Other		1,612		7		7
1-4 Family residential real estate:
Owner occupied		101		1		1
Total	$	2,673	$	8	$	8	$	738	$	473	$	—	$	1,907	$	7	$	7

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 ~~December 31, 2017~~September 30, 2022 and June 30, ~~2017:~~2022:

	December 31, 2017				June 30, 2017				September 30, 2022				June 30, 2022
			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									$	—	$	—	$	276	$	9
Commercial real estate:
Other		537		—		729		—		—		—		—		—
1 – 4 Family residential:
Owner occupied		13		—		90		—		20		—		22		—
Non-owner occupied		315		—		—		—		27		—		133		—
Consumer										—		19		—		—
Total	$	865	$	—	$	1,187	$	—	$	47	$	19	$	431	$	9

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)~~amounts

The following table presents the aging of the recorded investment in past due loans as of ~~December 31, 2017~~September 30, 2022 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	$	—	$	—	$	—	$	—	$	49,675	$	49,675	$	—	$	—	$	—	$	—	$	91,575	$	91,575
Commercial real estate:
Construction		—		—		—		—		5,943		5,943		—		—		—		—		15,018		15,018
Other		230		—		—		230		169,837		170,067		—		—		—		—		299,768		299,768
1-4 Family residential:
Owner occupied		12		—		—		12		45,477		45,489		116		7		—		123		146,551		146,674
Non-owner occupied		—		—		—		—		16,210		16,210		—		—		27		27		24,610		24,637
Construction		—		—		—		—		1,934		1,934		—		—		—		—		6,381		6,381
Consumer		4		2		—		6		4,965		4,971		346		39		19		404		54,455		54,859
Total	$	246	$	2	$	—	$	248	$	294,041	$	294,289	$	462	$	46	$	46	$	554	$	638,358	$	638,912

The above table of past due loans includes the recorded investment in non-accrual loans of $27 in the ~~$865~~90 days or greater category and $20 in the loans not past due category.

The following table presents the aging of the recorded investment in past due loans as of June 30, ~~2017~~2022 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	$	—	$	—	$	35	$	35	$	46,402	$	46,437	$	—	$	—	$	9	$	9	$	87,242	$	87,251
Commercial real estate:
Construction		—		—		—		—		5,596		5,596		—		—		—		—		15,138		15,138
Other		—		—		130		130		158,037		158,167		52		—		—		52		291,723		291,775
1-4 Family residential:
Owner occupied		13		—		74		87		41,605		41,692		125		—		—		125		143,381		143,506
Non-owner occupied		—		—		—		—		14,416		14,416		—		—		27		27		26,036		26,063
Construction		—		—		—		—		1,996		1,996		—		—		—		—		4,375		4,375
Consumer		22		—		—		22		5,122		5,144		381		79		—		460		44,489		44,949
Total	$	35	$	—	$	239	$	274	$	273,174	$	273,448	$	558	$	79	$	36	$	673	$	612,384	$	613,057

The above table of past due loans includes the recorded investment in non-accrual loans of~~$239~~ $27 in the 90 days or greater category and ~~$948~~$404 in the loans not past due category.

Troubled Debt ~~Restructurings:~~Restructurings (TDR):

The Corporation has certain loans that have been modified in order to maximize collection of loan balances that are classified as TDRs. A modified loan is usually classified as a TDR if, for economic reasons, management grants a concession to the original terms and conditions of the loan to a borrower who is experiencing financial difficulties that it would not have otherwise considered.

As of ~~December 31, 2017,~~September 30, 2022 and June 30, 2022, the ~~recorded investment~~Corporation had $336 and $318, respectively, of loans classified as ~~troubled debt restructurings was~~ ~~$1,582~~ ~~with~~ ~~$30~~ ~~of specific reserves allocated to these loans.~~TDRs which are included in impaired loans above. As of ~~December 31, 2017,~~September 30, 2022 and June 30, 2022, the Corporation had notcommitted to lend anany additional ~~$192~~funds to customers with outstanding loans that were classified as troubled debt restructurings. As of September 30, 2022 and June 30, ~~2017,~~2022 ~~the recorded investment of loans classified as troubled debt restructurings was~~there were ~~$1,740~~no ~~with~~ ~~$33~~ of specific reserves allocated to these loans. ~~As of~~

During the ~~June~~three-month periods ended September 30, ~~2017,~~2022 ~~the Corporation had committed to lend an additional~~and ~~$175~~2021, ~~to customers with outstanding loans~~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-month periods ended September 30, 2022 and 2021.

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

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

~~During the~~ ~~three~~ ~~and~~ ~~six~~ ~~months ended~~ ~~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~~ ~~December 31, 2017~~ ~~and~~ ~~2016.~~

~~There were~~ no loans classified as troubled debt restructurings for which there was a payment default within 12 months following the modification during the three ~~and~~ ~~six~~ ~~month~~-month periods ended ~~December 31, 2017~~September 30, 2022 and ~~2016.~~2021. 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: ~~curren~~tcurrent 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~~affirms 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. Generally, 1-4 Family Residential and Consumer loans are not risk rated, except when collateral is used for a business purpose. 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 December 31, 2017										As of September 30, 2022
			Special						Not				Special						Not
	Pass		Mention		Substandard		Doubtful		Rated		Pass		Mention		Substandard		Doubtful		Rated
Commercial	$	48,091	$	883	$	339	$	—	$	362	$	90,618	$	309	$	480	$	—	$	168
Commercial real estate:
Construction		5,941		—		2		—		—		15,018		—		—		—		—
Other		156,415		10,365		1,772		537		978		292,023		2,351		4,758		—		636
1-4 Family residential real estate:
Owner occupied		2,661		58		14		13		42,743		1,273		—		—		20		145,381
Non-owner occupied		14,669		203		433		315		590		24,178		57		107		27		268
Construction		765		—		—		—		1,169		2,114		—		—		—		4,267
Consumer		119		—		—		—		4,852		559		—		—		—		54,300
Total	$	228,661	$	11,509	$	2,560	$	865	$	50,694	$	425,783	$	2,717	$	5,345	$	47	$	205,020

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 — 4 43
Other
150,460 5,110 1,566 470 561
1-4 Family residential real estate:

Owner occupied
2,668 — 11 30 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
16

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

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

As of June 30, 2022, and based on the most recent analysis performed, the recorded investment by risk category of loans by class of loans is as follows:

	As of June 30, 2022
			Special						Not
	Pass		Mention		Substandard		Doubtful		Rated
Commercial	$	86,265	$	350	$	178	$	276	$	182
Commercial real estate:
Construction		15,138		—		—		—		—
Other		283,877		2,500		4,711		—		687
1-4 Family residential real estate:
Owner occupied		1,321		—		—		22		142,163
Non-owner occupied		25,606		59		—		133		265
Construction		1,234		—		—		—		3,141
Consumer		605		—		—		—		44,344
Total	$	414,046	$	2,909	$	4,889	$	431	$	190,782

Note 45 - 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.

~~Leve~~lLevel 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~~’scompany’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 ~~recurrin~~grecurring basis include the following:

Securities available-for-sale: When available, the fair values of available-for-sale securities are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs). For securities where quoted market prices are not available, fair values are calculated based on market prices of similar securities (Level 2 inputs). For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other unobservable inputs (Level 3 inputs).

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts

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 me~~asure~~measure fair value:

Fair Value Measurements at
December 31, 2017 Using

Balance at
December 31,
2017

Level 1

Level 2

Level 3

Assets:

Obligations of U.S. government-sponsored entities and agencies
$ 13,636 $ — $ 13,636 $ —
Obligations of states and political subdivisions
57,181 — 57,181 —
Mortgage-backed securities – residential
57,518 — 57,518 —
Mortgage-backed securities – commercial
1,436 — 1,436 —
Collateralized mortgage obligations - residential
5,346 — 5,346 —
Pooled trust preferred security
621 — 621 —

	Balance at September 30,		Fair Value Measurements at September 30, 2022
	2022		Level 1		Level 2		Level 3
Assets:
Obligations of U.S. Treasury	$	8,264	$	—	$	8,264	$	—
Obligations of U.S. government-sponsored entities and agencies		24,376		—		24,376		—
Obligations of state and political subdivisions		92,758		—		92,758		—
U.S. Government-sponsored mortgage-backed securities – residential		93,079		—		93,079		—
U.S. Government-sponsored mortgage-backed securities – commercial		6,726		—		6,726		—
U.S. Government-sponsored collateralized mortgage obligations - residential		37,142		—		37,142		—
Other debt securities		16,073		—		16,073		—
Equity securities		376		—		376		—

~~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

Balance at
June 30,
2017

Level 1

Level 2

Level 3

Assets:

Obligations of U.S. government-sponsored entities and agencies
$ 12,587 $ — $ 12,587 $ —
Obligations of states and political subdivisions
57,460 — 57,460 —
Mortgage-backed securities - residential
63,838 — 63,838 —
Mortgage-backed securities - commercial
1,458 — 1,458 —
Collateralized mortgage obligations - residential
6,211 — 6,211 —
Pooled trust preferred security
532 — 532 —

	Balance at June 30,		Fair Value Measurements at June 30, 2022
	2022		Level 1		Level 2		Level 3
Assets:
Obligations of U.S. treasury	$	8,447	$	—	$	8,447	$	—
Obligations of U.S. government-sponsored entities and agencies		26,265		—		26,265		—
Obligations of state and political subdivisions		97,357		—		97,357		—
U.S. government-sponsored mortgage-backed securities - residential		102,183		—		102,183		—
U.S. government-sponsored mortgage-backed securities - commercial		7,301		—		7,301		—
U.S. government-sponsored collateralized mortgage obligations - residential		38,179		—		38,179		—
Other debt securities		16,615		—		16,615		—
Equity securities		400		—		400		—

There were no transfers between Level 1 and Level 2 during the three or ~~six~~ ~~month periods~~-month period ended ~~December 31, 2017~~ September 30, 2022.or ~~2016.~~

Certain ~~financial~~ assets and ~~financial~~ liabilities are measured at fair value on a non-recurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances. ~~Financial assets~~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. There were no impaired loans measured at fair value on a non-recurring basis at September 30, 2022 or June 30, 2022 and there was no impact to the provision for loan losses for the three-month periods ended September 30, 2022 or 2021.

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts

Other Real Estate and Repossessed Assets 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 and other repossessed assets, which are primarily vehicles, 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 ~~financial assets measured at fair value on a non-recurring basis at~~ ~~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~~ ~~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~~ ~~being recorded for the~~ ~~six~~ ~~months ended~~ ~~December 31, 2017.~~ ~~Impaired loans, measured for impairment using the fair value of the collateral, had a recorded investment of~~ ~~$130,~~ ~~with~~ no ~~valuation allowance at~~ ~~June 30, 2017.~~ ~~The resulting impact to the provision for loan losses was a decrease of~~ ~~$87~~ ~~and~~ ~~$47~~ ~~being recorded for the~~ ~~three~~ ~~and~~ ~~six~~ ~~months ended~~ ~~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,~~ ~~which was made up of the outstanding balance of~~ ~~$103,~~ ~~net of a valuation allowance of~~ ~~$32~~ at ~~June 30, 2017.~~ ~~There were~~ no other real estate owned or other repossessed assets being carried at fair value as of ~~December 31, 2017.~~September 30, 2022

~~The following tables present quantitative information about Level~~ 3 ~~fair value measurements for financial instruments measured at fair value on a non-recurring basis at~~or June 30, ~~2017:~~2022.

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
%
0.0
%
Other Real Estate Owned:

1-4 Family residential real estate
$ 71
Bid Indications
N/A 0.0
%
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 values of financial instruments that are reported at amortized cost in the ~~Corporation~~’sCorporation’s consolidated balance sheets, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

December 31, 2017

June 30, 2017

Carrying
Amount

Estimated
Fair
Value

Carrying
Amount

Estimated
Fair
Value

Financial Assets:

Level 1 inputs:

Cash and cash equivalents
$ 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
Loans held for sale
814 833 1,252 1,286
Accrued interest receivable
1,310 1,310 1,212 1,212
Level 3 inputs:

Securities held-to-maturity
4,061 4,083 4,259 4,329
Loans, net
290,369 284,618 269,781 266,041
Financial Liabilities:

Level 2 inputs:

Demand and savings deposits
316,218 316,218 307,960 307,960
Time deposits
66,771 66,676 66,511 66,535
Short-term borrowings
22,507 22,507 23,986 23,986
Federal Home Loan Bank advances
17,188 16,796 12,320 12,054
Accrued interest payable
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.~~

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

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

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

~~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~~ ~~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~~ ~~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 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.~~

	September 30, 2022				June 30, 2022
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial Assets:
Level 1 inputs:
Cash and cash equivalents	$	25,515	$	25,515	$	20,952	$	20,952
Level 2 inputs:
Certificates of deposit in other financial institutions		3,769		3,694		3,781		3,847
Loans held for sale		433		439		1,165		1,188
Accrued interest receivable		2,813		2,813		2,703		2,703
Level 3 inputs:
Securities held-to-maturity		7,769		7,122		7,874		7,831
Loans, net		630,055		568,277		604,683		577,708
Financial Liabilities:
Level 2 inputs:
Demand and savings deposits		792,540		792,540		784,181		784,181
Time deposits		119,543		119,884		102,381		102,622
Short-term borrowings		20,946		20,946		21,295		21,295
Federal Home Loan Bank advances		8,217		7,051		8,256		7,215
Accrued interest payable		75		75		49		49

Note 56 – Earnings Per Share

Basic earnings per share is the amount of earnings available to each share of common stock outstanding during the reporting period and is equal to net income divided by the weighted average number of shares outstanding during the period. Diluted earnings per share is the amount of earnings available to each share of common stock outstanding during the reporting period adjusted to include the effect of potentially dilutive common shares that may be issued upon the vesting of restricted stock awards. There were ~~2,062~~7,103 shares of restricted stock that were anti-dilutive for the three ~~and~~ ~~six~~ ~~months~~-month period ended ~~December 31, 2017.~~September 30, 2022. There were no ~~equity instruments~~ shares of restricted stock that were anti-dilutive for the three ~~and~~ ~~six~~ ~~months~~-month period ended ~~December 31, 2016.~~September 30, 2021. The following table details the calculation of basic and diluted earnings per share:

For the Three Months Ended
December 31,

For the Six Months Ended
December 31,

2017

2016

2017

2016

Basic:

Net income available to common shareholders
$ 657 $ 722 $ 1,586 $ 1,623
Weighted average common shares outstanding
2,727,666 2,724,061 2,725,859 2,723,988
Basic income per share
$ 0.24 $ 0.27 $ 0.58 $ 0.60

Diluted:

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

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

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

	For the Three Months Ended September 30,
	2022		2021
Basic:
Net income available to common shareholders	$	2,535	$	2,665
Weighted average common shares outstanding		3,048,018		3,024,794
Basic income per share	$	0.83	$	0.88

Diluted:
Net income available to common shareholders	$	2,535	$	2,665
Weighted average common shares outstanding		3,048,018		3,024,794
Dilutive effect of restricted stock		—		202
Total common shares and dilutive potential common shares		3,048,018		3,024,996
Dilutive income per share	$	0.83	$	0.88

Note 67 –Accumulated Other Comprehensive Income (Loss)

The components of other comprehensive income related to unrealized gains and losses on available-for-sale securities for the three ~~and~~ ~~six~~ ~~month period~~-month periods ended ~~December 31, 2017~~September 30, 2022 and ~~2016,~~2021, were as follows:

Pretax

Tax Effect

After-tax

Affected Line
Item in
Consolidated
Statements of
Income
Balance as of September 30, 2017
$ 741 $ (252
)
$ 489
Unrealized holding loss on available-for-sale securities arising during the period
(631
)
215 (416
)

Balance as of December 31, 2017
$ 110 $ (37
)
$ 73

Balance as of September 30, 2016
$ 3,095 $ (1,053
)
$ 2,042
Unrealized holding loss on available-for-sale securities arising during the period
(3,319
)
1,128 (2,191
)

Amounts reclassified from accumulated other comprehensive income
(22
)
8 (14
)
(a)(b)
Net current period other comprehensive loss
(3,341
)
1,136 (2,205
)

Balance as of December 31, 2016
$ (246
)
$ 83 $ (163
)

	Pretax			Tax Effect			After-tax			Affected Line Item in Consolidated Statements of Income
Balance as of June 30, 2022	$	(27,982	)	$	5,876		$	(22,106	)
Unrealized holding losses on available-for-sale securities arising during the period		(16,140	)		3,389			(12,751	)
Amounts reclassified from accumulated other comprehensive income		11			(2	)		9		(a)(b)
Net current period other comprehensive loss		(16,129	)		3,387			(12,742	)
Balance as of September 30, 2022	$	(44,111	)	$	9,263		$	(34,848	)

	Pretax			Tax Effect			After-tax			Affected Line Item in Consolidated Statements of Income
Balance as of June 30, 2021	$	4,493		$	(943	)	$	3,550
Unrealized holding losses on securities arising during the period		(1,566	)		328			(1,238	)	(a)(b)
Balance as of September 30, 2021	$	2,927		$	(615	)	$	2,312

(a)(a) Securities ~~gains,~~(gains) losses, net

(b) Income tax expense

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

Pretax

Tax Effect

After-tax

Affected Line
Item in
Consolidated
Statements of
Income
Balance as of June 30, 2017
$ 675 $ (230
)
$ 445
Unrealized holding loss on available-for-sale securities arising during the period
(527
)
180 (347 )
Amounts reclassified from accumulated other comprehensive income
(38
)
13 (25
)
(a)(b)
Net current period other comprehensive loss
(565
)
193 (372
)

Balance as of December 31, 2017
$ 110 $ (37
)
$ 73

Balance as of June 30, 2016
$ 3,621 $ (1,232
)
$ 2,389
Unrealized holding loss on available-for-sale securities arising during the period
(3,742
)
1,272 (2,470
)

Amounts reclassified from accumulated other comprehensive income
(125
)
43 (82
)
(a)(b)
Net current period other comprehensive loss
(3,867
)
1,315 (2,552
)

Balance as of December 31, 2016
$ (246
)
$ 83 $ (163
)

~~(a) Securities gains, net~~

~~(b) Income tax expense~~(Dollars in thousands, except per share amounts

Note 78 – COVID-19~~Income Taxes~~

OnIn December ~~22, 2017,~~2019, a novel strain of coronavirus surfaced in Wuhan, China, and has spread around the ~~U.S. government enacted comprehensive tax legislation commonly referred~~world, resulting in business and social disruption. The coronavirus was declared a Pandemic by the World Health Organization on March 11, 2020. While vaccinations (including booster shots) have created optimism in the community, some uncertainty remains due to as the ~~Tax Cuts~~continued concern over increased infection rates from various variants of COVID-19. The operations and ~~Jobs Act (Tax Act). The Tax Act significantly revises the future ongoing U.S. corporate income tax by, among other things, decreasing U.S. corporate income tax rates to~~ ~~21.0%~~ ~~from~~ ~~35.0%.~~ Asbusiness results of the Corporation ~~has a~~could be materially adversely affected. The extent to which the coronavirus ~~June 30~~may ~~fiscal year-end,~~impact future business activity or investment results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the ~~lower corporate income tax rate will be phased in,~~severity of the coronavirus and the actions required to contain the coronavirus or treat its impact, among others. The economic impacts related to the COVID-19 pandemic continue to linger due to supply chain disruptions, additional employee costs, rising inflationary pressures and the prospects of recession, all which may impact the ability of our customers to make payments on loans, resulting in ~~a blended U.S. statutory federal rate of approximately~~ ~~27.55%~~ ~~for the Corporation's fiscal year ending~~ ~~June 30, 2018,~~ elevated loan losses and ~~21.0%~~ ~~for subsequent fiscal years. In addition, the reduction of the corporate tax rate required the Corporation to revalue its deferred tax assets and liabilities based on the lower federal tax rate of~~ ~~21.0%.~~

~~As a result of the new legislation, during the quarter ended~~ ~~December 31, 2017,~~ ~~the Corporation recorded a~~ ~~one~~~~-time income tax expense of $~~~~348~~ ~~in conjunction with writing down its net deferred tax assets. The impact of using the~~ ~~27.55%~~ ~~blended federal tax rate for the quarter ended~~ ~~December 31, 2017~~ ~~versus a~~ ~~34.0%~~ ~~rate reduced the income tax expense by approximately~~ ~~$95.~~ ~~Therefore, the effective tax rate was~~ ~~42.7%~~ ~~and~~ ~~31.7%~~ ~~for the~~ ~~three~~ ~~and~~ ~~six~~ ~~months ended~~ ~~December 31, 2017,~~ ~~respectively, compared to~~ ~~16.7%~~ ~~and~~ ~~19.7%~~ ~~for the~~ ~~three~~ ~~and~~ ~~six~~ ~~months ended~~ ~~December 31, 2016,~~ ~~respectively.~~

~~The changes included~~an increase in the T~~ax Act are broad and complex. The final transition impacts of the Tax Act~~ ~~may~~ differ from the above estimates, possibly materially, due to, among other things, changes in interpretations of the Tax Act, any legislative action to address questions that arise because of the Tax Act, and any changes in accounting standardsCorporation’s allowance for ~~income taxes or related interpretations in response to the Tax Act~~.loan losses.

CONSUMERS BANCORP, INC.

Management's Discussion and Analysis of Financial Condition

and Results of Operations

(Dollars in thousands, except per share data

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

(Dollars in thousands, except per share data)

General

The following is ~~management~~’smanagement’s analysis of the Corporation’s results of operations for the ~~three and six months~~three-month period ended ~~December 31, 2017,~~September 30, 2022, compared to the same period in ~~2016,~~2021, and the consolidated balance sheet at ~~December 31, 2017,~~September 30, 2022, compared to June 30, ~~2017.~~2022. This discussion is designed to provide a more comprehensive review of the operating results and financial condition than could be obtained from an examination of the financial statements alone. This analysis should be read in conjunction with the consolidated financial statements and related footnotes and the selected financial data included elsewhere in this report.

Overview

Consumers Bancorp, Inc., a bank holding company incorporated under the laws of the State of Ohio (the Corporation), owns all ~~of th~~ethe 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.~~Ohio, Pennsylvania, and West Virginia. The Bank also invests in securities consisting primarily of U.S. government sponsored entities, municipal obligations, mortgage-backed and collateralized mortgage obligations issued by Fannie Mae, Freddie Mac and Ginnie Mae.

Results of Operations

~~Three~~ Three-Month Periods Ended September 30, 2022 and ~~Six~~ ~~Months Ended~~ ~~December 31~~~~, 2017 and~~ ~~December 31~~~~, 2016~~2021

InNet income for the ~~second~~first quarter of fiscal year ~~2018, pre-tax income increased by $279,~~2023 was $2,535, or ~~32.2% from the same period last year. Net income for the second quarter of fiscal year 2018 was $657, or $0.24~~$0.83 per common share, compared to ~~$722,~~$2,665, or ~~$0.27~~$0.88 per common share for the three months ended ~~December 31, 2016.~~September 30, 2021. The following are key highlights of our results of operations for the three months ended ~~December 31, 2017:~~September 30, 2022, compared to the prior fiscal year comparable period:

	●	~~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 ~~$391~~$423, or 5.3%, to ~~$3,927, or by 11.1%,~~$8,396 in the ~~second~~first quarter of fiscal year ~~2018~~2023 from the same prior year ~~period;~~period primarily as a result of the growth in average interest-earning assets;
	●	~~the~~ a $410 provision for loans loss expense was recorded for the three-month period ended September 30, 2022 compared with $190 for the same prior year period primarily as a result of the organic growth within the loan ~~losses~~portfolio in the ~~second~~first quarter of fiscal year ~~2018 totaled $60 compared to $140 in the same prior year period;~~2023;
	●	~~non-interest~~noninterest income ~~increased~~decreased by $~~42,~~$142, or ~~5.3%~~11.2%, in the ~~second~~first quarter of fiscal year ~~2018~~2023 from the same prior year ~~period;~~period primarily as a result of a $176, or 68.2%, decline in mortgage banking activity which was partially offset by a $39, or 10.9%, increase in service charges on deposit accounts and a $32, or 6.3%, increase in debit card interchange income; and
	●	~~non-interest~~noninterest expenses increased by $~~234,~~$246, or ~~7.0%~~4.2%, in the ~~second~~first quarter of fiscal year ~~2018~~2023 from the same prior year ~~period.~~

~~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:

	●	~~net interest income increased~~period primarily due to increases in salaries and employee benefits; occupancy and equipment expenses; and Federal Deposit Insurance Corporation (FDIC) assessments that was primarily driven 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~~growth in the ~~same prior year period;~~organization.
	●	~~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.~~

Return on average equity and return on average assets were ~~7.09%~~18.03% and ~~0.67%~~1.02%, respectively, for the ~~first six~~three months ~~of fiscal year 2018~~ended September 30, 2022 compared to ~~7.34%~~14.75% and ~~0.74%~~1.14%, respectively, for the same prior year period.

~~CONSUMERS BANCORP, INC.~~

~~Management's Discussion and Analysis of Financial Condition~~

~~and Results of Operations (continued)~~

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

Net Interest Income

Net interest income, the difference between interest income earned on interest-earning assets and interest expense incurred on interest-bearing liabilities, is the largest component of the ~~Corporation~~’sCorporation’s earnings. Net interest income is affected by changes in the volumes, rates and composition of interest-earning assets and interest-bearing liabilities. In addition, prevailing economic conditions, fiscal and monetary policies and the policies of various regulatory agencies all affect market rates of interest and the availability and cost of credit, which, in turn, can significantly affect net interest income. 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~~2023 and 2022 fiscal ~~year~~years 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 3.61%~~balances and average securities include unrealized gains and losses on securities available for the three months ended December 31, 2017, compared with 3.62% for the same period in 2016. FTE net interest income for the three months ended December 31, 2017 increased by $290, or 7.8%, to $4,011 from $3,721 for the same year ago period.

~~Tax-equivalent~~ interest income for the three months ended December 31, 2017 increased by $404, or 10.2%, from the same year ago period. Interest income was positively impacted by a $31,513, or 7.7%, increase in average interest-earning assets from the same prior year period. The Corporation’s yieldsale, while yields are based on average interest-earning assets increased to 3.94% for the three months ended December 31, 2017 from 3.86% for the same period last year. The yield on average interest-earning assets increased despite a decline in the 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 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 rates.

~~Interest expense for the three months ended~~ December 31, 2017 increased by $114 from the same year ago period. The Corporation’s cost of funds was 0.46% for the three months ended 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.amortized cost.

~~CONSUMERS BANCORP, INC.~~

~~Management's Discussion and Analysis of Financial Condition~~

~~and Results of Operations (continued)~~

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

Average Balance Sheets and Analysis of Net Interest Income for the Three Months Ended 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
%

~~(1) calculated on a fully taxable equivalent basis~~ ~~utilizing a statutory federal income tax rate of 27.55% in the 2018 fiscal year and 34.0% in the 2017 fiscal year~~

CONSUMERS BANCORP, INC.

Management's Discussion and Analysis of Financial Condition

and Results of Operations (continued)

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

The Corporation’s net interest margin was 3.48% for the three months ended September 30, 2022, compared with 3.62% for the same period in 2021. FTE net interest income for the three months ended September 30, 2022 increased by $425, or 5.3%, to $8,517 from $8,092 for the same prior year period.

Average Balance Sheets and Analysis of Net Interest Income for the Six 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
$ 83,578 $ 970 2.30
%
$ 75,745 $ 779 2.07
%
Nontaxable securities (1)
60,635 997 3.30 59,710 1,061 3.61
Loans receivable (1)
286,273 6,674 4.62 262,296 6,219 4.70
Interest bearing deposits and federal funds sold
7,546 65 1.71 9,225 60 1.29
Total interest-earning assets
438,032 8,706 3.95
%
406,976 8,119 3.98
%

Noninterest-earning assets
31,699 28,008

Total Assets
$ 469,731 $ 434,984

Interest-bearing liabilities:

NOW
$ 53,556 $ 40 0.15
%
$ 48,770 $ 36 0.15
%
Savings
152,080 158 0.21 135,957 67 0.10
Time deposits
66,595 303 0.90 66,216 250 0.75
Short-term borrowings
26,197 112 0.85 19,965 23 0.23
FHLB advances
12,915 108 1.66 14,583 114 1.55
Total interest-bearing liabilities
311,343 721 0.46
%
285,491 490 0.34
%

Noninterest-bearing liabilities:

Noninterest-bearing checking accounts
110,111 102,144
Other liabilities
3,920 3,507
Total liabilities
425,374 391,142
Shareholders’ equity
44,357 43,842

Total liabilities and shareholders’ equity
$ 469,731 $ 434,984

Net interest income, interest rate spread (1)
$ 7,985 3.49
%
$ 7,629 3.64
%

Net interest margin (net interest as a percent of average interest-earning assets) (1)
3.62
%
3.74
%

Federal tax exemption on non-taxable securities and loans included in interest income
$ 272 $ 366

Average interest-earning assets to interest-bearing liabilities
140.69
%
142.55
%

Tax-equivalent interest income increased by $741, or 8.8%, for the three months ended September 30, 2022 from the same prior year period. Interest income was positively impacted by a $51,979, or 5.8%, increase in average interest-earning assets from the same prior year period as well as the increase in current market rates. The interest income earned from the growth in average interest-earning assets for the three-month period ended September 30, 2022 more than offset the decline of $987 on interest and fee income earned from the forgiveness of Paycheck Protection Program (PPP) loans that was recognized in the same prior year period. The yield on average interest-earning assets declined to 3.76% for the three months ended September 30, 2022, compared with 3.78% for the same period last year. The yield on loans and the yield on interest-earning assets was negatively impacted by the decline in interest and fee income from the forgiveness of PPP loans.

Interest expense for the three months ended September 30, 2022 increased by $316, or 87.3%, from the same prior year period primarily due to an increase in deposit and short-term borrowing costs as a result of higher market interest rates. The Corporation’s cost of funds increased to 0.40% for the three months ended September 30, 2022 compared with 0.23% for the same prior year period.

CONSUMERS BANCORP, INC.

Management's Discussion and Analysis of Financial Condition

and Results of Operations (continued)

(Dollars in thousands, except per share data

Average Balance Sheets and Analysis of Net Interest Income for the Three Months Ended September 30, (In thousands, except percentages)
	2022								2021
	Average Balance			Interest		Yield/ Rate			Average Balance			Interest		Yield/ Rate
Interest-earning assets:
Taxable securities	$	214,023		$	1,248		2.11	%	$	153,942		$	711		1.85	%
Nontaxable securities (1)		89,477			704		2.90			82,250			595		3.00
Loans receivable (1)		623,840			7,132		4.54			578,361			7,070		4.85
Federal bank and other restricted stocks		2,337			23		3.90			2,472			20		3.21
Equity securities		400			8		7.93			400			8		7.93
Interest bearing deposits and federal funds sold		13,968			80		2.27			74,641			50		0.27
Total interest-earning assets		944,045			9,195		3.76	%		892,066			8,454		3.78	%

Noninterest-earning assets		46,432								35,102

Total Assets	$	990,477							$	927,168

Interest-bearing liabilities:
NOW	$	160,491		$	175		0.43	%	$	137,899		$	33		0.09	%
Savings		368,287			260		0.28			324,680			89		0.11
Time deposits		108,681			162		0.59			121,112			174		0.57
Short-term borrowings		20,949			59		1.12			11,568			2		0.07
FHLB advances		8,232			22		1.06			16,597			64		1.53
Total interest-bearing liabilities		666,640			678		0.40	%		611,856			362		0.23	%

Noninterest-bearing liabilities:
Noninterest-bearing checking accounts		260,014								236,456
Other liabilities		8,047								7,164
Total liabilities		934,701								855,476
Shareholders’ equity		55,776								71,692

Total liabilities and shareholders’ equity	$	990,447							$	927,168

Net interest income, interest rate spread (1)				$	8,517		3.36	%				$	8,092		3.55	%

Net interest margin (net interest as a percent of average interest-earning assets) (1)							3.48	%							3.62	%

Federal tax exemption on non-taxable securities and loans included in interest income				$	121							$	119

Average interest-earning assets to interest-bearing liabilities		141.61	%							145.80	%

(1) calculated on a fully taxable equivalent basis utilizing a statutory federal income tax rate of ~~27.55% in the 2018 fiscal year and 34.0% in the 2017 fiscal year~~21.0%

CONSUMERS BANCORP, INC.

Management's Discussion and Analysis of Financial Condition

and Results of Operations (continued)

(Dollars in thousands, except per share data

Provision for Loan Losses

The provision for loan losses represents the charge to income necessary to adjust the allowance for loan losses to an amount that represents ~~management~~’smanagement’s assessment of the estimated probable incurred credit losses in the Bank’s loan portfolio that have been incurred at each balance sheet date. For the ~~three months~~three-month period ended ~~December 31, 2017,~~September 30, 2022, the provision for loan losses was ~~$60~~$410 compared ~~to $140~~with $190 for the same prior year period. ~~For~~Net charge-offs of $24 and net recoveries of $16 were recorded during the ~~six-month period~~three-month periods ended ~~December 31, 2017,~~September 30, 2022 and 2021, respectively. The loan loss provision expense recorded in fiscal year 2022 was primarily due to the ~~provision for~~organic growth within the loan ~~losses was $150 compared to $276 for the same prior year period.~~portfolio.

Non-performing loans were $~~865~~$66 as of ~~December 31, 2017~~September 30, 2022, compared with ~~$1,187~~$440 as of June 30, ~~2017~~2022 and ~~$1,589~~$1,719 as of ~~December 31, 2016. For~~September 30, 2021. Non-performing loans to total loans were 0.01% at September 30, 2022 and 0.07% at June 30, 2022. Non-performing loans declined from June 30, 2022 since two loans were upgraded and returned to accrual status during the ~~six months ended December 31, 2017 net charge-offs totaled $11 compared with net charge-offs~~first quarter of ~~$719 for the same prior~~fiscal year ~~period.~~2023. The allowance for loan losses as a percentage of loans was ~~1.10%~~1.18% at ~~December 31, 2017~~September 30, 2022 and ~~1.13%~~1.17% at June 30, ~~2017. The~~2022. Uncertainty remains regarding future levels of criticized and classified loans, non-performing loans and charge-offs. Management will continue to closely monitor changes in the loan portfolio and adjust the provision ~~for loan losses for the period ended December 31, 2017 was considered sufficient by management for maintaining an appropriate allowance for probable incurred credit losses.~~accordingly.

~~Non-Interest~~Noninterest Income

~~Non-interest~~Noninterest income ~~increased~~decreased by ~~$42~~,$142, or ~~5.3%~~11.2%, for the ~~second~~first quarter of fiscal year ~~2018 from the same period last year and by $66, or 4.0%, for the first six months of fiscal year 2018~~2023 from the same period last year. ~~Non-interest income~~The decline was ~~positively impacted by increases~~primarily the result of a $176, or 68.2%, decline in ~~debit card interchange income, gains~~mortgage banking activity from the same prior year period. Gains from the sale of mortgage loans ~~and earnings on bank owned life insurance. These increases were~~to the secondary market declined as refinancing of mortgages slowed because of the increase in mortgage rates from the record lows in the previous year. This decline was partially offset by ~~a decline~~increases in ~~gains from~~service charges on deposit accounts of $39, or 10.9%, and debit card interchange income increasing by $32, or 6.3% for the ~~sale of securities.~~

~~Non-Interest Expenses~~

~~Total non-interest expenses increased to $3,560, or by 7.0%, during the second~~first quarter of fiscal year ~~2018, compared with $3,326 during~~2023 from the same ~~year ago period.~~ period last year. Effective March 1, 2022, the Bank made a small reduction to the non-sufficient funds/overdraft fee and eliminated many internal account transfer fees. The Bank may make future reductions to the non-sufficient funds/overdraft fee in response to the industry wide trend of reducing overdraft fees as large banks have announced a reduction in these types of fees in response to regulatory pressure. As a result, service charges on deposit accounts may be negatively impacted in future periods.

Noninterest Expenses

Total ~~non-interest~~noninterest expenses increased ~~to $6,953,~~by $246, or ~~by 5.2%~~4.2%, ~~during~~for the first ~~six months~~quarter of fiscal year ~~2018,~~2023 compared with ~~$6,612 during~~ the same ~~year ago period. Total non-interest~~period last year. Increases in salaries and employee benefits; FDIC assessments; and occupancy and equipment expenses ~~were impacted by increases~~contributed to the increase in ~~salary, incentive and debit card processing expenses.~~noninterest expenses for the three-month period ended September 30, 2022.

On October 18, 2022, the FDIC issued a final rule that will increase the initial base deposit insurance assessment rate paid by insured depository institutions by two basis points, beginning with the first quarterly assessment period of calendar year 2023. According to the FDIC, the proposal increases the likelihood that its designated reserve ratio will reach the required minimum level of 1.35% by the statutory deadline of September 30, 2028 and will support progress toward achieving the long-term goal of a 2% ratio. The proposed increase would remain in effect until the long-term goal of a 2% FDIC designated reserve ratio is achieved. Progressively lower assessment rates will take effect when the reserve ratio reaches 2% and again when the reserve ratio reaches 2.5%.

On September 2, 2022, the OCC announced reduced assessment rates for OCC-chartered community banks. Effective with the March 2023 assessment, the OCC will make a 40% reduction in assessments based on the first $200 million in bank assets and a 20% reduction for assets between $200 million and $20 billion.

Income Taxes

Income tax expense was ~~$489 and $735~~$504 for the ~~three and six months~~three- month period ended ~~December 31, 2017, respectively,~~September 30, 2022, compared to ~~$145 and $397~~$559 for the ~~three~~three-month period ended September 30, 2021. The effective tax rates were 16.6% and ~~six months~~17.3% for the three-month periods ended ~~December 31, 2016,~~September 30, 2022 and 2021, respectively. The effective tax ~~rate was 42.7% and 31.7% for the three~~ and six months ended December 31, 2017, respectively, compared to 16.7% and 19.7% for the three and six months ended December 31, 2016, respectively. Income tax expense and the effective tax rate was higher in the 2018 fiscal year compared to the same prior year periods primarily due to the enactment of the Tax Act and increased income before income taxes. As a result of the enactment of the Tax Act, a one-time income tax expense of $253 was recorded in conjunction with revaluing the Company's net deferred tax assets and utilization of a blended tax rate. The enactment of the Tax Act required the Corporation to revalue its deferred tax assets and liabilities based upon the lower enacted federal corporate income tax rate at which the Corporation expects to recognize the benefit. During the three months ended December 31, 2017 a one-time income tax expense of $348 was recorded in conjunction with writing down its net deferred tax assets. In addition, the Company will utilize a blended tax rate for its fiscal year ending June 30, 2018 given the Tax Act loweredrates differed from the federal ~~corporate tax~~statutory rate ~~beginning January 1, 2018. As a result~~because of ~~utilizing a blended tax rate for its fiscal year ending June 30, 2018, the Company recognized a $95 benefit to~~tax-exempt income ~~tax expense for both the three~~from obligations of state and ~~six months ended December 31, 2017.~~

~~Financial Condition~~

~~Total assets at~~ ~~December 31, 2017 were $470,282 compared to $457,883 at June 30, 2017, an increase of $12,399, or an annualized 5.4%.~~political subdivisions, loans, and bank owned life insurance income.

CONSUMERS BANCORP, INC.

Management's ~~Discussion~~Discussion and Analysis of Financial Condition

and Results of Operations (continued)

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

Financial Condition

Total assets as of September 30, 2022 were $991,423 compared to $977,313 at June 30, 2022, an increase of $14,110, or an annualized 5.8%. From June 30, 2022, total loans increased by $25,758, or an annualized 16.8% and total deposits increased by $25,521, or an annualized 11.5%.

Available-for-sale securities decreased from $296,347 as of June 30, 2022, to $278,418 as of September 30, 2022. The portfolio had an unrealized loss of $44,135 as of September 30, 2022 as a result of recent increases in market interest rates compared with the yields within the portfolio that were available at the time the underlying securities were purchased. The fair value is expected to recover as the securities approach their maturity date or repricing date or if market yields for such securities decline. As of September 30, 2022, the projected cash flow from the portfolio over the next 12 months was approximately $23,250 that will be available to reinvest into loans or securities at the then current market rates.

Total loans increased by $~~20,727,~~$25,758, or an annualized ~~15.2%~~16.8%, from ~~$272,867 at~~ June 30, ~~2017 to $293,594 at December 31, 2017.~~2022. The growth in ~~the loan portfolio~~loans was primarily ~~related to growth~~ within the consumer and commercial real estate ~~and 1-4 family residential real estate segments to borrowers within the Bank’s primary market area. The~~loan portfolios. Consumer loan growth was primarily ~~funded by~~from indirect loans due to the expansion of consumer loan sales staff and an ~~increase of $8,518, or an annualized 4.5%, in total deposits and a decline of $6,348 in available-for-sale securities.~~expanded dealer network.

Non-Performing Assets

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

	December 31, 2017			June 30, 2017			December 31, 2016			September 30, 2022			June 30, 2022			September 30, 2021
Non-accrual loans	$	865		$	1,187		$	1,589		$	47		$	431		$	1,719
Loans past due over 90 days and still accruing		—			—			—			19			9			—
Total non-performing loans		865			1,187			1,589
Other real estate owned		57			71			—
Total non-performing assets	$	922		$	1,258		$	1,589
Total non-performing loans											66			440			1,719
Other real estate and repossessed assets											11			—			—
Total non-performing assets										$	77		$	440		$	1,719

Non-performing loans to total loans		0.29	%		0.44	%		0.60	%		0.01	%		0.07	%		0.30	%
Allowance for loan losses to total non-performing loans		372.83	%		259.98	%		196.54	%		11,433.33	%		1,661.25	%		388.42	%

As of ~~December 31, 2017,~~September 30, 2022, impaired loans totaled ~~$1,765,~~$383, of which ~~$865~~$47 are included in non-accrual loans. As of June 30, 2022, impaired loans totaled $473, of which $431 are included in non-accrual loans. Commercial and commercial real estate loans are classified as impaired if management determines that full collection of principal and interest, in accordance with the terms of the loan documents, is not probable. Impaired loans and non-performing loans have been considered in management’s analysis of the appropriateness of the allowance for loan losses. Management and the Board of Directors are closely monitoring these loans and believe that the prospects for recovery of principal and interest, less identified specific reserves, are favorable.

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

Liquidity

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

For the three months ended September 30, 2022, net cash inflow from operating activities was $3,957, net cash outflows from investing activities was $24,071 and net cash inflows from financing activities was $24,677. A major source of cash was a $25,521 increase in deposits and $8,047 from maturity, calls, principal pay downs and sales of available-for-sale securities. A major use of cash included $6,509 purchases of available-for-sale securities and a $25,793 increase in loans. Total cash and cash equivalents were $25,515 as of September 30, 2022, compared to $20,952 at June 30, 2022 and $87,092 at September 30, 2021.

CONSUMERS BANCORP, INC.

Management's Discussion and Analysis of Financial Condition

and Results of Operations (continued)

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

For the six months ended December 31, 2017, net cash inflow from operating activities was $3,484, net cash outflows from investing activities was $15,494 and net cash inflows from financing activities was $11,239. A major source of cash was $10,434 from sales, maturities, calls or principal pay downs on available-for-sale securities, $8,518 increase in deposits and $5,400 proceeds from FHLB advances. The major use of cash was a $20,967 increase in loans. Total cash and cash equivalents was $9,141 as of December 31, 2017, compared to $9,912 at June 30, 2017 and $10,850 at December 31, 2016.

The Bank offers several types of deposit products to its customers. We believe the rates offered by the Bank and the fees charged for them are competitive with ~~others~~the rates and fees charged by other banks for similar deposit products currently available in the market area. Deposits totaled ~~$382,989~~$912,083 at ~~December 31, 2017~~September 30, 2022 compared with ~~$374,471~~$886,562 at June 30, ~~2017.~~2022.

To provide an additional source of liquidity, the Corporation has entered into an agreement with the ~~FHLB~~Federal Home Loan Bank (FHLB) of Cincinnati. At ~~December 31, 2017,~~September 30, 2022, advances from the FHLB of Cincinnati totaled ~~$17,188~~$8,217 compared with ~~$12,320~~$8,256 at June 30, ~~2017.~~2022. As of ~~December 31, 2017,~~September 30, 2022, the Bank had the ability to borrow an additional ~~$17,032~~$101,775 from the FHLB of Cincinnati based on a blanket pledge of qualifying first mortgage and multi-family loans. The Corporation considers the FHLB of Cincinnati to be a reliable source of liquidity funding, secondary to its deposit base.

Short-term borrowings consisted of repurchase agreements, which are financing arrangements that mature daily, and ~~federal funds purchased from correspondent banks.~~a line of credit for the Corporation. The Bank pledges securities as collateral for the repurchase agreements. Short-term borrowings totaled ~~$22,507~~$20,946 at ~~December 31, 2017~~September 30, 2022 and ~~$23,986~~$21,295 at June 30, ~~2017.~~2022.

Jumbo time deposits (those with balances of $250 and over) totaled ~~$13,754 at December 31, 2017~~$23,311 as of September 30, 2022 and ~~$14,252 at~~$18,164 as of June 30, ~~2017.~~2022. These deposits are monitored closely by the Corporation and are mainly priced on an individual basis. ~~When these deposits are from a municipality, certain bank-owned securities are pledged to guarantee the safety of these public fund deposits as required by Ohio law.~~ The Corporation has the option to use a fee-paid broker to obtain deposits from outside its normal service area as an additional source of funding. The Corporation, however, does not rely upon these deposits as a primary source of funding. Although management monitors interest rates on an ongoing basis, a quarterly rate sensitivity report is used to determine the effect of interest rate changes on the financial statements. In the opinion of management, enough assets or liabilities could be repriced over the near term (up to three years) to compensate for such changes. The spread on interest rates, or the difference between the average earning assets and the average interest-bearing liabilities, is monitored quarterly.

~~CONSUMERS BANCORP, INC.~~

~~Management's Discussion and Analysis of Financial Condition~~

~~and Results of Operations (continued)~~

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

~~Off-Balance Sheet~~ ~~Arrangements~~

~~In the normal course of business, to~~To meet the financial needs of our customers, ~~we are a party to financial instruments with off-balance sheet risk. These financial instruments generally include~~ commitments to originate mortgage, commercial, construction, and consumer l~~oans,~~loans and ~~involve to varying degrees, elements~~commitments for commercial, home equity, and consumer lines of credit and interest rate risk in excess of amounts recognized in the Consolidated Balance Sheets. The maximum exposure to credit loss in the event of nonperformance by the borrower is represented by the contractual amount of those instruments.have been issued. Since commitments to extend credit have a fixed expiration date or other termination clause, some commitments will expire without being drawn upon and the total commitment amounts do not necessarily represent future cash requirements. The same credit policies are used in making commitments as are used for on-balance sheet instruments and collateral is required in instances where deemed necessary. Undisbursed balances of loans closed include funds not disbursed but committed for construction projects. Unused lines of credit include funds not disbursed, but committed for home equity, commercial and consumer lines of credit. Financial standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. The same credit ~~risk involved~~policies are used in ~~issuing~~making commitments and financial standby letters of credit ~~is essentially the same~~ as ~~that involved in extending loan facilities to customers.~~are used for on-balance sheet instruments. Total unused commitments were ~~$62,158 at December 31, 2017~~$162,315 as of September 30, 2022 and ~~$53,742 at~~$149,500 as of June 30, ~~2017.~~2022.

Capital Resources

Total ~~shareholders~~’shareholders’ equity ~~increased~~declined to ~~$44,171~~$43,458 as of ~~December 31, 2017~~September 30, 2022, from ~~$43,535~~$53,970 as of June 30, ~~2017.~~2022. The ~~increase was the result of net income of $1,586~~primary reason for the ~~2018 fiscal year which~~decline in shareholders’ equity was ~~partially offset by $668~~an increase of $12,742 in ~~cash dividends paid and a $372~~the accumulated other comprehensive loss from the mark-to-market of available-for-sale securities and from cash dividends paid of $519. As market interest rates rise, the fair value of fixed-rate available-for-sale securities decline with a corresponding net of tax decline recorded in ~~unrealized gains on available-for-sale securities.~~the accumulated other comprehensive loss portion of equity. The fair value is expected to recover as the securities approach their maturity date or repricing date or if market yields for such securities decline. These declines were partially offset by net income of $2,535 for the three-month period ended September 30, 2022.

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

As of ~~December 31, 2017,~~September 30, 2022, the Bank’s common equity tier 1 capital and tier 1 capital ratios were ~~12.64%~~11.14% and the leverage and total risk-based capital ratios were ~~9.00%~~7.55% and ~~13.60%~~12.24%, respectively. This compares with common equity tier 1 capital and tier 1 capital ratios of ~~13.21%~~11.39% and leverage and total risk-based capital ratios of ~~9.06%~~7.39% and ~~14.20%~~12.49%, respectively, as of June 30, ~~2017.~~2022. The Bank exceeded minimum regulatory capital requirements to be considered well-capitalized for both periods. Management is not aware of any matters occurring subsequent to ~~December 31, 2017~~September 30, 2022 that would cause the Bank’s capital category to change.

CONSUMERS BANCORP, INC.

Management's Discussion and Analysis of Financial Condition

and Results of Operations (continued)

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

Critical Accounting Policies

The Corporation’s consolidated financial ~~condition and results of operations for the Corporation presented~~statements are prepared in accordance with accounting principles generally accepted in the ~~Consolidated Financial Statements, accompanying notes to~~United States of America and follow general practices within the ~~Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations are, to a large degree, dependent upon the Corporation’s accounting policies. The selection and application~~industry in which it operates. Application of these principles requires management to make estimates or judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates are based on information available as of the date of the financial statements; accordingly, as this information changes, the financial statements could reflect different estimates or judgments. Certain policies inherently have a greater reliance on the use of estimates, and as such have a greater possibility of producing results that could be materially different than originally reported.

Critical accounting policies ~~involve~~are those policies that are highly dependent on subjective or complex judgments, estimates and ~~uncertainties that are susceptible to change.~~

assumptions and where changes in those estimates and assumptions could have a significant impact on the financial statements. The Corporation has identified the appropriateness of the allowance for loan losses and the evaluation of goodwill for impairment as a critical accounting ~~policy~~policies and an understanding of ~~this policy~~these policies is necessary to understand the financial statements. ~~Critical accounting policies are those policies that require management’s most difficult, subjective or complex judgments often as a result of the need to make estimates about the effect of matters that are inherently uncertain.~~ Note one (Summary of Significant Accounting Policies - Allowance for Loan ~~Losses)~~Losses and Goodwill and Other Intangible Assets), ~~note three~~Note four (Loans), Note six (Goodwill and Intangible Assets) and Management’s Discussion and Analysis of Financial Condition and Results of Operation (Critical Accounting Policies and Use of Significant Estimates) of the ~~2017~~2022 Form 10-K provide detail ~~with regard to~~regarding the Corporation’s accounting for the ~~allowance for loan losses.~~critical accounting policies. There have been no significant changes in the application of accounting policies since June 30, ~~2017.~~2022.

Allowance for Loan Losses. The determination of the allowance for loan losses involves considerable subjective judgment and estimation by management. The allowance for loan losses is a reserve established through a provision for loan losses charged to expense, which represents management’s best estimate of probable losses that have been incurred within the existing portfolio of loans. The balance in the allowance for loan losses is determined based on management’s review and evaluation of the loan portfolio in relation to past loss experience, the size and composition of the portfolio, current economic events and conditions and other pertinent factors, including management’s assumptions as to future delinquencies, recoveries, and losses. All these factors may be susceptible to significant change. Among the many factors affecting the allowance for loan losses, some are quantitative while others require qualitative judgment. Although management believes its process for determining the allowance adequately considers all the potential factors that could potentially result in credit losses, the process includes subjective elements and may be susceptible to significant change. To the extent actual outcomes differ from management’s estimates, additional provisions for loan losses may be required that would adversely impact the Corporation’s financial condition or earnings in future periods.

Goodwill. The Company accounts for business combinations using the acquisition method of accounting. Accordingly, the identifiable assets acquired and the liabilities assumed are recorded at their estimated fair values as of the date of acquisition with any excess of the cost of the acquisition over the fair value recorded as goodwill. The Company performs an evaluation of goodwill for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The evaluation for impairment involves comparing the current estimated fair value of the Company to its carrying value. If the current estimated fair value exceeds the carrying value, no additional testing is required, and an impairment loss is not recorded. If the estimated fair value is less than the carrying value, further valuation procedures are performed that could result in impairment of goodwill being recorded. As of April 30, 2022, the measurement date, a qualitative assessment was performed to determine whether there is a more likely than not (greater than 50% likelihood) that the fair value of the Corporation was less than its carrying amount. The qualitative impairment test of goodwill indicated no impairment existed as of the measurement date. However, it is impossible to know the future impact of the evolving economic conditions. If for any future period it is determined that there has been impairment in the carrying value of our goodwill balances, the Corporation will record a charge to earnings, which could have a material adverse effect on net income, but not risk-based capital ratios.

CONSUMERS BANCORP, INC.

Management's Discussion and Analysis of Financial Condition

and Results of Operations (continued)

(Dollars in thousands, except per share data

Forward-Looking Statements

~~When used~~Certain statements contained in this ~~report (including information incorporated by reference in this report~~),Quarterly Report on Form 10-Q, which are not statements of historical fact, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The words ~~or phrases “will likely result,~~“may,” ~~“are expected to,” “will continue,” “is anticipated,~~“continue,” “estimate,” “intend,” “plan,” “seek,” “will,” “believe,” “project,” ~~“believe” or~~“expect,” “anticipate” and similar expressions are intended to identify ~~“forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.~~forward-looking statements. These forward-looking statements may involve risks and uncertainties that are difficult to predict, may be beyond ~~the Corporation’s~~our control, and could cause actual results to differ materially from those described in such statements. Any such forward-looking statements are made only as of the date of this report or the respective dates of the relevant incorporated documents, as the case may be, and, except as required by law, ~~the Corporation undertakes~~we undertake no obligation to update these forward-looking statements to reflect subsequent events or circumstances. ~~Factors~~Risks and uncertainties that could cause actual results for future periods to differ materially from those anticipated or projected include, but are not limited to:

●

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

●

local, regional and national economic conditions becoming less favorable than ~~expected,~~we expect, resulting in ~~among other things,~~ a deterioration in asset credit quality ~~of assets and the underlying value of collateral could prove to be less valuable than otherwise assumed~~ or debtors being unable to meet their ~~obligations;~~obligations because of high unemployment rates and inflationary pressures;

	●	rapid fluctuations in market interest rates could result in changes in fair market valuations and a decline in net interest income;
	●	~~pricing~~changes in the level of non-performing assets and charge-offs;
	●	unanticipated changes in our liquidity ~~pressures~~position, including, but not limited to, changes in the cost of liquidity and our ability to find alternative funding sources;
	●	the effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities, and insurance) with which we must comply;
	●	the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve Board;
	●	breaches of security or failures of our technology systems due to technological or other factors and cybersecurity threats;
	●	changes in consumer spending, borrowing and savings habits;
	●	declining asset values impacting the underlying value of collateral;
	●	changes in accounting policies, rules and interpretations that may come as a result ~~in a rising market rate environment;~~of COVID-19 or otherwise;

	●	our ability to attract and retain qualified employees;
	●	competitive pressures on product pricing and services;

	●	~~the economic impact from the oil and gas activity in the region could be less than expected or the timeline for development could be longer than anticipated;~~ and
	●	changes in the ~~nature, extent, and timing~~reliability of ~~government and regulatory actions.~~our vendors, internal control systems or information systems.

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

CONSUMERS BANCORP, INC.

~~Management's Discussion and Analysis of Financial Condition~~

~~and Results of Operations (continued)~~

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

Item 4 – Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by the report, an evaluation was performed under the supervision and with the participation of the ~~Corporation~~’sCorporation’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Corporation’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15e. Based on the evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Corporation’s disclosure controls and procedures were effective as of ~~December 31, 2017.~~September 30, 2022.

Changes in Internal Controls Over Financial Reporting

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

CONSUMERS BANCORP, INC.

PART II – OTHER INFORMATION

Item 1 – Legal Proceedings

None

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

None

Item 3 – Defaults Upon Senior Securities

None

Item 4 – Mine Safety Disclosures

Not Applicable

Item 5 – Other Information

None

Item 6 – Exhibits

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

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

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

Exhibit 32.1	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes Oxley Act of 2002.

~~Exhibit 101~~101.INS	~~The following materials from Consumers Bancorp, Inc.’s Form 10-Q Report~~Inline XBRL Instance Document (The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document) (1)
101.SCH	Inline XBRL Taxonomy Extension Schema Document (1)
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document (1)
101.DEF	Inline XBRL Taxonomy Extension Definitions Linkbase Document (1)
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document (1)
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document (1)
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101.1)

(1)	These interactive date files shall not be deemed filed for purposes of Section 11 or 12 of the ~~quarterly period ended December 31, 2017, formatted in XBRL (Extensible Business Reporting Language) include: (1) Unaudited Consolidated Balance Sheets, (2) Unaudited Consolidated Statements~~Securities Act of ~~Income, (3) Unaudited Consolidated Statements~~1933, as amended, or Section 18 of ~~Comprehensive Income, (4) Unaudited Consolidated Statement~~the Securities Exchange Act of ~~Changes in Shareholders’ Equity, (5) Unaudited Condensed Consolidated Statements of Cash Flows, and (6) the Notes~~1934, as amended, or otherwise subject to ~~Unaudited Condensed Consolidated Financial Statements.~~liability under those sections.

SIGNATURES

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

		CONSUMERS BANCORP, INC. (Registrant)

Date: ~~February 14, 201~~8November 10, 2022		/s/ Ralph J. Lober
		Ralph J. Lober, II President & Chief Executive Officer (principal executive officer)

Date: ~~February 14, 201~~8November 10, 2022		/s/ Renee K. Wood
		Renee K. Wood Chief Financial Officer & Treasurer (principal financial officer)

(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

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

	As of June 30, 2017						Six Months ended December 31, 2016
	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	$	482	$	444	$	—	$	330	$	80	$	80
Commercial real estate:
Construction		—		—		—		170		6		6
Other		1,928		1,039		—		1,081		105		105
1-4 Family residential real estate:
Owner occupied		104		103		—		127		—		—
Non-owner occupied		—		—		—		205		—		—
With an allowance recorded:
Commercial		—		—		—		7		—		—
Commercial real estate:
Other		548		548		42		2,030		15		15
1-4 Family residential real estate:
Owner occupied		99		100		2		139		3		3
Total	$	3,161	$	2,234	$	44	$	4,089	$	209	$	209

			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