cbkm20240930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2024

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

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

(330) 868-7701

(Registrant’s telephone number)

Not applicable

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

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

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 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 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 ☒	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 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 ☒

There were 3,127,770 shares of Registrant’s common stock, no par value, outstanding as of November 8, 2024.

CONSUMERS BANCORP, INC.

FORM 10-Q

QUARTER ENDED September 30, 2024

Table of Contents

Page

Number (s)

Part I – Financial Information

Item 1 – Financial Statements
Consolidated Balance Sheets at September 30, 2024 and June 30, 2024	1

Consolidated Statements of Income for the three months ended September 30, 2024 and 2023 (unaudited)	2

Consolidated Statements of Comprehensive Income for the three months ended September 30, 2024 and 2023 (unaudited)	3

Consolidated Statements of Changes in Shareholders’ Equity for the three months ended September 30, 2024 and 2023 (unaudited)	4

Condensed Consolidated Statements of Cash Flows for the three months ended September 30, 2024 and 2023 (unaudited)	5

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

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

Item 3 – Not Applicable for Smaller Reporting Companies

Item 4 – Controls and Procedures	30
Part II – Other Information
Item 1 – Legal Proceedings	31

Item 1A – Not Applicable for Smaller Reporting Companies	31

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds	31

Item 3 – Defaults Upon Senior Securities	31
,
Item 4 – Mine Safety Disclosure	31

Item 5 – Other Information	31

Item 6 – Exhibits	31

Signatures	32

PART I – FINANCIAL INFORMATION

Item 1 – Financial Statements

CONSUMERS BANCORP, INC.

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share data)	September 30, 2024 (unaudited)			June 30, 2024
ASSETS
Cash on hand and noninterest-bearing deposits in financial institutions	$	20,296		$	17,709
Federal funds sold and interest-bearing deposits in financial institutions		6,629			14
Total cash and cash equivalents		26,925			17,723
Securities, available-for-sale		272,757			264,802
Securities, held-to-maturity (fair value of $5,625 at September 30, 2024 and $5,530 at June 30, 2024)		5,948			6,054
Equity securities, at fair value		381			381
Federal bank and other restricted stocks, at cost		2,072			2,186
Loans held for sale		2,240			908
Total loans		766,473			759,114
Less allowance for credit losses		(7,948	)		(7,930	)
Net loans		758,525			751,184
Cash surrender value of life insurance		12,967			10,500
Premises and equipment, net		17,631			16,927
Goodwill		2,452			2,452
Core deposit intangible, net		343			357
Accrued interest receivable and other assets		21,612			23,615
Total assets	$	1,123,853		$	1,097,089

LIABILITIES
Deposits
Noninterest-bearing demand	$	238,543		$	225,087
Interest bearing demand		142,459			142,261
Savings		354,272			351,305
Time		263,618			254,327
Total deposits		998,892			972,980

Short-term borrowings		27,101			30,007
Federal Home Loan Bank advances		8,087			13,709
Accrued interest and other liabilities		16,472			16,708
Total liabilities		1,050,552			1,033,404
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; 3,176,409 and 3,172,227 shares issued as of September 30, 2024 and June 30, 2024, respectively)		21,350			21,178
Retained earnings		73,176			71,534
Treasury stock, at cost (48,639 common shares as of September 30, 2024 and June 30, 2024)		(644	)		(695	)
Accumulated other comprehensive loss		(20,581	)		(28,332	)
Total shareholders’ equity		73,301			63,685
Total liabilities and shareholders’ equity	$	1,123,853		$	1,097,089

See accompanying notes to consolidated financial statements.

CONSUMERS BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

	Three Months ended September 30,
(Dollars in thousands, except per share amounts)	2024			2023

Interest and dividend income
Loans, including fees	$	10,939		$	9,697
Securities, taxable		1,571			1,449
Securities, tax-exempt		441			469
Equity securities		8			8
Federal bank and other restricted stocks		40			41
Federal funds sold and other interest-bearing deposits		155			71
Total interest and dividend income		13,154			11,735
Interest expense
Deposits		4,878			3,417
Short-term borrowings		200			126
Federal Home Loan Bank advances		33			38
Total interest expense		5,111			3,581
Net interest income		8,043			8,154
Provision for credit losses on loans		77			40
Provision for credit losses on unfunded commitments		(45	)		79
Net interest income after provision for credit losses		8,011			8,035

Noninterest income
Service charges on deposit accounts		450			426
Debit card interchange income		617			552
Mortgage banking activity		133			98
Bank owned life insurance income		92			68
Securities losses, net		—			(79	)
Other		101			92
Total noninterest income		1,393			1,157

Noninterest expenses
Salaries and employee benefits		3,764			3,498
Occupancy and equipment		884			784
Data processing expenses		211			196
Debit card processing expenses		362			312
Professional and director fees		306			236
FDIC assessments		207			189
Franchise taxes		40			96
Marketing and advertising		177			228
Telephone and network communications		89			88
Amortization of intangible		14			14
Other		634			624
Total noninterest expenses		6,688			6,265
Income before income taxes		2,716			2,927
Income tax expense		480			517
Net income	$	2,236		$	2,410

Basic and diluted earnings per share	$	0.72		$	0.78

See accompanying notes to consolidated financial statements.

CONSUMERS BANCORP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(Dollars in thousands)	Three Months Ended September 30,
	2024			2023

Net income	$	2,236		$	2,410

Other comprehensive income (loss), net of tax:
Net change in unrealized losses on securities available-for-sale:
Unrealized gains (losses) arising during the period		9,813			(9,852	)
Reclassification adjustment for net losses included in income		—			79
Net unrealized gains (losses)		9,813			(9,773	)
Income tax effect		(2,062	)		2,053
Other comprehensive income (loss)		7,751			(7,720	)

Total comprehensive income (loss)	$	9,987		$	(5,310	)

See accompanying notes to consolidated financial statements.

CONSUMERS BANCORP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (continued)

(Unaudited)

(Dollars in thousands, except per share data)	Common Stock		Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Income (Loss)			Total Shareholders’ Equity
Balance, June 30, 2024	$	21,178	$	71,534		$	(695	)	$	(28,332	)	$	63,685
Net income		—		2,236			—			—			2,236
Other comprehensive income		—		—			—			7,751			7,751
3,553 shares associated with vested restricted stock awards		27		—			51			—			78
Restricted stock expense		73		—			—			—			73
Issuance of 4,182 shares associated with dividend reinvestment plan and stock purchase plan		72		—			—			—			72
Cash dividends declared ($0.19 per share)		—		(594	)		—			—			(594	)
Balance, September 30, 2024	$	21,350	$	73,176		$	(644	)	$	(20,581	)	$	73,301

(Dollars in thousands, except per share data)	Common Stock		Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Loss			Total Shareholders’ Equity
Balance, June 30, 2023	$	20,769	$	65,200		$	(809	)	$	(29,961	)	$	55,199
Net income		—		2,410			—			—			2,410
Other comprehensive loss		—		—			—			(7,720	)		(7,720	)
5,676 shares associated with vested stock awards		47		—			62			—			109
Issuance of 8,519 stock-based incentive plan shares, net of forfeitures		2		—			—			—			2
Restricted stock expense		50		—			—			—			50
Issuance of 3,786 shares associated with dividend reinvestment plan and stock purchase plan		65		—			—			—			65
Cash dividends declared ($0.18 per share)		—		(560	)		—			—			(560	)
Balance, September 30, 2023	$	20,933	$	67,050		$	(747	)	$	(37,681	)	$	49,555

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,
	2024			2023
Cash flows from operating activities
Net cash from operating activities	$	1,142		$	3,654
Cash flow from investing activities
Purchases of securities, available-for-sale		(6,631	)		(1,603	)
Maturities, calls and principal pay downs of securities, available-for-sale		8,423			6,168
Sale of securities, available-for-sale		—			4,002
Principal pay downs of securities, held-to-maturity		106			104
Net decrease in certificates of deposit in other financial institutions		—			8
Net change in Federal Home Loan Bank stock, at cost		114			186
Net increase in loans		(7,418	)		(7,593	)
Purchase of bank owned life insurance		(2,375	)		—
Premises and equipment purchases		(1,021	)		(332	)
Net cash used in (from) investing activities		(8,802	)		940
Cash flow from financing activities
Net increase in deposit accounts		25,912			8,841
Net change in short-term borrowings		(2,906	)		(4,422	)
Repayments of Federal Home Loan Bank advances		(5,622	)		(630	)
Proceeds from dividend reinvestment and stock purchase plan		72			65
Dividends paid		(594	)		(560	)
Net cash from financing activities		16,862			3,294
Increase in cash or cash equivalents		9,202			7,888
Cash and cash equivalents, beginning of period		17,723			11,755
Cash and cash equivalents, end of period	$	26,925		$	19,643

Supplemental disclosure of cash flow information:
Cash paid during the period:
Interest	$	4,993		$	3,418
Federal income taxes		600			9
Non-cash items:
Issuance of treasury stock for vested restricted stock awards		78			109

See accompanying notes to consolidated financial statements.

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited)

(Dollars in thousands, except per share amounts)

Note 1 – Summary of Significant Accounting Policies:

Nature of Operations: Consumers Bancorp, Inc. (the Company) 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, Mahoning, Stark, Summit, and contiguous counties in 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 Company’s Form 10-K for the year ended June 30, 2024. 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 Company and the Bank. All significant inter-company transactions and accounts have been eliminated in consolidation.

Segment Information: The Company is a bank holding company engaged in the business of commercial and retail banking, which accounts for substantially all the revenues, operating income, and assets. Accordingly, all the Company’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.

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

Note 2 – Securities

Debt securities

The following tables summarize the amortized cost, fair value, and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive loss on the Company’s debt securities available-for-sale and gross unrecognized losses on the Company’s debt securities held-to-maturity as of September 30, 2024 and June 30, 2024:

Available –for-Sale	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
September 30, 2024
Obligations of U.S. Treasury	$	6,476	$	—	$	(112	)	$	6,364
Obligations of U.S. government-sponsored entities and agencies		27,596		37		(2,569	)		25,064
Obligations of state and political subdivisions		83,247		52		(5,880	)		77,419
U.S. Government-sponsored mortgage-backed securities–residential		90,975		17		(11,248	)		79,744
U.S. Government-sponsored mortgage-backed securities– commercial		8,581		—		(1,407	)		7,174
U.S. Government-sponsored collateralized mortgage obligations– residential		64,673		475		(4,436	)		60,712
Other debt securities		17,260		—		(980	)		16,280
Total securities available-for-sale	$	298,808	$	581	$	(26,632	)	$	272,757

Held-to-Maturity	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses			Fair Value
September 30, 2024
Obligations of state and political subdivisions	$	5,948	$	—	$	(323	)	$	5,625

Available-for-sale	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
June 30, 2024
Obligation of U.S Treasury	$	6,471	$	—	$	(219	)	$	6,252
Obligations of U.S. government-sponsored entities and agencies		28,019		4		(3,356	)		24,667
Obligations of state and political subdivisions		85,917		46		(8,233	)		77,730
U.S. Government-sponsored mortgage-backed securities - residential		94,303		—		(14,936	)		79,367
U.S. Government-sponsored mortgage-backed securities - commercial		8,584		—		(1,752	)		6,832
U.S. Government-sponsored collateralized mortgage obligations – residential		60,333		92		(5,757	)		54,668
Other debt securities		17,039		—		(1,753	)		15,286
Total securities available-for-sale	$	300,666	$	142	$	(36,006	)	$	264,802

Held-to-maturity

Amortized
Cost

Gross
Unrecognized
Gains

Gross
Unrecognized

Losses

Fair
Value

June 30, 2024

Obligations of state and political subdivisions

6,054

—

(524

)

5,530

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

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

	Three Months Ended September 30,
	2024		2023
Proceeds from sales	$	—	$	4,002
Gross realized gains		—		—
Gross realized losses		—		79

The income tax benefit related to the net realized losses amounted to $16 for the three-month period ended September 30, 2023.

The amortized cost and fair values of debt securities as of September 30, 2024, 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, are shown separately.

Available-for-Sale	Amortized Cost		Estimated Fair Value
Due in one year or less	$	8,646	$	8,615
Due after one year through five years		29,037		27,827
Due after five years through ten years		36,871		34,574
Due after ten years		60,025		54,111
Total		134,579		125,127

U.S. Government-sponsored mortgage-backed and related securities		164,229		147,630
Total securities available-for-sale	$	298,808	$	272,757

Held-to-Maturity
Due in one year or less	$	43	$	43
Due after one year through five years		2,303		2,256
Due after five years through ten years		3,602		3,326
Total securities held-to-maturity	$	5,948	$	5,625

Securities with a carrying value of approximately $158,873 and $153,908 were pledged at September 30, 2024 and June 30, 2024, respectively, to secure public deposits and commitments as required or permitted by law.

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

The following table summarizes the debt securities with unrealized and unrecognized losses as of September 30, 2024 and June 30, 2024, 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, 2024
Obligation of U.S. Treasury	$	—	$	—		$	6,364	$	(112	)	$	6,364	$	(112	)
Obligations of U.S. government-sponsored entities and agencies		—		—			23,513		(2,569	)		23,513		(2,569	)
Obligations of state and political subdivisions		11,673		(1,062	)		59,953		(4,818	)		71,626		(5,880	)
U.S. Government-sponsored mortgage-backed securities – residential		5,343		(229	)		74,401		(11,019	)		79,744		(11,248	)
U.S. Government-sponsored mortgage-backed securities – commercial		—		—			7,174		(1,407	)		7,174		(1,407	)
Collateralized mortgage obligations - residential		4,802		(49	)		36,796		(4,387	)		41,598		(4,436	)
Other debt securities		—		—			16,030		(980	)		16,030		(980	)
Total	$	21,818	$	(1,340	)	$	224,231	$	(25,292	)	$	246,049	$	(26,632	)

	Less than 12 Months				12 Months or more					Total
Held to Maturity	Fair Value		Unrecognized Loss		Fair Value		Unrecognized Loss			Fair Value		Unrecognized Loss
September 30, 2024
Obligations of state and political subdivisions	$	—	$	—	$	5,625	$	(323	)	$	5,625	$	(323	)
Total	$	—	$	—	$	5,625	$	(323	)	$	5,625	$	(323	)

	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, 2024
Obligations of U.S. Treasury	$	—	$	—		$	6,252	$	(219	)	$	6,252	$	(219	)
Obligations of U.S. government-sponsored entities and agencies		153		(4	)		22,899		(3,352	)		23,052		(3,356	)
Obligations of state and political subdivisions		8,110		(148	)		63,612		(8,085	)		71,722		(8,233	)
Mortgage-backed securities – residential		1,010		(3	)		78,357		(14,933	)		79,367		(14,936	)
Mortgage-backed securities – commercial		—		—			6,832		(1,752	)		6,832		(1,752	)
Collateralized mortgage obligations - residential		10,363		(96	)		36,049		(5,661	)		46,412		(5,757	)
Other debt securities		—		—			15,286		(1,753	)		15,286		(1,753	)
Total	$	19,636	$	(251	)	$	229,287	$	(35,755	)	$	248,923	$	(36,006	)

	Less than 12 Months				12 Months or more					Total
Held to Maturity	Fair Value		Unrecognized Loss		Fair Value		Unrecognized Loss			Fair Value		Unrecognized Loss
June 30, 2024
Obligations of state and political subdivisions	$	—	$	—	$	5,530	$	(524	)	$	5,530	$	(524	)
Total	$	—	$	—	$	5,530	$	(524	)	$	5,530	$	(524	)

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

At September 30, 2024, the Company’s portfolio consisted of 416 securities, 388 of which were available-for-sale and 4 of which were held-to-maturity securities in unrealized or unrecognized loss positions. As of September 30, 2024, no allowance for credit losses has been recognized on securities in an unrealized loss position as management does not believe any of the securities are impaired due to reasons of credit quality. This is based upon our analysis of the underlying risk characteristics, including credit ratings, and other qualitative factors related to our available-for-sale securities.

The Company’s mortgage-backed securities and collateralized mortgage obligations were issued by U.S. government-sponsored entities and agencies. The Company does not own any private label mortgage-backed securities. The Company’s municipal bond portfolio consists of tax-exempt and taxable general obligation and revenue bonds to a broad range of counties, towns, school districts, and other essential service providers. As of September 30, 2024, 97.4% of the municipal bonds held in the available-for-sale portfolio had a S&P or Moody’s investment grade rating, and 2.6% were non-rated issues. The municipal bonds in the held-to-maturity portfolio are all non-rated issues to local entities that are also deposit customers. The other debt securities consist of subordinated notes issued by other bank holding companies.

The issuers of all securities owned by the Company continue to make timely principal and interest payments under the securities’ contractual terms. The unrealized losses related to these securities have not been recognized into income because the decline in fair value is not attributed to credit quality, management does not intend to sell the securities, and it is not likely that management will be required to sell the securities prior to their anticipated recovery. The unrealized losses on these securities are primarily due to increases in market interest rates over the yields available at the time the underlying securities were purchased. The securities’ fair value is expected to recover as the securities approach their maturity date or repricing date or if market yields for such investments decline.

Equity Securities

The Company owned equity securities with an amortized cost of $400 and a fair value of $381 as of September 30, 2024, and June 30, 2024. Changes in the fair value of these securities are included in noninterest income on the consolidated statements of income. There were no net unrealized gains or losses on equity securities recognized in earnings and there were no sales of equity securities during the three-month periods ended September 30, 2024 and 2023.

Note 3 – Loans and Allowance for Credit Losses

The following table presents loans by major category.

	September 30, 2024			June 30, 2024
Commercial & Industrial	$	125,100		$	127,782
Commercial real estate:
Owner occupied		166,027			163,856
Non-owner occupied		151,219			146,827
Farmland		38,481			38,898
Land Development		13,377			12,654
1 – 4 family residential real estate		196,098			196,098
Consumer		76,101			72,915
Subtotal		766,403			759,030
Unamortized deferred loan costs, net		70			84
Allowance for credit losses		(7,948	)		(7,930	)
Net Loans	$	758,525		$	751,184

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 credit losses by portfolio segment for the three months ended September 30, 2024.

	Commercial			Commercial							1-4 Family
	&			Real					Land		Residential
	Industrial			Estate		Farmland			Development		Real Estate			Consumer			Total

ACL beginning balance	$	1,144		$	3,650	$	89		$	174	$	2,018		$	855		$	7,930
Provision for expected credit losses		(57	)		28		(2	)		9		(1	)		100			77
Charge-offs		—			—		—			—		—			(126	)		(126	)
Recoveries		1			—		—			—		1			65			67
ACL ending balance	$	1,088		$	3,678	$	87		$	183	$	2,018		$	894		$	7,948

The following table presents the activity in the allowance for credit losses by portfolio segment for the three months ended September 30, 2023.

	Commercial			Commercial									1-4 Family
	&			Real						Land			Residential
	Industrial			Estate			Farmland			Development			Real Estate			Consumer			Total

ACL beginning balance	$	1,308		$	3,943		$	—		$	—		$	1,571		$	902		$	7,724
Cumulative effect of change in accounting principle		(455	)		(53	)		93			398			166			(97	)		52
Provision for expected credit losses		121			61			(2	)		(132	)		(99	)		91			40
Charge-offs		—			—			—			—			—			(106	)		(106	)
Recoveries		—			—			—			—			—			72			72
ACL ending balance	$	974		$	3,951		$	91		$	266		$	1,638		$	862		$	7,782

The following table presents the amortized cost of non-accrual loans by class as of September 30, 2024 and the interest income recognized on non-accrual loans for the three month period ended September 30, 2024:

	September 30, 2024
					Interest Income
	Non-accrual		Total		Recognized during
	loans with		Non-accrual		the period on
	no ACL		loans		non-accrual loans
Commercial & Industrial	$	50	$	306	$	—
Commercial real estate:
Owner occupied		138		138		6
1 – 4 family residential real estate		452		467		—
Total	$	640	$	911	$	6

The following table presents the amortized cost of non-accrual loans by class as of June 30, 2024 and the interest income recognized on non-accrual loans for the three month period ended September 30, 2023:

	June 30, 2024				Three months ended September 30, 2023
					Interest Income
	Non-accrual		Total		Recognized during
	loans with		Non-accrual		the period on
	no ACL		loans		non-accrual loans
Commercial & Industrial	$	51	$	308	$	—
Commercial real estate:
Owner occupied		189		189		—
1 – 4 family residential real estate		262		277		—
Total	$	502	$	774	$	—

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

The following table presents the aging of the amortized cost of past due loans as of September 30, 2024 by class of loans:

													Loans 90
	Days Past Due												Days Past
	30 – 59 Days		60 - 89 Days		90 Days or Greater		Total Past Due		Loans Not Past Due		Total		Due and Accruing
Commercial & Industrial	$	—	$	—	$	256	$	256	$	124,840	$	125,096	$	—
Commercial real estate:
Owner occupied		195		—		138		333		165,397		165,730		—
Non-owner occupied		—		—		—		—		150,925		150,925		—
Farmland		—		—		—		—		38,379		38,379		—
Land development		—		—		—		—		13,341		13,341		—
1 – 4 family residential real estate		397		189		215		801		196,343		197,144		—
Consumer		481		156		8		645		75,213		75,858		8
Total	$	1,073	$	345	$	617	$	2,035	$	764,438	$	766,473	$	8

The above table of past due loans includes the recorded investment in non-accrual loans of $117 in the loans not past due category, $185 in the loans 60-89 days past due category and $609 in the 90 days or greater category.

The following table presents the aging of the amortized cost of past due loans as of June 30, 2024 by class of loans:

													Loans 90
	Days Past Due												Days Past
	30 – 59 Days		60 - 89 Days		90 Days or Greater		Total Past Due		Loans Not Past Due		Total		Due and Accruing
Commercial & Industrial	$	—	$	—	$	308	$	308	$	127,503	$	127,811	$	—
Commercial real estate:
Owner occupied		311		—		189		500		163,043		163,543		—
Non-owner occupied		—		—		—		—		146,529		146,529		—
Farmland		—		—		—		—		38,799		38,799		—
Land development		—		—		—		—		12,615		12,615		—
1 – 4 family residential real estate		294		—		158		452		196,691		197,143		68
Consumer		575		98		16		689		71,985		72,674		16
Total	$	1,180	$	98	$	671	$	1,949	$	757,165	$	759,114	$	84

The above table of past due loans includes the recorded investment in non-accrual loans of $187 in the loans not past due category and $587 in the 90 days or greater category.

Modifications to Borrowers Experiencing Financial Difficulty

Occasionally, the Company modifies loans to borrowers experiencing financial difficulty to maximize collection of loan balances by providing principal forgiveness, term extension, an other-than insignificant payment delay, or an interest rate reduction. In some cases, the Company may provide multiple types of concessions on one loan. If principal forgiveness is provided, the amount of forgiveness is charged-off against the allowance for credit losses.

There were no modifications of loans to borrowers in financial distress completed during the three-month periods ended September 30, 2024 and 2023.

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

Collateral Dependent Loans

A loan is considered to be collateral dependent when, based upon management's assessment, the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. In such cases, expected credit losses are based on the fair value of the collateral at the measurement date, adjusted for estimated selling costs if satisfaction of the loan depends on the sale of the collateral. The following table presents the amortized cost of collateral dependent loans and the related allowance for credit losses allocated to these loans:

September 30, 2024:	Real Estate		Other		ACL
Commercial & Industrial	$	—	$	256	$	66
Commercial real estate:
Owner occupied		139		—		—
Total loans	$	139	$	256	$	66

June 30, 2024:	Real Estate		Other		ACL
Commercial & Industrial	$	—	$	257	$	67
Commercial real estate:
Owner occupied		189		—		—
Total loans	$	189	$	257	$	67

Credit Quality Indicators:

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, current economic trends and other relevant information. At the time of origination, the Company analyzes all commercial loans individually and classifies the loans by credit risk. Management regularly monitors commercial loans for any changes in the borrowers’ ability to service their debt and completes an annual review to confirm the risk rating for those loans with total outstanding loan relationships greater than $500. The Company uses the following definitions for risk ratings:

Pass. Loans classified as pass exhibit a wide array of characteristics but at a minimum represent minimal level of risk and are considered collectable. Borrowers in this rating may have leveraged but acceptable balance sheet positions, satisfactory asset quality, stable to favorable sales and earnings trends, acceptable liquidity, and adequate cash flow. While generally adhering to credit policy, these loans may exhibit occasional exceptions that do not result in undue risk. Borrowers are generally capable of absorbing setbacks, financial and otherwise.

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.

Not Rated. Loans listed as not rated are included in groups of homogeneous loans. Past due information is the primary credit indicator for groups of homogenous loans.

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

Based on the most recent analysis performed, the following tables present the amortized cost by internal risk category and class of loans as of September 30, 2024:

	Term Loans by Fiscal Year of Origination												Revolving Loans Amortized		Revolving Loans Converted
	2025		2024		2023		2022		2021		Prior		Cost Basis		To Term		Total
Commercial & Industrial
Pass	$	2,136	$	16,633	$	21,992	$	26,746	$	6,577	$	6,511	$	43,284	$	92	$	123,971
Special Mention		—		145		63		189		9		112		536		—		1,054
Substandard		—		—		—		—		7		—		—		—		7
Doubtful		—		—		—		—		—		—		64		—		64
Total Commercial & Industrial	$	2,136	$	16,778	$	22,055	$	26,935	$	6,593	$	6,623	$	43,884	$	92	$	125,096
Current year-to-date gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial real estate:
Owner occupied:
Pass	$	1,643	$	19,029	$	20,128	$	34,157	$	20,961	$	55,894	$	12,223	$	136	$	164,171
Special Mention		—		—		—		—		640		504		152		—		1,296
Substandard		—		—		—		—		—		249		—		—		249
Doubtful		—		—		—		—		14		—		—		—		14
Total owner occupied	$	1,643	$	19,029	$	20,128	$	34,157	$	21,615	$	56,647	$	12,375	$	136	$	165,730
Current year-to-date gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Non-owner occupied:
Pass	$	2,823	$	19,797	$	36,753	$	22,091	$	23,278	$	45,465	$	718	$	—	$	150,925
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Total non-owner occupied	$	2,823	$	19,797	$	36,753	$	22,091	$	23,278	$	45,465	$	718	$	—	$	150,925
Current year-to-date gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Farmland:
Pass	$	408	$	1,792	$	5,805	$	5,818	$	5,248	$	18,203	$	962	$	139	$	38,375
Special Mention		—		—		—		—		—		4		—		—		4
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Total Farmland	$	408	$	1,792	$	5,805	$	5,818	$	5,248	$	18,207	$	962	$	139	$	38,379
Current year-to-date gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Land Development:
Pass	$	257	$	6,304	$	1,991	$	345	$	468	$	756	$	3,220	$	—	$	13,341
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Total Land Development	$	257	$	6,304	$	1,991	$	345	$	468	$	756	$	3,220	$	—	$	13,341
Current year-to-date gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Total:
Pass	$	7,267	$	63,555	$	86,669	$	89,157	$	56,532	$	126,829	$	60,407	$	367	$	490,783
Special Mention		—		145		63		189		649		620		688		—		2,354
Substandard		—		—		—		—		7		249		—		—		256
Doubtful		—		—		—		—		14		—		64		—		78
Total	$	7,267	$	63,700	$	86,732	$	89,346	$	57,202	$	127,698	$	61,159	$	367	$	493,471

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

Management monitors the credit risk profile by payment activity for residential and consumer loan classes. Loans past due 90 days or more and loans on nonaccrual are considered nonperforming. The following table presents the amortized cost of residential real estate and consumer loans based on payment status as of September 30, 2024:

	Term Loans by Fiscal Year of Origination												Revolving Loans Amortized		Revolving Loans Converted
	2025		2024		2023		2022		2021		Prior		Cost Basis		To Term		Total
1 – 4 family residential real estate:
Performing	$	2,957	$	17,783	$	23,047	$	29,005	$	53,329	$	45,784	$	24,697	$	75	$	196,677
Nonperforming		—		—		129		273		—		65		—		—		467
Total 1-4 family residential real estate	$	2,957	$	17,783	$	23,176	$	29,278	$	53,329	$	45,849	$	24,697	$	75	$	197,144
Current year-to-date gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Consumer:
Performing	$	10,353	$	27,211	$	23,004	$	10,980	$	3,544	$	580	$	178	$	—	$	75,850
Nonperforming		—		—		—		8		—		—		—		—		8
Total consumer	$	10,353	$	27,211	$	23,004	$	10,988	$	3,544	$	580	$	178	$	—	$	75,858
Current year-to-date gross write-offs	$	6	$	23	$	19	$	76	$	—	$	2	$	—	$	—	$	126
Total:
Performing	$	13,310	$	44,994	$	46,051	$	39,985	$	56,873	$	46,364	$	24,875	$	75	$	272,527
Nonperforming		—		—		129		281		—		65		—		—		475
Total	$	13,310	$	44,994	$	46,180	$	40,266	$	56,873	$	46,429	$	24,875	$	75	$	273,002

Based on the most recent analysis performed, the following tables present the amortized cost by internal risk category and class of commercial loans as of June 30, 2024:

	Term Loans by Fiscal Year of Origination												Revolving Loans Amortized		Revolving Loans Converted
	2024		2023		2022		2021		2020		Prior		Cost Basis		To Term		Total
Commercial & Industrial
Pass	$	43,540	$	24,263	$	28,588	$	7,370	$	3,448	$	3,954	$	14,868	$	93	$	126,124
Special Mention		151		67		569		12		—		61		755		—		1,615
Substandard		—		—		—		8		—		—		—		—		8
Doubtful		—		—		—		—		—		—		64		—		64
Total Commercial & Industrial	$	43,691	$	24,330	$	29,157	$	7,390	$	3,448	$	4,015	$	15,687	$	93	$	127,811
Current year-to-date gross write-offs	$	—	$	—	$	—	$	—	$	—	$	6	$	—	$	—	$	6
Commercial real estate:
Owner occupied:
Pass	$	16,207	$	20,615	$	34,572	$	21,405	$	14,877	$	41,035	$	11,684	$	—	$	160,395
Special Mention		—		—		—		650		320		1,708		151		—		2,829
Substandard		—		—		—		—		—		254		—		—		254
Doubtful		—		—		—		14		—		51		—		—		65
Total owner occupied	$	16,207	$	20,615	$	34,572	$	22,069	$	15,197	$	43,048	$	11,835	$	—	$	163,543
Current year-to-date gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Non-owner occupied:
Pass	$	16,395	$	37,241	$	22,324	$	23,564	$	11,616	$	34,570	$	819	$	—	$	146,529
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Total non-owner occupied	$	16,395	$	37,241	$	22,324	$	23,564	$	11,616	$	34,570	$	819	$	—	$	146,529
Current year-to-date gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

	Term Loans by Fiscal Year of Origination												Revolving Loans Amortized		Revolving Loans Converted
	2024		2023		2022		2021		2020		Prior		Cost Basis		To Term		Total
Farmland:
Pass	$	1,543	$	5,854	$	5,867	$	5,309	$	2,280	$	16,591	$	1,201	$	143	$	38,788
Special Mention		—		—		—		—		—		11		—		—		11
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Total Farmland	$	1,543	$	5,854	$	5,867	$	5,309	$	2,280	$	16,602	$	1,201	$	143	$	38,799
Current year-to-date gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Land Development:
Pass	$	4,449	$	2,005	$	353	$	512	$	285	$	504	$	4,507	$	—	$	12,615
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Total Land Development	$	4,449	$	2,005	$	353	$	512	$	285	$	504	$	4,507	$	—	$	12,615
Current year-to-date gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Total:
Pass	$	82,134	$	89,978	$	91,704	$	58,160	$	32,506	$	96,654	$	33,079	$	236	$	484,451
Special Mention		151		67		569		662		320		1,780		906		—		4,455
Substandard		—		—		—		8		—		254		—		—		262
Doubtful		—		—		—		14		—		51		64		—		129
Total	$	82,285	$	90,045	$	92,273	$	58,844	$	32,826	$	98,739	$	34,049	$	236	$	489,297

	Term Loans by Fiscal Year of Origination												Revolving Loans Amortized		Revolving Loans Converted
	2024		2023		2022		2021		2020		Prior		Cost Basis		To Term		Total
1 – 4 family residential real estate:
Performing	$	16,675	$	23,451	$	29,857	$	54,816	$	18,891	$	28,792	$	24,235	$	81	$	196,798
Nonperforming		—		—		277		—		—		68		—		—		345
Total 1-4 family residential real estate	$	16,675	$	23,451	$	30,134	$	54,816	$	18,891	$	28,860	$	24,235	$	81	$	197,143
Current year-to-date gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Consumer:
Performing	$	29,800	$	25,179	$	12,422	$	4,241	$	586	$	236	$	194	$	—	$	72,658
Nonperforming		8		—		8		—		—		—		—		—		16
Total consumer	$	29,808	$	25,179	$	12,430	$	4,241	$	586	$	236	$	194	$	—	$	72,674
Current year-to-date gross write-offs	$	63	$	140	$	265	$	56	$	35	$	1	$	—	$	—	$	560
Total:
Performing	$	46,475	$	48,630	$	42,279	$	59,057	$	19,477	$	29,028	$	24,429	$	81	$	269,456
Nonperforming		8		—		285		—		—		68		—		—		361
Total	$	46,483	$	48,630	$	42,564	$	59,057	$	19,477	$	29,096	$	24,429	$	81	$	269,817

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

Note 4 - Fair Value

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

Financial assets and financial liabilities measured at fair value on a recurring basis include the following:

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

Assets and liabilities measured at fair value on a recurring basis are summarized below, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

	Balance at September 30,		Fair Value Measurements at September 30, 2024
	2024		Level 1		Level 2		Level 3
Assets:
Obligations of U.S. Treasury	$	6,364	$	6,364	$	—	$	—
Obligations of U.S. government-sponsored entities and agencies		25,064		—		25,064		—
Obligations of state and political subdivisions		77,419		—		77,419		—
U.S. Government-sponsored mortgage-backed securities – residential		79,744		—		79,744		—
U.S. Government-sponsored mortgage-backed securities – commercial		7,174		—		7,174		—
U.S. Government-sponsored collateralized mortgage obligations - residential		60,712		—		60,712		—
Other debt securities		16,280		—		16,280		—
Equity securities		381		—		381		—

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

	Balance at June 30,		Fair Value Measurements at June 30, 2024
	2024		Level 1		Level 2		Level 3
Assets:
Obligations of U.S. treasury	$	6,252	$	6,252	$	—	$	—
Obligations of U.S. government-sponsored entities and agencies		24,667		—		24,667		—
Obligations of state and political subdivisions		77,730		—		77,730		—
U.S. government-sponsored mortgage-backed securities - residential		79,367		—		79,367		—
U.S. government-sponsored mortgage-backed securities - commercial		6,832		—		6,832		—
U.S. government-sponsored collateralized mortgage obligations - residential		54,668		—		54,668		—
Other debt securities		15,286		—		15,286		—
Equity securities		381		—		381		—

There were no transfers between Level 1 and Level 2 during the three-month period ended September 30, 2024.

Certain assets and 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. Assets that may be recorded at fair value on a nonrecurring basis include individually evaluated collateral dependent loans , other real estate owned, and other repossessed assets.

Collateral Dependent Loans: The fair value of collateral dependent loans with specific allocations of the allowance for credit losses is generally based on recent real estate appraisals. Collateral dependent individually evaluated loans carried at fair value generally receive specific allocations of the allowance for credit losses or are charged down to their fair value. 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 collateral dependent individually evaluated loans measured at fair value on a non-recurring basis at September 30, 2024 or June 30, 2024.

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. Subsequent to their initial recognition, these assets are remeasured at fair value, which is the lower of cost or fair value less estimated costs to sell, through a write-down included in other non-interest expense. Real estate owned properties and other repossessed assets, which are primarily vehicles, are evaluated on a quarterly basis for additional impairment and adjusted accordingly. There were no such fair value measurement adjustments recorded during the periods ended September 30, 2024 or 2023. There was no other real estate owned and other repossessed assets as of September 30, 2024 or June 30, 2024.

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 Company’s consolidated balance sheets, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

	September 30, 2024				June 30, 2024
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial Assets:
Level 1 inputs:
Cash and cash equivalents	$	26,925	$	26,925	$	17,723	$	17,723
Level 2 inputs:
Loans held for sale		2,240		2,277		908		920
Accrued interest receivable		3,382		3,382		3,560		3,560
Level 3 inputs:
Securities held-to-maturity		5,948		5,625		6,054		5,530
Loans, net		758,525		732,187		751,184		714,205
Financial Liabilities:
Level 2 inputs:
Demand and savings deposits		735,274		735,274		718,653		718,653
Time deposits		263,618		263,095		254,327		253,458
Short-term borrowings		27,101		27,101		30,007		30,007
Federal Home Loan Bank advances		8,087		7,379		13,709		12,672
Accrued interest payable		1,033		1,033		915		915

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

Cash and cash equivalents: The carrying value of cash and deposits in other financial institutions were considered to approximate fair value resulting in a Level 1 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. The estimated fair value approximates carrying value for variable-rate loans that reprice frequently and with no significant change in credit risk. The fair value of fixed-rate loans and variable-rate loans which reprice on an infrequent basis is estimated by discounting future cash flows using the current interest rates at which similar loans with similar terms would be made to borrowers of similar credit quality resulting in a Level 3 classification. An overall valuation adjustment is made for specific credit risks as well as general portfolio credit risk.

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

Time deposits: Fair value of fixed-maturity certificates of deposit was estimated using the rates offered at September 30, 2024 and June 30, 2024 for deposits of similar remaining maturities, resulting in 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.

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

Federal Home Loan Bank advances: Fair value of Federal Home Loan Bank advances was estimated using current rates at September 30, 2024 and June 30, 2024 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 Company’s lending commitments have variable interest rates and “escape” clauses if the customer’s credit quality deteriorates. Therefore, the fair values of these items are not significant and are not included in the above table.

NOTE 5—AFFORDABLE HOUSING TAX CREDIT PARTNERSHIP

In April 2023, the Company invested in a limited partnership that will in turn invest in qualified affordable housing projects that will generate tax benefits for the limited partner investors, including federal low-income housing tax credits pursuant to Section 42 of the Internal Revenue Code. This partnership investment is an unconsolidated Variable Interest Entity (VIE) for which the Company holds an interest in but is not the primary beneficiary of the VIE. The purpose of this investment is to achieve a satisfactory return on capital, to facilitate the sale of additional affordable housing product offerings, and to assist in achieving goals associated with the Community Reinvestment Act. The primary activities of the limited partnership include the identification, development, and operation of multi-family housing that is leased to qualifying residential tenants. Generally, these types of investments are funded through a combination of debt and equity.

The Company uses the proportional amortization method to account for its investment. The investment is included in other assets and the unfunded commitment is included in other liabilities. As a limited partner, there is no recourse to the Company by the creditors of the limited partnership, however, the tax credits are generally subject to recapture should the partnership fail to comply with the applicable government regulations.

The following table summarizes the balances of the affordable housing tax credit investment and related unfunded commitment at September 30, 2024 and June 30, 2024.

	September 30, 2024			June 30, 2024
Affordable housing tax credit investment	$	10,250		$	10,250
Less: amortization		(519	)		(397	)
Net affordable housing tax credit investment	$	9,731		$	9,853
Unfunded commitments	$	8,055		$	8,279

The following summarizes other information relating to the affordable housing tax credit investment for the three-month periods ended September 30, 2024 and 2023.

	Three Months Ended September 30,
	2024		2023
Tax credits and other tax benefits recognized	$	143	$	15
Proportional amortization expense included in provision for income taxes		122		1

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

Note 6 – 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 9,897 and 21,082 shares of restricted stock that were anti-dilutive for the three- month periods ended September 30, 2024 and 2023, respectively. The following table details the calculation of basic and diluted earnings per share:

	For the Three Months Ended September 30,
	2024		2023
Basic:
Net income available to common shareholders	$	2,236	$	2,410
Weighted average common shares outstanding		3,119,603		3,092,945
Basic income per share	$	0.72	$	0.78

Diluted:
Net income available to common shareholders	$	2,236	$	2,410
Weighted average common shares outstanding		3,119,603		3,092,945
Dilutive effect of restricted stock		—		—
Total common shares and dilutive potential common shares		3,119,603		3,092,945
Dilutive income per share	$	0.72	$	0.78

Note 7 –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- month periods ended September 30, 2024 and 2023, were as follows:

	Pretax			Tax Effect			After-tax			Affected Line Item in Consolidated Statements of Income
Balance as of June 30, 2024	$	(35,864	)	$	7,532		$	(28,332	)
Unrealized holding gains on available-for-sale securities arising during the period		9,813			(2,062	)		7,751
Balance as of September 30, 2024	$	(26,051	)	$	5,470		$	(20,581	)

	Pretax			Tax Effect			After-tax			Affected Line Item in Consolidated Statements of Income
Balance as of June 30, 2023	$	(37,925	)	$	7,964		$	(29,961	)
Unrealized holding losses on available-for-sale securities arising during the period		(9,852	)		2,069			(7,783	)
Amounts reclassified from accumulated other comprehensive loss		79			(16	)		63			(a)(b)
Net current period other comprehensive loss		(9,773	)		2,053			(7,720	)
Balance as of September 30, 2023	$	(47,698	)	$	10,017		$	(37,681	)

(a) Securities (gains) losses, net

(b) Income tax expense

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 Discussion and Analysis of Financial Condition and Results of Operations

(Dollars in thousands, except per share data)

General

The following is management’s analysis of the Company’s results of operations for the three-month period ended September 30, 2024, compared to the same period in fiscal year 2023, and the consolidated balance sheet at September 30, 2024, compared to June 30, 2024. 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 Company), owns all the issued and outstanding common shares of Consumers National Bank, a bank chartered under the laws of the United States of America (the Bank). The Company’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, Mahoning, Stark, Summit, and contiguous counties in 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-Month Periods Ended September 30, 2024 and 2023

Net income for the first quarter of fiscal year 2025 was $2,236, or $0.72 per common share, compared to $2,410, or $0.78 per common share for the three months ended September 30, 2023. The following are key highlights of our results of operations for the three months ended September 30, 2024, compared with the prior fiscal year comparable period:

	●	net interest income decreased by $111 or 1.4%, to $8,043 in the first quarter of fiscal year 2025 from the same prior year period mainly because of the rapid increase in short-term market rates in 2023 and 2024 causing interest bearing liabilities to reprice faster than interest earning assets;
	●	a $77 provision for credit losses on loans and a $45 reduction to the provision for credit losses on unfunded commitments was recorded for the three-month period ended September 30, 2024 compared with a $40 provision for credit losses on loans and a $79 provision for credit losses on unfunded commitments for the same prior year period. The reduction to the reserve for unfunded commitments recorded in the first quarter of fiscal year 2025 was the result of lower loss rates and a reduction in the balance of unfunded commitments.;
	●	noninterest income increased by $236, or 20.4%, in the first quarter of fiscal year 2025 from the same prior year period. A $79 loss on the sale of lower yielding securities was included in noninterest income during the three-month period ended September 30, 2023. Excluding this securities loss, noninterest income increased by $157, or 12.7%, compared with the same prior year period primarily because of an increase in debit card interchange income of $65, or 11.8%, gains from mortgage banking activity of $35, or 35.7%, and an increase in service charges on deposit accounts of $24, or 5.6%.
	●	noninterest expenses increased by $423, or 6.8%, in the first quarter of fiscal year 2025 from the same prior year period primarily due to increases in salaries and benefits, software expenses, and debit card processing expenses.

The annualized return on average equity and return on average assets were 13.08% and 0.80%, respectively, for the three months ended September 30, 2024 compared to 17.31% and 0.90%, respectively, for the same prior year period.

CONSUMERS BANCORP, INC.

Management's Discussion and Analysis of Financial Condition

and Results of Operations

(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 Company’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 2025 and 2024 fiscal years was 21.0%. All average balances are daily average balances. Non-accruing loans are included in average loan balances and average securities include unrealized gains and losses on securities available-for-sale, while yields are based on average amortized cost.

The Company’s net interest margin was 2.92% for the three months ended September 30, 2024, compared with 3.09% for the same prior year period. FTE net interest income for the three months ended September 30, 2024, decreased by $171, or 2.1%, to $7,940 from $8,111 for the same prior year period.

The yield on average interest-earning assets increased to 4.81% for the three months ended September 30, 2024, compared with 4.45% for the same period last year. Tax-equivalent interest income increased by $1,359, or 11.6%, for the three months ended September 30, 2024, from the same prior year period because of a $42,325, or 4.2%, increase in average interest-earning assets as well as the affect of higher market interest rates on new and repricing earning assets. However, the yield on nontaxable securities is being negatively impacted since the interest expense attributable to carrying tax exempt securities is not deductible. Interest expense for the three months ended September 30, 2024 increased by $1,530 from the same prior year period primarily due to an increase in savings and time deposit costs as a result of higher market interest rates, an increase in competition for deposits impacting the time deposit and money market offering rates, and from a shift of funds from lower yielding deposit products to higher yielding time and money market accounts. The Company’s cost of funds increased to 2.56% for the three months ended September 30, 2024 compared with 1.91% for the same prior year period. Competitive pressures on deposit pricing have begun to ease and pricing on money market accounts and time deposits were able to be reduced following the 50-basis point cut in the discount rate in September 2024. As a result, management expects the cost of funds to trend downward in future quarters.

CONSUMERS BANCORP, INC.

Management's Discussion and Analysis of Financial Condition

and Results of Operations

(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)

	2024									2023
	Average Balance			Interest			Yield/ Rate			Average Balance			Interest			Yield/ Rate
Interest-earning assets:
Taxable securities	$	207,070		$	1,571			2.68	%	$	209,311		$	1,449			2.39	%
Nontaxable securities (1)		67,957			339			1.81			71,594			427			2.14
Loans receivable (1)		756,952			10,938			5.73			713,498			9,696			5.39
Federal bank and other restricted stocks		2,126			40			7.46			2,087			41			7.79
Equity securities		385			8			8.24			386			8			8.22
Interest bearing deposits and federal funds sold		11,284			155			5.45			6,573			71			4.29
Total interest-earning assets		1,045,774			13,051			4.81	%		1,003,449			11,692			4.45	%

Noninterest-earning assets		60,285									57,645

Total Assets	$	1,106,059								$	1,061,094

Interest-bearing liabilities:
NOW	$	142,794		$	276			0.77	%	$	152,747		$	373			0.97	%
Savings		351,698			1,709			1.93			335,453			1,137			1.34
Time deposits		260,669			2,893			4.40			222,729			1,907			3.40
Short-term borrowings		28,274			200			2.81			24,444			126			2.05
FHLB advances		8,890			33			1.47			9,323			38			1.62
Total interest-bearing liabilities		792,325			5,111			2.56	%		744,696			3,581			1.91	%

Noninterest-bearing liabilities:
Noninterest-bearing checking accounts		228,972									243,258
Other liabilities		16,951									17,902
Total liabilities		1,038,248									1,005,856
Shareholders’ equity		67,811									55,238

Total liabilities and shareholders’ equity	$	1,106,059								$	1,061,094

Net interest income, interest rate spread (1)				$	7,940			2.25	%				$	8,111			2.54	%

Net interest margin (net interest as a percent of average interest-earning assets) (1)								2.92	%								3.09	%

Federal tax exemption on non-taxable securities and loans included in interest income				$	(103	)							$	(43	)

Average interest-earning assets to interest-bearing liabilities		131.99	%								134.75	%

(1) calculated on a fully taxable equivalent basis utilizing a statutory federal income tax rate of 21.0%

CONSUMERS BANCORP, INC.

Management's Discussion and Analysis of Financial Condition

and Results of Operations

(Dollars in thousands, except per share data)

Provision for Credit Losses

The allowance for credit losses on loans consists of general and specific components. The general component covers loans collectively evaluated for credit loss and is based on peer historical loss experience adjusted for current and forecasted factors. For each portfolio segment, a loss driver analysis (LDA) is performed to identify appropriate loss indicators and create a regression model for use in forecasting cash flows. The LDA analysis utilizes peer data from the Federal Financial Institutions Examination Council’s (FFIEC) Call Report data for all segments. Since the Company has had very limited loss experience, management elected to utilize benchmark peer loss history data to estimate historical loss rates. The Company has established a one-year reasonable and supportable forecast period with a one-year straight-line reversion to the long-term historical average. The Company uses the central tendency seasonally adjusted civilian unemployment rate forecast from the Federal Open Market Committee for all portfolio segments. Other key assumptions include a maturity assumption for loans without maturity dates and prepayment / curtailment rates specific to each loan segment. Prepayment and curtailment rates are calculated based on the Company’s own data.

Management's adjustments to the quantitative evaluation may be for trends in delinquencies, trends in the volume of loans, changes in underwriting standards, changes in the value of underlying collateral, the existence and effect of portfolio concentration, regulatory environment, economic conditions, Company management and the status of portfolio administration including the Company’s loan review function.

The specific component includes loans that do not share similar risk characteristics that are evaluated on an individual basis and are excluded from the pooling approach. As of September 30, 2024, individually evaluated loans totaled $29,776 and included the $28,865 third-party residential mortgage warehouse line-of-credit and $911 of nonaccrual loans. The warehouse line-of-credit is included in individually evaluated loans because of the unique structure of the loan given the short-term nature of the advances, curtailment features provided by the lead financial institution that provides the lines-of-credit, as well as being secured by individual residential properties. There was a $66 specific allocation of the allowance for credit losses to the individually evaluated loans as of September 30, 2024.

For the three-month period ended September 30, 2024, the provision for credit losses on loans was $77 compared with $40 for the same period last year. The allowance for credit losses as a percentage of loans was 1.04% at September 30, 2024 and June 30, 2024. Net charge-offs of $59, or an annualized 0.03% of total loans, were recorded during the three-month period ended September 30, 2024 compared with net charge offs of $34, or an annualized 0.02% of total loans, for the same period last year.

Non-performing loans were $919 as of September 30, 2024, compared with $858 as of June 30, 2024. As of September 30, 2024, non-performing loans included $359 that is guaranteed by the Small Business Administration. Non-performing loans to total loans were 0.12%, or 0.07% excluding the guaranteed portion, at September 30, 2024 and 0.11%, or 0.07% excluding the guaranteed portion, at June 30, 2024. 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 will work with borrowers as needed to mitigate losses to the Company.

The allowance for credit losses on off-balance sheet credit exposures is a liability account representing expected credit losses over the contractual period for which the Company is exposed to credit risk resulting from a contractual obligation to extend credit. The reserve for unfunded commitments is primarily related to 1 - 4 family home equity lines of credit and construction loans, land development loans, and commercial construction loans. For the three-month period ended September 30, 2024, a reduction of $45 was recorded to the reserve for unfunded commitments compared with a $79 reserve for the same period last year. The reduction to the reserve recorded in the first quarter of fiscal year 2025 was the result of lower loss rates and a reduction in the balance of unfunded commitments.

Noninterest Income

Noninterest income increased by $236, or 20.4%, for the first quarter of fiscal year 2025 from the same period last year. During the three-month period ended September 30, 2023, a $79 loss on the sale of lower yielding securities was included in noninterest income. Excluding this securities loss, noninterest income increased by $157, or 12.7%, compared with the same prior year period primarily because of an increase in debit card interchange income of $65, or 11.8%, gains from mortgage banking activity of $35, or 35.7%, and an increase in service charges on deposit accounts of $24, or 5.6%.

CONSUMERS BANCORP, INC.

Management's Discussion and Analysis of Financial Condition

and Results of Operations

(Dollars in thousands, except per share data)

Noninterest Expenses

Total noninterest expenses increased by $423, or 6.8%, for the first quarter of fiscal year 2025 compared with the same period last year. Salaries and employee benefits expenses increased by $266, or 7.6%, for the three-month period ended September 30, 2024 compared to the same prior year period primarily due to merit and cost of living increases and increases to incentive expense accruals. Occupancy and equipment expenses increased by $100, or 12.8%, for the first quarter of fiscal year 2025 compared with the same period last year primarily because of investments in new software, increases in software licensing fees, and increases in building maintenance and repair. Debit card processing expenses increased by $50, or 16.0%, for the three-month period ended September 30, 2024 compared to the same prior year period primarily due to an increase in customer card usage and an increase in the number of cards issued. These increases were partially offset by a decline of $56, or 58.3% in Ohio franchise tax expense for the three-month period ended September 30, 2024 compared to the same prior year period due to the full year impact of the reduction in total shareholders’ equity because of the accumulated other comprehensive loss.

Income Taxes

Income tax expense was $480 for the three-month period ended September 30, 2024 compared to $517 for the three-month period ended September 30, 2023. The effective tax rate was 17.7% for both of the three-month periods ended September 30, 2024 and 2023. The effective tax rates differed from the federal statutory rate because of tax-exempt income from obligations of state and political subdivisions, loans, bank owned life insurance income, and the low-income housing tax credits.

Financial Condition

Total assets as of September 30, 2024 were $1,123,853 compared to $1,097,089 at June 30, 2024, an increase of $26,764, or an annualized 9.8%. From June 30, 2024 to September 30, 2024, total loans increased by $7,359, or an annualized 3.9%, and total deposits increased by $25,912, or an annualized 10.7%.

Available-for-sale securities increased from $264,802 as of June 30, 2024, to $272,757 as of September 30, 2024. As of September 30, 2024, the portfolio had an unrealized loss of $26,051 as a result of the increase 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 or repricing dates or if market yields for such securities decline. The portfolio is primarily comprised of agency mortgage-backed securities, obligations of state and political subdivisions, other government agencies’ debt, corporate debt, and U.S. Treasury notes. The municipal bond portfolio consists of tax-exempt and taxable general obligations and revenue bonds to a broad range of counties, towns, school districts, and other essential service providers. As of September 30, 2024, 97.4 % of the municipal bonds held in the available-for-sale portfolio had an S&P or Moody’s investment grade rating, and 2.6% were non-rated issues. The other debt securities consist of subordinated notes issued by other bank holding companies. As of September 30, 2024, the projected cash flow from the portfolio over the next 12 months was approximately $39,679 which may be available to reinvest into loans or securities at the then current market rates.

Total loans increased by $7,359, or an annualized 3.9%, from June 30, 2024. The growth in loans was primarily within the commercial real estate and consumer loan portfolios. Consumer loan growth was primarily from indirect loans due to the expansion of the indirect dealer network.

Asset Quality

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

	September 30, 2024			June 30, 2024			September 30, 2023
Non-accrual loans	$	911		$	774		$	193
Loans past due over 90 days and still accruing		8			84			98
Total non-performing loans		919			858			291
Other real estate and repossessed assets		—			—			124
Total non-performing assets	$	919		$	858		$	415

Non-performing loans to total loans		0.12	%		0.11	%		0.04	%

CONSUMERS BANCORP, INC.

Management's Discussion and Analysis of Financial Condition

and Results of Operations

(Dollars in thousands, except per share data)

As of September 30, 2024, non-accrual loans include loans that are guaranteed by the Small Business Administration. Excluding the guaranteed portion, non-performing loans were $560, or 0.07% of total loans as of September 30, 2024.

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 Company 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 Company’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 Company to be sufficiently liquid to meet normal operating needs and conditions. The Company’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 ensure the soundness of the portfolio, as well as to provide funding for loan demand as needed.

For the three months ended September 30, 2024, net cash inflows from operating activities was $1,142, net cash outflows from investing activities was $8,802 and net cash inflows from financing activities was $16,862. A major source of cash was $25,912 from the increase in deposits and $8,423 from maturity, calls, and principal pay downs of available-for-sale securities. A major use of cash was $7,418 for loan originations. Total cash and cash equivalents were $26,925 as of September 30, 2024, compared to $17,723 at June 30, 2024 and $19,643 at September 30, 2023.

The Bank offers several types of deposit products to a diverse base of business, public fund, and personal customers. We believe the rates offered by the Bank and the fees charged for them are competitive with the rates and fees charged by other banks for similar deposit products currently available in the market area. Deposits totaled $998,892 at September 30, 2024, an increase of $25,912, or an annualized 10.7%, compared with $972,980 at June 30, 2024. As of September 30, 2024, the estimated percentage of uninsured deposits, excluding collateralized public fund deposits, was 18.3%.

Jumbo time deposits (those with balances of $250 and over) totaled $66,735 as of September 30, 2024 and $59,233 as of June 30, 2024 and are from local customers and businesses. These deposits are monitored closely by the Company and are mainly priced on an individual basis. The Company has the option to use a fee-paid broker or CD listing service to obtain deposits from outside its normal service area as an additional source of funding. The Company, however, does not rely upon these types of deposits as a primary source of funding. There were $2,049 and $6,004 of deposits classified as brokered deposits as of September 30, 2024 and June 30, 2024, respectively. 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 monthly.

To provide additional sources of liquidity, the Company has lines of credit with other financial institutions and entered into agreements with the FHLB of Cincinnati and the Federal Reserve discount window. At September 30, 2024, advances from the FHLB of Cincinnati totaled $8,087 compared with $13,709 at June 30, 2024. As of September 30, 2024, the Bank had the ability to borrow an additional $102,155 from the FHLB of Cincinnati based on a blanket pledge of qualifying first mortgage and multi-family loans. The Company considers the FHLB of Cincinnati to be a reliable source of liquidity funding, secondary to its deposit base. In addition, at September 30, 2024, the Company had approximately $96,877 in securities unencumbered by a pledge that could be used to support additional borrowings, as needed, through the Federal Reserve discount window.

CONSUMERS BANCORP, INC.

Management's Discussion and Analysis of Financial Condition

and Results of Operations

(Dollars in thousands, except per share data)

Borrowings with original maturities of one year or less are classified as short-term and were comprised of the following:

	September 30, 2024		June 30, 2024
Repurchase agreements	$	17,101	$	18,307
Federal funds purchased		—		1,700
Bank term funding program		10,000		10,000
Total short-term borrowings	$	27,101	$	30,007

Repurchase agreements are financing arrangements with local customers that mature daily. The Bank pledges securities as collateral for the repurchase agreements. The Federal Reserve’s Bank Term Funding Program (BTFP) was a facility established in 2023 in response to liquidity concerns within the banking industry and the program ceased making new loans on March 11, 2024. The BTFP was designed to provide additional funding to eligible depository institutions in order to help assure that banks had the ability to meet the needs of all their depositors. Under the program, eligible depository institutions could obtain loans of up to one year in length by pledging certain U.S. Treasuries, agency debt, mortgage-backed securities, and other qualifying assets as collateral. These assets were valued at par. A line of credit from another financial institution was established since the holding company does not conduct operations and its primary sources of liquidity are dividends upstreamed from the Bank and borrowings from outside sources. As of September 30, 2024, the available credit on the holding company’s line of credit was $5,000.

To meet the financial needs of our customers, we have issued commitments to originate mortgage, commercial, construction, and consumer loans and commitments for commercial, home equity, and consumer lines of credit. 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. Financial standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. The same credit policies are used in making commitments and financial standby letters of credit as are used for on-balance sheet instruments. Total unused commitments were $142,769 as of September 30, 2024, and $145,796 as of June 30, 202.

Capital Resources

Total shareholders’ equity increased by $9,616 to $73,301 as of September 30, 2024, from $63,685 as of June 30, 2024 because of a reduction of $7,751 in the accumulated other comprehensive loss from the mark-to-market of available-for-sale securities and from net income of $2,236 for the first three months of fiscal year 2025 which was partially offset by cash dividends paid of $594. 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 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.

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 Company’s financial statements.

As of September 30, 2024, the Bank’s common equity tier 1 capital and tier 1 capital ratios were 11.13% and the leverage and total risk-based capital ratios were 8.05% and 12.13%, respectively. This compares with common equity tier 1 capital and tier 1 capital ratios of 11.07% and leverage and total risk-based capital ratios of 7.98% and 12.07%, respectively, as of June 30, 2024. 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 September 30, 2024 that would cause the Bank’s capital category to change.

Critical Accounting Policies

The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America and follow general practices within the 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.

CONSUMERS BANCORP, INC.

Management's Discussion and Analysis of Financial Condition

and Results of Operations

(Dollars in thousands, except per share data)

Critical accounting policies are those policies that are highly dependent on subjective or complex judgments, estimates and assumptions and where changes in those estimates and assumptions could have a significant impact on the financial statements. The Company has identified the appropriateness of the allowance for credit losses and the evaluation of goodwill for impairment as critical accounting policies and an understanding of these policies is necessary to understand the financial statements. Note 1 (Summary of Significant Accounting Policies – Adoption of ASC 326 and Allowance for Credit Losses) and Note 3 (Loans and Allowance for Credit Losses) of the Company’s Consolidated Financial Statements provide detail regarding the Company’s accounting for the allowance for credit losses. Note 5 (Goodwill and Acquired 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 2024 Form 10-K provide detail regarding the Company’s accounting for Goodwill.

Forward-Looking Statements

Certain statements contained in this 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 “may,” “continue,” “estimate,” “intend,” “plan,” “seek,” “will,” “believe,” “project,” “expect,” “anticipate” and similar expressions are intended to identify forward-looking statements. These forward-looking statements may involve risks and uncertainties that are difficult to predict, may be beyond 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, we undertake no obligation to update these forward-looking statements to reflect subsequent events or circumstances. 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:

	●	changes in local, regional and national economic conditions becoming less favorable than we expect, resulting in a deterioration in asset credit quality or debtors being unable to meet their 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;
	●	changes in the level of non-performing assets and charge-offs;
	●	unanticipated changes in our liquidity position, including, but not limited to, changes in the cost of liquidity, our ability to find alternative funding sources, and potential market reactions to the default or risk of default by other financial institutions;
	●	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 or our vendor’s 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;
	●	our ability to attract and retain qualified employees;
	●	competitive pressures on product pricing and services; and
	●	changes in the reliability of our vendors, internal control systems or information systems.

CONSUMERS BANCORP, INC.

Item 4 – Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by the report, an evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’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 Company’s disclosure controls and procedures were effective as of September 30, 2024.

Changes in Internal Controls Over Financial Reporting

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

101.INS	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)
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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 Securities Act of 1933, as amended, or Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to 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: November 8, 2024	/s/ Ralph J. Lober Ralph J. Lober, II President & Chief Executive Officer (principal executive officer)

Date: November 8, 2024	/s/ Renee K. Wood Renee K. Wood Chief Financial Officer & Treasurer (principal financial officer)