UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

~~[X]~~☒	Quarterly Report Pursuant to Section 13 or 15 (d) ofof the Securities Exchange Act of 1934

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

For the quarterly period ended ~~December~~March 31, ~~2017~~2021

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~~’sRegistrant’s telephone number)

Not applicable

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

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

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

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

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

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

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

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

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

There were ~~2,729,644~~3,028,100 shares of ~~Registrant~~’sRegistrant’s common stock, no par value, outstanding as of ~~February 9, 2018.~~May 12, 2021.

CONSUMERS BANCORP, INC.

FORM 10-Q

QUARTER ENDED ~~December~~March 31,~~, 2017~~ 2021

Table of Contents

Page

Number (s)

Part I – Financial Information

Item 1 – Financial Statements ~~(Unaudited)~~

Consolidated Balance Sheets at ~~December~~March 31, ~~2017~~2021 and June 30, ~~2017~~2020	1

Consolidated Statements of Income for the three and ~~six~~nine months ended ~~December~~March 31, ~~2017~~2021 and ~~2016~~2020 (unaudited)	2

Consolidated Statements of Comprehensive Income ~~(Loss)~~ for the three and ~~six~~nine months ended ~~December~~March 31, ~~2017~~2021 and ~~2016~~2020 (unaudited)	3

Condensed Consolidated Statements of Changes in ~~Shareholders~~’Shareholders’ Equity for the three and ~~six~~nine months ended ~~December~~March 31, ~~2017~~2021 and ~~2016~~2020 (unaudited)	4

Condensed Consolidated Statements of Cash Flows for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2021 and ~~2016~~2020 (unaudited)	5

Notes to the Consolidated Financial Statements (unaudited)	~~6-2~~66-22

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations	2~~7-35~~23-32

Item 3 – Not Applicable for Smaller Reporting Companies

Item 4 – Controls and Procedures	3633

Part II – Other Information

Item 1 – Legal Proceedings	3734

Item 1A – Not Applicable for Smaller Reporting Companies	3734

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds	3734

Item 3 – Defaults Upon Senior Securities	3734

Item 4 – Mine Safety Disclosure	3734

Item 5 – Other Information	3734

Item 6 – Exhibits	3734

Signatures	3835

PART I – FINANCIAL INFORMATION

Item 1 – Financial Statements

CONSUMERS BANCORP, INC.

CONSOLIDATED BALANCE SHEETS ~~(Unaudited)~~

(Dollars in thousands, except per share data)

December 31,
2017

June 30,
2017

ASSETS

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

LIABILITIES

Deposits

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

Short-term borrowings
22,507 23,986
Federal Home Loan Bank advances
17,188 12,320
Accrued interest and other liabilities
3,427 3,571
Total liabilities
426,111 414,348
Commitments and contingent liabilities

SHAREHOLDERS’ EQUITY

Preferred stock (no par value, 350,000 shares authorized, none outstanding)
— —
Common stock (no par value, 3,500,000 shares authorized; 2,854,133 shares issued as of December 31, 2017 and June 30, 2017)
14,630 14,630
Retained earnings
31,044 30,122
Treasury stock, at cost (124,489 and 130,606 common shares as of December 31, 2017 and June 30, 2017, respectively)
(1,576
)
(1,662
)
Accumulated other comprehensive income
73 445
Total shareholders’ equity
44,171 43,535
Total liabilities and shareholders’ equity
$ 470,282 $ 457,883

~~See accompanying notes to consolidated financial statements~~

~~CONSUMERS BANCORP, INC.~~

~~CONSOLIDATED STATEMENTS OF INCOME (Unaudited)~~

Three Months ended
December 31,

Six Months ended
December 31,

(Dollars in thousands, except per share amounts)

2017

2016

2017

2016

Interest income

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

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

Non-interest income

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

Non-interest expenses

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

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

~~See accompanying notes to consolidated financial statements~~

~~CONSUMERS BANCORP, INC.~~

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

~~(Unaudited)~~

~~(Dollars in thousands)~~

Three Months ended
December 31

Six Months ended
December 31,

2017

2016

2017

2016

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

Other comprehensive income (loss), net of tax:

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

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

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

(Dollars in thousands, except per share data)	March 31, 2021 (unaudited)			June 30, 2020
ASSETS
Cash on hand and noninterest-bearing deposits in financial institutions	$	8,541		$	8,429
Federal funds sold and interest-bearing deposits in financial institutions		32,491			1,230
Total cash and cash equivalents		41,032			9,659
Certificates of deposit in other financial institutions		7,335			11,635
Securities, available-for-sale		169,059			143,918
Securities, held-to-maturity (fair value of $8,483 at March 31, 2021 and $3,868 at June 30, 2020)		8,036			3,541
Equity securities, at fair value		412			—
Federal bank and other restricted stocks, at cost		2,472			2,472
Loans held for sale		561			3,507
Total loans		553,137			542,861
Less allowance for loan losses		(6,076	)		(5,678	)
Net loans		547,061			537,183
Cash surrender value of life insurance		9,637			9,442
Premises and equipment, net		15,345			14,901
Goodwill		836			836
Core deposit intangible, net		236			256
Accrued interest receivable and other assets		3,470			3,470
Total assets	$	805,492		$	740,820

LIABILITIES
Deposits
Noninterest-bearing demand	$	215,828		$	190,233
Interest bearing demand		124,046			99,173
Savings		275,636			228,567
Time		88,478			115,382
Total deposits		703,988			633,355

Short-term borrowings		9,419			6,943
Federal Home Loan Bank advances		18,067			31,161
Accrued interest and other liabilities		6,445			6,121
Total liabilities		737,919			677,580
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; 3,124,053 shares issued as of March 31, 2021 and June 30, 2020)		20,011			19,974
Retained earnings		46,154			40,460
Treasury stock, at cost (95,953 and 108,475 common shares as of March 31, 2021 and June 30, 2020, respectively)		(1,324	)		(1,454	)
Accumulated other comprehensive income		2,732			4,260
Total shareholders’ equity		67,573			63,240
Total liabilities and shareholders’ equity	$	805,492		$	740,820

See accompanying notes to consolidated financial statements.

CONSUMERS BANCORP, INC.

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

INCOME (Unaudited)

(Dollars in thousands, except per share data)

Three Months ended
December 31,

Six Months ended
December 31,

2017

2016

2017

2016

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

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

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

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

	Three Months ended March 31,				Nine Months ended March 31,
(Dollars in thousands, except per share amounts)	2021		2020		2021		2020
Interest and dividend income
Loans, including fees	$	5,840	$	5,654	$	18,912	$	15,277
Securities, taxable		368		488		1,084		1,478
Securities, tax-exempt		428		387		1,275		1,186
Equity securities		8		—		8		—
Federal bank and other restricted stocks		19		16		58		56
Federal funds sold and other interest-bearing deposits		41		61		130		103
Total interest and dividend income		6,704		6,606		21,467		18,100
Interest expense
Deposits		299		918		1,363		2,773
Short-term borrowings		2		14		8		38
Federal Home Loan Bank advances		67		80		208		218
Total interest expense		368		1,012		1,579		3,029
Net interest income		6,336		5,594		19,888		15,071
Provision for loan losses		185		445		445		760
Net interest income after provision for loan losses		6,151		5,149		19,443		14,311

Noninterest income
Service charges on deposit accounts		290		355		911		1,088
Debit card interchange income		467		367		1,368		1,142
Gain on sale of mortgage loans		149		121		631		397
Bank owned life insurance death benefit		—		—		—		324
Bank owned life insurance income		64		65		195		199
Securities gains, net		6		121		14		231
Other		78		78		229		220
Total noninterest income		1,054		1,107		3,348		3,601

Noninterest expenses
Salaries and employee benefits		2,527		2,760		7,978		7,140
Occupancy and equipment		662		655		1,938		1,782
Data processing expenses		182		206		544		732
Debit card processing expenses		242		204		696		599
Professional and director fees		188		414		674		804
FDIC assessments		76		54		224		52
Franchise taxes		132		106		349		296
Marketing and advertising		114		125		364		399
Telephone and network communications		84		79		247		223
Amortization of intangible		6		7		20		7
Other		452		464		1,261		1,280
Total noninterest expenses		4,665		5,074		14,295		13,314
Income before income taxes		2,540		1,182		8,496		4,598
Income tax expense		424		164		1,472		637
Net income	$	2,116	$	1,018	$	7,024	$	3,961

Basic and diluted earnings per share	$	0.70	$	0.34	$	2.33	$	1.40

See accompanying notes to consolidated financial statements.

CONSUMERS BANCORP, INC.

~~CONDENSED~~ CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~COMPREHENSIVE INCOME

(Unaudited)

(Dollars in thousands)

Six Months Ended
December 31,

2017

2016

Cash flows from operating activities

Net cash from operating activities
$ 3,484 $ 2,152

Cash flow from investing activities

Securities available-for-sale

Purchases
(5,101
)
(17,368
)
Maturities, calls and principal pay downs
8,848 11,753
Proceeds from sales
1,586 3,383
Securities held-to-maturity

Purchases
— (1,000
)
Principal pay downs
198 198
Net decrease in certificates of deposits in other financial institutions
— 990
Net increase in loans
(20,967
)
(9,255
)
Purchase of Bank owned life insurance
— (2,000
)
Acquisition of premises and equipment
(129
)
(252
)
Sale of other real estate owned
71 7
Net cash from investing activities
(15,494
)
(13,544
)

Cash flow from financing activities

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

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

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

Supplemental disclosure of cash flow information:

Cash paid during the period:

Interest
$ 709 $ 484
Federal income taxes
405 150
Non-cash items:

Transfer from loans to other real estate owned
57 10
Transfer from loans held for sale to portfolio
172 —
Issuance of treasury stock for stock awards
90 —
Expired and forfeited dividend reinvestment plan shares associated with restricted stock awards that were retired to treasury stock
4 4

(Dollars in thousands)	Three Months ended March 31,						Nine Months ended March 31,
	2021			2020			2021			2020
Net income	$	2,116		$	1,018		$	7,024		$	3,961

Other comprehensive income, net of tax:
Net change in unrealized gains (losses) on securities:
Unrealized gains (losses) arising during the period		(2,269	)		1,900			(1,921	)		2,690
Reclassification adjustment for gains included in income		(6	)		(121	)		(14	)		(231	)
Net unrealized gains (losses)		(2,275	)		1,779			(1,935	)		2,459
Income tax effect		478			(373	)		407			(517	)
Other comprehensive income (loss)		(1,797	)		1,406			(1,528	)		1,942

Total comprehensive income	$	319		$	2,424		$	5,496		$	5,903

See accompanying notes to consolidated financial statements.

CONSUMERS BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)

(Dollars in thousands, except per share data)	Common Stock		Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Income (Loss)			Total Shareholders’ Equity
Balance, December 31, 2019	$	14,697	$	38,691		$	(1,454	)	$	2,102		$	54,036
Net income				1,018									1,018
Other comprehensive income										1,406			1,406
269,920 shares issued for the Peoples acquisition		5,277											5,277
Cash dividends declared ($0.135 per share)				(409	)								(409	)
Balance, March 31, 2020	$	19,974	$	39,300		$	(1,454	)	$	3,508		$	61,328

Balance, December 31, 2020	$	20,011	$	44,492		$	(1,324	)	$	4,529		$	67,708
Net income				2,116									2,116
Other comprehensive loss										(1,797	)		(1,797	)
Cash dividends declared ($0.15 per share)				(454	)								(454	)
Balance, March 31, 2021	$	20,011	$	46,154		$	(1,324	)	$	2,732		$	67,573

(Dollars in thousands, except per share data)	Common Stock		Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Income (Loss)				Total Shareholders’ Equity
Balance, June 30, 2019	$	14,656	$	36,487		$	(1,543	)	$	1,566			$	51,166
Net income				3,961										3,961
Other comprehensive income										1,942				1,942
269,920 shares issued for the Peoples acquisition		5,277												5,277
11,813 shares associated with vested stock awards		41					89					��		130
Cash dividends declared ($0.405 per share)				(1,148	)									(1,148	)
Balance, March 31, 2020	$	19,974	$	39,300		$	(1,454	)	$	3,508			$	61,328


Balance, June 30, 2020	$	19,974	$	40,460		$	(1,454	)	$	4,260			$	63,240
Net income				7,024										7,024
Other comprehensive loss										(1,528	)			(1,528	)
12,522 shares associated with vested and expired stock awards		37					130							167
Cash dividends declared ($0.44 per share)				(1,330	)									(1,330	)
Balance, March 31, 2021	$	20,011	$	46,154		$	(1,324	)	$	2,732			$	67,573

See accompanying notes to consolidated financial statements.

CONSUMERS BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)	Nine Months Ended March 31,
	2021			2020
Cash flows from operating activities
Net cash from operating activities	$	11,421		$	5,024
Cash flow from investing activities
Purchases of securities, available-for-sale		(63,825	)		(18,610	)
Maturities, calls and principal pay downs of securities, available-for-sale		30,890			17,575
Sale of securities, available-for-sale		5,545			11,841
Purchase of securities, held-to-maturity		(4,700	)		—
Principal pay downs of securities, held-to-maturity		205			206
Purchase of equity securities		(400	)		—
Net decrease in certificate of deposit in other financial institutions		4,300			1,914
Purchase of Federal Reserve stock, at cost		—			(595	)
Net increase in loans		(10,332	)		(43,405	)
Acquisition, net cash acquired		—			(4,295	)
Proceeds from BOLI death benefit		—			753
Premises and equipment purchases		(433	)		(453	)
Sale of other repossessed assets		17			39
Net cash from investing activities		(38,733	)		(35,030	)
Cash flow from financing activities
Net increase in deposit accounts		70,633			29,997
Net change in short-term borrowings		2,476			352
Proceeds from Federal Home Loan Bank advances		1,300			17,500
Repayments of Federal Home Loan Bank advances		(14,394	)		(13,612	)
Dividends paid		(1,330	)		(1,148	)
Net cash from financing activities		58,685			33,089
Increase in cash or cash equivalents		31,373			3,083
Cash and cash equivalents, beginning of period		9,659			9,461
Cash and cash equivalents, end of period	$	41,032		$	12,544

Supplemental disclosure of cash flow information:
Cash paid during the period:
Interest	$	1,627		$	3,048
Federal income taxes		1,930			675
Non-cash items:
Transfer of loans to other repossessed assets		9			—
Issuance of treasury stock for stock awards		167			89
Right of use assets obtained in exchange for lease liabilities		—			582

Acquisition of Peoples:
Consideration paid				$	10,405
Noncash assets acquired:
Certificates of deposit in other financial institutions					11,839
Securities, available-for-sale					4,051
Federal bank and other restricted stocks, at cost					154
Loans, net					55,320
Premises and equipment					818
Goodwill					836
Core deposit intangible					270
Accrued interest receivable and other assets					140
Total noncash assets acquired					73,428
Liabilities assumed:
Deposits					60,851
Federal funds purchased					2,348
Federal Home Loan Bank advances					491
Other liabilities					166
Total liabilities assumed					63,856
Net noncash assets acquired					9,572
Cash acquired					833

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

Basis of Presentation: The consolidated financial statements for interim periods are unaudited and reflect all adjustments (consisting of only normal recurring adjustments), which, in the opinion of management, are necessary to present fairly the financial position and results of operations and cash flows for the periods presented. The unaudited financial statements are presented in accordance with the requirements of Form 10-Q10-Q and do not include all disclosures normally required by accounting principles generally accepted in the United States of America. The financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Corporation’s Form 10-K10-K for the year ended June 30, ~~2017.~~ 2020. The results of operations for the interim period disclosed herein are not necessarily indicative of the results that may be expected for a full year.

The consolidated financial statements include the accounts of the Corporation and the ~~Ban~~k.Bank. All significant inter-company transactions and accounts have been eliminated in consolidation.

Segment Information: The Corporation is a bank holding company engaged in the business of commercial and retail banking, which accounts for substantially all of the revenues, operating income, and assets. Accordingly, all ~~of its~~the Corporation’s operations are recorded in one segment, banking.

Reclassifications: Certain items in prior financial statements have been reclassified to conform to the current presentation. Any reclassifications had no impact on prior year net income or shareholders’ equity.

Recently Issued Accounting Pronouncements Not Yet Effective: In ~~May 2014,~~ ~~FASB issued~~June 2016, the Financial Accounting Standards ~~Update (ASU)~~ ~~2014~~-~~09,~~ ~~Revenue from Contracts with Customers (Topic~~ ~~606~~~~). The ASU creates a new topic, Topic~~ ~~606,~~ to provide guidance on revenue recognition for entities that enter into contracts with customers to transfer goods or services or enter into contracts for the transfer of nonfinancial assets. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additional disclosures are required to provide quantitative and qualitative information regarding the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The new guidance is effective for annual reporting periods, and interim reporting periods within those annual periods, beginning after ~~December 15, 2017.~~ ~~Most of the Corporation’s revenue is derived from loans and financial instruments, which is not part of the scope of this ASU.The adoption of ASU~~ ~~2014~~-09 ~~as it relates to non-interest income, such as service charges and debit card interchange income, is~~ ~~not~~ ~~expected to have a material effect on the Corporation’s financial statements.~~

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

~~CONSUMERS BANCORP, INC.~~

~~Notes to the Consolidated Financial Statements~~

~~(Unaudited) (continued)~~

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

In ~~June 2016,~~ ~~FASB Issued ASU~~ ~~2016~~-~~13,~~2016-13, Financial Instruments—Credit Losses (Topic ~~326~~)326): Measurement of Credit Losses on Financial Instruments. This ASU adds a new Topic 326 to the codification and removes the thresholds that companies apply to measure credit losses on financial instruments measured at amortized cost, such as loans, receivables, and held-to-maturity debt securities. Under current U.S. ~~GAAP,~~generally accepted accounting principles, companies generally recognize credit losses when it is probable that the loss has been incurred. The revised guidance will remove all current loss recognition thresholds and will require companies to recognize an allowance for credit losses for the difference between the amortized cost basis of a financial instrument and the amount of amortized cost that the corporation expects to collect over the instrument’s contractual life. ASU ~~2016~~-132016-13 also amends the credit loss measurement guidance for available-for-sale debt securities and beneficial interests in securitized financial assets. The guidance in ASU ~~2016~~-132016-13 is effective for “public business entities,” as defined in the guidance, that are SEC filers for fiscal years and for interim periods ~~with~~within those fiscal years beginning after December 15, 2019. Early adoption of the guidance is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. ~~Management is currently evaluating~~However, during July 2019, FASB unanimously voted for a proposal to delay this ASU to January 2023 for smaller reporting companies. On October 16, 2019, FASB approved a final ASU delaying the impact of the adoption of this guidance on the Corporation’s consolidated financial statements, and are in the midst of gathering critical data to evaluate the impact. However, it is too early to estimate the impact.

In ~~February 2016,~~ ~~the FASB issued ASU~~ ~~2016~~-02 ~~- Leases (Topic~~ ~~842~~~~). The ASU will require all organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights~~ ~~and obligations created by those leases. Additional qualitative and quantitative disclosures will be required so that users can understand more about the nature of an entity’s leasing activities.~~effective date. The new guidance is effective for annual ~~reporting periods~~ and interim ~~reporting periods within those annual~~ periods beginning after December 15, ~~2018.~~ ~~Early adoption~~2022 for certain entities, including smaller reporting companies. The Corporation is ~~permitted. Management is currently evaluating~~a smaller reporting company.

CONSUMERS BANCORP, INC.

Notes to the ~~impact~~Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

In March 2020, the FASB issued ASU 2020-04, "Facilitation of the ~~adoption~~Effects of ~~this~~Reference Rate Reform on Financial Reporting". The ASU is intended to provide relief for companies preparing for discontinuation of interest rates based on LIBOR, or other reference rates that may be discontinued, and provides optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria. The ASU also provides for a one-time sale and/or transfer to AFS or trading to be made for HTM debt securities that both reference an eligible reference rate and were classified as HTM before January 1, 2020. ASU 2020-04 is effective March 12, 2020 through December 31, 2022. The guidance requires companies to apply the guidance prospectively to contract modifications and hedging relationships while the one-time election to sell and/or transfer debt securities classified as HTM may be made any time after March 12, 2020. The Corporation does not expect ASU 2020-04 to have a material impact on its financial statements and disclosures.

Note 2 – Acquisition

On December 29, 2020, the Bank entered into a Branch Purchase and Assumption Agreement (P&A Agreement) with CFBank National Association (CFBank) to acquire two branches of CFBank in Columbiana County, Ohio. The P&A Agreement provides for the sale and transfer by CFBank to the Bank the land, buildings and other associated assets of CFBank’s drive-up branch location in Wellsville, Ohio and CFBank’s branch location in Calcutta, Ohio (the Branches); approximately $100 million in deposits attributable to the Branches; $15 million in aggregate principal amount of subordinated debt securities issued by unrelated financial institutions; all performing loans attributable to the Branches which are outstanding at closing (totaling approximately $3.1 million in aggregate principal amount as of November 30, 2020); and up to $13.5 million in aggregate principal amount of single family residential mortgage loans and home equity lines of credit to be identified by the parties prior to the closing principally from CFBank’s Northeast Ohio loan portfolio. In addition, CFBank will provide the opportunity for the Corporation to purchase at par at least $15 million in aggregate principal amount of participation interests in commercial and commercial real estate loans originated by and held in CFBank’s portfolio. In exchange, Consumers will pay to CFBank the net book value of the land, building and associated assets of the Branches, a deposit premium equal to 1.75% of the average daily deposits of the Branches for the 30 days preceding the closing, and the par value of the subordinated debt securities and loans acquired by Consumers. The transaction is expected to close in July 2021, pending the completion of customary closing conditions. All necessary regulatory approvals have been received.

On January 1, 2020, Consumers completed the acquisition by merger of Peoples Bancorp of Mt. Pleasant, Inc. (Peoples) and its wholly owned subsidiary, The Peoples National Bank of Mount Pleasant (Peoples Bank) in a stock and cash transaction for an aggregate consideration of approximately $10,405. In connection with the acquisition, the Corporation issued 269,920 shares of common stock and paid $5,128 in cash to the former shareholders of Peoples. Immediately following the merger, Peoples Bank, was merged into the Corporation’s banking subsidiary, Consumers National Bank.

The assets and liabilities of Peoples were recorded on the Corporation’s ~~consolidated financial statements~~Balance Sheet at their estimated fair values as of January 1, 2020, the acquisition date, and ~~expects to recognize an increase in other assets and other liabilities for the rights and obligations created by leasing~~Peoples’ results of ~~branch offices. Management also expects minimal impact~~operations are included in the ~~income statement with respect to occupancy expense related to leases.~~Corporation’s Consolidated Statements of Income beginning on that date. As of the date of acquisition of Peoples, the estimated fair value of loans received was $55,320 and the estimated fair value of deposits assumed was $60,851.

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

Note 23 – Securities

Available –for-Sale

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair
Value

December 31, 2017

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

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair
Value

March 31, 2021

Obligations of U.S. government-sponsored entities and agencies
$ 11,456 $ 222 $ (74
)
$ 11,604
Obligations of state and political subdivisions
68,177 3,018 (153
)
71,042
U.S. Government-sponsored mortgage-backed securities–residential
72,894 1,280 (918
)
73,256
U.S. Government-sponsored mortgage-backed securities– commercial
2,869 — — 2,869
U.S. Government-sponsored collateralized mortgage obligations– residential
9,705 161 (70
)
9,796
Other
500 — (8
)
492
Total available-for-sale securities
$ 165,601 $ 4,681 $ (1,223
)
$ 169,059

Held-to-Maturity	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value		Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
December 31, 2017
March 31, 2021
Obligations of state and political subdivisions	$	4,061	$	22	$	—	$	4,083	$	8,036	$	447	$	—	$	8,483

Available–for-Sale

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair
Value

June 30, 2017

Obligations of U.S. government-sponsored entities and agencies
$ 12,571 $ 90 $ (74
)
$ 12,587
Obligations of state and political subdivisions
56,824 890 (254
)
�� 57,460
Mortgage-backed securities – residential
64,092 184 (438
)
63,838
Mortgage-backed securities – commercial
1,459 — (1
)
1,458
Collateralized mortgage obligations - residential
6,310 1 (100
)
6,211
Pooled trust preferred security
155 377 — 532
Total available-for-sale securities
$ 141,411 $ 1,542 $ (867
)
$ 142,086
Available–for-Sale

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair
Value

June 30, 2020

U.S. Treasury
$ 1,248 $ 8 $ — $ 1,256
Obligations of U.S. government-sponsored entities and agencies
10,133 399 — 10,532
Obligations of state and political subdivisions
60,343 3,149 — 63,492
U.S. government-sponsored mortgage-backed securities – residential
48,645 1,515 (4
)
50,156
U.S. government-sponsored mortgage-backed securities – commercial
8,444 55 (2
)
8,497
U.S. government-sponsored collateralized mortgage obligations – residential
9,712 285 (12
)
9,985
Total available-for-sale securities
$ 138,525 $ 5,411 $ (18
)
$ 143,918

Held-to-Maturity	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses			Fair Value		Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
June 30, 2017
June 30, 2020
Obligations of state and political subdivisions	$	4,259	$	73	$	(3	)	$	4,329	$	3,541	$	327	$	—	$	3,868

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

Three Months Ended
March 31,

Nine Months Ended
March 31,

2021

2020

2021

2020

Proceeds from sales and calls
$ 2,812 $ 5,731 5,545 11,841
Gross realized gains
13 121 44 231
Gross realized losses
7 — 30 —

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

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

Three Months Ended
December 31

Six Months Ended
December 31,

2017

2016

2017

2016

Proceeds from sales
$ — $ 1,594 $ 1,586 $ 3,383
Gross realized gains
— 24 39 127
Gross realized losses
— 2 1 2

The i~~ncome~~income tax provision related to ~~these~~the net realized gains ~~and losses~~ amounted to ~~$13~~$1 and $3 for the ~~six~~ ~~months~~three- and nine-month periods ended ~~December~~March 31, ~~2017~~ 2021, respectively. The income tax provision related to the net realized gains amounted to $26 and $8 ~~and~~ ~~$43~~$49 for the ~~three~~three- and ~~six~~ ~~months~~nine-month periods ended ~~December~~March 31, ~~2016.~~2020, respectively.

The amortized cost and fair values of debt securities at ~~December~~March 31, ~~2017,~~ 2021, by expected maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date, primarily mortgage-backed securities, ~~collateralized mortgage obligations and the pooled trust preferred security~~ are shown separately.

Available-for-Sale	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due in one year or less	$	2,170	$	2,192	$	4,525	$	4,602
Due after one year through five years		18,053		18,167		13,129		13,596
Due after five years through ten years		28,838		28,992		17,662		18,060
Due after ten years		21,409		21,466		44,817		46,880
Total		70,470		70,817		80,133		83,138

U.S. Government-sponsored mortgage-backed and related securities		64,980		64,300		85,468		85,921
Pooled trust preferred security		178		621
Total available-for-sale securities	$	135,628	$	135,738	$	165,601	$	169,059

Held-to-Maturity

Due after one year through five years					$	334	$	350
Due after five years through ten years		564		579		5,367		5,686
Due after ten years		3,497		3,504		2,335		2,447
Total held-to-maturity securities	$	4,061	$	4,083	$	8,036	$	8,483

~~CONSUMERS BANCORP, INC.~~

~~Notes to the Consolidated Financial Statements~~

~~(Unaudited) (continued)~~

The following table summarizes the securities with unrealized losses at ~~December~~March 31, ~~2017~~ 2021 and June 30,~~2017,~~ 2020, 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

March 31, 2021

Obligations of U.S. government-sponsored entities and agencies
$ 3,006 $ (74
)
$ — $ — $ 3,006 $ (74
)
Obligations of states and political subdivisions
7,745 (153
)
— — 7,745 (153
)
U.S. Government-sponsored mortgage-backed securities – residential
31,512 (918
)
— — 31,512 (918
)
U.S. Government-sponsored collateralized mortgage obligations - residential
4,859 (70
)
— — 4,859 (70
)
Other
492 (8
)
492 (8
)
Total temporarily impaired
$ 47,614 $ (1,223
)
$ — $ — $ 47,614 $ (1,223
)

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

Less than 12 Months

12 Months or more

Total

Available-for-sale

Fair
Value

Unrealized
Loss

Fair
Value

Unrealized
Loss

Fair
Value

Unrealized
Loss

December 31, 2017

Obligations of US government-sponsored entities and agencies
$ 9,901 $ (146
)
$ — $ — $ 9,901 $ (146
)
Obligations of states and political subdivisions
11,862 (93
)
8,179 (190
)
20,041 (283
)
Mortgage-backed securities - residential
27,316 (243
)
22,415 (388
)
49,731 (631
)
Mortgage-backed securities - commercial
1,435 (10
)
— — 1,435 (10
)
Collateralized mortgage obligations – residential
— — 5,346 (137
)
5,346 (137
)
Total temporarily impaired
$ 50,514 $ (492
)
$ 35,940 $ (715
)
$ 86,454 $ (1,207
)

Less than 12 Months

12 Months or more

Total

Available-for-sale

Fair
Value

Unrealized
Loss

Fair
Value

Unrealized
Loss

Fair
Value

Unrealized
Loss

June 30, 2017

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

Less than 12 Months

12 Months or more

Total

Available-for-sale

Fair
Value

Unrealized
Loss

Fair
Value

Unrealized
Loss

Fair
Value

Unrealized
Loss

June 30, 2020

U.S. Government-sponsored mortgage-backed securities – residential
— — 625 (4
)
625 (4
)
U.S. Government-sponsored mortgage-backed securities – commercial
1,806 (2
)
— — 1,806 (2
)
U.S. Government-sponsored collateralized mortgage obligations - residential
1,700 (12
)
— — 1,700 (12
)
Total temporarily impaired
$ 3,506 $ (14
)
$ 625 $ (4
)
$ 4,131 $ (18
)

Management evaluates securities for other-than-temporary ~~impairme~~ntimpairment (OTTI) on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. The securities portfolio is evaluated for OTTI by segregating the portfolio into two general segments and applying the appropriate OTTI model. Investment securities are generally evaluated for OTTI under FASB ASC Topic 320, Accounting for Certain Investments in Debt and Equity Securities.

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

~~CONSUMERS BANCORP, INC.~~

~~Notes to the Consolidated Financial Statements~~

~~(Unaudited) (continued)~~

~~(Dollars~~At March 31, 2021, there were a total of 44 available-for-sale securities in ~~thousands, except per share amounts)~~

the portfolio with unrealized losses mainly due to an increase in market rates when compared to the time of purchase. The unrealized losses within the securities portfolio as of ~~December~~March 31, ~~2017~~ 2021 have not been recognized into income because the decline in fair value is not attributed to credit quality and management does not intend to sell, and it is not likely that management will be required to sell, the securities prior to their anticipated recovery. ~~The decline in fair value within the securities portfolio is largely due to changes in interest rates and the fair value is expected to recover as the securities approach maturity.~~ The mortgage-backed securities and collateralized mortgage obligations were primarily issued by Fannie Mae, Freddie Mac and Ginnie Mae, institutions which the government has affirmed its commitment to support. The Corporation does not own any private label mortgage-backed securities.

The following table presents the net unrealized gains and losses on equity securities recognized in earnings for the three and nine months ended March 31, 2021 and 2020. There were no realized gains or losses on the sale of equity securities during the periods presented.

Three Months Ended
March 31,

Nine Months Ended
March 31,

2021

2020

2021

2020

Unrealized gains recognized on equity securities held at the end of the period
$ 12 $ — $ 12 $ —

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

Note 34 – – Loans

Major classifications of loans were as follows:

	December 31, 2017			June 30, 2017			March 31, 2021			June 30, 2020
Commercial	$	49,561		$	46,336		$	131,079		$	158,667
Commercial real estate:
Construction		5,936			5,588			4,030			16,235
Other		169,692			157,861			258,421			229,029
1 – 4 Family residential real estate:
Owner occupied		45,351			41,581			108,288			90,494
Non-owner occupied		16,163			14,377			19,528			19,370
Construction		1,931			1,993			7,771		��	9,344
Consumer		4,960			5,131			26,002			21,334
Subtotal		293,594			272,867			555,119			544,473
Net deferred loan fees and costs								(1,982	)		(1,612	)
Allowance for loan losses		(3,225	)		(3,086	)		(6,076	)		(5,678	)
Net Loans	$	290,369		$	269,781		$	547,061		$	537,183

~~Loans presented~~The commercial loan category in the above ~~are net~~table includes PPP loans of ~~deferred loan fees~~$65,492 as of March 31, 2021 and ~~costs~~$66,606 as of $~~313~~ ~~and~~ ~~$294~~ ~~for~~ ~~December 31, 2017~~ ~~and~~ June 30, ~~2017,~~ ~~respectively.~~2020 and a mortgage loan warehouse line of credit to another financial institution with an outstanding balance of $7,121 as of March 31, 2021 and $32,869 as of June 30, 2020. The outstanding balance of the warehouse line of credit can fluctuate significantly based on the other financial institution’s funding needs.

The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended March 31, 2021:

1-4 Family

Commercial

Residential

Real

Real

Commercial

Estate

Estate

Consumer

Total

Allowance for loan losses:

Beginning balance
$ 858 $ 3,817 $ 1,028 $ 209 $ 5,912
Provision for loan losses
79 (109
)
166 49 185
Loans charged-off
— — (4
)
(39
)
(43
)
Recoveries
— 1 1 20 22
Total ending allowance balance
$ 937 $ 3,709 $ 1,191 $ 239 $ 6,076

The following table presents the activity in the allowance for loan losses by portfolio segment for the nine months ended March 31, 2021:

1-4 Family

Commercial

Residential

Real

Real

Commercial

Estate

Estate

Consumer

Total

Allowance for loan losses:

Beginning balance
$ 947 $ 3,623 $ 989 $ 119 $ 5,678
Provision for loan losses
12 83 205 145 445
Loans charged-off
(22
)
— (4
)
(95
)
(121
)
Recoveries
— 3 1 70 74
Total ending allowance balance
$ 937 $ 3,709 $ 1,191 $ 239 $ 6,076

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended ~~December~~March 31, ~~2017:~~2020:

						1-4 Family
				Commercial		Residential													1-4 Family
				Real		Real											Commercial		Residential
	Commercial			Estate		Estate			Consumer			Total					Real		Real
															Commercial		Estate		Estate		Consumer			Total
Allowance for loan losses:
Beginning balance	$	572		$	2,081	$	473		$	68		$	3,194		$	766	$	2,652	$	615	$	62		$	4,095
Provision for loan losses		(17	)		57		20			—			60			25		203		116		101			445
Loans charged-off		—			—		(33	)		(5	)		(38	)		—		—		—		(91	)		(91	)
Recoveries		—			6		1			2			9			—		1		1		17			19
Total ending allowance balance	$	555		$	2,144	$	461		$	65		$	3,225		$	791	$	2,856	$	732	$	89		$	4,468

The following table presents the activity in the allowance for loan losses by portfolio segment for the ~~six~~nine months ended ~~December~~March 31, ~~2017:~~2020:

1-4 Family

Commercial

Residential

Real

Real

Commercial

Estate

Estate

Consumer

Total

Allowance for loan losses:

Beginning balance
$ 518 $ 2,038 $ 473 $ 57 $ 3,086
Provision for loan losses
35 82 20 13 150
Loans charged-off
— — (33
)
(8
)
(41
)
Recoveries
2 24 1 3 30
Total ending allowance balance
$ 555 $ 2,144 $ 461 $ 65 $ 3,225

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

1-4 Family

Commercial

Residential

Real

Real

Commercial

Estate

Estate

Consumer

Total

Allowance for loan losses:

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

~~CONSUMERS BANCORP, INC.~~

~~Notes to the Consolidated Financial Statements~~

~~(Unaudited) (continued)~~

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

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

							1-4 Family													1-4 Family
				Commercial			Residential											Commercial		Residential
				Real			Real											Real		Real
	Commercial			Estate			Estate			Consumer			Total			Commercial		Estate		Estate		Consumer			Total
Allowance for loan losses:
Beginning balance	$	505		$	2,518		$	402		$	141		$	3,566		$	660	$	2,575	$	494	$	59		$	3,788
Provision for loan losses		(9	)		282			78			(75	)		276			131		278		236		115			760
Loans charged-off		—			(700	)		(44	)		(12	)		(756	)		—		—		—		(114	)		(114	)
Recoveries		1			—			29			7			37			—		3		2		29			34
Total ending allowance balance	$	497		$	2,100		$	465		$	61		$	3,123		$	791	$	2,856	$	732	$	89		$	4,468

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of ~~December~~March 31, ~~2017.~~ 2021. Included in the recorded investment in loans is ~~$695~~$1,289 of accrued interest receivable.

					1-4 Family										1-4 Family
			Commercial		Residential								Commercial		Residential
			Real		Real								Real		Real
	Commercial		Estate		Estate		Consumer		Total		Commercial		Estate		Estate		Consumer		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Ending allowance for loan losses balance attributable to loans:
Individually evaluated for impairment	$	—	$	30	$	—	$	—	$	30	$	1	$	—	$	4	$	—	$	5
Collectively evaluated for impairment		555		2,114		461		65		3,195
Acquired loans collectively evaluated for impairment												—		99		79		—		178
Originated loans collectively evaluated for impairment												936		3,610		1,108		239		5,893
Total ending allowance balance	$	555	$	2,144	$	461	$	65	$	3,225	$	937	$	3,709	$	1,191	$	239	$	6,076

Recorded investment in loans:
Loans individually evaluated for impairment	$	122	$	1,303	$	340	$	—	$	1,765	$	446	$	936	$	692	$	—	$	2,074
Loans collectively evaluated for impairment		49,553		174,707		63,293		4,971		292,524
Acquired loans collectively evaluated for impairment												907		7,766		22,067		7,671		38,411
Originated loans collectively evaluated for impairment												128,064		253,673		113,849		18,355		513,941
Total ending loans balance	$	49,675	$	176,010	$	63,633	$	4,971	$	294,289	$	129,417	$	262,375	$	136,608	$	26,026	$	554,426

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of June 30, ~~2017.~~ 2020. Included in the recorded investment in loans is ~~$581~~$1,936 of accrued ~~intere~~stinterest receivable.

					1-4 Family										1-4 Family
			Commercial		Residential								Commercial		Residential
			Real		Real								Real		Real
	Commercial		Estate		Estate		Consumer		Total		Commercial		Estate		Estate		Consumer		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	—	$	42	$	2	$	—	$	44	$	28	$	6	$	—	$	—	$	34
Collectively evaluated for impairment		518		1,996		471		57		3,042
Acquired loans collectively evaluated for impairment												—		103		94		—		197
Originated loans collectively evaluated for impairment												919		3,514		895		119		5,447
Total ending allowance balance	$	518	$	2,038	$	473	$	57	$	3,086	$	947	$	3,623	$	989	$	119	$	5,678

Recorded investment in loans:
Loans individually evaluated for impairment	$	444	$	1,587	$	203	$	—	$	2,234	$	179	$	1,045	$	699	$	—	$	1,923
Loans collectively evaluated for impairment		45,993		162,176		57,901		5,144		271,214
Acquired loans collectively evaluated for impairment												1,095		8,072		27,252		12,550		48,969
Originated loans collectively evaluated for impairment												156,054		236,840		92,168		8,843		493,905
Total ending loans balance	$	46,437	$	163,763	$	58,104	$	5,144	$	273,448	$	157,328	$	245,957	$	120,119	$	21,393	$	544,797

The following table presents information related to unpaid principal balance, recorded investment and interest income associated with loans individually evaluated for impairment by class of loans as of ~~December~~March 31, ~~2017~~ 2021 and for the ~~six~~nine months ended ~~December~~March 31, ~~2017:~~2021:

	As of December 31, 2017						Six Months ended December 31, 2017						As of March 31, 2021						Nine Months ended March 31, 2021
	Unpaid				Allowance for Loan		Average		Interest		Cash Basis		Unpaid				Allowance for Loan		Average		Interest		Cash Basis
	Principal		Recorded		Losses		Recorded		Income		Interest		Principal		Recorded		Losses		Recorded		Income		Interest
	Balance		Investment		Allocated		Investment		Recognized		Recognized		Balance		Investment		Allocated		Investment		Recognized		Recognized
With no related allowance recorded:
Commercial	$	122	$	122	$	—	$	117	$	3	$	3	$	422	$	306	$	—	$	77	$	—	$	—
Commercial real estate:
Other		973		976		—		1,057		16		16		1,073		936		—		893		6		6
1-4 Family residential real estate:
Owner occupied		25		25		—		80		—		—		498		456		—		577		11		11
Non-owner occupied		315		315		—		322		—		—		270		209		—		220		—		—
With an allowance recorded:
Commercial														139		140		1		154		6		6
Commercial real estate:
Other		327		327		30		337		5		5		—		—		—		160		7		7
1-4 Family residential real estate:
Owner occupied														29		27		4		13		—		—
Total	$	1,762	$	1,765	$	30	$	1,913	$	24	$	24	$	2,431	$	2,074	$	5	$	2,094	$	30	$	30

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

The following table presents information related to average recorded investment and interest income associated with loans individually evaluated for impairment by class of loans for the three months ended ~~December~~March 31,~~2017:~~ 2021:

	Average		Interest		Cash Basis		Average		Interest		Cash Basis
	Recorded		Income		Interest		Recorded		Income		Interest
	Investment		Recognized		Recognized		Investment		Recognized		Recognized
With no related allowance recorded:
Commercial	$	120	$	1	$	1	$	308	$	—	$	—
Commercial real estate:
Other		1,061		6		6		941		2		2
1-4 Family residential real estate:
Owner occupied		318		—		—		473		—		—
Non-owner occupied		58		—		—		211		—		—
With an allowance recorded:
Commercial								142		2		2
Commercial real estate:
Other		330		5		5		68		1		1
1-4 Family residential real estate:
Owner occupied								29		—		—
Total	$	1,887	$	12	$	12	$	2,172	$	5	$	5

The following table presents information related to unpaid principal balance, recorded investment and interest income associated with loans individually evaluated for impairment by class of loans as of June 30, ~~2017~~ 2020 and for the ~~six~~nine months ended ~~December~~March 31, ~~2016:~~2020:

	As of June 30, 2017						Six Months ended December 31, 2016						As of June 30, 2020						Nine Months ended March 31, 2020
	Unpaid				Allowance for Loan		Average		Interest		Cash Basis		Unpaid				Allowance for Loan		Average		Interest		Cash Basis
	Principal		Recorded		Losses		Recorded		Income		Interest		Principal		Recorded		Losses		Recorded		Income		Interest
	Balance		Investment		Allocated		Investment		Recognized		Recognized		Balance		Investment		Allocated		Investment		Recognized		Recognized
With no related allowance recorded:
Commercial	$	482	$	444	$	—	$	330	$	80	$	80	$	—	$	—	$	—	$	5		—		—
Commercial real estate:
Construction		—		—		—		170		6		6
Other		1,928		1,039		—		1,081		105		105		922		836		—		415		88		88
1-4 Family residential real estate:
Owner occupied		104		103		—		127		—		—		604		463		—		27		7		7
Non-owner occupied		—		—		—		205		—		—		284		236		—		251		—		—
With an allowance recorded:
Commercial		—		—		—		7		—		—		176		179		28		164		7		7
Commercial real estate:
Other		548		548		42		2,030		15		15		209		209		6		218		10		10
1-4 Family residential real estate:
Owner occupied		99		100		2		139		3		3
Total	$	3,161	$	2,234	$	44	$	4,089	$	209	$	209	$	2,195	$	1,923	$	34	$	1,080	$	112	$	112

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

	Average		Interest		Cash Basis		Average		Interest		Cash Basis
	Recorded		Income		Interest		Recorded		Income		Interest
	Investment		Recognized		Recognized		Investment		Recognized		Recognized
With no related allowance recorded:
Commercial							$	14	$	—	$	—
Commercial real estate:
Construction	$	10	$	—	$	—
Other		607		—		—		641		1		1
1-4 Family residential real estate:
Owner occupied		127		—		—		31		—		—
Non-owner occupied		202		—		—		244		—		—
With an allowance recorded:
Commercial		14		—		—		158		2		2
Commercial real estate:
Other		1,612		7		7		216		4		4
1-4 Family residential real estate:
Owner occupied		101		1		1
Total	$	2,673	$	8	$	8	$	1,304	$	7	$	7

The ~~following~~following table presents the recorded investment in non-accrual and loans past due over 90 days still on accrual by class of loans as of ~~December~~March 31, ~~2017~~ 2021 and June 30, ~~2017:~~2020:

	December 31, 2017				June 30, 2017				March 31, 2021				June 30, 2020
			Loans Past Due				Loans Past Due				Loans Past Due				Loans Past Due
			Over 90 Days				Over 90 Days				Over 90 Days				Over 90 Days
			Still				Still				Still				Still
	Non-accrual		Accruing		Non-accrual		Accruing		Non-accrual		Accruing		Non-accrual		Accruing
Commercial	$	—	$	—	$	368	$	—
Commercial									$	306	$	—	$	21	$	—
Commercial real estate:
Other		537		—		729		—		888		—		785		—
1 – 4 Family residential:
Owner occupied		13		—		90		—		480		—		143		29
Non-owner occupied		315		—		—		—		209		—		236		—
Consumer										—		—		—		12
Total	$	865	$	—	$	1,187	$	—	$	1,883	$	—	$	1,185	$	41

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

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

The following table presents the aging of the recorded investment in past due loans as of ~~December~~March 31, ~~2017~~ 2021 by class of loans:

	Days Past Due												Days Past Due
	30 - 59		60 - 89		90 Days or		Total		Loans Not				30 - 59		60 - 89		90 Days or		Total		Loans Not
	Days		Days		Greater		Past Due		Past Due		Total		Days		Days		Greater		Past Due		Past Due		Total
Commercial	$	—	$	—	$	—	$	—	$	49,675	$	49,675	$	—	$	—	$	—	$	—	$	129,417	$	129,417
Commercial real estate:
Construction		—		—		—		—		5,943		5,943		—		—		—		—		3,982		3,982
Other		230		—		—		230		169,837		170,067		—		—		629		629		257,764		258,393
1-4 Family residential:
Owner occupied		12		—		—		12		45,477		45,489		28		—		238		266		108,956		109,222
Non-owner occupied		—		—		—		—		16,210		16,210		—		—		—		—		19,529		19,529
Construction		—		—		—		—		1,934		1,934		—		—		—		—		7,857		7,857
Consumer		4		2		—		6		4,965		4,971		43		36		—		79		25,947		26,026
Total	$	246	$	2	$	—	$	248	$	294,041	$	294,289	$	71	$	36	$	867	$	974	$	553,452	$	554,426

The above table of past due loans includes the recorded investment in non-accrual loans of~~$865~~ $867 in the 90 days or greater category and $1,016 in the loans not past due category.

The following table presents the aging of the recorded investment in past due loans as of June 30, ~~2017~~ 2020 by class of loans:

	Days Past Due												Days Past Due
	30 - 59		60 - 89		90 Days or		Total		Loans Not				30 - 59		60 - 89		90 Days or		Total		Loans Not
	Days		Days		Greater		Past Due		Past Due		Total		Days		Days		Greater		Past Due		Past Due		Total
Commercial	$	—	$	—	$	35	$	35	$	46,402	$	46,437	$	—	$	—	$	21	$	21	$	157,307	$	157,328
Commercial real estate:
Construction		—		—		—		—		5,596		5,596		—		—		—		—		16,241		16,241
Other		—		—		130		130		158,037		158,167		—		2		628		630		229,086		229,716
1-4 Family residential:
Owner occupied		13		—		74		87		41,605		41,692		—		—		172		172		91,102		91,274
Non-owner occupied		—		—		—		—		14,416		14,416		—		—		—		—		19,410		19,410
Construction		—		—		—		—		1,996		1,996		—		—		—		—		9,435		9,435
Consumer		22		—		—		22		5,122		5,144		127		49		12		188		21,205		21,393
Total	$	35	$	—	$	239	$	274	$	273,174	$	273,448	$	127	$	51	$	833	$	1,011	$	543,786	$	544,797

The above table of past due loans includes the recorded investment in non-accrual loans of~~$239~~ $2 in the 60-89 days, $792 in the 90 days or greater category and ~~$948~~$391 in the loans not past due category.

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

The Corporation has certain loans that have been modified in order to maximize collection of loan balances that are classified as TDRs. A modified loan is usually classified as a TDR if, for economic reasons, management grants a concession to the original terms and conditions of the loan to a borrower who is experiencing financial difficulties that it would not have otherwise considered. In response to COVID-19, on March 22, 2020 the Corporation adopted a loan modification program to assist borrowers impacted by the virus. The program is available to most borrowers whose loan was not past due on March 22, 2020, the date this loan modification program was adopted. The program offers principal and interest payment deferrals for up to 90 days or interest only payments for up to 90 days. Borrowers are eligible for an additional 90 days of payment deferrals if situations warrant a need for an extension. Interest will be deferred but will continue to accrue during the deferment period and the maturity date on amortizing loans will be extended by the number of months the payment was deferred. Consistent with issued regulatory guidance, modifications made under this program in response to COVID-19 will not be classified as TDRs. As of March 31, 2021, 7 borrowers with an aggregate outstanding balance of $89 are in payment deferral status under this loan modification program.

As of ~~December~~March 31, ~~2017,~~ 2021 and June 30, 2020, the ~~recorded investment~~Corporation had $706 and $974, respectively, of loans classified as ~~troubled debt restructurings was~~ ~~$1,582~~ ~~with~~ ~~$30~~ ~~of specific reserves allocated to these loans.~~TDRs which are included in impaired loans above. As of ~~December~~March 31, ~~2017,~~ 2021 and June 30, 2020, the Corporation had not committed to lend anany additional ~~$192~~funds to customers with outstanding loans that were classified as troubled debt restructurings. As of March 31, 2021 and June 30, ~~2017,~~ 2020, the ~~recorded investment of loans classified as troubled debt restructurings was~~ ~~$1,740~~ ~~with~~ ~~$33~~Corporation had $1 and $12, respectively, of specific ~~reserves~~reserve allocated to these loans. ~~As of~~ ~~June 30, 2017,~~ ~~the Corporation had committed to lend an additional~~ ~~$175~~ ~~to customers with outstanding loans that were classified as troubled debt restructurings.~~

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

During the ~~three~~three- and ~~six~~ ~~months~~nine-month periods ended ~~December~~March 31, ~~2017~~ 2021 and ~~2016~~,2020, there were no loan modifications completed that were classified as troubled debt restructurings. There were no ~~charge offs~~ charge-offs from troubled debt restructurings that were completed during the ~~three~~three- and ~~six~~ ~~month~~nine-month periods ended ~~December~~March 31, ~~2017~~ 2021 and ~~2016.~~2020.

~~The~~reThere were no loans classified as troubled debt restructurings for which there was a payment default within 12 months following the modification during the ~~three~~three- and ~~six~~ ~~month~~nine-month periods ended ~~December~~March 31, ~~2017~~ 2021 and ~~2016.~~2020. A loan is considered ~~to be~~ in payment default once it is 90 days contractually past due under the modified terms.

Credit Quality Indicators:

The Corporation categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: ~~curren~~tcurrent financial information, historical payment experience, credit documentation, public information, current economic trends and other relevant information. The Corporation analyzes loans individually by classifying the loans as to credit risk. This analysis includes loans with a total outstanding loan relationship greater than ~~$100~~$100 and non-homogeneous loans, such as commercial and commercial real estate loans. Management monitors the loans on an ongoing basis for any changes in the borrower’s ability to service their debt and ~~affirm~~affirms the risk ratings for the loans and leases in their respective portfolio on an annual basis. The Corporation uses the following definitions for risk ratings:

Special Mention. Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

~~CONSUMERS BANCORP, INC.~~

~~Notes to the Consolidated Financial Statements~~

~~(Unaudited) (continued)~~

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

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered ~~to be~~ pass rated loans. Loans listed as not rated are ~~either~~either less than ~~$100~~$100 or are included in groups of homogeneous loans. Generally, 1-4 Family Residential and Consumer loans are not risk rated, except when collateral is used for a business purpose. These loans are evaluated based on delinquency status, which are disclosed in the previous table within this footnote. Based on the most recent analysis performed, the recorded investment by risk category of loans by class of loans was as follows:

As of December 31, 2017

Special

Not

Pass

Mention

Substandard

Doubtful

Rated

Commercial
$ 48,091 $ 883 $ 339 $ — $ 362
Commercial real estate:

Construction
5,941 — 2 — —
Other
156,415 10,365 1,772 537 978
1-4 Family residential real estate:

Owner occupied
2,661 58 14 13 42,743
Non-owner occupied
14,669 203 433 315 590
Construction
765 — — — 1,169
Consumer
119 — — — 4,852
Total
$ 228,661 $ 11,509 $ 2,560 $ 865 $ 50,694

	As of June 30, 2017										As of March 31, 2021
			Special						Not				Special						Not
	Pass		Mention		Substandard		Doubtful		Rated		Pass		Mention		Substandard		Doubtful		Rated
Commercial	$	44,435	$	907	$	642	$	—	$	453	$	128,281	$	295	$	292	$	306	$	243
Commercial real estate:
Construction		4,514		1,035		—		4		43
Construction												3,982		—		—		—		—
Other		150,460		5,110		1,566		470		561		247,040		4,739		4,789		888		937
1-4 Family residential real estate:
Owner occupied		2,668		—		11		30		38,983
Owner occupied												1,461		—		17		480		107,264
Non-owner occupied		13,633		210		261		187		125		18,673		167		203		209		277
Construction		1,223		—		—		—		773		1,752		—		—		—		6,105
Consumer		145		—		—		—		4,999		791		—		—		—		25,235
Total	$	217,078	$	7,262	$	2,480	$	691	$	45,937	$	401,980	$	5,201	$	5,301	$	1,883	$	140,061

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

As of June 30, 2020, and based on the most recent analysis performed, the recorded investment by risk category of loans by class of loans is as follows:

As of June 30, 2020

Special

Not

Pass

Mention

Substandard

Doubtful

Rated

Commercial
$ 152,911 $ 143 $ 3,979 $ 21 $ 274
Commercial real estate:

Construction
16,241 — — — —
Other
220,311 1,469 5,378 785 1,773
1-4 Family residential real estate:

Owner occupied
2,419 — 334 — 88,521
Non-owner occupied
18,435 186 223 236 330
Construction
3,234 — — — 6,201
Consumer
153 — — — 21,240
Total
$ 413,704 $ 1,798 $ 9,914 $ 1,042 $ 118,339

Note 45 - Fair Value

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

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

~~Leve~~l 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~~’scompany’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

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

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

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

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

Fair Value Measurements at
December 31, 2017 Using

Balance at
December 31,
2017

Level 1

Level 2

Level 3

Assets:

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

Fair Value Measurements at
March 31, 2021

Balance at
March 31,
2021

Level 1

Level 2

Level 3

Assets:

Obligations of U.S. government-sponsored entities and agencies
$ 11,604 $ — $ 11,604 $ —
Obligations of states and political subdivisions
71,042 — 71,042 —
U.S. Government-sponsored mortgage-backed securities – residential
73,256 — 73,256 —
U.S. Government-sponsored mortgage-backed securities – commercial
2,869 — 2,869 —
U.S. Government-sponsored collateralized mortgage obligations - residential
9,796 — 9,796 —
Other
492 — 492 —
Equity securities
412 — 412 —

~~CONSUMERS BANCORP, INC.~~

~~Notes to the Consolidated Financial Statements~~

~~(Unaudited) (continued)~~

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

Fair Value Measurements at
June 30, 2017 Using

Balance at
June 30,
2017

Level 1

Level 2

Level 3

Assets:

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

Fair Value Measurements at
June 30, 2020

Balance at
June 30,
2020

Level 1

Level 2

Level 3

Assets:

Securities available-for-sale:

Obligations of U.S. Treasury
$ 1,256 $ — $ 1,256 $ —
Obligations of government-sponsored entities
10,532 — 10,532 —
Obligations of states and political subdivisions
63,492 — 63,492 —
U.S. Government-sponsored mortgage-backed securities - residential
50,156 — 50,156 —
U.S. Government-sponsored mortgage-backed securities – commercial
8,497 — 8,497 —
U.S. Government-sponsored collateralized mortgage obligations
9,985 — 9,985 —

There were no transfers between Level 1 and Level 2 during the ~~three~~ or ~~six~~ ~~month~~three-month and nine-month periods ended ~~December~~March 31, ~~2017~~ 2021 or ~~2016.~~2020.

Certain ~~financial~~ assets and ~~financial~~ liabilities are measured at fair value on a non-recurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances. ~~Financial assets~~Assets and ~~financial~~ liabilities measured at fair value on a non-recurring basis include the following:

Impaired Loans: At the time a loan is considered impaired, it is valued at the lower of cost or fair value. Impaired loans carried at fair value generally receive specific allocations of the allowance for loan losses or are charged down to their fair value. For collateral dependent loans, fair value is commonly based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. There were no impaired loans measured at fair value on a non-recurring basis at March 31, 2021 or June 30, 2020 and there was no impact to the provision for loan losses for the three- or nine-month periods ended March 31, 2020 or 2021.

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

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

~~CONSUMERS BANCORP, INC.~~

~~Notes to the Consolidated Financial Statements~~

~~(Unaudited) (continued)~~

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

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

Fair Value Measurements at
June 30, 2017 Using

Balance at
June 30, 2017

Level 1

Level 2

Level 3

Impaired loans:

Commercial Real Estate - Other
$ 130 $ — $ — $ 130
Other Real Estate Owned:

1-4 Family residential real estate
71 — — 71

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

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

~~The following tables present quantitative information about Level~~ 3 ~~fair value measurements for financial instruments measured at fair value on a non-recurring basis at~~ 2021 or June 30, ~~2017:~~

June 30, 2017

Fair
Value

Valuation
Technique

Unobservable
Inputs

Range

Weighted
Average

Impaired loans:

Commercial Real Estate – Other
$ 130
Bid Indications
N/A 0.0
%
0.0
%
Other Real Estate Owned:

1-4 Family residential real estate
$ 71
Bid Indications
N/A 0.0
%
0.0
%

~~CONSUMERS BANCORP, INC.~~

~~Notes to the Consolidated Financial Statements~~

~~(Unaudited) (continued)~~

~~(Dollars in thousands, except per share amounts)~~2020.

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

	December 31, 2017				June 30, 2017				March 31, 2021				June 30, 2020
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial Assets:
Financial Assets:
Level 1 inputs:
Cash and cash equivalents	$	9,141	$	9,141	$	9,912	$	9,912	$	41,032	$	41,032	$	9,659	$	9,659
Level 2 inputs:
Certificates of deposits in other financial institutions		3,921		3,924		3,921		3,927
Certificates of deposit in other financial institutions										7,335		7,497		11,635		11,889
Loans held for sale		814		833		1,252		1,286		561		572		3,507		3,566
Accrued interest receivable		1,310		1,310		1,212		1,212		2,169		2,169		2,646		2,646
Level 3 inputs:
Securities held-to-maturity		4,061		4,083		4,259		4,329		8,036		8,483		3,541		3,868
Loans, net		290,369		284,618		269,781		266,041		547,061		554,818		537,183		548,247
Financial Liabilities:
Level 2 inputs:
Demand and savings deposits		316,218		316,218		307,960		307,960		615,510		615,510		517,973		517,973
Time deposits		66,771		66,676		66,511		66,535		88,478		89,111		115,382		116,238
Short-term borrowings		22,507		22,507		23,986		23,986		9,419		9,419		6,943		6,943
Federal Home Loan Bank advances		17,188		16,796		12,320		12,054		18,067		18,170		31,161		31,571
Accrued interest payable		74		74		40		40		59		59		107		107

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

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

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

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

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

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

~~CONSUMERS BANCORP, INC.~~

~~Notes to the Consolidated Financial Statements~~

~~(Unaudited) (continued)~~

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

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

~~Time deposits:~~ ~~Fair value of fixed-maturity certificates of deposit was estimated using the rates offered at~~ ~~December 31, 2017~~ ~~and~~ ~~June 30, 2017,~~ ~~for deposits of similar remaining maturities, resulting in a Level~~ 2 ~~classification. Estimated fair value does~~ ~~not~~ ~~include the benefit that results from low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market.~~

~~Federal Home Loan Bank advances:~~ ~~Fair value of Federal Home Loan Bank advances was estimated using current rates at~~ ~~December 31, 2017~~ ~~and~~ ~~June 30, 2017~~ ~~for similar financing resulting in a Level~~ 2 ~~classification.~~

~~Federal bank and other restricted stocks, at cost:~~ Federal bank and other restricted stocks include stock acquired for regulatory purposes, such as Federal Home Loan Bank stock and Federal Reserve Bank stock that are accounted for at cost due to restrictions placed on their transferability; and therefore, are ~~not~~ ~~subject to the fair value disclosure requirements.~~

~~Off-balance sheet commitments:~~ ~~The Corporation’s lending commitments have variable interest rates and “escape” clauses if the customer’s credit quality deteriorates. Therefore, the fair values of these items are~~ ~~not~~ ~~significant and are~~ ~~not~~ ~~included in the above table.~~

Note 56 – Earnings Per Share

Basic earnings per share is the amount of earnings available to each share of common stock outstanding during the reporting period and is equal to net income divided by the weighted average number of shares outstanding during the period. Diluted earnings per share is the amount of earnings available to each share of common stock outstanding during the reporting period adjusted to include the effect of potentially dilutive common shares that may be issued upon the vesting of restricted stock awards. There were ~~2,062~~3,622 shares of restricted stock that were anti-dilutive for the ~~three~~ ~~and~~ ~~six~~ ~~months~~nine-month period ended ~~December~~March 31, ~~2017.~~ 2021. There were no ~~equity instruments~~1,786 and 2,863 shares of restricted stock that were anti-dilutive for the ~~three~~three- and ~~six~~ ~~months~~nine-month periods ended ~~December~~March 31, ~~2016.~~ 2020, respectively. The following table details the calculation of basic and diluted earnings per share:

	For the Three Months Ended December 31,				For the Six Months Ended December 31,				For the Three Months Ended March 31,				For the Nine Months Ended March 31,
	2017		2016		2017		2016		2021		2020		2021		2020
Basic:
Net income available to common shareholders	$	657	$	722	$	1,586	$	1,623	$	2,116	$	1,018	$	7,024	$	3,961
Weighted average common shares outstanding		2,727,666		2,724,061		2,725,859		2,723,988		3,018,529		3,003,205		3,017,773		2,828,427
Basic income per share	$	0.24	$	0.27	$	0.58	$	0.60	$	0.70	$	0.34	$	2.33	$	1.40

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

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

Diluted:

Net income available to common shareholders
$ 2,116 $ 1,018 $ 7,024 $ 3,961
Weighted average common shares outstanding
3,018,529 3,003,205 3,017,773 2,828,427
Dilutive effect of restricted stock
320 — — —
Total common shares and dilutive potential common shares
3,018,849 3,003,205 3,017,773 2,828,427
Dilutive income per share
$ 0.70 $ 0.34 $ 2.33 $ 1.40

Note 7 –Accumulated Other Comprehensive Income (Loss)

The components of other comprehensive income related to unrealized gains and losses on available-for-sale securities and equity securities for the three and nine-month periods ended March 31, 2021 and 2020, were as follows:

Pretax

Tax Effect

After-tax

Affected Line
Item in
Consolidated
Statements of
Income
Balance as of December 31, 2020
$ 5,733 $ (1,204
)
$ 4,529
Unrealized holding losses on securities arising during the period
(2,269
)
477 (1,792
)

Amounts reclassified from accumulated other comprehensive income
(6
)
1 (5
)
(a)(b)
Net current period other comprehensive loss
(2,275
)
478 (1,797
)

Balance as of March 31, 2021
$ 3,458 $ (726
)
$ 2,732

Balance as of December 31, 2019
$ 2,662 $ (560
)
$ 2,102
Unrealized holding gains on available-for-sale securities arising during the period
1,900 (399
)
1,501
Amounts reclassified from accumulated other comprehensive income
(121
)
26 (95
)
(a)(b)
Net current period other comprehensive income
1,779 (373
)
1,406
Balance after reclassification as of March 31, 2020
$ 4,441 $ (933
)
$ 3,508

(a) Securities (gains) losses, net

(b) Income tax expense

CONSUMERS BANCORP, INC.

Notes to the Consolidated Financial Statements

(Unaudited) (continued)

(Dollars in thousands, except per share amounts)

~~Note~~ 6~~–Accumulated Other Comprehensive Income~~

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

Pretax

Tax Effect

After-tax

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

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

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

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

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

(a~~) Securities gains, net~~

~~(b) Income tax expense~~

~~CONSUMERS BANCORP, INC.~~

~~Notes to the Consolidated Financial Statements~~

~~(Unaudited) (continued)~~

Pretax

Tax Effect

After-tax

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

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

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

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

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

Pretax

Tax Effect

After-tax

Affected Line
Item in
Consolidated
Statements of
Income
Balance as of June 30, 2020
$ 5,393 $ (1,133
)
$ 4,260
Unrealized holding losses on securities arising during the period
(1,921
)
404 (1,517
)

Amounts reclassified from accumulated other comprehensive income
(14
)
3 (11
)
(a)(b)
Net current period other comprehensive loss
(1,935
)
407 (1,528
)

Balance as of March 31, 2021
$ 3,458 $ (726
)
$ 2,732

Balance as of June 30, 2019
$ 1,982 $ (416
)
$ 1,566
Unrealized holding gains on available-for-sale securities arising during the period
2,690 (566
)
2,124
Amounts reclassified from accumulated other comprehensive income
(231
)
49 (182
)
(a)(b)
Net current period other comprehensive income
2,459 (517
)
1,942
Balance after reclassification as of March 31, 2020
$ 4,441 $ (933
)
$ 3,508

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

(b) Income tax expense

Note 78 – COVID-19~~Income Taxes~~

On In December ~~22, 2017,~~ 2019, a novel strain of coronavirus surfaced in Wuhan, China, and has spread around the ~~U.S. government enacted comprehensive tax legislation commonly referred to as~~world, resulting in business and social disruption. The coronavirus was declared a Pandemic by the ~~Tax Cuts~~World Health Organization on March 11, 2020. The operations and ~~Jobs Act (Tax Act). The Tax Act significantly revises the future ongoing U.S. corporate income tax by, among other things, decreasing U.S. corporate income tax rates to~~ ~~21.0%~~ ~~from~~ ~~35.0%.~~ Asbusiness results of the Corporation ~~has a~~ ~~June 30~~ ~~fiscal year-end,~~could be materially adversely affected. The extent to which the ~~lower corporate income tax rate~~coronavirus may impact business activity or investment results will depend on future developments, which are highly uncertain and cannot be ~~phased in, resulting in a blended U.S. statutory federal rate of approximately~~ ~~27.55%~~ ~~for~~predicted, including new information which may emerge concerning the ~~Corporation's fiscal year ending~~ ~~June 30, 2018,~~ ~~and~~ ~~21.0%~~ ~~for subsequent fiscal years. In addition, the reduction~~severity of the ~~corporate tax rate~~coronavirus and the actions required to contain the ~~Corporation to revalue~~coronavirus or treat its ~~deferred tax assets and liabilities based on the lower federal tax rate of~~ ~~21.0%.~~

impact, among others. As a result of the ~~new legislation, during~~economic shutdown engineered to slow down the ~~quarter ended~~ ~~December 31, 2017,~~ spread of COVID-19, the ~~Corporation recorded a~~ ~~one~~~~-time income tax expense~~ability of $~~348~~our customers to make payments on loans could be adversely impacted, resulting in ~~conjunction with writing down its net deferred tax assets. The impact of using the~~ ~~27.55%~~ ~~blended federal tax rate for the quarter ended~~ ~~December 31, 2017~~ ~~versus a~~ ~~34.0%~~ ~~rate reduced the income tax expense by approximately~~ ~~$95.~~ ~~Therefore, the effective tax rate was~~ ~~42.7%~~elevated loan losses and ~~31.7%~~ ~~for the~~ ~~three~~ ~~and~~ ~~six~~ ~~months ended~~ ~~December 31, 2017,~~ ~~respectively, compared to~~ ~~16.7%~~ ~~and~~ ~~19.7%~~ ~~for the~~ ~~three~~ ~~and~~ ~~six~~ ~~months ended~~ ~~December 31, 2016,~~ ~~respectively.~~

~~The changes included~~an increase in the T~~ax Act are broad and complex. The final transition impacts~~Corporation’s allowance for loan losses. Additionally, it is reasonably possible future evaluations of the ~~Tax Act~~ ~~may~~ ~~differ from the above estimates, possibly materially, due to, among other things, changes~~carrying amount of goodwill could result in ~~interpretations of the Tax Act, any legislative action to address questions~~a conclusion that ~~arise because of the Tax Act, and any changes in accounting standards for income taxes or related interpretations in response to the Tax Act~~.goodwill is impaired.

CONSUMERS BANCORP, INC.

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

(Dollars in thousands, except per share data)

General

The following is ~~management~~’smanagement’s analysis of the Corporation’s results of operations for the ~~three~~three- and ~~six months~~nine-month periods ended ~~December~~March 31, ~~2017,~~2021, compared to the same period in ~~2016,~~2020, and the consolidated balance sheet at ~~December~~March 31, ~~2017,~~2021, compared to June 30, ~~2017.~~2020. This discussion is designed to provide a more comprehensive review of the operating results and financial condition than could be obtained from an examination of the financial statements alone. This analysis should be read in conjunction with the consolidated financial statements and related footnotes and the selected financial data included elsewhere in this report.

Overview

Consumers Bancorp, Inc., a bank holding company incorporated under the laws of the State of Ohio (the Corporation), owns all ~~of th~~ethe issued and outstanding common shares of Consumers National Bank, a bank chartered under the laws of the United States of America (the Bank). The Corporation’s activities have been limited primarily to holding the common shares of the Bank. The Bank’s business involves attracting deposits from businesses and individual customers and using such deposits to originate commercial, mortgage and consumer loans in its market area, consisting primarily of Carroll, Columbiana, Jefferson, Stark, Summit, Wayne and contiguous counties in Ohio. 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.

On December 29, 2020, the Bank entered into a P&A Agreement with CFBank to acquire CFBank’s drive-up branch location in Wellsville, Ohio and CFBank’s branch location in Calcutta, Ohio. As part of this transaction, the Bank will acquire approximately $100 million in deposits attributable to the Branches; $15 million in aggregate principal amount of subordinated debt securities issued by unrelated financial institutions; and up to $31.6 million in aggregate principal amount of loans purchased or of participation interests in loans originated by and held in CFBank’s portfolio. The transaction is expected to close in July 2021, pending the completion of customary closing conditions. All necessary regulatory approvals have been received.

On January 1, 2020, Consumers completed the acquisition by merger of Peoples and its wholly owned subsidiary Peoples Bank. The assets and liabilities of Peoples were recorded on the Corporation’s Balance Sheet at their estimated fair values as of January 1, 2020, the acquisition date, and Peoples’ results of operations are included in the Corporation’s Consolidated Statements of Income beginning on that date. As of the date of acquisition of Peoples, the estimated fair value of loans received was $55,320 and the estimated fair value of deposits assumed was $60,851.

COVID-19 Pandemic

In response to COVID-19, management is actively pursuing multiple avenues to assist customers during these uncertain times. For commercial borrowers, the Coronavirus Aid, Relief and Economic Security Act (the CARES Act) includes key SBA initiatives to assist small businesses. The Paycheck Protection Program (PPP) was designed to provide a direct incentive for small businesses to keep their workers on the payroll. The SBA will forgive loans obtained under this program if the borrower meets payroll and other requirements. A total of $25,129 of PPP loans from the first round of assistance were outstanding as of March 31, 2021. Demand for the second round of the PPP program has been strong and submission of applications began on January 15, 2021. As of March 31, 2021, there were a total of $40,363 of loans funded as part of the second round of the PPP loan program.

Additionally, on March 22, 2020 the Corporation adopted a loan modification program to assist borrowers impacted by COVID-19. The program is available to most borrowers whose loan was not past due on March 22, 2020, the date this loan modification program was adopted. The program offers principal and interest payment deferrals for up to 90 days or interest only payments for up to 90 days. Borrowers are eligible for an additional 90 days of payment deferrals if situations warrant a need for an extension. Interest will be deferred but will continue to accrue during the deferment period and the maturity date on amortizing loans will be extended by the number of months the payment was deferred. Consistent with issued regulatory guidance, modifications made under this program in response to COVID-19 will not be classified as troubled debt restructurings. As of March 31, 2021, 7 borrowers with an outstanding balance of $89 are in payment deferral status under this loan modification program.

CONSUMERS BANCORP, INC.

Management's Discussion and Analysis of Financial Condition

and Results of Operations (continued)

(Dollars in thousands, except per share data)

We have assisted and may continue to assist customers who are experiencing financial hardship due to COVID-19 by waiving late charges, refunding NSF and overdraft fees, and waiving CD prepayment penalties. The consumer reserve personal line of credit, an unsecured line of credit that is linked to a personal checking account, has been redesigned to provide easier access and a lower initial rate. Commercial customers have been encouraged to access available funds on their lines of credit, and we have been ready to provide emergency commercial lines of credit to qualified borrowers in order to assist in meeting payroll and other recurring fixed expenses. In response to COVID-19, we provided four emergency lines of credit; however, the lines of credit have since been closed as the borrowers did not need to access the funds.

The Corporation has modified its business practices with a portion of employees working remotely from their homes to limit interruptions to operations as much as possible and to help reduce the risk of COVID-19 infecting entire departments. The branch lobbies were closed at various times throughout the pandemic but are now open for normal business. The Corporation is encouraging virtual meetings and conference calls in place of in-person meetings. Additionally, travel for business has been restricted. The Corporation is promoting social distancing, frequent hand washing and thorough disinfection of all surfaces.

Results of Operations

~~Three~~ Three- and ~~Six~~ ~~Months~~Nine-Month Periods Ended ~~December~~March 31,~~, 2017~~ 2021 and ~~December 31~~~~, 2016~~2020

InNet income for the ~~second~~third quarter of fiscal year ~~2018, pre-tax income increased by $279,~~2021 was $2,116, or ~~32.2% from the same period last year. Net income for the second quarter of fiscal year 2018 was $657, or $0.24~~$0.70 per common share, compared to ~~$722,~~$1,018, or ~~$0.27~~$0.34 per common share for the three months ended ~~December~~March 31, ~~2016.~~2020. The following are key highlights of our results of operations for the three months ended ~~December~~March 31, ~~2017:~~2021 compared to the prior fiscal year comparable period:

	●	~~the estimated impact of the enactment of the Tax Act resulted in a net increase of $253 in income tax expense;~~
	●	net interest income increased by ~~$391~~$742 to ~~$3,927,~~$6,336, or ~~by 11.1%~~13.3%, in the ~~second~~third quarter of fiscal year ~~2018~~2021 from the same prior year period primarily as a result of a reduction in the cost of funds;
	●	a $185 provision for loans loss expense was recorded for the third quarter of fiscal year 2021 compared with $445 for the prior year period;
	●	noninterest income decreased by $53 in the third quarter of fiscal year 2021 from the same prior year period primarily since the prior year period included a $121 gain on the sale of securities. This was offset by a $100, or 27.2%, increase in debit card interchange income and a $28, or 23.1%, increase on gains from the sale of mortgage loans; and
	●	noninterest expenses decreased by $409 in the third quarter of fiscal year 2021 from the same prior year period primarily since the three-month period ended March 31, 2020 included $433 of acquisition costs from the merger with Peoples that closed on January 1, 2020.

In the first nine months of fiscal year 2021, net income was $7,024, or $2.33 per common share, compared to $3,961, or $1.40 per common share, for the nine months ended March 31, 2020. The following are key highlights of our results of operations for the nine months ended March 31, 2021:

	●	net interest income increased by $4,817 to $19,888, or by 32.0%, in the first nine months of fiscal year 2021 from the same prior year period primarily as a result of an increase in average interest earning assets and a reduction in the cost of funds;
	●	a provision for loan loss expense of $445 was recorded in the first nine months of fiscal year 2021 compared with $760 during the same prior year period;
	●	~~the~~ ~~provision for loan losses~~noninterest income decreased by $253 in the ~~second quarter~~first nine months of fiscal year ~~2018 totaled $60 compared to $140 in~~2021 primarily since the ~~same~~ prior year ~~period;~~period included $324 of income recognized as a result of proceeds received from a bank owned life insurance policy claim and a $231 gain on the sale of securities. These reductions were partially offset by a $233, or 58.5%, increase on gains from the sale of mortgage loans and a $226, or 19.8%, increase in debit card interchange income; and
	●	~~non-interest income~~noninterest expenses increased by $~~42,~~$981, or ~~5.3%~~7.4%, in the ~~second quarter~~first nine months of fiscal year ~~2018~~2021 from the same prior year ~~period;~~period primarily due to an increase in salaries and
	●	~~non-interest~~ employee benefit expenses ~~increased by $234, or 7.0%, in~~due to the ~~second quarter~~inclusion of ~~fiscal year 2018 from~~expenses associated with the ~~same prior year period.~~

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

	●	~~net interest income increased by $450, or 6.2%, in fiscal year 2018 from the same prior year period;~~
	●	~~the provision for loan losses~~ ~~totaled $150 in fiscal year 2018 compared to $276 in the same prior year period;~~
	●	~~non-interest income increased by $66, or 4.0% in fiscal year 2018 from the same prior year period;~~
	●	~~non-interest expenses increased by $341, or 5.2% in fiscal year 2018 from the same prior year period;~~three new office locations and
	●	~~the estimated impact~~ additional staff gained as a result of the ~~enactment of~~merger with Peoples, increased incentive accruals, and higher mortgage commissions due to the ~~Tax Act resulted~~increase in ~~a net increase of $253 in income tax expense in fiscal year 2018.~~volume.

Return on average equity and return on average assets were ~~7.09%~~14.05% and ~~0.67%~~1.24%, respectively, for the ~~first six~~nine months ~~of fiscal year 2018~~ended March 31, 2021 compared to ~~7.34%~~9.53% and ~~0.74%~~0.90%, respectively, for the same prior year period.

CONSUMERS BANCORP, INC.

Management's Discussion and Analysis of Financial Condition

and Results of Operations (continued)

(Dollars in thousands, except per share data)

Net Interest Income

Net interest income, the difference between interest income earned on interest-earning assets and interest expense incurred on interest-bearing liabilities, is the largest component of the ~~Corporation~~’sCorporation’s earnings. Net interest income is affected by changes in the volumes, rates and composition of interest-earning assets and interest-bearing liabilities. In addition, prevailing economic conditions, fiscal and monetary policies and the policies of various regulatory agencies all affect market rates of interest and the availability and cost of credit, which, in turn, can significantly affect net interest income. As a result of the Federal Open Market Committee establishing a near-zero target range for the federal funds rate, earnings could be negatively affected if the interest we receive on loans and securities falls more quickly than interest we pay on deposits and borrowings. Net interest margin is calculated by dividing net interest income on a fully tax equivalent basis (FTE) by total average interest-earning assets. FTE income includes tax-exempt income, restated to a pre-tax equivalent, based on the statutory federal income tax rate. The federal income tax rate in effect for the ~~2018~~2021 and 2020 fiscal ~~year~~years was 27.55% and for the 2017 fiscal year was 34.0%. With the enactment of the Tax Act, the statutory tax rate was changed in the second quarter of fiscal year 2018 to 27.55% by using a blended rate of the new 21.0% ~~federal rate that went into effect on January 1, 2018 and the previous federal rate of 34.0%~~. All average balances are daily average balances. Non-accruing loans are included in average loan balances.

The ~~Corporation~~’sCorporation’s net interest margin was ~~3.61%~~3.56% for the three months ended ~~December~~March 31, ~~2017,~~2021, compared with ~~3.62%~~3.76% for the same period in ~~2016.~~2020. FTE net interest income for the three months ended ~~December~~March 31, ~~2017~~2021 increased by ~~$290,~~$763, or ~~7.8%~~13.5%, to ~~$4,011~~$6,435 from ~~$3,721~~$5,672 for the same prior year ~~ago~~ period.

Tax-equivalent interest income for the three months ended ~~December~~March 31, ~~2017~~2021 increased by ~~$404,~~$119, or ~~10.2%~~1.8%, from the same prior year ~~ago~~ period. Interest income was positively impacted by a ~~$31,513,~~$129,951, or ~~7.7%~~21.3%, increase in average interest-earning assets from the same prior year ~~period. The~~period due to the origination of PPP loans and organic loan growth. This increase from the growth in average interest-earning assets was partially offset by the Corporation’s yield on average interest-earning assets ~~increased~~declining to ~~3.94%~~3.76% for the three months ended ~~December~~March 31, ~~2017 from 3.86%~~2021 compared with 4.43% for the same period last year. ~~The~~A reduction in the accretion of origination fees from PPP loans as these loans are forgiven and the longer amortization period of the origination fees for the second round of PPP loans, combined with the significant decline in interest rates, will continue to impact the yield on ~~average~~ interest-earning assets ~~increased despite~~and could ultimately result in a decline in interest income.

Interest expense for the ~~tax-equivalent yield on nontaxable securities which occurred~~three months ended March 31, 2021 decreased by $644, or 63.6%, from the same prior year period primarily due to a reduction in deposit and borrowing costs as a result of lower market interest rates. The Corporation’s cost of funds was 0.30% for the ~~decline~~three months ended March 31, 2021 compared with 0.92% for the same prior year period.

The Corporation’s net interest margin was 3.76% for the nine months ended March 31, 2021, compared with 3.68% for the same period in 2020. FTE net interest income for the ~~statutory federal tax rate. The~~nine months ended March 31, 2021 increased by $4,887, or 31.9%, to $20,191 from $15,304 for the same prior year period.

Tax-equivalent interest income for the nine months ended March 31, 2021 increased by $3,437, or 18.7%, from the same prior year period. Interest income was positively impacted by a $164,919, or 29.6%, increase in ~~the yield on~~ average interest-earning assets from the same prior year period due to the assets acquired from the Peoples acquisition as well as organic loan growth. Additionally, interest income was ~~primarily~~positively impacted by the accretion of origination fees from the PPP loans and from a ~~result of a positive~~ change in the earning asset mix, with higher yielding loans increasing faster than lower yielding ~~securities~~securities. However, a reduction in the accretion of origination fees from PPP loans as ~~well as an increase~~these loans are forgiven and the longer amortization period of the origination fees for the second round of PPP loans, combined with the significant decline in interest ~~rates.~~rates, will continue to impact the yield on interest-earning assets and could ultimately result in a decline in interest income. The Corporation’s yield on average interest-earning assets was 4.05% for the nine months ended March 31, 2021 compared with 4.41% for the same period last year.

Interest expense for the ~~three~~nine months ended ~~December~~March 31, ~~2017 increased~~2021 decreased by ~~$114~~$1,450 from the same prior year ~~ago~~ period. The Corporation’s cost of funds was ~~0.46%~~0.43% for the ~~three~~nine months ended ~~December~~March 31, ~~2017~~2021 compared with ~~0.34%~~1.00% for the same prior year ~~ago~~ period. The ~~increase~~decline in short term market interest rates ~~has impacted~~had an impact on the rates paid on ~~money market accounts, short-term borrowings~~all interest-bearing deposit products and ~~time deposits.~~

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

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

~~CONSUMERS BANCORP, INC.~~

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

~~and Results of Operations (continued)~~

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

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

2017

2016

Average
Balance

Interest

Yield/
Rate

Average
Balance

Interest

Yield/
Rate

Interest-earning assets:

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

Noninterest-earning assets
31,646 29,148

Total Assets
$ 472,825 $ 438,814

Interest-bearing liabilities:

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

Noninterest-bearing liabilities:

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

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

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

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

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

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

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

CONSUMERS BANCORP, INC.
Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)

(Dollars in thousands, except per share data)

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

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

2017

2016

2021

2020

Average
Balance

Interest

Yield/
Rate

Average
Balance

Interest

Yield/
Rate

Average
Balance

Interest

Yield/
Rate

Average
Balance
Interest
Yield/
Rate

Interest-earning assets:

Taxable securities
$ 83,578 $ 970 2.30
%
$ 75,745 $ 779 2.07
%
$ 87,488 $ 368 1.74
%
$ 81,069 $ 488 2.45
%
Nontaxable securities (1)
60,635 997 3.30 59,710 1,061 3.61 70,195 523 3.18 58,979 464 3.28
Loans receivable (1)
286,273 6,674 4.62 262,296 6,219 4.70 544,669 5,844 4.35 453,887 5,655 5.01
Federal bank and other restricted stocks
2,472 19 3.12 1,926 16 3.34
Equity securities
400 8 8.11 — — —
Interest bearing deposits and federal funds sold
7,546 65 1.71 9,225 60 1.29 34,091 41 0.49 13,503 61 1.82
Total interest-earning assets
438,032 8,706 3.95
%
406,976 8,119 3.98
%
739,315 6,803 3.76
%
609,364 6,684 4.43
%

Noninterest-earning assets
31,699 28,008 31,129 33,412

Total Assets
$ 469,731 $ 434,984 $ 770,444 $ 642,776

Interest-bearing liabilities:

NOW
$ 53,556 $ 40 0.15
%
$ 48,770 $ 36 0.15
%
$ 109,758 $ 33 0.12
%
$ 81,093 $ 90 0.45
%
Savings
152,080 158 0.21 135,957 67 0.10 260,416 73 0.11 207,490 221 0.43
Time deposits
66,595 303 0.90 66,216 250 0.75 94,338 193 0.83 129,300 607 1.89
Short-term borrowings
26,197 112 0.85 19,965 23 0.23 8,426 2 0.10 4,707 14 1.20
FHLB advances
12,915 108 1.66 14,583 114 1.55 18,072 67 1.50 19,424 80 1.66
Total interest-bearing liabilities
311,343 721 0.46
%
285,491 490 0.34
%
491,010 368 0.30
%
442,014 1,012 0.92
%

Noninterest-bearing liabilities:

Noninterest-bearing checking accounts
110,111 102,144 204,716 135,822
Other liabilities
3,920 3,507 6,136 4,780
Total liabilities
425,374 391,142 701,862 582,616
Shareholders’ equity
44,357 43,842
Shareholders’ equity
68,582 60,160

Total liabilities and shareholders’ equity
$ 469,731 $ 434,984
Total liabilities and shareholders’ equity
$ 770,444 $ 642,776

Net interest income, interest rate spread (1)
$ 7,985 3.49
%
$ 7,629 3.64
%
$ 6,435 3.46
%
$ 5,672 3.51
%

Net interest margin (net interest as a percent of average interest-earning assets) (1)
3.62
%
3.74
%
3.56
%
3.76
%

Federal tax exemption on non-taxable securities and loans included in interest income
$ 272 $ 366 $ 99 $ 78

Average interest-earning assets to interest-bearing liabilities
140.69
%
142.55
%
150.57
%
137.86
%

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

CONSUMERS BANCORP, INC.
Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
(Dollars in thousands, except per share data)
Average Balance Sheets and Analysis of Net Interest Income for the Nine Months Ended March 31,
(In thousands, except percentages)
2021 2020

Average
Balance
Interest
Yield/
Rate

Average
Balance
Interest
Yield/
Rate

Interest-earning assets:

Taxable securities
$ 79,934 $ 1,084 1.86
%
$ 81,285 $ 1,478 2.44
%
Nontaxable securities (1)
68,173 1,566 3.22 60,355 1,413 3.22
Loans receivable (1)
547,262 18,924 4.61 405,812 15,283 5.01
Federal bank and other restricted stocks
2,472 58 3.13 1,791 56 4.16
Equity securities
136 8 7.84 — — —
Interest bearing deposits and federal funds sold
23,555 130 0.74 7,370 103 1.86
Total interest-earning assets
721,532 21,770 4.05
%
556,613 18,333 4.41
%

Noninterest-earning assets
30,774 31,870

Total Assets
$ 752,306 $ 588,483

Interest-bearing liabilities:

NOW
$ 106,365 $ 116 0.15
%
$ 82,580 $ 366 0.59
%
Savings
241,302 262 0.14 181,224 653 0.48
Time deposits
107,326 985 1.22 117,875 1,754 1.98
Short-term borrowings
8,301 8 0.13 4,367 38 1.16
FHLB advances
20,750 208 1.34 15,797 218 1.84
Total interest-bearing liabilities
484,044 1,579 0.43
%
401,843 3,029 1.00
%

Noninterest-bearing liabilities:

Noninterest-bearing checking accounts
195,707 126,750
Other liabilities
5,945 4,587
Total liabilities
685,696 533,180
Shareholders’ equity
66,610 55,303

Total liabilities and shareholders’ equity
$ 752,306 $ 588,483

Net interest income, interest rate spread (1)
$ 20,191 3.62
%
$ 15,304 3.41
%

Net interest margin (net interest as a percent of average interest-earning assets) (1)
3.76
%
3.68
%

Federal tax exemption on non-taxable securities and loans included in interest income
$ 303 $ 233

Average interest-earning assets to interest-bearing liabilities
149.06
%
138.52
%

(1) calculated on a fully taxable equivalent basis utilizing a statutory federal income tax rate of 21.0%
27
CONSUMERS BANCORP, INC.
Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
(Dollars in thousands, except per share data)

Provision for Loan Losses
The provision for loan losses represents the charge to income necessary to adjust the allowance for loan losses to an amount that represents ~~management~~’smanagement’s assessment of the estimated probable incurred credit losses in the Bank’s loan portfolio that have been incurred at each balance sheet date. For the ~~three months~~three-month period ended ~~December~~March 31, ~~2017,~~2021, the provision for loan losses was ~~$60~~$185 compared ~~to $140~~with $445 for the same prior year period. Net charge-offs of $21 were recorded during the three-month period ended March 31, 2021 compared with $72 during the three-month period ended March 31, 2020. In the third quarter of fiscal year 2021, the $185 provision for loan losses was the amount needed to maintain an adequate allowance of loan losses due to the organic loan growth during the quarter along with an adjustment in the qualitative factors, primarily changes in international, national, regional and local conditions, due to the improvement in the economic environment.
For the ~~six-month~~nine-month period ended ~~December~~March 31, ~~2017,~~2021, the provision for loan losses was ~~$150~~$445 compared ~~to $276~~with $760 for the same prior year period. Net charge-offs of $47 were recorded during the nine-month period ended March 31, 2021 compared with $80 during the nine-month period ended March 31, 2020.

Non-performing loans were $~~865~~$1,883 as of ~~December~~March 31, ~~2017~~2021 compared with ~~$1,187~~$1,226 as of June 30, ~~2017~~2020 and ~~$1,589~~$1,110 as of ~~December~~March 31, ~~2016. For~~2020. Non-performing loans to total loans were 0.34% at March 31, 2021 and 0.23% at June 30, 2020. Non-accrual loans have primarily increased within the ~~six months ended December 31, 2017 net charge-offs totaled $11 compared with net charge-offs of $719 for the same prior year period.~~ 1-4 family owner occupied and commercial loan categories.
The allowance for loan losses as a percentage of loans was 1.10% at ~~December~~March 31, ~~2017~~2021 and ~~1.13%~~1.05% at June 30, ~~2017. The~~2020. As of March 31, 2021, the ALLL as a percentage of total loans excluding PPP loans was 1.25%. During fiscal year 2021, there was a significant decline in loans classified as substandard due to the full payoff of a large loan relationship that was in this category. Uncertainty remains regarding future levels of criticized and classified loans, non-performing loans and charge-offs. Management will continue to closely monitor changes in the loan portfolio and adjust the provision ~~for loan losses~~accordingly.
Noninterest Income
Noninterest income decreased by $53 for the ~~period ended December 31, 2017 was considered sufficient by management for maintaining an appropriate allowance for probable incurred credit losses.~~
~~Non-Interest Income~~
~~Non-interest income increased by $42, or 5.3%, for the second~~third quarter of fiscal year ~~2018~~2021 from the same period last year ~~and by $66, or 4.0%, for~~primarily due to a $121 gain on the ~~first six months~~sale of securities recognized in the third quarter of fiscal year ~~2018~~2020. This decline was offset by a $100, or 27.2%, increase in debit card interchange income and a $28, or 23.1%, increase in gains from the sale of mortgage loans. Debit card interchange income increased as a result of increased debit card usage and an increase in the number of cards issued. These increases were partially offset by a decline of $65, or 18.3%, in service charges on deposit accounts primarily due to a decline in overdraft charges as many eligible individuals have received Economic Impact Payments and consumer spending habits have changed during the pandemic, resulting in fewer overdrafts.
Noninterest income decreased by $253 for the nine-month period ended March 31, 2021 from the same period last ~~year. Non-interest~~year primarily since the prior year period included $324 of income ~~was positively impacted~~recognized as a result of proceeds received from a bank owned life insurance policy claim and a $231 gain on the sale of securities. These reductions were partially offset by ~~increases in debit card interchange income,~~a $233, or 58.5%, increase on gains from the sale of mortgage loans and ~~earnings on bank owned life insurance. These increases~~a $226, or 19.8%, increase in debit card interchange income, that were partially offset by a decline of $177, or 16.3%, in ~~gains~~service charges on deposit accounts. Gains from the sale of ~~securities.~~mortgage loans have been positively impacted by record low mortgage rates in fiscal year 2021 helping increase the volume of loans sold.

~~Non-Interest~~Noninterest Expenses
Total ~~non-interest~~noninterest expenses ~~increased to $3,560,~~decreased by $409, or ~~by 7.0%~~8.1%, ~~during~~for the ~~second~~third quarter of fiscal year ~~2018,~~2021 compared with ~~$3,326~~the same period last year. Noninterest expenses for the three-month period ended March 31, 2020 included $433 of acquisition costs associated with the merger with Peoples and were primarily consulting fees that were charged to professional and director fees and severance and retention bonuses that were charged to salaries and employee benefits.
Total noninterest expenses increased by $981, or 7.4%, for the nine-month period ended March 31, 2021 compared with the same period last year. Salaries and employee benefit expenses increased by $838, or 11.7%, due to the inclusion of expenses in fiscal year 2021 associated with the three new office locations and additional staff gained as a result of the merger with Peoples, increased incentive accruals, and higher mortgage commissions due to the increase in volume. Data processing expenses declined by $188, or 25.7%, and professional and director fees declined by $130, or 16.2%, because fiscal year 2020 included expenses associated with the merger with Peoples. Also, FDIC assessments increased by $172 for the current year-to-date period since the Small Bank Assessment Credits were applied to the FDIC insurance invoices during the ~~same year ago period. Total non-interest expenses increased to $6,953, or by 5.2%, during the first six months of~~2020 fiscal ~~year 2018, compared with $6,612 during the same year ago period. Total non-interest expenses were impacted by increases in salary, incentive and debit card processing expenses.~~year.

28
CONSUMERS BANCORP, INC.
Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
(Dollars in thousands, except per share data)
Income Taxes
Income tax expense was ~~$489~~$424 and ~~$735~~$1,472 for the ~~three~~three- and ~~six months~~nine-month periods ended ~~December~~March 31, ~~2017,~~2021, respectively, compared to ~~$145~~$164 and ~~$397~~$637 for the ~~three~~three- and ~~six months~~nine-month periods ended ~~December~~March 31, ~~2016,~~2020, respectively. The effective tax rate was ~~42.7%~~16.7% and ~~31.7%~~17.3% for the ~~three~~three- and ~~six months~~nine-month periods ended ~~December~~March 31, ~~2017,~~2021, respectively, compared ~~to 16.7% and 19.7%~~with 13.9% for the ~~three~~three- and ~~six months~~nine-month periods ended ~~December~~March 31, ~~2016, respectively. Income tax expense and the~~2020. The effective tax rates differed from the federal statutory rate ~~was higher in the 2018 fiscal year compared to the same prior year periods primarily due to the enactment of the Tax Act and increased income before income taxes. As~~as a result of ~~the enactment~~tax-exempt income from obligations of ~~the Tax Act, a one-time income tax expense of $253 was recorded in conjunction with revaluing the Company's net deferred tax assets~~states and ~~utilization of a blended tax rate. The enactment of the Tax Act required the Corporation to revalue its deferred tax assets~~political subdivisions, loans and ~~liabilities based upon the lower enacted federal corporate income tax rate at which the Corporation expects to recognize the~~bank owned life insurance earnings and death benefit. During the three months ended December 31, 2017 a one-time income tax expense of $348 was recorded in conjunction with writing down its net deferred tax assets. In addition, the Company will utilize a blended tax rate for its fiscal year ending June 30, 2018 given the Tax Act lowered the federal corporate tax rate beginning January 1, 2018. As a result of utilizing a blended tax rate for its fiscal year ending June 30, 2018, the Company recognized a $95 benefit to income tax expense for both the three and six months ended December 31, 2017.

Financial Condition
Total assets at ~~December~~as of March 31, ~~2017~~2021 were ~~$470,282~~$805,492 compared to ~~$457,883~~$740,820 at June 30, ~~2017,~~2020, an increase of ~~$12,399,~~$64,672, or an annualized ~~5.4%~~11.6%.

~~CONSUMERS BANCORP, INC.~~
~~Management's Discussion and Analysis of Financial Condition~~
~~and Results of Operations (continued)~~
~~(Dollars in thousands, except per share data)~~

Total loans increased by $~~20,727,~~$10,276, or an annualized ~~15.2%~~2.5%, from ~~$272,867 at~~$542,861 as of June 30, ~~2017~~2020 to ~~$293,594 at December~~$553,137 as of March 31, ~~2017. The~~2021. As of March 31, 2021, total loans included $65,492 of PPP loans, a decline of $1,114, or 1.7%, from June 30, 2020. As of March 31, 2021, the bank originated $40,363 in second round PPP loans. Total loans include a mortgage loan warehouse line of credit to another financial institution that had an outstanding balance of $7,121 as of March 31, 2021 and $32,869 as of June 30, 2020. As of March 31, 2021, organic loan growth, which excludes the change in PPP loans and the mortgage loan ~~portfolio~~warehouse line of credit, was ~~primarily related to growth within~~$37,138, or an annualized 11.1%, from June 30, 2020. As of March 31, 2021, the Corporation’s commercial real estate ~~and~~portfolio grew by $17,229, or an annualized 9.3%, the 1-4 family residential real estate ~~segments to borrowers within the Bank’s primary market area. The loan growth was primarily funded~~portfolio grew by ~~an increase of $8,518,~~$16,799, or an annualized ~~4.5%~~18.7%, and the consumer loan portfolio grew by $4,296, or an annualized 26.3%, from June 30, 2020. The increase in the 1-4 family residential real estate portfolio was primarily due to a majority of the mortgage loans originated in the third quarter of fiscal year 2021 being kept within the portfolio rather than being sold to the secondary market.
As of March 31, 2021, total deposits increased by $70,633, or an annualized 14.8%, from June 30, 2020. Deposits from businesses, public fund customers, and consumers have all increased in part due to the deposit of PPP loan proceeds, the receipt of the Economic Impact Payments and other COVID stimulus payments. However, the Corporation has been able to maintain a ~~decline of $6,348~~favorable deposit mix, with 30.7% in ~~available-for-sale securities.~~noninterest-bearing deposits, 17.6% in interest bearing demand deposits, 39.1% in savings and money market deposits, and 12.6% in time deposits.

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

December 31,
2017

June 30,
2017

December 31,
2016

March 31,
2021

June 30,
2020

March 31,
2020

Non-accrual loans
$ 865 $ 1,187 $ 1,589 $ 1,883 $ 1,185 $ 1,097
Loans past due over 90 days and still accruing
— — — — 41 13
Total non-performing loans
865 1,187 1,589
Other real estate owned
57 71 —
Total non-performing assets
$ 922 $ 1,258 $ 1,589
Total non-performing loans
1,883 1,226 1,110
Other repossessed assets
— 7 39
Total non-performing assets
$ 1,883 $ 1,233 $ 1,149

Non-performing loans to total loans
0.29
%
0.44
%
0.60
%
0.34
%
0.23
%
0.24
%
Allowance for loan losses to total non-performing loans
372.83
%
259.98
%
196.54
%
322.68
%
463.13
%
402.52
%

As of ~~December~~March 31, ~~2017,~~2021, impaired loans totaled ~~$1,765,~~$2,074, of which ~~$865~~$1,883 are included in non-accrual loans. Commercial and commercial real estate loans are classified as impaired if management determines that full collection of principal and interest, in accordance with the terms of the loan documents, is not probable. Impaired loans and non-performing loans have been considered in management’s analysis of the appropriateness of the allowance for loan losses. Management and the Board of Directors are closely monitoring these loans and believe that the prospects for recovery of principal and interest, less identified specific reserves, are favorable.

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

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

29

CONSUMERS BANCORP, INC.
Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)

(Dollars in thousands, except per share data)

ForFor the ~~six~~nine months ended ~~December~~March 31, ~~2017,~~2021, net cash inflow from operating activities was ~~$3,484,~~$11,421, net cash outflows from investing activities was ~~$15,494~~$38,733 and net cash inflows from financing activities was ~~$11,239.~~$58,685. A major source of cash was ~~$10,434~~a $70,633 increase in deposits and $36,435 from sales, maturities, calls or principal pay downs on available-for-sale ~~securities, $8,518 increase in deposits and $5,400 proceeds from FHLB advances. The~~securities. A major use of cash was $68,525 purchases of available-for-sale and held-to-maturity securities and a ~~$20,967~~$10,332 increase in loans. Total cash and cash equivalents ~~was $9,141~~were $41,032 as of ~~December~~March 31, ~~2017,~~2021, compared to ~~$9,912~~$9,659 at June 30, ~~2017~~2020 and ~~$10,850~~$12,544 at ~~December~~March 31, ~~2016.~~2020.

The Bank offers several types of deposit products to its customers. We believe the rates offered by the Bank and the fees charged for them are competitive with ~~others~~the rates and fees charged by other banks for similar deposit products currently available in the market area. Deposits totaled ~~$382,989~~$703,988 at ~~December~~March 31, ~~2017~~2021 compared with ~~$374,471~~$633,355 at June 30, ~~2017.~~2020.

To provide an additional source of liquidity, the Corporation has entered into an agreement with the FHLB of Cincinnati. At ~~December~~March 31, ~~2017,~~2021, advances from the FHLB of Cincinnati totaled ~~$17,188~~$18,067 compared with ~~$12,320~~$31,161 at June 30, ~~2017.~~2020. As of ~~December~~March 31, ~~2017,~~2021, the Bank had the ability to borrow an additional ~~$17,032~~$46,319 from the FHLB of Cincinnati based on a blanket pledge of qualifying first mortgage and multi-family loans. The Corporation considers the FHLB of Cincinnati to be a reliable source of liquidity funding, secondary to its deposit base.

Short-term borrowings consisted of repurchase agreements, which are financing arrangements that mature daily, and federal funds purchased from correspondent banks. The Bank pledges securities as collateral for the repurchase agreements. Short-term borrowings totaled ~~$22,507~~$9,419 at ~~December~~March 31, ~~2017~~2021 and ~~$23,986~~$6,943 at June 30, ~~2017.~~2020.

Jumbo time deposits (those with balances of $250 and over) totaled ~~$13,754 at December~~$17,715 as of March 31, ~~2017~~2021 and ~~$14,252 at~~$36,747 as of June 30, ~~2017.~~2020. These deposits are monitored closely by the Corporation and are mainly priced on an individual basis. When these deposits are from a municipality, certain bank-owned securities are pledged to guarantee the safety of these public fund deposits as required by Ohio law. The Corporation has the option to use a fee-paid broker to obtain deposits from outside its normal service area as an additional source of funding. The Corporation, however, does not rely upon these deposits as a primary source of funding. Although management monitors interest rates on an ongoing basis, a quarterly rate sensitivity report is used to determine the effect of interest rate changes on the financial statements. In the opinion of management, enough assets or liabilities could be repriced over the near term (up to three years) to compensate for such changes. The spread on interest rates, or the difference between the average earning assets and the average interest-bearing liabilities, is monitored quarterly.

~~CONSUMERS BANCORP, INC.~~
~~Management's Discussion and Analysis of Financial Condition~~
~~and Results of Operations (continued)~~

~~(Dollars in thousands, except per share data)~~
Off-Balance Sheet Arrangements
In the normal course of business, to meet the financial needs of our customers, we are a party to financial instruments with off-balance sheet risk. These financial instruments generally include commitments to originate mortgage, commercial and consumer l~~oans,~~loans, and involve to varying degrees, elements of credit and interest rate risk in excess of amounts recognized in the Consolidated Balance Sheets. The maximum exposure to credit loss in the event of nonperformance by the borrower is represented by the contractual amount of those instruments. Since commitments to extend credit have a fixed expiration date or other termination clause, some commitments will expire without being drawn upon and the total commitment amounts do not necessarily represent future cash requirements. The same credit policies are used in making commitments as are used for on-balance sheet instruments and collateral is required in instances where deemed necessary. Undisbursed balances of loans closed include funds not disbursed but committed for construction projects. Unused lines of credit include funds not disbursed, but committed for home equity, commercial and consumer lines of credit. Financial standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. Total unused commitments were ~~$62,158 at December~~$119,571 as of March 31, ~~2017~~2021 and ~~$53,742 at~~$101,026 as of June 30, ~~2017.~~2020.

30
CONSUMERS BANCORP, INC.
Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
(Dollars in thousands, except per share data)
Capital Resources
Total ~~shareholders~~’shareholders’ equity increased to ~~$44,171~~$67,573 as of ~~December~~March 31, ~~2017~~2021 from ~~$43,535~~$63,240 as of June 30, ~~2017.~~2020. The primary reason for the increase in shareholders’ equity was ~~the result of~~from net income of ~~$1,586~~$7,024 for the ~~2018~~first nine months of fiscal year 2021 which was partially offset by ~~$668 in~~ cash dividends paid ~~and a $372 other comprehensive loss from a decline in unrealized gains on available-for-sale securities.~~of $1,330.

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

As of ~~December~~March 31, ~~2017,~~2021, the Bank’s common equity tier 1 capital and tier 1 capital ratios were ~~12.64%~~12.36% and the leverage and total risk-based capital ratios were ~~9.00%~~8.26% and ~~13.60%~~13.55%, respectively. This compares with common equity tier 1 capital and tier 1 capital ratios of ~~13.21%~~11.55% and leverage and total risk-based capital ratios of ~~9.06%~~8.04% and ~~14.20%~~12.69%, respectively, as of June 30, ~~2017.~~2020. The Bank exceeded minimum regulatory capital requirements to be considered well-capitalized for both periods. Management is not aware of any matters occurring subsequent to ~~December~~March 31, ~~2017~~2021 that would cause the Bank’s capital category to change.

~~CONSUMERS BANCORP, INC.~~
~~Management's Discussion~~ ~~and Analysis of Financial Condition~~
~~and Results of Operations (continued)~~
~~(Dollars in thousands, except per share data)~~

Critical Accounting Policies
The financial condition and results of operations for the Corporation presented in the Consolidated Financial Statements, accompanying notes to the Consolidated Financial Statements and ~~Management~~’sManagement’s Discussion and Analysis of Financial Condition and Results of Operations are, to a large degree, dependent upon the Corporation’s accounting policies. The selection and application of these accounting policies involve judgments, estimates and uncertainties that are susceptible to change.

The Corporation has identified the appropriateness of the allowance for loan losses and the evaluation of goodwill for impairment as a critical accounting ~~policy~~policies and an understanding of ~~this policy~~these policies is necessary to understand the financial statements. Critical accounting policies are those policies thatthat require management’s most difficult, subjective or complex judgments often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Note one (Summary of Significant Accounting Policies - Allowance for Loan ~~Losses)~~Losses and Goodwill and Other Intangible Assets), ~~note three~~Note four (Loans), Note six (Goodwill and Intangible Assets) and Management’s Discussion and Analysis of Financial Condition and Results of Operation (Critical Accounting Policies and Use of Significant Estimates) of the ~~2017~~2020 Form 10-K provide detail with regard to the Corporation’s accounting for the allowance for loan losses. There have been no significant changes in the application of accounting policies since June 30, ~~2017.~~2020.

Forward-Looking Statements
~~When used~~Certain statements contained in this ~~report (including information incorporated by reference in this report~~),Quarterly Report on Form 10-Q, which are not statements of historical fact, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The words ~~or phrases “will likely result,~~“may,” ~~“are expected to,” “will continue,” “is anticipated,~~“continue,” “estimate,” “intend,” “plan,” “seek,” “will,” “believe,” “project,” ~~“believe” or~~“expect,” “anticipate” and similar expressions are intended to identify ~~“forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.~~forward-looking statements. These forward-looking statements may involve risks and uncertainties that are difficult to predict, may be beyond ~~the Corporation’s~~our control, and could cause actual results to differ materially from those described in such statements. Any such forward-looking statements are made only as of the date of this report or the respective dates of the relevant incorporated documents, as the case may be, and, except as required by law, ~~the Corporation undertakes~~we undertake no obligation to update these forward-looking statements to reflect subsequent events or circumstances. ~~Factors~~The COVID-19 pandemic is affecting us, our customers, employees, and third-party service providers, and the ultimate extent of the impact on our business, financial position, results of operations, liquidity, and prospects is uncertain. Other risks and uncertainties that could cause actual results for future periods to differ materially from those anticipated or projected include, but are not limited to:

●
~~material unforeseen~~ changes in ~~the financial condition or results of Consumers National Bank’s customers;~~
●
local, regional and national economic conditions becoming less favorable than ~~expected,~~we expect, resulting in, among other things, high unemployment rates, a deterioration in credit quality of our assets ~~and the underlying value of collateral could prove to be less valuable than otherwise assumed~~ or debtors being unable to meet their obligations;
●
~~rapid fluctuations in market interest rates could result in changes in fair market valuations and net interest income;~~

●
~~pricing and liquidity pressures that may result in a rising market rate environment;~~
●
~~competitive pressures on product pricing~~ ~~and services;~~
●
~~the economic impact from the oil and gas activity~~changes in the ~~region could be less than expected or the timeline for development could be longer than anticipated;~~level of non-performing assets and charge-offs;

●
declining asset values impacting the ~~nature, extent,~~underlying value of collateral;
●
sustained low market interest rates could result in a decline in the net interest margin and ~~timing of government and regulatory actions.~~net interest income;

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

31

CONSUMERS BANCORP, INC.
Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)

(Dollars in thousands, except per share data)

●
unanticipated changes in our liquidity position, including, but not limited to, changes in the cost of liquidity and our ability to find alternative funding sources;
●
the effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities and insurance) with which we must comply;
●
changes in consumer spending, borrowing and savings habits;
●
changes in accounting policies, rules and interpretations that may come as a result of COVID-19 or otherwise;
●
the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve Board;
●
competitive pressures on product pricing and services;
●
breaches of security or failures of our technology systems due to technological or other factors and cybersecurity threats;
●
changes in the reliability of our vendors, internal control systems or information systems; and
●
our ability to attract and retain qualified employees.
32
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 ~~Corporation~~’sCorporation’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Corporation’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15e. Based on the evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Corporation’s disclosure controls and procedures were effective as of ~~December~~March 31, ~~2017.~~2021.

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

CONSUMERS BANCORP, INC.

PART II – OTHER INFORMATION

Item 1 – Legal Proceedings
None

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds
None

Item 3 – Defaults Upon Senior Securities
None

Item 4 – Mine Safety Disclosures
Not Applicable

Item 5 – Other Information
None

Item 6 – Exhibits

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

Exhibit 31.1
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.
Exhibit 31.2
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.
Exhibit 32.1
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes Oxley Act of 2002.
Exhibit 101
The following materials from Consumers Bancorp, Inc.’s Form 10-Q Report for the quarterly period ended ~~December~~March 31, ~~2017,~~2021, formatted in XBRL (Extensible Business Reporting Language) include: (1) Unaudited Consolidated Balance Sheets, (2) Unaudited Consolidated Statements of Income, (3) Unaudited Consolidated Statements of Comprehensive Income, (4) Unaudited Condensed Consolidated Statement of Changes in Shareholders’ Equity, (5) Unaudited Condensed Consolidated Statements of Cash Flows, and (6) the Notes to Unaudited Condensed Consolidated Financial Statements.

34

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: May 13, 2021
~~(Registrant)~~
/s/ Ralph J. Lober

~~Date:~~ ~~February 14, 201~~8
~~/s/ Ralph J. Lober~~
Ralph J. Lober, II
President & Chief Executive Officer
(principal executive officer)
Date: ~~February 14~~May 13, 2021~~, 201~~8
/s/ Renee K. Wood
Renee K. Wood
Chief Financial Officer & Treasurer
(principal financial officer)

38
35

	Three Months ended December 31						Six Months ended December 31,
	2017			2016			2017			2016

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

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

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

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

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

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

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

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

Available –for-Sale	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
March 31, 2021
Obligations of U.S. government-sponsored entities and agencies	$	11,456	$	222	$	(74	)	$	11,604
Obligations of state and political subdivisions		68,177		3,018		(153	)		71,042
U.S. Government-sponsored mortgage-backed securities–residential		72,894		1,280		(918	)		73,256
U.S. Government-sponsored mortgage-backed securities– commercial		2,869		—		—			2,869
U.S. Government-sponsored collateralized mortgage obligations– residential		9,705		161		(70	)		9,796
Other		500		—		(8	)		492
Total available-for-sale securities	$	165,601	$	4,681	$	(1,223	)	$	169,059

Available–for-Sale	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
June 30, 2020
U.S. Treasury	$	1,248	$	8	$	—		$	1,256
Obligations of U.S. government-sponsored entities and agencies		10,133		399		—			10,532
Obligations of state and political subdivisions		60,343		3,149		—			63,492
U.S. government-sponsored mortgage-backed securities – residential		48,645		1,515		(4	)		50,156
U.S. government-sponsored mortgage-backed securities – commercial		8,444		55		(2	)		8,497
U.S. government-sponsored collateralized mortgage obligations – residential		9,712		285		(12	)		9,985
Total available-for-sale securities	$	138,525	$	5,411	$	(18	)	$	143,918

	Less than 12 Months					12 Months or more				Total
Available-for-sale	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
March 31, 2021
Obligations of U.S. government-sponsored entities and agencies	$	3,006	$	(74	)	$	—	$	—	$	3,006	$	(74	)
Obligations of states and political subdivisions		7,745		(153	)		—		—		7,745		(153	)
U.S. Government-sponsored mortgage-backed securities – residential		31,512		(918	)		—		—		31,512		(918	)
U.S. Government-sponsored collateralized mortgage obligations - residential		4,859		(70	)		—		—		4,859		(70	)
Other		492		(8	)						492		(8	)
Total temporarily impaired	$	47,614	$	(1,223	)	$	—	$	—	$	47,614	$	(1,223	)

			Fair Value Measurements at March 31, 2021
	Balance at March 31, 2021		Level 1		Level 2		Level 3
Assets:
Obligations of U.S. government-sponsored entities and agencies	$	11,604	$	—	$	11,604	$	—
Obligations of states and political subdivisions		71,042		—		71,042		—
U.S. Government-sponsored mortgage-backed securities – residential		73,256		—		73,256		—
U.S. Government-sponsored mortgage-backed securities – commercial		2,869		—		2,869		—
U.S. Government-sponsored collateralized mortgage obligations - residential		9,796		—		9,796		—
Other		492		—		492		—
Equity securities		412		—		412		—

			Fair Value Measurements at June 30, 2020
	Balance at June 30, 2020		Level 1		Level 2		Level 3
Assets:
Securities available-for-sale:
Obligations of U.S. Treasury	$	1,256	$	—	$	1,256	$	—
Obligations of government-sponsored entities		10,532		—		10,532		—
Obligations of states and political subdivisions		63,492		—		63,492		—
U.S. Government-sponsored mortgage-backed securities - residential		50,156		—		50,156		—
U.S. Government-sponsored mortgage-backed securities – commercial		8,497		—		8,497		—
U.S. Government-sponsored collateralized mortgage obligations		9,985		—		9,985		—

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

	Pretax			Tax Effect			After-tax			Affected Line Item in Consolidated Statements of Income
Balance as of December 31, 2020	$	5,733		$	(1,204	)	$	4,529
Unrealized holding losses on securities arising during the period		(2,269	)		477			(1,792	)
Amounts reclassified from accumulated other comprehensive income		(6	)		1			(5	)	(a)(b)
Net current period other comprehensive loss		(2,275	)		478			(1,797	)
Balance as of March 31, 2021	$	3,458		$	(726	)	$	2,732

Balance as of December 31, 2019	$	2,662		$	(560	)	$	2,102
Unrealized holding gains on available-for-sale securities arising during the period		1,900			(399	)		1,501
Amounts reclassified from accumulated other comprehensive income		(121	)		26			(95	)	(a)(b)
Net current period other comprehensive income		1,779			(373	)		1,406
Balance after reclassification as of March 31, 2020	$	4,441		$	(933	)	$	3,508

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

Average Balance Sheets and Analysis of Net Interest Income for the Three Months Ended March 31,																	Average Balance Sheets and Analysis of Net Interest Income for the Three Months Ended March 31,
(In thousands, except percentages)																	(In thousands, except percentages)
	2017								2016									2021								2020
	Average Balance			Interest		Yield/ Rate			Average Balance			Interest		Yield/ Rate				Average Balance			Interest		Yield/ Rate			Average Balance			Interest		Yield/ Rate
Interest-earning assets:
Taxable securities	$	83,578		$	970		2.30	%	$	75,745		$	779		2.07	%		$	87,488		$	368		1.74	%	$	81,069		$	488		2.45	%
Nontaxable securities (1)		60,635			997		3.30			59,710			1,061		3.61				70,195			523		3.18			58,979			464		3.28
Loans receivable (1)		286,273			6,674		4.62			262,296			6,219		4.70				544,669			5,844		4.35			453,887			5,655		5.01
Federal bank and other restricted stocks																			2,472			19		3.12			1,926			16		3.34
Equity securities																			400			8		8.11			—			—		—
Interest bearing deposits and federal funds sold		7,546			65		1.71			9,225			60		1.29				34,091			41		0.49			13,503			61		1.82
Total interest-earning assets		438,032			8,706		3.95	%		406,976			8,119		3.98	%			739,315			6,803		3.76	%		609,364			6,684		4.43	%

Noninterest-earning assets		31,699								28,008									31,129								33,412

Total Assets	$	469,731							$	434,984								$	770,444							$	642,776

Interest-bearing liabilities:
NOW	$	53,556		$	40		0.15	%	$	48,770		$	36		0.15	%		$	109,758		$	33		0.12	%	$	81,093		$	90		0.45	%
Savings		152,080			158		0.21			135,957			67		0.10				260,416			73		0.11			207,490			221		0.43
Time deposits		66,595			303		0.90			66,216			250		0.75				94,338			193		0.83			129,300			607		1.89
Short-term borrowings		26,197			112		0.85			19,965			23		0.23				8,426			2		0.10			4,707			14		1.20
FHLB advances		12,915			108		1.66			14,583			114		1.55				18,072			67		1.50			19,424			80		1.66
Total interest-bearing liabilities		311,343			721		0.46	%		285,491			490		0.34	%			491,010			368		0.30	%		442,014			1,012		0.92	%

Noninterest-bearing liabilities:
Noninterest-bearing checking accounts		110,111								102,144									204,716								135,822
Other liabilities		3,920								3,507									6,136								4,780
Total liabilities		425,374								391,142									701,862								582,616
Shareholders’ equity		44,357								43,842
Shareholders’ equity																			68,582								60,160

Total liabilities and shareholders’ equity	$	469,731							$	434,984
Total liabilities and shareholders’ equity																		$	770,444							$	642,776

Net interest income, interest rate spread (1)				$	7,985		3.49	%				$	7,629		3.64	%					$	6,435		3.46	%				$	5,672		3.51	%

Net interest margin (net interest as a percent of average interest-earning assets) (1)							3.62	%							3.74	%								3.56	%							3.76	%

Federal tax exemption on non-taxable securities and loans included in interest income				$	272							$	366								$	99							$	78

Average interest-earning assets to interest-bearing liabilities		140.69	%							142.55	%								150.57	%							137.86	%

	December 31, 2017			June 30, 2017			December 31, 2016			March 31, 2021			June 30, 2020			March 31, 2020
Non-accrual loans	$	865		$	1,187		$	1,589		$	1,883		$	1,185		$	1,097
Loans past due over 90 days and still accruing		—			—			—			—			41			13
Total non-performing loans		865			1,187			1,589
Other real estate owned		57			71			—
Total non-performing assets	$	922		$	1,258		$	1,589
Total non-performing loans											1,883			1,226			1,110
Other repossessed assets											—			7			39
Total non-performing assets										$	1,883		$	1,233		$	1,149

Non-performing loans to total loans		0.29	%		0.44	%		0.60	%		0.34	%		0.23	%		0.24	%
Allowance for loan losses to total non-performing loans		372.83	%		259.98	%		196.54	%		322.68	%		463.13	%		402.52	%

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

	●	~~the economic impact from the oil and gas activity~~changes in the ~~region could be less than expected or the timeline for development could be longer than anticipated;~~level of non-performing assets and charge-offs;
	●	declining asset values impacting the ~~nature, extent,~~underlying value of collateral;
	●	sustained low market interest rates could result in a decline in the net interest margin and ~~timing of government and regulatory actions.~~net interest income;

	●	unanticipated changes in our liquidity position, including, but not limited to, changes in the cost of liquidity and our ability to find alternative funding sources;
	●	the effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities and insurance) with which we must comply;
	●	changes in consumer spending, borrowing and savings habits;
	●	changes in accounting policies, rules and interpretations that may come as a result of COVID-19 or otherwise;
	●	the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve Board;
	●	competitive pressures on product pricing and services;
	●	breaches of security or failures of our technology systems due to technological or other factors and cybersecurity threats;
	●	changes in the reliability of our vendors, internal control systems or information systems; and
	●	our ability to attract and retain qualified employees.

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

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

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

	CONSUMERS BANCORP, INC.
	(Registrant)

Date: May 13, 2021 ~~(Registrant)~~	/s/ Ralph J. Lober

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

Date: ~~February 14~~May 13, 2021~~, 201~~8	/s/ Renee K. Wood
	Renee K. Wood Chief Financial Officer & Treasurer (principal financial officer)