CBKM 10-K Fiscal year ended June 30, 2022

PART I

Item 1 — Business

(Dollars in thousands, except per share data)

General

Consumers Bancorp, Inc. (Corporation) is a bank holding company as defined under the Bank Holding Company Act of 1956, as amended (BHCA), and is a registered bank holding company under that act and was incorporated under the laws of the State of Ohio in 1994. In February 1995, the Corporation acquired all the issued and outstanding capital stock of Consumers National Bank (Bank), a bank chartered under the laws of the United States of America. The Corporation’s activities have been limited primarily to holding the common stock of the Bank.

Consumers National Bank is a community-oriented financial institution that offers a wide range of commercial and consumer loan and deposit products, as well as mortgage, financial planning and investment services to individuals, farmers and small and medium sized businesses in our markets. Since 1965, the Bank’s main office has been serving the Minerva, Ohio, and surrounding areas from its location at 614 East Lincoln Way, Minerva, Ohio. The Bank seeks to be the provider of choice for financial solutions to customers who value exceptional personalized service, local decision making, and modern banking technology. 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, and Wayne counties in Ohio. Its market includes these counties as well as the fourteen contiguous counties in northeast Ohio, western Pennsylvania, and northern West Virginia. As of June 30, 2022, the Bank had 21 full-service branch locations and one loan production office. The Bank also invests in securities consisting primarily of obligations of U.S. government-sponsored entities, municipal obligations and mortgage-backed securities issued by Fannie Mae, Freddie Mac and Ginnie Mae.

On July 16, 2021, the Corporation completed its acquisition (branch acquisition) of two branches located in Calcutta and Wellsville, Ohio from CFBank, National Association. In connection with the branch acquisition, the Corporation assumed $104,538 in branch deposits for a deposit premium of 1.75%. In addition, the Corporation acquired $15,602 of subordinated debt securities issued by unrelated financial institutions, $19,943 of loans, and recorded goodwill of $1,616. This transaction qualified as a business combination.

Supervision and Regulation

The Corporation and the Bank are subject to regulation by the Securities and Exchange Commission (SEC), the Board of Governors of the Federal Reserve System (Federal Reserve Board), the Office of the Comptroller of the Currency (OCC) and other federal and state regulators.  The regulatory framework is intended primarily for the protection of depositors, federal deposit insurance funds and the banking system as a whole and not for the protection of shareholders and creditors. Earnings and dividends of the Corporation are affected by state and federal laws and regulations and by policies of various regulatory authorities. Changes in applicable law or in the policies of various regulatory authorities could affect materially the business and prospects of the Corporation and the Bank. The following describes selected federal and state statutory and regulatory provisions that have, or could have, a material impact on the Corporation. The following discussion of supervision and regulation is qualified in its entirety by reference to the statutory and regulatory provisions discussed.

Regulation of the Corporation

The Bank Holding Company Act: As a bank holding company, the Corporation is subject to regulation under the BHCA, and the examination and reporting requirements of the Federal Reserve Board. Under the BHCA, the Corporation is subject to periodic examination by the Federal Reserve Board and is required to file periodic reports regarding its operations and any additional information that the Federal Reserve Board may require.

The BHCA generally limits the activities of a bank holding company to banking, managing or controlling banks, furnishing services to or performing services for its subsidiaries and engaging in any other activities that the Federal Reserve Board has determined to be so closely related to banking or to managing or controlling banks as to be a proper incident to those activities. In addition, subject to certain exceptions, the BHCA requires every bank holding company to obtain the approval of the Federal Reserve Board prior to acquiring substantially all the assets of any bank, acquiring direct or indirect ownership or control of more than 5% of the voting shares of a bank or merging or consolidating with another bank holding company.

Under Federal Reserve Board policy, a bank holding company is expected to act as a source of financial strength to each subsidiary bank and to commit resources to support those subsidiary banks. Under this policy, the Federal Reserve Board may require a bank holding company to contribute additional capital to an undercapitalized subsidiary bank and may disapprove of the payment of dividends to shareholders if the Federal Reserve Board believes the payment of such dividends would be an unsafe or unsound practice. The Federal Reserve Board has extensive enforcement authority over bank holding companies for violations of laws and regulations and unsafe or unsound practices.

Privacy Provisions of Gramm-Leach-Bliley Act: The Gramm-Leach-Bliley Act of 1999 contains extensive provisions on a customer’s right to privacy of non-public personal information. Under these provisions, a financial institution must provide to its customers the institution’s policies and procedures regarding the handling of customers’ non-public personal information. Except in certain cases, an institution may not provide personal information to unaffiliated third parties unless the institution discloses that such information may be disclosed, and the customer is given the opportunity to opt out of such disclosure. The Corporation and the Bank are also subject to certain state laws that deal with the use and distribution of non-public personal information.

Sarbanes-Oxley Act: The Sarbanes-Oxley Act of 2002 contains important requirements for public companies in the areas of financial disclosure and corporate governance. In accordance with section 302(a) of the Sarbanes-Oxley Act, written certifications by the Corporation’s Chief Executive Officer and Chief Financial Officer are required. These certifications attest that the Corporation’s quarterly and annual reports filed with the SEC do not contain any untrue statement of a material fact or omit to state a material fact.

Regulation of the Bank

As a national bank, the Bank is subject to regulation, supervision, and examination by the OCC and by the Federal Deposit Insurance Corporation (FDIC). These examinations are designed primarily for the protection of the depositors of the Bank.

Dividend Restrictions: Dividends from the Bank are the primary source of funds for payment of dividends to the Corporation’s shareholders. There are statutory limits, however, on the amount of dividends the Bank can pay without regulatory approval. Under regulations promulgated by the OCC, the Bank may not declare a dividend in excess of its undivided profits. Additionally, the Bank may not declare a dividend if the total amount of all dividends, including the proposed dividend, declared by the Bank in any calendar year exceeds the total of its retained net income of that year to date, combined with its retained net income of the two preceding years, unless the dividend is approved by the OCC. The Bank may not declare or pay any dividend if, after making the dividend, the Bank would be “undercapitalized,” as defined in the federal regulations.

FDIC: The FDIC is an independent federal agency, which insures the deposits of federally insured banks and savings associations up to certain prescribed limits and safeguards the safety and soundness of financial institutions. The deposits of the Bank are subject to the deposit insurance assessments of the Deposit Insurance Fund of the FDIC. Under the FDIC’s deposit insurance assessment system, the assessment rate for any insured institution varies according to regulatory capital levels of the institution and other factors such as supervisory evaluations.

The FDIC is authorized to prohibit any insured institution from engaging in any activity that poses a serious threat to the insurance fund and may initiate enforcement actions against banks, after first giving the institution’s primary regulatory authority an opportunity to take such action. The FDIC may also terminate the deposit insurance of any institution that has engaged in or is engaging in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, order or condition imposed by the FDIC.

The Coronavirus Aid, Relief, and Economic Security Act of 2020: In response to the novel COVID-19 pandemic (COVID-19), the Coronavirus Aid, Relief, and Economic Security Act of 2020, as amended (the CARES Act), was signed into law on March 27, 2020, to provide national emergency economic relief measures. Many of the CARES Act’s programs are dependent upon the direct involvement of U.S. financial institutions, such as the Corporation and the Bank, and have been implemented through rules and guidance adopted by federal departments and agencies, including the U.S. Department of Treasury, the Federal Reserve Board and other federal banking agencies, including those with direct supervisory jurisdiction over the Corporation. Furthermore, as COVID-19 evolves, federal regulatory authorities continue to issue additional guidance with respect to the implementation, lifecycle, and eligibility requirements for the various CARES Act programs as well as industry-specific recovery procedures for COVID-19.

The CARES Act amended the loan program of the U.S. Small Business Administration (SBA), in which the Bank participates, to create a guaranteed, unsecured loan program, the Paycheck Protection Program (PPP), to fund operational costs of eligible businesses, organizations and self-employed persons during COVID-19. In June 2020, the Paycheck Protection Program Flexibility Act was enacted, which, among other things, gave borrowers additional time and flexibility to use PPP loan proceeds. Shortly thereafter, and due to the evolving impact of COVID-19, Congress enacted additional legislation authorizing the SBA to resume accepting PPP applications on July 6, 2020 and extending the PPP application deadline to August 8, 2020. On September 29, 2020, the federal bank regulatory agencies issued a final rule that neutralizes the regulatory capital and liquidity coverage ratio effects of participating in certain COVID-19 liquidity facilities due to the fact there is no credit or market risk in association with exposures pledged to such facilities. As a result, the final rule supports the flow of credit to households and businesses affected by COVID-19. In December 2020, the Bipartisan-Bicameral Omnibus COVID Relief Deal was enacted to provide additional economic stimulus to individuals and businesses in response to the extended economic distress caused by the pandemic. This legislation included provisions for additional stimulus payments to individuals and their dependents, the extension of enhanced unemployment benefits, $284 billion of additional funds for a second round of PPP loans and a new simplified forgiveness procedure for PPP loans of $150,000 or less. As a participating lender in the PPP, the Corporation continues to monitor legislative, regulatory, and supervisory developments related thereto.

Certain provisions within the CARES Act encourage financial institutions to practice prudent efforts to work with borrowers impacted by the pandemic. Under these provisions, loan modifications deemed to be COVID-19 related would not be considered a troubled debt restructuring (TDR) if the loan was not more than 30 days past due as of December 31, 2019 and the deferral was executed between March 1, 2020 and the earlier of 60 days after the date of the termination of the COVID-19 national emergency or December 31, 2020. The banking regulators issued a similar guidance, which also clarified that a COVID-19 related modification should not be considered a TDR if the borrower was current on payments at the time the underlying loan modification program was implemented and if the modification is considered short-term. Section 541 of the Consolidated Appropriations Act, 2021, extended this relief to the earlier of 60 days after the end of the national emergency proclamation or January 1, 2022. The Corporation implemented a short-term modification program that offered principal and interest payment deferrals for up to 90 days or interest only payments for up to 90 days. Borrowers were eligible for an additional 90 days of payment deferrals if situations warranted a need for an extension. Interest was deferred but continued to accrue during the deferment period and the maturity date on amortizing loans was 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 were not classified as troubled debt restructurings.

Banks and bank holding companies have been particularly impacted by the COVID-19 pandemic as a result of disruption and volatility in the global markets. The above mentioned and other significant fiscal stimulus and monetary policy actions of the U.S. government and Federal Reserve have been contributing factors to an inflationary surge during most of 2021 and into 2022. Management continues to monitor the potential development of additional legislative, fiscal, or monetary policy developments taken by the U.S. government.

Current Expected Credit Loss Model: In December 2018, the OCC, the Federal Reserve Board, and the FDIC issued a final rule to address regulatory treatment of credit loss allowances under the current expected credit loss (CECL) model. The rule revised the federal banking agencies’ regulatory capital rules to identify which credit loss allowances under the CECL model are eligible for inclusion in regulatory capital and to provide banking organizations the option to phase in over three years the day one adverse effects on regulatory capital that may result from the adoption of the CECL model. The Bank is required to adopt the CECL model by July 1, 2023 since it’s a smaller reporting company.

Risk-Based Capital Requirements: The Federal Reserve Board and the OCC employ similar risk-based capital guidelines in their examination and regulation of bank holding companies and national banks, respectively. The Corporation meets the definition of a Small Bank Holding Company and, therefore, was exempt from maintaining consolidated regulatory capital ratios. Instead, regulatory capital ratios only apply at the subsidiary bank level. The guidelines involve a process of assigning various risk weights to different classes of assets, then evaluating the sum of the risk-weighted balance sheet structure against the capital base. If capital falls below the minimum levels established by the guidelines, the bank holding company or bank may be denied approval to acquire or establish additional banks or non-bank businesses or to open new facilities. In addition, failure to satisfy capital guidelines could subject a banking institution to a variety of enforcement actions by federal bank regulatory authorities, including the termination of deposit insurance by the FDIC and a prohibition on the acceptance of “brokered deposits.”

Effective January 1, 2020, qualifying community banking organizations may elect to comply with a greater than 9% community bank leverage ratio (CBLR) requirement in lieu of the currently applicable requirements for calculating and reporting risk-based capital ratios. The CBLR is equal to Tier 1 capital divided by average total consolidated assets. In order to qualify for the CBLR election, a community bank must (i) have a leverage capital ratio greater than 9 percent, (ii) have less than $10 billion in average total consolidated assets, (iii) not exceed certain levels of off-balance sheet exposure and trading assets plus trading liabilities and (iv) not be an advanced approaches banking organization. A community bank that meets the above qualifications and elects to utilize the CBLR is considered to have satisfied the risk-based and leverage capital requirements in the generally applicable capital rules and is also considered to be "well capitalized" under the prompt corrective action rules. The Bank has not elected to be subject to the CBLR.

Unless a community bank qualifies for, and elects to comply with the CBLR beginning on January 1, 2020, national banks are required to maintain the Basel III minimum levels of regulatory capital. The Basel III capital requirements for U.S. banking organizations became effective on January 1, 2015 and were fully phased in by January 1, 2019. Under Basel III, the Bank is required to maintain a minimum common equity Tier 1 capital ratio of 4.5%, a Tier 1 capital ratio of 6%, a total capital ratio of 8%, and a Tier 1 leverage ratio of 4%. Basel III also established a “capital conservation buffer” of 2.5% above the new regulatory minimum capital requirements, which effectively resulted in a minimum common equity Tier 1 capital ratio of 7%, a Tier 1 capital ratio of 8.5%, a total capital ratio of 10.5% and a Tier 1 leverage ratio of 6.5%. The capital conservation buffer is designed to absorb losses during periods of economic stress. Banking institutions with a common equity Tier 1 ratio to risk-weighted assets above the minimum but below the conservation buffer will face constraints on dividends, equity repurchases, and compensation based on the amount of the shortfall.

The OCC and the FDIC may take various corrective actions against any undercapitalized bank and any bank that fails to submit an acceptable capital restoration plan or fails to implement a plan accepted by the OCC or the FDIC.  These powers include, but are not limited to, requiring the institution to be recapitalized, prohibiting asset growth, restricting interest rates paid, requiring prior approval of capital distributions by any bank holding company that controls the institution, requiring divestiture by the institution of its subsidiaries or by the holding company of the institution itself, requiring new election of directors, and requiring the dismissal of directors and officers. The OCC’s final supervisory judgment concerning an institution’s capital adequacy could differ significantly from the conclusions that might be derived from the absolute level of an institution’s risk-based capital ratios. Therefore, institutions generally are expected to maintain risk-based capital ratios that exceed the minimum ratios. As of June 30, 2022, the Bank exceeded minimum regulatory capital requirements to be considered well-capitalized.

Dodd-Frank Wall Street Reform and Consumer Protection Act: The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) established the Consumer Financial Protection Bureau (CFPB), which regulates consumer financial products and services and certain financial services providers. The CFPB is authorized to prevent unfair, deceptive and abusive acts or practices and seeks to ensure consistent enforcement of laws so that consumers have access to fair, transparent and competitive markets for consumer financial products and services. Since it was established the CFPB has exercised extensive rulemaking and interpretive authority.

Interstate Banking and Branching: The Interstate Banking and Branch Efficiency Act of 1995 has eased restrictions on interstate expansion and consolidation of banking operations by, among other things: (i) permitting interstate bank acquisitions regardless of host state laws, (ii) permitting interstate merger of banks unless specific states have opted out of this provision, and (iii) permitting banks to establish new branches outside the state provided the law of the host state specifically allows interstate bank branching.

Community Reinvestment Act: The Community Reinvestment Act (CRA) requires depository institutions to assist in meeting the credit needs of their market areas, including low- and moderate-income areas, consistent with safe and sound banking practices. Under this Act, each institution is required to adopt a statement for each of its market areas describing the depository institution’s efforts to assist in its community’s credit needs. Depository institutions are periodically examined for compliance and assigned ratings. Banking regulators consider these ratings when considering approval of a proposed transaction by an institution. The Bank’s most recent CRA rating is satisfactory.

USA PATRIOT Act: In 2001, Congress enacted the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Patriot Act). The Patriot Act is designed to deny terrorists and criminals the ability to obtain access to the United States’ financial system and has significant implications for depository institutions, brokers, dealers, and other businesses involved in the transfer of money. The Patriot Act mandates that financial services companies implement additional policies and procedures with respect to additional measures designed to address any or all of the following matters: money laundering, terrorist financing, identifying and reporting suspicious activities and currency transactions, and currency crimes.

Cybersecurity: In March 2015, federal regulators issued two related statements regarding cybersecurity. One statement indicates that financial institutions should design multiple layers of security controls to establish lines of defense and to ensure that their risk management processes also address the risk posed by compromised customer credentials, including security measures to reliably authenticate customers accessing internet-based services of the financial institution. The other statement indicates that a financial institution’s management is expected to maintain sufficient business continuity planning processes to ensure the rapid recovery, resumption and maintenance of the institution’s operations after a cyberattack involving destructive malware. A financial institution is also expected to develop appropriate processes to enable recovery of data and business operations and address rebuilding network capabilities and restoring data if the institution or its critical service providers fall victim to this type of cyberattack.

In the ordinary course of business, electronic communications and information systems are relied upon to conduct operations, to deliver services to customers and to store sensitive data. The Corporation employs a variety of preventative and detective tools to monitor, block, and provide alerts regarding suspicious activity, as well as to report on any suspected advanced persistent threats. Risks and exposures related to cybersecurity attacks are expected to remain high for the foreseeable future due to the rapidly evolving nature and sophistication of these threats, increasing volume of attacks, as well as due to the expanding use of internet banking, mobile banking and other technology-based products and services by the Corporation and its customers.

Government Monetary Policy: The earnings of the Corporation are affected by general and local economic conditions and by the policies of various governmental regulatory authorities. In particular, the Federal Reserve Board regulates money and credit conditions and interest rates to influence general economic conditions, primarily through open market acquisitions or dispositions of United States Government securities, varying the discount rate on member bank borrowings and setting reserve requirements against member and nonmember bank deposits. Federal Reserve Board monetary policies have had a significant effect on the interest income and interest expense of commercial banks, including the Bank, and are expected to continue to do so in the future.

Employees

As of June 30, 2022, the Bank employed 171 full-time and 16 part-time employees. None of the employees are represented by a collective bargaining group. Management considers its relations with employees to be good.

Available Information

The Corporation files annual, quarterly, and current reports, proxy statements, and other information with the SEC. These filings are available to the public over the Internet at the SEC’s website at www.sec.gov. Shareholders may also read and copy any document that the Corporation files at the SEC’s public reference room located at 100 F Street, NE, Washington, DC 20549. Shareholders may call the SEC at 1-800-SEC-0330 for further information on the public reference room.

The Corporation’s reports on Forms 10-K, 10-Q and 8-K, and amendments to those reports, are available, free of charge, on our website (www.consumers.bank) as soon as reasonably practicable after such reports are filed with or furnished to the SEC. The Corporation’s Code of Ethics Policy, which is applicable to all directors, officers and employees of the Corporation, and its Code of Ethics for Principal Financial Officers, which is applicable to the principal executive officer and the principal financial officer, are each available on the Investor Relations section under Corporate Governance of the Corporation’s website. The Corporation intends to post amendments to or waivers from either of its Code of Ethics Policies on its website. A printed copy of any of these documents will be provided to any requesting shareholder.

Item 1A — Risk Factors

Not applicable for Smaller Reporting Companies.

Item 1B — Unresolved Staff Comments

None.

Item 2 — Properties

The Bank operates 21 full-service banking facilities and one loan production office (LPO) as noted below:

Location		Address		Owned		Leased
Adena		9 East Main Street, Adena, Ohio 43901		X
Alliance		610 West State Street, Alliance, Ohio 44601				X
Bergholz		256 2nd Street, Bergholz, Ohio 43908				X
Brewster		210 Wabash Ave S, Brewster, Ohio 44613		X
Calcutta		49028 Foulks Drive, Calcutta, Ohio 43920		X
Carrollton		1017 Canton Road NW, Carrollton, Ohio 44615				X
Dillonvale		44 Smithfield Street, Dillonvale, Ohio 43917		X
East Canton		440 W. Noble, East Canton, Ohio 44730		X
Fairlawn		3680 Embassy Parkway Suite B, Fairlawn, Ohio 44333				X
Green		4086 Massillon Road, Green, Ohio 44685				X
Hanoverton		30034 Canal Street, P.O. Box 178, Hanoverton, Ohio 44423		X
Hartville		1215 W. Maple Street, Hartville, Ohio 44632		X
Jackson-Belden		4026 Dressler Road NW, Canton, Ohio 44718		X
Lisbon		7985 Dickey Drive, Lisbon, Ohio 44432		X
Louisville		1111 N. Chapel Street, Louisville, Ohio 44641		X
Malvern		4070 Alliance Road, Malvern, Ohio 44644				X
Minerva		614 E. Lincoln Way, P.O. Box 256, Minerva, Ohio 44657		X
Mount Pleasant		298 Union Street, Mount Pleasant, Ohio 43939		X
Salem		141 S. Ellsworth Avenue, P.O. Box 798, Salem, Ohio 44460		X
Waynesburg		8607 Waynesburg Drive SE, P.O. Box 746, Waynesburg, Ohio 44688		X
Wellsville		565 Main Street, Wellsville, Ohio 43968		X
Wooster LPO		146 East Liberty Street, Wooster, Ohio 44691				X

The Bank considers its physical properties to be in good operating condition and suitable for the purposes for which they are being used. In management’s opinion, all properties owned and operated by the Bank are adequately insured.

Item 3 — Legal Proceedings

The Corporation is not a party to any pending material legal or administrative proceedings, other than ordinary routine litigation incidental to the business of the Corporation. Further, there are no material legal proceedings in which any director, executive officer, principal shareholder or affiliate of the Corporation is a party or has a material interest therein that is adverse to the Corporation. No routine litigation in which the Corporation is involved is expected to have a material adverse impact on the financial position or results of operations of the Corporation.

Item 4 — Mine Safety Disclosures

None.

PART II

Item 5 — Market for Registrant ’ s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities

The Corporation had 3,056,674 common shares outstanding on June 30, 2022, with 735 shareholders of record and an estimated 756 additional beneficial holders whose stock was held in nominee name. Attention is directed to Item 12 in this Form 10-K for information regarding the Corporation’s equity incentive plans, which information is incorporated herein by reference.

The common shares of Consumers Bancorp, Inc. are quoted on the OTCQX® Best Market under the symbol CBKM. The following quoted market prices reflect inter-dealer prices, without adjustments for retail markups, markdowns, or commissions and may not represent actual transactions. The market prices represent highs and lows reported during the applicable quarterly period.

Quarter Ended		September 30, 2021				December 31, 2021				March 31, 2022				June 30, 2022
High		$	23.75			$	23.20			$	24.50			$	23.40
Low			19.21				21.47				21.86				19.00
Cash dividends paid per share			0.16				0.16				0.16				0.16

Quarter Ended		September 30, 2020				December 31, 2020				March 31, 2021				June 30, 2021
High		$	16.00			$	19.50			$	20.00			$	19.76
Low			14.40				15.50				19.12				19.11
Cash dividends paid per share			0.145				0.145				0.15				0.15

Management does not have knowledge of the prices paid in all transactions and has not verified the accuracy of those prices that have been reported. Because of the lack of an established market for the Corporation’s common shares, these prices may not reflect the prices at which the common shares would trade in an active market.

The Corporation’s management is currently committed to continuing to pay regular cash dividends; however, there can be no assurance as to future dividends because they are dependent on the Corporation’s future earnings, capital requirements and financial condition. The Corporation’s principal source of funds for dividend payment is dividends received from the Bank. Banking regulations limit the amount of dividends that may be paid without prior approval of regulatory agencies. Under these regulations, the amount of dividends that may be paid in any calendar year is limited to the current year’s net profits, combined with the retained net profits of the preceding two years, subject to the capital requirements described above. See Note 1 and Note 13 to the Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations for dividend restrictions.

There were no repurchases of the Corporation’s securities during fiscal year 2022.

Item 7 — Management ’ s Discussion and Analysis of Financial Condition and Results of Operations

(Dollars in thousands, except per share data)

General

The following is management’s analysis of the Corporation’s financial condition and results of operations as of and for the years ended June 30, 2022 and 2021. This discussion is designed to provide a more comprehensive review of the operating results and financial position 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.

Forward-Looking Statements

Certain statements contained in this Annual Report on Form 10-K, which are not statements of historical fact, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The words “may,” “continue,” “estimate,” “intend,” “plan,” “seek,” “will,” “believe,” “project,” “expect,” “anticipate” and similar expressions are intended to identify forward-looking statements. These forward-looking statements may involve risks and uncertainties that are difficult to predict, may be beyond our control, and could cause actual results to differ materially from those described in such statements. Any such forward-looking statements are made only as of the date of this report or the respective dates of the relevant incorporated documents, as the case may be, and, except as required by law, we undertake no obligation to update these forward-looking statements to reflect subsequent events or circumstances. Risks and uncertainties that could cause actual results for future periods to differ materially from those anticipated or projected include, but are not limited to:

	●	changes in local, regional and national economic conditions becoming less favorable than we expect, resulting in a deterioration in asset credit quality or debtors being unable to meet their obligations because of high unemployment rates and inflationary pressures;
	●	rapid fluctuations in market interest rates could result in changes in fair market valuations and a decline in net interest income;
	●	changes in the level of non-performing assets and charge-offs;
	●	unanticipated changes in our liquidity position, including, but not limited to, changes in the cost of liquidity and our ability to find alternative funding sources;
	●	the effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities, and insurance) with which we must comply;
	●	the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve Board;
	●	breaches of security or failures of our technology systems due to technological or other factors and cybersecurity threats;
	●	changes in consumer spending, borrowing and savings habits;
	●	declining asset values impacting the underlying value of collateral;
	●	changes in accounting policies, rules and interpretations that may come as a result of COVID-19 or otherwise;
	●	our ability to attract and retain qualified employees;
	●	competitive pressures on product pricing and services; and
	●	changes in the reliability of our vendors, internal control systems or information systems.

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

Overview

Consumers Bancorp, Inc., a bank holding company incorporated under the laws of the State of Ohio, owns all the issued and outstanding capital stock of Consumers National Bank, a bank chartered under the laws of the United States of America. The Corporation’s activities have been limited primarily to holding the common stock 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, and Wayne counties in Ohio. Its market includes these counties as well as the fourteen contiguous counties in northeast Ohio, western Pennsylvania, and northern West Virginia. The Bank also invests in securities consisting primarily of U.S. government-sponsored entities, municipal obligations, mortgage-backed and collateralized mortgage obligations issued by Fannie Mae, Freddie Mac and Ginnie Mae.

On July 16, 2021, the Corporation completed the branch acquisition and assumed $104,538 of branch deposits for a 1.75% deposit premium and purchased $15,602 in subordinated debt securities issued by unrelated financial institutions and $19,943 in loans. In relation to the branch acquisition, the Corporation recorded goodwill of $1,616. This transaction qualified as a business combination.

COVID-19 Pandemic

In response to COVID-19, management actively pursued multiple avenues to assist customers during these uncertain times. For commercial borrowers, the CARES Act included key SBA initiatives to assist small businesses. The PPP loans were designed to provide a direct incentive for small businesses to keep their workers on the payroll. The Bank originated a total of $113,367 of PPP loans during the first and second rounds of assistance. As of June 30, 2022, there were $179 of PPP loans outstanding.

Additionally, on March 22, 2020 the Corporation adopted a loan modification program to assist borrowers impacted by COVID-19. The program was available to most borrowers whose loan was not past due on March 22, 2020, the date this loan modification program was adopted. The program offered principal and interest payment deferrals for up to 90 days or interest only payments for up to 90 days. Interest was deferred but continued to accrue during the deferment period and the maturity date on amortizing loans was 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 were not classified as troubled debt restructurings. As of June 30, 2022, there were no loans in payment deferral status under this loan modification program. This modification program ended as of April 26, 2022.

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.

Given the dynamic nature of the circumstances surrounding the pandemic, it is difficult to ascertain the full impact that the ongoing economic disruption will have on the Corporation. 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. The Corporation is promoting social distancing, frequent hand washing and thorough disinfection of all surfaces. The Corporation will continue to closely monitor situations arising from the pandemic and adjust operations accordingly.

Comparison of Results of Operations for the Years Ended June 30, 2022 and June 30, 2021

Net Income. Net income was $11,192 for fiscal year 2022 compared with $8,988 for fiscal year 2021. The following key factors summarize our results of operations for the year ended June 30, 2022 compared with the same prior year period:

	●	net interest income increased by $6,163, or 23.2%, in fiscal year 2022, primarily because of a $179,192, or 24.2%, increase in average interest-earning assets along with a reduction in the cost of funds;
	●	a $735 provision for loan loss expense was recorded during fiscal year 2022 compared with $850 during fiscal year 2021;
	●	total other income increased by $269, or 6.0%, in fiscal year 2022, primarily due to a $240, or 19.7%, increase in service charges on deposit accounts and a $178, or 9.4%, increase in debit card interchange income which were partially offset by a $121, or 16.1%, decline in mortgage banking activity; and
	●	total other expenses increased by $3,854, or 19.9%, in fiscal year 2022 due to increases in salaries and employee benefits; occupancy and equipment expenses; and Federal Deposit Insurance Corporation (FDIC) assessments that was primarily driven by the growth in the organization from the branch acquisition.

Return on average equity and return on average assets were 16.43% and 1.17%, respectively, for fiscal year 2022 compared with 13.36% and 1.16%, respectively, for the same period last year.

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’s earnings. Net interest income is affected by changes in the volumes, rates and composition of interest-earning assets and interest-bearing liabilities. In addition, prevailing economic conditions, fiscal and monetary policies, and the policies of various regulatory agencies all affect market rates of interest and the availability and cost of credit, which, in turn, can significantly affect net interest income.

Net interest margin is calculated by dividing net interest income on a fully tax equivalent basis (FTE) by total interest-earning assets. FTE income includes tax-exempt income, restated to a pre-tax equivalent, based on the statutory federal income tax rate of 21.0%. All average balances are daily average balances. Non-accruing loans are included in average loan balances and average securities include unrealized gains and losses on securities available for sale, while yields are based on average amortized cost.

Net Interest Income Year ended June 30,		2022				2021
Net interest income		$	32,746			$	26,583
Taxable equivalent adjustments to net interest			513				419
Net interest income, fully taxable equivalent		$	33,259			$	27,002
Net interest margin			3.54	%			3.62	%
Taxable equivalent adjustment			0.06				0.05
Net interest margin, fully taxable equivalent			3.60	%			3.67	%

FTE net interest income for fiscal year 2022 was $33,259, an increase of $6,257 or 23.2%, from $27,002 in fiscal year 2021. The Corporation’s tax equivalent net interest margin was 3.60% for fiscal year 2022 and 3.67% for fiscal year 2021. FTE interest income for fiscal year 2022 was $34,673, an increase of $5,771, or 20.0%, from fiscal year 2021, primarily due to a $179,192, or 24.2%, increase in average interest-earning assets from fiscal year 2021. The growth in average interest-earning assets was primarily a result of a $112,149 increase in the average balance of available-for-sale securities and a $46,960, or 8.5%, increase in average loans. Interest income was positively impacted in both the current and prior year periods by the accretion of origination fees from PPP loans that were forgiven during those periods. The PPP loans had an average balance of $17,692 for fiscal year 2022, and during this same period, $2,612 of interest and fee income was recognized on the PPP loans. This compares with an average balance of $63,761 for fiscal year 2021, and the recognition of $2,549 of interest and fee income during fiscal year 2021. The Corporation’s yield on average interest-earning assets was 3.75% for the 2022 fiscal year compared with 3.93% for the same period last year.

Interest expense for fiscal year 2022 was $1,414, a decrease of $486, or 25.6%, from fiscal year 2021. The Corporation’s cost of funds was 0.22% for fiscal year 2022 compared with 0.38% for the same prior year period. The historically low market interest rates that were in place throughout much of fiscal year 2022 had an impact on the rates paid on interest-bearing deposit products. The cost of funds is expected to increase due to the recent increases in short-term market rates.

Average Balance Sheet and Net Interest Margin

		2022												2021
		Average Balance				Interest				Yield/ Rate				Average Balance				Interest				Yield/ Rate
Interest earning assets:
Taxable securities		$	185,741			$	3,572				1.87	%		$	89,424			$	1,594				1.82	%
Nontaxable securities (1)			86,710				2,580				3.00				70,878				2,148				3.18
Loan receivables (1)			596,850				28,216				4.73				549,890				24,901				4.53
Federal bank and other restricted stocks			2,489				82				3.29				2,472				76				3.07
Equity securities			427				33				7.73				202				17				8.42
Interest bearing deposits and federal funds sold			47,672				190				0.40				27,831				166				0.60
Total interest earning assets			919,889				34,673				3.75	%			740,697				28,902				3.93	%
Noninterest earning assets			39,059												31,283
Total assets		$	958,948											$	771,980
Interest bearing liabilities:
Interest bearing demand		$	147,312			$	166				0.11	%		$	112,801			$	149				0.13	%
Savings			349,380				388				0.11				251,138				333				0.13
Time deposits			113,143				568				0.50				102,554				1,133				1.10
Short-term borrowings			12,960				47				0.36				8,895				9				0.10
FHLB advances			14,639				245				1.67				20,077				276				1.37
Total interest-bearing liabilities			637,434				1,414				0.22	%			495,465				1,900				0.38	%
Noninterest-bearing liabilities			253,407												209,262
Total liabilities			890,841												704,727
Shareholders’ equity			68,107												67,253
Total liabilities and shareholders’ equity		$	958,948											$	771,980
Net interest income, interest rate spread (1)						$	33,259				3.53	%						$	27,002				3.55	%
Net interest margin (net interest as a percent of average interest earning assets) (1)											3.60	%											3.67	%
Federal tax exemption on non-taxable securities and loans included in interest income						$	513											$	419
Average interest earning assets to interest bearing liabilities											144.31	%											149.50	%

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

The following table presents the changes in the Corporation’s interest income and interest expense resulting from changes in interest rates and changes in the volume of interest-earning assets and interest-bearing liabilities. Changes attributable to both rate and volume that cannot be segregated have been allocated in proportion to the changes due to rate and volume.

INTEREST RATES AND INTEREST DIFFERENTIAL

		2022 Compared to 2021 Increase / (Decrease)												2021 Compared to 2020 Increase / (Decrease)
		Total Change				Change due to Volume				Change due to Rate				Total Change				Change due to Volume				Change due to Rate
		(In thousands)
Interest earning assets:
Taxable securities		$	1,978			$	1,932			$	46			$	(338	)		$	162			$	(500	)
Nontaxable securities (1)			432				558				(126	)			234				269				(35	)
Loan receivables (2)			3,315				2,188				1,127				3,348				5,376				(2,028	)
Federal bank and other restricted stocks			6				1				5				1				17				(16	)
Interest bearing deposits and federal funds sold			24				92				(68	)			9				144				(135	)
Equity securities			16				17				(1	)			17				17				—
Total interest and dividend income			5,771				4,788				983				3,271				5,985				(2,714	)
Interest bearing liabilities:
Interest bearing demand			17				41				(24	)			(279	)			103				(382	)
Savings deposits			55				115				(60	)			(466	)			197				(663	)
Time deposits			(565	)			107				(672	)			(1,126	)			(278	)			(848	)
Short-term borrowings			38				6				32				(34	)			23				(57	)
FHLB advances			(31	)			(84	)			53				(16	)			37				(53	)
Total interest expense			(486	)			185				(671	)			(1,921	)			82				(2,003	)
Net interest income		$	6,257			$	4,603			$	1,654			$	5,192			$	5,903			$	(711	)

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(1)	Nontaxable income is adjusted to a fully tax equivalent basis utilizing a statutory federal income tax rate of 21.0%.

(2)	Non-accrual loan balances are included for purposes of computing the rate and volume effects although interest on these balances has been excluded.

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’s assessment of the estimated probable credit losses in the Corporation’s loan portfolio that have been incurred at each balance sheet date. The amount of the provision is affected by loan charge-offs, recoveries and changes in specific and general allocations required for the allowance for loan losses. Management considers a number of factors that impact the provision for loan losses, such as historical loss experience, the present and prospective financial condition of borrowers, the current conditions within the markets where the Corporation originates loans, the status of nonperforming assets, the estimated underlying value of the collateral and other factors related to the ultimate collectability of the loan portfolio.

A provision for loan loss expense of $735 was recorded in fiscal year 2022 compared with $850 in fiscal year 2021. The loan loss provision expense recorded in fiscal year 2022 was primarily due to the organic growth within the loan portfolio. For fiscal year 2022, net charge offs of $46 were recorded compared with $57 for the same period last year. The allowance for loan losses as a percentage of loans was 1.17% at June 30, 2022 and 1.14% at June 30, 2021. As of June 30, 2021, the allowance for loan losses as a percentage of total loans, excluding the PPP loans, was 1.25%. The decline in the allowance for loan losses as a percentage of total loans excluding the PPP loans was due to the improvement in economic conditions that had been adversely impacted by the 2020 economic shutdown and restrictions in response to the ongoing COVID-19 pandemic. While vaccinations (including booster shots) have created optimism in the community, but some uncertainty remains due to the continued concern over increased infection rates from various variants of COVID-19.

Non-performing loans were $440 as of June 30, 2022 and represented 0.07% of total loans. This compared with $1,771, or 0.31% of total loans at June 30, 2021. Non-performing loans declined primarily due to the full payoff of three loans that had a balance of $949 as of June 30, 2021 that were on non-accrual for an extended period. 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 closely monitor these loans and believe the prospect for recovery of principal, less identified specific reserves, are favorable.

Other Income. Total other income increased by $269, or 6.0%, to $4,735 for fiscal year 2022. Service charges on deposit accounts increased by $240, or 19.7% primarily due to an increase in the number of overdraft charges as overdrafts increased from the lows that were experienced during the pandemic as many eligible individuals received economic stimulus payments and consumers changed their spending habits in 2020 and 2021. Effective March 1, 2022, the Bank made a small reduction to the non-sufficient funds/overdraft fee and eliminated many internal account transfer fees. The Bank may make future reductions to the non-sufficient funds/overdraft fee in response to the industry wide trend of reducing overdraft fees as large banks have announced a reduction in these types of fees in response to regulatory pressure. As a result, service charges on deposit accounts may be negatively impacted in future periods. Debit card interchange income increased by $178, or 9.4%, in fiscal year 2022 to $2,069 primarily as a result of increased debit card usage and an increase in the number of cards issued. Mortgage banking activity decreased by $121, or 16.1%, in fiscal year 2022 because of a decrease in volume due to the increase in mortgage rates.

Other Expenses. Total other expenses were $23,215 for the year ended June 30, 2022; an increase of $3,854, or 19.9%, from $19,361 for the year ended June 30, 2021.

Salaries and employee benefit expenses increased by $2,408, or 22.2%, during fiscal year 2022 primarily due to the addition of staff at three new office locations, the addition of lending staff, and increases in health care costs.

Occupancy and equipment expenses increased by $440, or 17.0%, during fiscal year 2022 from the same period last year primarily due to investments in new technology and computer equipment as well as higher real estate taxes, custodial, building upkeep, maintenance, lease and utility expenses for the additional office locations.

Data processing expenses increased by $67, or 9.2% and FDIC assessments increased by $278, or 92.1%, for fiscal year 2022 from the same prior year period due to the growth in the organization.

Debit card processing expenses increased by $75, or 7.9% primarily as a result of increased debit card usage. The increase in debit card usage is also reflected in debit card interchange income which increased by $178, or 9.4% from the prior year.

Income Tax Expense. Income tax expense totaled $2,339 and $1,850 and the effective tax rates were 17.3% and 17.1% for the fiscal years ended June 30, 2022 and 2021, respectively. Income tax expense was calculated utilizing a statutory federal income tax rate of 21.0% in fiscal years 2022 and 2021. The effective tax rate differs from the federal statutory rate as a result of tax-exempt income from obligations of states and political subdivisions, loans and bank owned life insurance earnings.

Financial Condition

Total assets at June 30, 2022 were $977,313 compared with $833,804 at June 30, 2021, an increase of $143,509, or 17.2%. The growth in total assets is mainly attributable to an increase of $88,465, or 41.0%, in available-for-sale and held-to-maturity securities and a $45,416, or 8.0%, increase in total loans. These increases were primarily funded by a $159,713, or 22.0%, increase in total deposits and include $104,538 of deposits acquired as part of the branch acquisition. Total shareholders’ equity declined to $53,970 as of June 30, 2022, from $69,900 as of June 30, 2021. The primary reason for the decline in shareholders’ equity was a $25,656 net decrease in accumulated other comprehensive income due to a shift in unrealized gains on the mark-to-market of available-for-sale securities to a net unrealized loss.

Securities. Total securities were $304,221 at June 30, 2022, of which $296,347 were classified as available-for-sale and $7,874 were classified as held-to-maturity. The securities portfolio is mainly comprised of mortgage-backed securities and collateralized mortgage obligations issued by Fannie Mae, Freddie Mac and Ginnie Mae, state and political subdivisions and government-sponsored enterprises.

The following tables summarize the amortized cost and fair value of available-for-sale securities at June 30, 2022 and 2021 and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income or loss:

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

June 30, 2021 Available-for-sale		Amortized Cost				Gross Unrealized Gains				Gross Unrealized Losses				Fair Value
U.S. Treasury		$	14,746			$	301			$	(14	)		$	15,033
Obligations of U.S. government-sponsored entities and agencies			73,013				3,561				(75	)			76,499
Obligations of state and political subdivisions			90,065				1,136				(684	)			90,517
U.S. government-sponsored mortgage-backed securities - residential			8,641				204				—				8,845
U.S. government-sponsored mortgage-backed securities - commercial			16,302				129				(57	)			16,374
U.S. government-sponsored collateralized mortgage obligations – residential			500				—				(8	)			492
Total available-for-sale securities		$	203,267			$	5,331			$	(838	)		$	207,760

The following tables summarize the amortized cost and fair value of held-to-maturity securities at June 30, 2022 and 2021 and the corresponding gross unrecognized gains and losses:

June 30, 2022 Held-to-maturity		Amortized Cost				Gross Unrecognized Gains				Gross Unrecognized Losses				Fair Value
Obligations of state and political subdivisions		$	7,874			$	47			$	(90	)		$	7,831

June 30, 2021 Held-to-maturity		Amortized Cost				Gross Unrecognized Gains				Gross Unrecognized Losses				Fair Value
Obligations of state and political subdivisions		$	7,996			$	356			$	—			$	8,352

The following tables summarize the amounts and distribution of the Corporation’s securities held and the weighted average yields as of June 30, 2022:

Available-for-sale		Amortized Cost				Fair Value				Average Yield
Obligations of U.S. Treasury
Over 1 year through 5 years		$	8,909			$	8,447				0.83	%
Total obligations of U.S. Treasury			8,909				8,447				0.83
Obligations of government-sponsored entities:
Over 3 months through 1 year			250			$	250				1.68	%
Over 1 year through 5 years			7,489				7,220				2.22
Over 5 years through 10 years			14,865				13,350				1.86
Over 10 years			6,085				5,445				1.68
Total obligations of government-sponsored entities			28,689				26,265				1.61
Obligations of state and political subdivisions:
Over 3 months through 1 year			600				601				3.94
Over 1 year through 5 years			15,736				15,540				3.00
Over 5 years through 10 years			20,926				19,988				2.91
Over 10 years			68,715				61,228				3.09
Total obligations of state and political subdivisions			105,977				97,357				3.05
Mortgage-backed securities - residential:
Over 3 months through 1 year			197				197				1.94
Over 1 year through 5 years			32,680				30,931				1.99
Over 5 years through 10 years			79,479				69,786				1.73
Over 5 years through 10 years			1,456				1,269				1.99
Total mortgage-backed securities - residential			113,812				102,183				1.81
Mortgage-backed securities – commercial:
Over 5 years through 10 years			4,267				3,706				1.84
Over 10 years			4,356				3,595				2.13
Total mortgage-backed securities - commercial			8,623				7,301				1.99

		Amortized Cost				Fair Value				Average Yield
Collateralized mortgage obligations:
3 months or less			35				35				2.11
Over 3 months through 1 year			2,185				2,169				3.21
Over 1 year through 5 years			24,277				22,681				2.54
Over 5 years through 10 years			10,614				9,918				2.43
Over 10 years			3,841				3,376				1.60
Total collateralized mortgage obligations			40,952				38,179				2.46
Other debt securities
Over 1 year through 5 years			5,281				5,059				2.90
Over 5 years through ten years			12,086				11,556				3.80
Total other debt securities			17,367				16,615				3.53
Total available-for-sale securities		$	324,329			$	296,347				2.33	%

Held-to-maturity
Obligations of state and political subdivisions:
Over 1 year through 5 years		$	212			$	212				2.90	%
Over 5 years through 10 years			4,212				3,522				1.82
Over 10 years			3,450				4,097				3.03
Total held-to-maturity securities		$	7,874			$	7,831				2.38	%

The weighted average interest rates are based on coupon rates for securities purchased at par value and on effective yields considering amortization or accretion if the securities were purchased at a premium or discount. The weighted average yield on tax-exempt obligations has been calculated on a tax equivalent basis. Average yields are based on amortized cost balances.

Loans. Loan receivables increased by $45,416 to $611,843 at June 30, 2022 compared to $566,427 at June 30, 2021. Excluding PPP and acquired loan balances, core organic loan growth was $81,194, or 15.7% for the fiscal year ended June 30, 2022. Commercial loans included PPP loans of $179 and $50,686 as of June 30, 2022 and 2021, respectively. Consumer loans increased by $15,251, or 51.6%, primarily as a result of the expansion of indirect auto lending and an increase in direct auto loans due to successful marketing campaigns. Major classifications of loans, net of deferred loan fees and costs, were as follows as of June 30:

		2022				2021
Commercial		$	87,080			$	109,922
Commercial real estate:
Construction			15,095				10,462
Other			291,310				269,157
1-4 Family residential real estate:
Owner occupied			143,180				119,046
Non-owner occupied			25,988				19,114
Construction			4,369				9,156
Consumer loans			44,821				29,570
Total loans		$	611,843			$	566,427

The following table shows the major classifications of loans, net of deferred fees and costs, which are based on the contractual terms for repayment of principal, that are due in the periods indicated as of June 30, 2022:

		Maturing
						After one year				After five years
		Within				but within				But within				After
		one year				five years				Fifteen years				Fifteen years				Total
Commercial		$	12,957			$	31,260			$	42,194			$	669			$	87,080
Commercial real estate:
Construction			83				10,359				3,368				1,285				15,095
Other			8,062				13,511				117,469				152,268				291,310
1-4 Family residential real estate:
Owner occupied			1,142				2,460				35,850				103,728				143,180
Non-owner occupied			1,399				1,021				15,534				8,034				25,988
Construction			763				90				—				3,516				4,369
Consumer loans			1,003				24,147				19,481				190				44,821
Total loans		$	25,409			$	82,848			$	233,896			$	269,690			$	611,843

The following is a schedule of fixed and variable rate 1-4 family residential real estate construction, commercial and commercial real estate loans due after one year (variable rate loans are those loans with floating or adjustable interest rates) as of June 30, 2022:

Total due after one year:		Fixed Interest Rates				Variable Interest Rates
Commercial		$	61,636			$	12,487
Commercial real estate:
Construction			3,628				11,384
Other			157,013				126,235
1-4 Family residential real estate:
Owner occupied			116,957				25,081
Non-owner occupied			15,050				9,539
Construction			3,516				90
Consumer loans			43,814				4

Allowance for Loan Losses. The allowance for loan losses balance and the provision charged to expense are judgmentally determined by management based upon a periodic review of the loan portfolio for valuation purposes and to determine the adequacy of the allowance for loan losses. Management establishes allowances for estimated losses on loans based upon its evaluation of the pertinent factors underlying the types and quality of loans; historical loss experience based on volume and types of loans; trend in portfolio volume and composition; level and trend of nonperforming assets; detailed analysis of individual loans for which full collectability may not be assured; determination of the existence and realizable value of the collateral and guarantees securing such loans and the current economic conditions affecting the collectability of loans in the portfolio.

Failure to receive principal and interest payments when due on any loan results in efforts to restore such loan to a current status. Loans are classified as non-accrual when, in the opinion of management, full collection of principal and accrued interest is not expected. The loans must be brought and kept current for six sustained payments before being considered for removal from non-accrual status. 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. If a loan is impaired, a portion of the allowance is allocated so the loan is reported, net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected from the collateral. Loans are evaluated for impairment when payments are delayed, typically 90 days or more, or when it is probable that not all principal and interest amounts will be collected according to the original terms of the loan. As of June 30, 2022, impaired loans totaled $473, of which $431 are included in non-accrual loans. Continued unsuccessful collection efforts generally lead to initiation of foreclosure or other legal proceedings.

The following table summarizes non-accrual loans, non-performing assets, impaired and restructured loans, and associated ratios for the years ended June 30:

		2022				2021
Non-accrual loans		$	431			$	1,771
Accruing loans past due 90 days or more			9				—
Total non-performing loans		$	440			$	1,771
Other real estate and repossessed assets owned			—				—
Total non-performing assets		$	440			$	1,771
Impaired loans		$	473			$	1,954
Accruing restructured loans		$	42			$	183
Non-accrual to total loans			0.07	%			0.31	%
ALLL to non-accrual loans			1661.25	%			365.39	%

The non-performing loans are either in the process of foreclosure or efforts are being made to work with the borrower to bring the loan current. Properties and vehicles acquired by the Corporation as a result of foreclosure or repossession, or by deed in lieu of foreclosure, are classified as “other real estate and repossessed assets owned” until they are sold or otherwise disposed of.

The following table summarizes the Corporation’s loan loss experience, and provides a breakdown of the charge-off, recovery and other activity for the years ended June 30:

		2022				2021
Allowance for loan losses at beginning of year		$	6,471			$	5,678
Loans charged off:
Commercial			—				22
1-4 Family residential real estate			41				4
Consumer loans			132				122
Total charge offs			173				148
Recoveries:
Commercial			23				—
Commercial real estate			2				4
1-4 Family residential real estate			20				3
Consumer loans			82				84
Total recoveries			127				91
Net charge offs			46				57
Provision for loan losses charged to operations			735				850
Allowance for loan losses at end of year		$	7,160			$	6,471
Ratio of net charge offs to average loans outstanding			0.01	%			0.01	%
ALLL to total loans			1.17	%			1.14	%

The following schedule is a breakdown of the allowance for loan losses allocated by type of loan and related ratios:

		Allocation of the Allowance for Loan Losses
		Allowance Amount				% of Loan Type to Total Loans				Allowance Amount				% of Loan Type to Total Loans
		June 30, 2022								June 30, 2021
Commercial		$	960				14.2	%		$	904				19.4	%
Commercial real estate loans			3,927				50.1				3,949				49.4
1-4 Family residential real estate			1,645				28.4				1,307				26.0
Consumer loans			628				7.3				311				5.2
Total		$	7,160				100.0	%		$	6,471				100.0	%

While management’s periodic analysis of the adequacy of the allowance for loan losses may allocate portions of the allowance for specific problem loan situations, the entire allowance is available for any loan charge-off that may occur. While the Corporation has historically experienced strong trends in asset quality, due to the current economic concerns with high inflation and rising interest rates, uncertainty remains regarding future levels of criticized and classified loans, nonperforming loans and charge-offs. Management will continue to closely monitor changes in the loan portfolio and adjust the provision accordingly.

Goodwill: Goodwill was $2,452 as of June 30, 2022 and $836 as of June 30, 2021. In July 2021, goodwill of $1,616 was recorded from the branch acquisition. Goodwill represents the excess of the total purchase price paid for the acquisition over the fair value of the identifiable assets acquired, net of the fair value of the liabilities assumed. Goodwill is evaluated for impairment at least annually and more frequently if events and circumstances indicate that the asset might be impaired. Management evaluated goodwill and concluded that no impairment existed during the year ended June 30, 2022.

Funding Sources. Total deposits increased by $159,713, or 22.0%, from $726,849 at June 30, 2021 to $886,562 at June 30, 2022. Total deposits include $104,538 of deposits acquired as part of the branch acquisition. For the fiscal year ended June 30, 2022, noninterest-bearing demand deposits increased by $28,563, or 12.5%, interest-bearing demand deposits increased by $30,015, or 23.6%, savings and money market deposits increased by $86,293, or 30.5%, and certificates and other time deposits increased by $14,842, or 17.0% from the same prior year period. As current market rates rise, it is anticipated that customers may choose to move funds from savings and money market deposit products to higher yielding certificates of deposits.

The following is a schedule of average deposit amounts and average rates paid on each category for the periods included:

		Years Ended June 30,
		2022								2021
		Amount				Rate				Amount				Rate
Noninterest-bearing demand deposit		$	246,089				—			$	203,181				—
Interest-bearing demand deposit			147,312				0.11	%			112,801				0.13	%
Savings			349,380				0.11				251,138				0.13
Certificates and other time deposits			113,143				0.50				102,554				1.10
Total		$	855,924				0.13	%		$	669,674				0.24	%

Uninsured deposits at June 30, 2022 and 2021 were $266,902 and $229,071, respectively. Uninsured deposits as of June 30, 2022 and 2021 are based on estimates and include portions of FDIC-insured deposit accounts that exceed the insurance limit of $250 thousand per separately insured depositor.

The following table summarizes time deposits issued in amounts of more than $250 thousand as of June 30, 2022 by time remaining until maturity:

Maturing in:
Under 3 months		$	3,961
Over 3 to 6 months			3,230
Over 6 to 12 months			7,783
Over 12 months			2,190
Total		$	17,164

Short-term borrowings increased by $9,092, or 74.5%, to $21,295 at June 30, 2022 from $12,203 at June 30, 2021. This increase was primarily associated with large new deposits from an existing local commercial customer in this sweep repurchase agreement product. See Note 8—Short-Term Borrowings to the Consolidated Financial Statements, for information concerning short-term borrowings.

Capital Resources

Total shareholders’ equity decreased by $15,930 from $69,900 at June 30, 2021 to $53,970 at June 30, 2022. The primary reason for the decline in shareholders’ equity was a $25,656 net decrease in accumulated other comprehensive income due to a shift in unrealized gains on the mark-to-market of available-for-sale securities to a net unrealized loss and by cash dividends paid of $1,949. These reductions were partially offset by net income of $11,192 for the current fiscal year. For fiscal year 2022, the average equity to average total assets ratio was 7.10% and the dividend payout ratio was 17.4%. For fiscal year 2021, the average equity to average total assets ratio was 8.71% and the dividend payout ratio was 19.9%.

At June 30, 2022, management believes the Bank complied with all regulatory capital requirements. Based on the Bank’s computed regulatory capital ratios, the OCC has determined the Bank to be well capitalized under the Federal Deposit Insurance Act as of its latest exam date. The Bank’s actual and required capital amounts are disclosed in Note 13-Regulatory Matters to the Consolidated Financial Statements. Management is not aware of any matters occurring subsequent to that exam that would cause the Bank’s capital category to change.

At June 30, 2022, the Corporation had no unconsolidated, related special purpose entities, nor did the Corporation engage in hedging contracts, such as interest rate swaps, which may expose the Corporation to liabilities greater than the amounts recorded on the consolidated balance sheet. The Corporation’s investment policy prohibits engaging in derivative contracts for speculative trading purposes; however, in the future, the Corporation may pursue certain contracts, such as interest rate swaps, to execute a sound and defensive interest rate risk management policy.

Liquidity

Management considers the asset position of the Bank to be sufficiently liquid to meet normal operating needs and conditions. The Bank’s earning assets are divided primarily between loans and available-for-sale securities, with any excess funds placed in federal funds sold or interest-bearing deposit accounts with other financial institutions.

For fiscal year 2022, net cash inflows from operating activities were $14,947, net cash inflows from financing activities were $52,698 and net cash outflows from investing activities were $65,222. The major sources of cash were net cash received of $66,552 from the branch acquisition, $55,175 net increase in deposits, and a $34,306 increase from sales, maturities, or principal pay downs on available-for-sale securities. The major uses of cash were the $141,210 purchase of available-for-sale securities and a $25,602 net increase in loans. Total cash and cash equivalents were $20,952 as of June 30, 2022 compared to $18,529 at June 30, 2021.

The Bank groups its loan portfolio into four major categories: commercial loans; commercial real estate loans; 1-4 family residential real estate loans; and consumer loans. The Bank’s 1-4 family residential real estate loan portfolio primarily consists of fixed and variable rate mortgage loans for terms generally not longer than thirty years and variable rate home equity lines of credit. Commercial and commercial real estate loans are comprised of both variable rate notes subject to interest rate changes based on the prime rate or Treasury index, and fixed rate notes having maturities of generally not greater than twenty years. Consumer loans offered by the Bank are generally written for periods of up to seven years, based on the nature of the collateral. These may be either installment loans having regular monthly payments or demand type loans for short periods of time.

Funds not allocated to the Bank’s loan portfolio are invested in various securities having diverse maturity schedules. A majority of the Bank’s securities are held in obligations of U.S. Government-sponsored entities, mortgage-backed securities, and investments in tax-exempt municipal bonds.

The Bank offers several forms of deposit products to its customers. We believe the rates offered by the Bank and the fees charged for them are competitive with others currently available in the market area. While the Bank continues to be under competitive pressures in the Bank’s market area as financial institutions attempt to attract and keep new deposits, we believe many commercial and retail customers are turning to community banks. Compared to our peers, the Corporation’s core deposits consist of a larger percentage of noninterest-bearing demand deposits resulting in the cost of funds being at a low level of 0.22% for fiscal year 2022.

Jumbo time deposits (those with balances of $250 and over) were $18,164 and $18,488 at June 30, 2022 and 2021, respectively. These deposits are monitored closely by the Bank and typically 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. However, these deposits are not relied upon as a primary source of funding and there were no brokered deposits as of June 30, 2022 or 2021.

Dividends from the Bank are the primary source of funds for payment of dividends to our shareholders. However, there are statutory limits on the amount of dividends the Bank can pay without regulatory approval. Under these regulations, the amount of dividends that may be paid in any calendar year is limited to the current year’s net profits, combined with the retained net profits of the preceding two years, subject to the capital requirements described above. Additionally, the Bank may not declare or pay any dividend if, after making the dividend, the Bank would be “undercapitalized,” as defined in the federal regulations. As of June 30, 2022, the Bank could, without prior approval, declare a dividend of approximately $14,695.

Impact of Inflation and Changing Prices

The financial statements and related data presented herein have been prepared in accordance with U.S. generally accepted accounting principles, which require the measurement of financial position and results of operations primarily in terms of historical dollars without considering changes in the relative purchasing power of money over time due to inflation. Unlike most industrial companies, virtually all the assets and liabilities of the Corporation are monetary in nature. Therefore, as a financial institution, interest rates have a more significant impact on the Corporation’s performance than the effects of general levels of inflation. Interest rates do not necessarily move in the same direction or in the same magnitude as the prices of goods and services. The liquidity, maturity structure and quality of the Corporation’s assets and liabilities are critical to the maintenance of acceptable performance levels.

Critical Accounting Policies and Use of Significant Estimates

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’s discussion and analysis 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 most significant accounting policies followed by the Corporation are presented in Note 1-Summary of Significant Accounting Policies to the Consolidated Financial Statements. These policies, along with the disclosures presented in the other financial statement notes, provide information on how significant assets and liabilities are valued in the financial statements and how those values are determined.

Management views critical accounting policies to be those which are highly dependent on subjective or complex judgments, estimates and assumptions, and where changes in those estimates and assumptions could have a significant impact on the financial statements. In the event different assumptions or conditions were to prevail, and depending upon the severity of such changes, the possibility of materially different financial condition or results of operations is a reasonable likelihood. Management has identified the following as critical accounting policies:

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

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

Contractual Obligations, Commitments and Contingent Liabilities

The following table presents, as of June 30, 2022, the Corporation’s significant fixed and determinable contractual obligations by payment date. The payment amounts represent those amounts contractually due to the recipient and do not include any unamortized premiums or discounts. Further discussion of the nature of each obligation is included in the referenced note to the consolidated financial statements.

		Note Reference			2023				2024				2025				2026				2027				Thereafter				Total
Certificates of deposit		7			$	76,823			$	13,656			$	4,381			$	3,258			$	3,398			$	865			$	102,381
Short-term borrowings		8				21,295				—				—				—				—				—				21,295
Federal Home Loan advances		9				84				67				4,056				46				3				4,000				8,256
Salary continuation plan		10				146				142				141				141				141				2,853				3,564
Operating leases		5				167				146				114				113				572				—				1,112
Deposits without maturity						—				—				—				—				—				—				784,181

Note 14-Commitments with Off-Balance Sheet Risk to the Consolidated Financial Statements discusses in greater detail other commitments and contingencies and the various obligations that exist under those agreements. These commitments and contingencies consist primarily of commitments to extend credit to borrowers under lines of credit.

Item 7A — Quantitative and Qualitative Disclosures About Market Risk

Not applicable for Smaller Reporting Companies.

Item 8 — Financial Statements and Supplementary Data

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Shareholders and the Board of Directors of Consumers Bancorp, Inc.

Minerva, Ohio

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Consumers Bancorp, Inc. and subsidiaries (the “Company”) as of June 30, 2022 and 2021, the related consolidated statements of income, comprehensive income, changes in shareholders' equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of June 30, 2022 and 2021, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

The Company's management is responsible for these financial statements. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting in accordance with the standards of the PCAOB. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance for Loan Losses – Significant Assumptions in General Reserves - Refer to Notes 1 and 4 to the Financial Statements

Critical Audit Matter Description

The allowance for loan losses (allowance) represents management’s best estimate of probable losses that have been incurred within the existing portfolio of loans. The allowance consists of specific and general components. The specific component relates to loans that are individually classified as impaired. The general component covers non-impaired loans and is based on historical loss experience adjusted for current factors based on the risks present for each portfolio segment. These factors include consideration of the following: levels of and trends in volume and terms of loans; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedures and practices; experience, ability and depth of lending management and other relevant staff; volume and severity of past due loans and other similar conditions; quality of the loan review system; value of underlying collateral for collateral dependent loans; national and local economic trends and conditions; industry conditions; and effects of changes in credit concentrations.

We identified the Company’s significant assumptions in general reserves in the allowance for loan losses as a critical audit matter. Given the significant estimates and assumptions management makes to estimate the current factor adjustments of the allowance for loan losses, performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions required a high degree of auditor judgment and an increased extent of effort.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the qualitative factors within the allowance included the following, among others:

●	We obtained an understanding of management’s process for determining the need for qualitative factor adjustments, identifying appropriate factors, and measuring the direction and magnitude of the adjustment.

●	We evaluated the reasonableness of management’s judgments and tests of accuracy of underlying support related to the qualitative factors.

●	We evaluated the design of controls over the application of management’s qualitative factor methodology in the estimate of general reserves.

●	We evaluated management's rationale for determining qualitative adjustments was relevant and warranted for each loan segment and assessed the measurement of qualitative factor adjustments applied by management.

●	Where applicable, we tested the accuracy and completeness of data used by management in the measurement of qualitative factor adjustments or vouched factors to relevant external data sources.

●	We assessed changes in qualitative factors year-over-year against overall trends in credit quality within the Company and broader trends within the industry and local and national economies to evaluate reasonableness of management’s qualitative factor adjustments.

/s/ Plante & Moran, PLLC

We have served as the Company's auditor since 2020.

Auburn Hills, Michigan

September 15, 2022

CONSOLIDATED BALANCE SHEETS

As of June 30, 2022 and 2021

(Dollar amounts in thousands, except per share data)

See accompanying notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF INCOME

Years Ended June 30, 2022 and 2021

(Dollar amounts in thousands, except per share data)

See accompanying notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Years Ended June 30, 2022 and 2021

(Dollar amounts in thousands, except per share data)

See accompanying notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS ’ EQUITY

Years Ended June 30, 2022 and 2021

(Dollar amounts in thousands, except per share data)

See accompanying notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended June 30, 2022 and 2021

(Dollar amounts in thousands, except per share data)

See accompanying notes to consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022 and 2021

(Dollar amounts in thousands, except per share data)

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation: The consolidated financial statements include the accounts of Consumers Bancorp, Inc. (Corporation) and its wholly owned subsidiary, Consumers National Bank (Bank), together referred to as the Corporation. All significant intercompany transactions have been eliminated in the consolidation.

Nature of Operations: Consumers Bancorp, Inc. is a bank holding company headquartered in Minerva, Ohio that provides, through its banking subsidiary, a broad array of products and services throughout its primary market area of Carroll, Columbiana, Jefferson, Stark, Summit and Wayne counties in Ohio. Its market includes these counties as well as the fourteen contiguous counties in northeast Ohio, western Pennsylvania, and northern West Virginia. The Bank’s business involves attracting deposits from businesses and individual customers and using such deposits to originate commercial, mortgage and consumer loans in its primary market area.

Business Segment Information: The Corporation is engaged in the business of commercial and retail banking, which accounts for substantially all its revenues, operating income, and assets. Accordingly, all its operations are reported in one segment, banking.

Acquisition: At the date of acquisition the Corporation records the assets and liabilities of acquired companies on the Consolidated Balance Sheet at their fair value. The results of operations for acquired companies are included in the Corporation’s Consolidated Statements of Income beginning at the acquisition date. Expenses arising from acquisition activities are recorded in the Consolidated Statements of Income during the periods incurred.

Use of Estimates: To prepare financial statements in conformity with U.S. generally accepted accounting principles, management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ.

Cash and Cash Equivalents: Cash and cash equivalents include cash, deposits with other financial institutions with original maturities of less than 90 days and federal funds sold.  Cash flows are reported on a net basis for customer loan and deposit transactions, interest bearing deposits in other financial institutions and short-term borrowings.

Interest – Bearing Deposits in Other Financial Institutions: Interest-bearing deposits in other financial institutions mature within one year and are carried at cost.

Certificates of Deposit in Financial Institutions: Certificates of deposit in other financial institutions are carried at cost.

Cash Reserves: The Bank is required to maintain cash on hand and noninterest-bearing balances on deposit with the Federal Reserve Bank to meet regulatory reserve and clearing requirements. The required reserve balance was zero at June 30, 2022 and 2021.

Securities: Securities are generally classified into either held-to-maturity or available-for-sale categories. Held-to-maturity securities are carried at amortized cost and are those the Corporation has the positive intent and ability to hold to maturity. Available-for-sale securities are those the Corporation may decide to sell before maturity if needed for liquidity, asset-liability management, or other reasons. Available-for-sale securities are reported at fair value, with unrealized gains or losses included in other comprehensive income (loss) as a separate component of equity, net of tax.

Interest income includes amortization of purchase premiums and accretion of discounts. Premiums and discounts on securities are amortized on the level-yield method without anticipating prepayments, except for mortgage-backed securities and collateralized mortgage obligations where prepayments are anticipated. Gains and losses on sales are recorded on the trade date and determined using the specific identification method.

Management evaluates securities for other-than-temporary impairment (OTTI) on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. The evaluation of securities includes consideration given to the length of time and the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, whether the market decline was affected by macroeconomic conditions and whether the Corporation has the intent to sell the security or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis. In analyzing an issuer's financial condition, management may consider whether the securities are issued by the federal government or its agencies, or U.S. Government sponsored enterprises, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer's financial condition. 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.

30

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

When OTTI occurs, the amount of the OTTI recognized in earnings depends on whether the Corporation intends to sell the security, or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis. If the Corporation intends to sell or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis, the OTTI will be recognized in earnings equal to the entire difference between the security's amortized cost basis and its fair value at the balance sheet date. The previous amortized cost basis less the OTTI recognized in earnings becomes the new amortized cost basis of the security. If a security is determined to be other-than-temporarily impaired, but the Corporation does not intend to sell the security, only the credit portion of the estimated loss is recognized in earnings, with the other portion of the loss recognized in other comprehensive income.

Equity Securities: Equity securities are carried at fair value, with changes in fair value reported in net income. Equity securities without readily determinable fair values are carried at cost, minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment.

Federal Bank and Other Restricted Stocks: The Bank is a member of the FHLB system. Members are required to own a certain amount of stock based on the level of borrowings and other factors and may invest in additional amounts. FHLB stock, included with Federal bank and other restricted stocks on the Consolidated Balance Sheet, is carried at cost, classified as a restricted security and periodically evaluated for impairment based on ultimate recovery of par value. Federal Reserve Bank stock is also carried at cost. Since these stocks are viewed as a long-term investment, impairment is based on ultimate recovery of par value. Both cash and stock dividends are reported as income.

Loans Held for Sale: Mortgage loans originated and intended for sale in the secondary market are carried at the lower of aggregate cost or fair value, as determined by outstanding commitments from investors. Mortgage loans held for sale are generally sold with servicing rights released. Net unrealized losses, if any, are recorded as a valuation allowance and charged to earnings. Gains and losses on sales of mortgage loans are based on the difference between the selling price and the carrying value of the related loan sold.

Mortgage Banking Derivatives: Commitments to fund mortgage loans (interest rate locks) to be sold into the secondary market are accounted for as free-standing derivatives. The fair value of the interest rate lock is recorded at the time the commitment to fund the mortgage loan is executed and is adjusted for the expected exercise of the commitment before the loan is funded. Changes in the fair values of these derivatives are included in net gains on sales of loans.

Loans: Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at the principal balance outstanding, net of deferred loan fees and costs, and an allowance for loan losses. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using the level-yield method without anticipating prepayments. The recorded investment in loans includes accrued interest receivable.

Interest income on commercial, commercial real estate and 1 - 4 family residential loans is discontinued at the time the loan is 90 days delinquent unless the loan is well-secured and in the process of collection. Consumer loans are typically charged off no later than 120 days past due. Past due status is determined by the contractual terms of the loan. In all cases, loans are placed on non-accrual or charged-off at an earlier date if collection of principal or interest is considered doubtful.

All interest accrued but not received on loans placed on non-accrual is reversed against interest income. Interest received on such loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when the customer has exhibited the ability to repay and demonstrated this ability over at least a consecutive six -month period and future payments are reasonably assured.

During the 2020 and 2021 fiscal year , the Corporation funded PPP loans to provide liquidity to small businesses because of the COVID- 19 pandemic. The loans are guaranteed by the SBA and are forgivable by the SBA if certain criteria are met. The Corporation originated PPP loans totaling $ 113,367 during the first and second rounds of assistance . PPP processing fees received from the SBA were deferred along with loan origination costs and recognized as interest income using the effective yield method. Upon forgiveness of a loan and resulting repayment by the SBA, any unrecognized net fee for a given loan is recognized as interest income. Approximately $ 2,435 and $ 1,911 of fees from the SBA were recognized in interest income in the 2022 and 2021 fiscal years, respectively. As of June 30, 2022, there were $ 12 of unamortized net deferred fees related to the PPP loans .

31

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Loan Commitments and Related Financial Instruments: Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit, issued to meet customer financing needs. The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded when funded.

Concentrations of Credit Risk: The Bank grants consumer, real estate, and commercial loans primarily to borrowers in Carroll, Columbiana, Jefferson, Stark, Summit and Wayne counties. Therefore, the Corporation’s exposure to credit risk is significantly affected by changes in the economy in these counties. Automobiles and other consumer assets, business assets and residential and commercial real estate secure most loans.

Allowance for Loan Losses: The allowance for loan losses is a valuation allowance for probable incurred credit losses. Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. Management estimates the allowance balance required based on past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged-off.

The allowance consists of specific and general components. The specific component relates to loans that are individually classified as impaired. The general component covers non-classified loans and is based on historical loss experience adjusted for current factors.

A loan is considered impaired when, based on current information and events, it is probable that the Corporation will be unable to collect all amounts due according to the contractual terms of the loan agreement. Loans, for which the terms have been modified, resulting in a concession, and for which the borrower is experiencing financial difficulties, are considered troubled debt restructurings, and classified as impaired. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.

Impairment is evaluated collectively for smaller-balance loans of similar nature such as residential mortgage, consumer loans and on an individual loan basis for other loans. If a loan is impaired, a portion of the allowance is allocated so the loan is reported, net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected from the collateral. Loans are evaluated for impairment when payments are delayed, typically 90 days or more, or when it is probable that not all principal and interest amounts will be collected according to the original terms of the loan. Troubled debt restructurings are separately identified for impairment disclosures and are measured at the present value of estimated future cash flows using the loan’s effective interest rate at inception. If a troubled debt restructuring is considered to be a collateral dependent loan, the loan is reported, net, at the fair value of the collateral. For troubled debt restructurings that subsequently default, the Corporation determines the amount of reserve in accordance with the accounting policy for the allowance for loan losses.

The general component covers non-impaired loans and is based on historical loss experience adjusted for current factors based on the risks present for each portfolio segment. The historical loss experience is determined by portfolio segment and is based on the actual loss history experienced by the Corporation over the most recent three -year period, depending on loan segment. This actual loss experience is supplemented with economic and other factors based on the risks present for each portfolio segment. These factors include consideration of the following: levels of and trends in volume and terms of loans; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedures, and practices; experience, ability and depth of lending management and other relevant staff; volume and severity of past due loans and other similar conditions; quality of the loan review system; value of underlying collateral for collateral dependent loans; national and local economic trends and conditions; industry conditions; and effects of changes in credit concentrations. The following portfolio segments have been identified:

Commercial: Commercial loans are made for a wide variety of general business purposes, including financing for equipment, inventories and accounts receivable. The term of each commercial loan varies by its purpose. Commercial loans are underwritten after evaluating and understanding the borrower’s ability to operate profitably and prudently expand its business. Current and projected cash flows are evaluated to determine the ability of the borrower to repay their obligations as agreed. Commercial loans are primarily made based on the identified cash flows of the borrower and secondarily made based on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the assets being financed or other business assets such as accounts receivable or inventory and usually incorporate a personal guarantee; however, some short-term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers. The commercial loan portfolio includes loans to a wide variety of corporations and businesses across many industrial classifications in the areas where the Bank operates.

32

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Commercial Real Estate: Commercial real estate loans include mortgage loans to farmers, owners of multi-family investment properties, developers and owners of commercial real estate. Commercial real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally largely dependent on the successful operation of the property securing the loan, the business conducted on the property securing the loan or, in the case of loans to farmers, management and operation of the farm. Commercial real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy. The properties securing the Corporation’s commercial real estate portfolio are diverse in terms of type and geographic location. This diversity helps reduce the Corporation’s exposure to adverse economic events that affect any single market or industry. Management monitors and evaluates commercial real estate loans based on collateral, geography and risk grade criteria. In addition, management tracks the level of owner-occupied commercial real estate loans versus nonowner-occupied loans.

1 - 4 Family Residential Real Estate : Residential real estate loans are secured by one to four family residential properties and include both owner occupied, non-owner occupied and home equity loans. Credit approval for residential real estate loans requires demonstration of sufficient income to repay the principal and interest and the real estate taxes and insurance, stability of employment, an established credit record and an appropriately appraised value of the real estate securing the loan that generally requires that the residential real estate loan amount be no more than 85% of the purchase price or the appraised value of the real estate securing the loan unless the borrower provides private mortgage insurance.

Consumer : The Corporation originates direct and indirect consumer loans, primarily automobile loans, personal lines of credit, and unsecured consumer loans in its primary market areas. Credit approval for consumer loans requires income sufficient to repay principal and interest due, stability of employment, an established credit record and sufficient collateral for secured loans. Consumer loans typically have shorter terms and lower balances with higher yields as compared to real estate mortgage loans, but generally carry higher risks of default. Consumer loan collections are dependent on the borrower’s continuing financial stability, and thus are more likely to be affected by adverse personal circumstances.

Other Real Estate and Repossessed Assets Owned: Real estate properties and other repossessed assets, which are primarily vehicles, acquired through, or in lieu of, loan foreclosure are initially recorded at fair value less costs to sell at the date of acquisition, establishing a new cost basis. Any reduction to fair value from the carrying value of the related loan at the time of acquisition is accounted for as a loan loss. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. If the fair value declines after acquisition, a valuation allowance is recorded as a charge to income. Operating costs after acquisition are expensed. Gains and losses on disposition are reported as a charge to income.

Transfers of Financial Assets: Transfers of financial assets are accounted for as sales when control over the assets has been relinquished. Control over transferred assets is deemed to be surrendered when the assets have been isolated from the Corporation, the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and the Corporation does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Premises and Equipment: Land is carried at cost. Premises and equipment are stated at cost less accumulated depreciation. Depreciation is computed primarily using the straight-line method over the estimated useful life of the owned asset and, for leasehold improvements, generally over the lesser of the remaining term of the lease facility or the estimated economic life of the improvement. Useful lives range from three years for software to thirty-nine and one -half years for buildings.

Cash Surrender Value of Life Insurance: The Bank has purchased single-premium life insurance policies to insure the lives of current and former participants in the salary continuation plan. As of June 30, 2022, the Bank had policies with total death benefits of $ 19,128 and total cash surrender values of $ 9,959 . As of June 30, 2021, the Bank had policies with total death benefits of $ 19,107 and total cash surrender values of $ 9,702 . Bank owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement. Tax-exempt income is recognized from the periodic increases in cash surrender value of these policies.

Goodwill and Other Intangible Assets: Goodwill results from business acquisitions and represents the excess of the purchase price over the fair value of acquired assets and liabilities. Core deposit intangible assets arise from whole bank or branch acquisitions and are measured at fair value and then are amortized over their estimated useful lives. Goodwill is not amortized but is assessed at least annually for impairment. Any such impairment will be recognized in the period identified. The Corporation has selected April 30 as the date to perform the annual impairment test. Goodwill is the only intangible asset with an indefinite life on the Corporation’s balance sheet.

33

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Long-Term Assets: Premises, equipment and other long-term assets are reviewed for impairment when events indicate their carrying amount may not be recoverable from future undiscounted cash flows. If impaired, the assets are recorded at fair value.

Repurchase Agreements: Substantially all repurchase agreement liabilities, which are classified as short-term borrowings, represent amounts advanced by various customers. Securities are pledged to cover these liabilities, which are not covered by federal deposit insurance.

Retirement Plans: The Bank maintains a 401 (k) savings and retirement plan covering all eligible employees and matching contributions are expensed as made. Salary continuation plan expense allocates the benefits over years of service.

Income Taxes: The Corporation files a consolidated federal income tax return. Income tax expense is the sum of the current-year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax consequences of temporary differences between the carrying amounts and tax basis of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. The Corporation applies a more likely than not recognition threshold for all tax uncertainties in accordance with U.S. generally accepted accounting principles. A tax position is recognized as a benefit only if it is more likely than not that the position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit greater than 50% likely of being realized on examination. The Corporation recognizes interest and/or penalties related to income tax matters in income tax expense.

Earnings per Common Share: Basic earnings per common share is net income divided by the weighted average number of common shares outstanding during the period. Diluted earnings per common share includes the dilutive effect of additional potential common shares issuable upon the vesting of restricted stock awards.

Stock-Based Compensation: Compensation cost is recognized for restricted stock awards issued to employees over the required service period, generally defined as the vesting period. The fair value of restricted stock awards is estimated by using the market price of the Corporation’s common stock at the date of grant. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award.

Comprehensive Income: Comprehensive income consists of net income and other comprehensive income (loss). Other comprehensive income (loss) includes unrealized gains and losses on securities available-for-sale, which are also recognized as a separate component of equity, net of tax.

Loss Contingencies: Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable, and an amount or range of loss can be reasonably estimated. Management does not believe there are such matters that will have a material effect on the Corporation’s financial statements.

Fair Value of Financial Instruments: Fair value of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in Note 15 of the Consolidated Financial Statements. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, discounted cash flows, prepayments, and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect these estimates.

Dividend Restrictions: Banking regulations require maintaining certain capital levels and may limit the dividends paid by the Bank to the holding company or by the holding company to shareholders.

Reclassifications: Certain reclassifications have been made to the June 30, 2021 financial statements to be comparable to the June 30, 2022 presentation. The reclassifications had no impact on prior year net income or shareholders’ equity.

34

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Recently Issued Accounting Pronouncements Not Yet Effective: In June 2016, Financial Accounting Standards Board (FASB) issued ASU 2016 - 13, Financial Instruments—Credit Losses (Topic 326 ): Measurement of Credit Losses on Financial Instruments. This ASU adds a new Topic 326 to the codification and removes the thresholds that companies apply to measure credit losses on financial instruments measured at amortized cost, such as loans, receivables, and held-to-maturity debt securities. Under current U.S. generally accepted accounting principles, companies generally recognize credit losses when it is probable that the loss has been incurred. The revised guidance will remove all current loss recognition thresholds and will require companies to recognize an allowance for credit losses for the difference between the amortized cost basis of a financial instrument and the amount of amortized cost that the corporation expects to collect over the instrument’s contractual life. ASU 2016 - 13 also amends the credit loss measurement guidance for available-for-sale debt securities and beneficial interests in securitized financial assets. The guidance in ASU 2016 - 13 is effective for “public business entities,” as defined in the guidance, that are SEC filers for fiscal years and for interim periods 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. 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 effective date. The new guidance is effective for annual and interim periods beginning after December 15, 2022 for certain entities, including smaller reporting companies. The Corporation is a smaller reporting company. The Corporation is currently evaluating the impact of adopting this new guidance on the consolidated financial statements, current systems and processes. At this time, the Corporation is reviewing potential methodologies for estimating expected credit losses using reasonable and supportable forecast information and has identified certain data and system requirements. Once adopted, we expect our allowance for loan losses to increase through a one -time adjustment to retained earnings; however, until our evaluation is complete, the estimated increase in allowance will be unknown. The Corporation is planning to adopt this new guidance within the time frame noted above.

In March 2020, the FASB issued ASU 2020 - 04, "Facilitation of the Effects of 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 available-for-sale or trading to be made for held-to-maturity (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 ASU 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 July 16, 2021, the Corporation completed its acquisition of two branches located in Calcutta and Wellsville, Ohio from CFBank, National Association. In connection with the branch acquisition, the Corporation assumed $ 104,538 in branch deposits for a deposit premium of 1.75 %. In addition, the Corporation acquired $ 15,602 of subordinated debt securities issued by unrelated financial institutions and $ 19,943 of loans. This transaction qualifies as a business combination.

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

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

35

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The acquired assets and liabilities were measured at estimated fair values. Management made certain estimates and exercised judgement in accounting for the acquisition. The fair value of loans was estimated using discounted contractual cash flows. The book balance of the loans at the time of the acquisition was $ 20,325 . The fair value disclosed above reflects a credit-related adjustment of $( 388 ) and an adjustment for other factors of $ 6 . Loans evidencing credit deterioration since origination, purchased credit impaired loans, included in loans receivable were immaterial. Acquisition costs of $ 144 pre-tax, or $ 118 after-tax, were recorded during fiscal year 2022 and $ 106 pre-tax, or $ 90 after-tax, were recorded during fiscal year 2021. The fair value measurements of assets acquired and liabilities assumed are subject to refinement for up to one year after the closing date of the acquisition as additional information relative to closing date fair values becomes available.

NOTE 3 — SECURITIES

The following table summarizes the amortized cost and fair value of securities available-for-sale and held-to-maturity at June 30, 2022 and 2021 and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) and gross unrecognized gains and losses:

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

Held-to-maturity		Amortized Cost				Gross Unrecognized Gains				Gross Unrecognized Losses				Fair Value
June 30, 2022
Obligations of state and political subdivisions		$	7,874			$	47			$	( 90	)		$	7,831

Available-for-sale		Amortized Cost				Gross Unrealized Gains				Gross Unrealized Losses				Fair Value
June 30, 2021
Obligations of U.S. government-sponsored entities and agencies		$	14,746			$	301			$	( 14	)		$	15,033
Obligations of state and political subdivisions			73,013				3,561				( 75	)			76,499
U.S. Government-sponsored mortgage-backed securities - residential			90,065				1,136				( 684	)			90,517
U.S. Government-sponsored mortgage-backed securities – commercial			8,641				204				—				8,845
U.S. Government-sponsored collateralized mortgage obligations – residential			16,302				129				( 57	)			16,374
Other debt securities			500				—				( 8	)			492
Total available-for-sale securities		$	203,267			$	5,331			$	( 838	)		$	207,760

Held-to-maturity		Amortized Cost				Gross Unrecognized Gains				Gross Unrecognized Losses				Fair Value
June 30, 2021
Obligations of state and political subdivisions		$	7,996			$	356			$	—			$	8,352

Proceeds from sales of available-for-sale securities during fiscal year 2022 and fiscal year 2021 were as follows:

		2022				2021
Proceeds from sales		$	2,722			$	5,545
Gross realized gains			8				44
Gross realized losses			( 2	)			( 30	)

36

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The income tax provision related to these net realized gains amounted to $ 1 in fiscal year 2022 and $ 3 in fiscal year 2021.

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

Available-for-sale		Amortized Cost				Fair Value
Due in one year or less		$	850			$	851
Due after one year through five years			37,415				36,266
Due after five years through ten years			47,877				44,894
Due after ten years			74,800				66,673
Total			160,942				148,684
U.S. Government-sponsored mortgage-backed and related securities			163,387				147,663
Total		$	324,329			$	296,347

Held-to-maturity		Amortized Cost				Fair Value
Due after one year through five years		$	212			$	212
Due after five years through ten years			4,212				3,522
Due after ten years			3,450				4,097
Total		$	7,874			$	7,831

Securities with a carrying value of approximately $ 126,679 and $ 96,970 were pledged at June 30, 2022 and 2021, respectively, to secure public deposits and commitments as required or permitted by law. At June 30, 2022 and 2021, there were no holdings of securities of any one issuer, other than obligations of U.S. government-sponsored entities and agencies, with an aggregate book value greater than 10% of shareholders’ equity.

The following table summarizes the securities with unrealized and unrecognized losses at June 30, 2022 and 2021, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position:

		Less than 12 Months								12 Months or more								Total
June 30, 2022		Fair Value				Unrealized Loss				Fair Value				Unrealized Loss				Fair Value				Unrealized Loss
Available-for-sale
Obligations of U.S Treasury		$	8,447			$	( 462	)		$	—			$	—			$	8,447			$	( 462	)
Obligations of U.S. government-sponsored entities and agencies			26,265				( 2,424	)			—				—				26,265				( 2,424	)
Obligations of state and political subdivisions			80,445				( 8,331	)			2,047				( 418	)			82,492				( 8,749	)
Mortgage-backed securities – residential			76,526				( 7,586	)			24,569				( 4,056	)			101,095				( 11,642	)
Mortgage-backed securities – commercial			7,301				( 1,322	)			—				—				7,301				( 1,322	)
Collateralized mortgage obligations - residential			30,729				( 2,308	)			2,713				( 466	)			33,442				( 2,774	)
Other debt securities			16,156				( 711	)			459				( 41	)			16,615				( 752	)
Total temporarily impaired		$	245,869			$	( 23,144	)		$	29,788			$	( 4,981	)		$	275,657			$	( 28,125	)

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

		Less than 12 Months								12 Months or more								Total
June 30, 2021		Fair Value				Unrealized Loss				Fair Value				Unrealized Loss				Fair Value				Unrealized Loss
Available-for-sale
Obligations of U.S. government-sponsored entities and agencies		$	2,003			$	( 14	)		$	—			$	—			$	2,003			$	( 14	)
Obligations of state and political subdivisions			7,398				( 75	)			—				—				7,398				( 75	)
Mortgage-backed securities – residential			42,378				( 684	)			—				—				42,378				( 684	)
Mortgage-backed securities – commercial			7,707				( 56	)			552				( 1	)			8,259				( 57	)
Collateralized mortgage obligations – residential			492				( 8	)			—				—				492				( 8	)
Total temporarily impaired		$	59,978			$	( 837	)		$	552			$	( 1	)		$	60,530			$	( 838	)

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

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

As of June 30, 2022, the Corporation’s securities portfolio consisted of 436 available-for-sale and four held-to-maturity securities. There were 387 available-for-sale securities in an unrealized loss position at June 30, 2022, 29 of which were in a continuous loss position for twelve or more months. There was one held-to-maturity security in an unrealized loss position at June 30, 2022. The unrealized losses within the available-for-sale and held-to-maturity security portfolios in fiscal year 2022 was primarily attributed to a change in rates. 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. Also, management monitors the financial condition of the individual municipal securities to ensure they meet minimum credit standards. Since the Corporation does not intend to sell these securities and it is not likely the Corporation will be required to sell these securities at an unrealized loss position prior to any anticipated recovery in fair value, which may be maturity, management does not believe there is any OTTI related to these securities at June 30, 2022. Also, there was no OTTI recognized at June 30, 2021.

As of June 30, 2022, the Corporation owned equity securities with an amortized cost of $ 400 . The following table presents the net unrealized gains and losses on equity securities recognized in earnings for the twelve months ended June 30, 2022 and 2021. There were no realized gains or losses on the sale of equity securities during the periods presented.

		2022				2021
Unrealized gain/(loss) recognized on equity securities held at the end of the period		$	( 24	)		$	24

38

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 — LOANS

Major classifications of loans were as follows as of June 30:

		2022				2021
Commercial		$	87,008			$	112,337
Commercial real estate:
Construction			15,158				10,525
Other			291,847				269,679
1 – 4 Family residential real estate:
Owner occupied			142,244				118,269
Non-owner occupied			26,029				19,151
Construction			4,317				9,073
Consumer			44,964				29,646
Subtotal			611,567				568,680
Net deferred loan fees and costs			276				( 2,253	)
Allowance for loan losses			( 7,160	)			( 6,471	)
Net loans		$	604,683			$	559,956

The commercial loan category in the above table includes PPP loans of $ 179 as of June 30, 2022 and $ 50,686 as of June 30, 2021.

The following table presents the activity in the allowance for loan losses by portfolio segment for the year ended June 30, 2022:

										1-4 Family
						Commercial				Residential
						Real				Real
		Commercial				Estate				Estate				Consumer				Total
Allowance for loan losses:
Beginning balance		$	904			$	3,949			$	1,307			$	311			$	6,471
Provision for loan losses			33				( 24	)			359				367				735
Loans charged-off			—				—				( 41	)			( 132	)			( 173	)
Recoveries			23				2				20				82				127
Total ending allowance balance		$	960			$	3,927			$	1,645			$	628			$	7,160

The following table presents the activity in the allowance for loan losses by portfolio segment for the year ended June 30, 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			( 21	)			322				319				230				850
Loans charged-off			( 22	)			—				( 4	)			( 122	)			( 148	)
Recoveries			—				4				3				84				91
Total ending allowance balance		$	904			$	3,949			$	1,307			$	311			$	6,471

39

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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, 2022. Included in the recorded investment in loans is $ 1,214 of accrued interest receivable.

										1-4 Family
						Commercial				Residential
						Real				Real
		Commercial				Estate				Estate				Consumer				Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment		$	—			$	—			$	—			$	—			$	—
Acquired loans collectively evaluated for impairment			1				62				85				—				148
Originated loans collectively evaluated for impairment			959				3,865				1,560				628				7,012
Total ending allowance balance		$	960			$	3,927			$	1,645			$	628			$	7,160
Recorded investment in loans:
Loans individually evaluated for impairment		$	276			$	42			$	155			$	—			$	473
Acquired loans collectively evaluated for impairment			665				10,095				27,731				3,051				41,542
Originated loans collectively evaluated for impairment			86,310				296,776				146,058				41,898				571,042
Total ending loans balance		$	87,251			$	306,913			$	173,944			$	44,949			$	613,057

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, 2021. Included in the recorded investment in loans is $ 1,184 of accrued interest receivable.

										1-4 Family
						Commercial				Residential
						Real				Real
		Commercial				Estate				Estate				Consumer				Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment		$	1			$	—			$	3			$	—			$	4
Acquired loans collectively evaluated for impairment			—				83				77				—				160
Originated loans collectively evaluated for impairment			903				3,866				1,227				311				6,307
Total ending allowance balance		$	904			$	3,949			$	1,307			$	311			$	6,471
Recorded investment in loans:
Loans individually evaluated for impairment		$	437			$	921			$	596			$	—			$	1,954
Acquired loans collectively evaluated for impairment			834				6,542				21,363				6,488				35,227
Originated loans collectively evaluated for impairment			109,016				272,563				125,689				23,162				530,430
Total ending loans balance		$	110,287			$	280,026			$	147,648			$	29,650			$	567,611

40

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents information related to loans individually evaluated for impairment by class of loans as of and for the year ended June 30, 2022:

		Unpaid								Allowance for				Average				Interest				Cash Basis
		Principal				Recorded				Loan Losses				Recorded				Income				Interest
		Balance				Investment				Allocated				Investment				Recognized				Recognized
With no related allowance recorded:
Commercial		$	414			$	276			$	—			$	291			$	—			$	—
Commercial real estate:
Other			83				42				—				518				193				193
1-4 Family residential real estate:
Owner occupied			48				22				—				187				8				8
Non-owner occupied			193				133				—				93				75				75
With an allowance recorded:
Commercial			—				—				—				113				6				6
Total		$	738			$	473			$	—			$	1,202			$	282			$	282

The following table presents information related to loans individually evaluated for impairment by class of loans as of and for the year ended June 30, 2021:

		Unpaid								Allowance for				Average				Interest				Cash Basis
		Principal				Recorded				Loan Losses				Recorded				Income				Interest
		Balance				Investment				Allocated				Investment				Recognized				Recognized
With no related allowance recorded:
Commercial		$	421			$	303			$	—			$	153			$	—			$	—
Commercial real estate:
Other			1,062				921				—				902				7				7
1-4 Family residential real estate:
Owner occupied			409				367				—				539				20				20
Non-owner occupied			267				202				—				216				—				—
With an allowance recorded:
Commercial			133				134				1				150				8				8
Commercial real estate:
Other			—				—				—				120				7				7
1-4 Family residential real estate:
Owner occupied			28				27				3				16				—				—
Total		$	2,320			$	1,954			$	4			$	2,096			$	42			$	42

41

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The 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 June 30, 2022 and 2021:

		June 30, 2022								June 30, 2021
						Loans Past Due								Loans Past Due
						Over 90 Days								Over 90 Days
						Still								Still
		Non-accrual				Accruing				Non-accrual				Accruing
Commercial		$	276			$	9			$	303			$	—
Commercial real estate:
Other			—				—				874				—
1 – 4 Family residential:
Owner occupied			22				—				392				—
Non-owner occupied			133				—				202				—
Consumer			—				—				—				—
Total		$	431			$	9			$	1,771			$	—

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.

The following table presents the aging of the recorded investment in past due loans as of June 30, 2022 by class of loans:

		Days Past Due
		30 –59				60 - 89				90 Days or				Total				Loans Not
		Days				Days				Greater				Past Due				Past Due				Total
Commercial		$	—			$	—			$	9			$	9			$	87,242			$	87,251
Commercial real estate:
Construction			—				—				—				—				15,138				15,138
Other			52				—				—				52				291,723				291,775
1-4 Family residential:
Owner occupied			125				—				—				125				143,381				143,506
Non-owner occupied			—				—				27				27				26,036				26,063
Construction			—				—				—				—				4,375				4,375
Consumer			381				79				—				460				44,489				44,949
Total		$	558			$	79			$	36			$	673			$	612,384			$	613,057

The above table of past due loans includes the recorded investment in non-accrual loans of $ 27 in the 90 days or greater category and $ 404 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, 2021 by class of loans:

		Days Past Due
		30 –59				60 - 89				90 Days or				Total				Loans Not
		Days				Days				Greater				Past Due				Past Due				Total
Commercial		$	—			$	—			$	—			$	—			$	110,287			$	110,287
Commercial real estate:
Construction			—				—				—				—				10,478				10,478
Other			—				175				629				804				268,744				269,548
1-4 Family residential:
Owner occupied			29				—				365				394				118,937				119,331
Non-owner occupied			—				—				—				—				19,148				19,148
Construction			—				—				—				—				9,169				9,169
Consumer			95				11				—				106				29,544				29,650
Total		$	124			$	186			$	994			$	1,304			$	566,307			$	567,611

The above table of past due loans includes the recorded investment in non-accrual loans of $ 994 in the 90 days or greater category and $ 777 in the loans not past due category.

42

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Troubled Debt 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 was available to most borrowers whose loan was not past due on March 22, 2020, the date this loan modification program was adopted. The program offered principal and interest payment deferrals for up to 90 days or interest only payments for up to 90 days. Borrowers were eligible for an additional 90 days of payment deferrals if situations warranted a need for an extension. Interest was deferred but continued to accrue during the deferment period and the maturity date on amortizing loans was 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 were not classified as TDRs. As of June 30, 2022, there were no loans in payment deferral status under this loan modification program. This modification program ended April 26, 2022.

On June 30, 2022, the Corporation had $ 318 of loans classified as TDRs and there were no specific reserves allocated to these loans. On June 30, 2021, the Corporation had $ 688 of loans classified as TDRs with $ 4 of specific reserves allocated to these loans. TDRs are also included as impaired loans that are listed above. For the years ended June 30, 2022 and 2021, there were no loans modified that were classified as a troubled debt restructuring.

There were no loans classified as troubled debt restructurings for which there was a payment default within 12 months following the modification during the twelve -month periods ended June 30, 2022 and 2021. A loan is considered in payment default once it is 90 days contractually past due under the modified terms.

Credit Quality Indicators:

The Corporation categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. 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 and non-homogeneous loans, such as commercial and commercial real estate loans. This analysis is performed monthly. 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, based on currently existing facts, conditions, and values, highly questionable and improbable.

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 less than $100 or are included in groups of homogeneous loans. These loans are evaluated based on delinquency status, which was discussed previously.

43

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

As of June 30, 2021, and based on the most recent analysis performed, the recorded investment by risk category of loans by class of loans is as follows:

						Special												Not
		Pass				Mention				Substandard				Doubtful				Rated
Commercial		$	109,118			$	280			$	309			$	303			$	277
Commercial real estate:
Construction			10,478				—				—				—				—
Other			259,327				3,700				4,718				874				929
1-4 Family residential real estate:
Owner occupied			1,715				—				6				392				117,218
Non-owner occupied			18,312				163				197				202				274
Construction			1,849				—				—				—				7,320
Consumer			694				—				—				—				28,956
Total		$	401,493			$	4,143			$	5,230			$	1,771			$	154,974

NOTE 5 — PREMISES AND EQUIPMENT

Major classifications of premises and equipment were as follows as of June 30:

		2022				2021
Land		$	1,685			$	1,603
Land improvements			318				381
Building and leasehold improvements			15,608				15,522
Furniture, fixture and equipment			7,206				6,616
Total premises and equipment			24,816				24,122
Accumulated depreciation and amortization			( 8,296	)			( 8,329	)
Premises and equipment, net		$	16,521			$	15,793

Depreciation expense was $ 991 and $ 940 for the years ended June 30, 2022 and 2021, respectively.

As of June 30, 2022, the Corporation leased real estate for seven office locations and various equipment under operating lease agreements. The lease agreements have maturity dates ranging from one year or less to May 31, 2035, including extension periods. Lease agreements for three locations have a lease term of 12 months or less and are therefore considered short-term leases. Most leases include one or more options to renew. The exercise of lease renewal options is typically at our sole discretion. The majority of renewals to extend the lease terms are included in our right-of-use assets and lease liabilities as they are reasonably certain of exercise. As most of our leases do not provide an implicit rate, we use the fully collateralized FHLB borrowing rate, commensurate with the lease terms based on the information available at the lease commencement date in determining the present value of the lease payments. The weighted average remaining life of the lease term for the leases with a term over 12 months was 75.81 months as of June 30, 2022 and the weighted-average discount rate was 1.78 %.

44

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Rent expense for all the operating leases was $ 228 and $ 205 for the twelve -month periods ended June 30, 2022 and 2021, respectively. The right-of-use asset, included in premises and equipment, and the lease liability, included in other liabilities, were $ 1,029 and $ 1,177 as of June 30, 2022 and 2021, respectively.

Total estimated rental commitments for the operating leases with a term over 12 months were as follows as of June 30, 2022:

Period Ending June 30
2023		$	167
2024			146
2025			114
2026			113
Thereafter			572
Total		$	1,112

NOTE 6 – GOODWILL AND ACQUIRED INTANGIBLE ASSETS

The change in goodwill was as follows:

		2022				2021
Beginning of year		$	836			$	836
Acquired goodwill			1,616				—
Ending balance as of June 30,		$	2,452			$	836

The following table summarizes the Corporation’s acquired intangible assets as of June 30, 2022 and 2021.

		June 30, 2022								June 30, 2021
		Gross Carrying Amount				Accumulated Amortization				Gross Carrying Amount				Accumulated Amortization
Core deposit intangible		$	565			$	95			$	270			$	41

Goodwill and the core deposit intangible assets resulted from the acquisition of Peoples Bancorp of Mt. Pleasant, Inc. that was completed on January 1, 2020, and the branch acquisition that was completed on July 16, 2021. Goodwill represents the excess of the total purchase price paid for the acquisition over the fair value of the identifiable assets acquired, net of the fair value of the liabilities assumed. Goodwill is not amortized but is evaluated for impairment on an annual basis or whenever events or changes in circumstances indicate the asset might be impaired. Impairment exists when a reporting unit’s carrying amount exceeds its fair value. For the goodwill impairment analysis, the Corporation is the only reporting unit. Management performed a qualitative impairment test of the Corporation’s goodwill during the fourth quarter of the 2022 fiscal year. Based on this test, management concluded that it was more likely than not that the fair value of the reporting unit exceeded its carrying value, resulting in no impairment. Goodwill is the only intangible asset on the Corporation’s balance sheet with an indefinite life.

The core deposit intangible asset is amortized on a straight-line basis over ten years. The Corporation recorded intangible amortization expense of $ 54 in 2022 and $ 27 in 2021. The intangible amortization expense is expected to be $ 57 per year for each of the next five fiscal years and $ 185 thereafter.

NOTE 7 — DEPOSITS

Interest-bearing deposits as of June 30, 2022 and 2021 were as follows:

		2022				2021
Demand		$	157,462			$	127,447
Savings and money market			369,054				282,761
Time:
$250 and over			18,164				18,488
Other			84,217				69,051
Total		$	628,897			$	497,747

45

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Scheduled maturities of time deposits at June 30, 2022 were as follows:

Twelve Months Ending June 30
2023		$	76,823
2024			13,656
2025			4,381
2026			3,258
2027			3,398
Thereafter			865
		$	102,381

NOTE 8 — SHORT-TERM BORROWINGS

Short-term borrowings consisted of repurchase agreements and a line of credit for the Corporation. Information concerning all short-term borrowings at June 30, 2022 and 2021, maturing in less than one year is summarized as follows:

		2022				2021
Balance at June 30		$	21,295			$	12,203
Average balance during the year			12,960				8,895
Maximum month-end balance			21,878				13,275
Average interest rate during the year			0.36	%			0.10	%
Weighted average rate, June 30			0.61	%			0.05	%

In fiscal year 2022, the Corporation acquired an unsecured $ 5,000 line of credit to provide capital support to the Bank and for other general corporate purposes. As of June 30, 2022, the outstanding balance on the line of credit was $ 1,270 . Repurchase agreements are financing arrangements that mature daily and are used to facilitate the needs of our customers. Physical control of all the securities is maintained for all securities pledged to secure repurchase agreements. Securities available-for-sale pledged for repurchase agreements as of June 30, 2022 and 2021 are presented in the following table:

		Overnight and Continuous
		2022				2021
U.S. government-sponsored entities and agencies pledged		$	3,331			$	767
Residential mortgage-backed securities pledged			11,954				6,493
Commercial mortgage-backed securities			6,682				6,042
Total pledged		$	21,967			$	13,302
Repurchase agreements		$	20,025			$	12,203

Total interest expense on short-term borrowings was $ 47 and $ 9 for the years ended June 30, 2022 and 2021, respectively.

46

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 — FEDERAL HOME LOAN BANK ADVANCES

A summary of Federal Home Loan Bank (FHLB) advances were as follows:

										June 30, 2022								June 30, 2021
		Stated Interest Rate Range												Weighted Average								Weighted Average
Advance Type		From				To				Amount				Rate				Amount				Rate
Fixed rate, amortizing			1.37	%			1.37	%		$	256				1.37	%		$	350				1.37	%
Fixed rate			0.90				1.18				8,000				1.04				17,700				1.40

Each fixed rate advance has a prepayment penalty equal to the present value of 100 % of the lost cash flow based upon the difference between the contract rate on the advance and the current rate on a comparable new advance. The following table is a summary of the scheduled principal payments for all advances as of June 30, 2022:

Twelve Months Ending June 30		Principal Payments
2023		$	84
2024			67
2025			4,056
2026			46
2027			3
Thereafter			4,000
Total		$	8,256

Pursuant to collateral agreements with the FHLB, advances are secured by all the stock invested in the FHLB and certain qualifying first mortgage and multi-family loans. The advances were collateralized by $ 152,868 and $ 127,703 of first mortgage and multi-family loans under a blanket lien arrangement at June 30, 2022 and 2021, respectively. Based on this collateral and the Corporation’s holdings of FHLB stock, the Bank was eligible to borrow up to a total of $ 96,548 in additional advances at June 30, 2022.

NOTE 10 — EMPLOYEE BENEFIT PLANS

The Bank maintains a 401 (k) savings and retirement plan that permits eligible employees to make before- or after-tax contributions to the plan, subject to the dollar limits from Internal Revenue Service regulations. The Bank matches 100 % of the employee’s voluntary contributions to the plan based on the amount of each participant’s contributions up to a maximum of 4 % of eligible compensation. All regular full-time and part-time employees who complete six months of service and are at least 21 years of age are eligible to participate. Amounts charged to operations were $ 364 and $ 321 for the years ended June 30, 2022 and 2021, respectively.

The Bank maintains a nonqualified Salary Continuation Plan (SCP) to reward and encourage certain Bank executives to remain employees of the Bank. The SCP is considered an unfunded plan for tax and Employee Retirement Income Security Act (ERISA) purposes and all obligations arising under the SCP are payable from the general assets of the Corporation. The estimated present value of future benefits to be paid to certain current and former executives totaled $ 3,564 as of June 30, 2022 and $ 3,140 as of June 30, 2021 and is included in other liabilities. For purposes of calculating the present value of future benefits, a discount rate of 3.0 % was in effect at June 30, 2022 and 2021. For the years ended June 30, 2022 and 2021, $ 534 and $ 530 , respectively, have been charged to expense in connection with the SCP. Distributions to participants were $ 110 for the fiscal year ended June 30, 2022 and $ 85 for the fiscal year ended June 30, 2021.

The 2010 Omnibus Incentive Plan ( 2010 Plan) is a nonqualified share-based compensation plan. The 2010 Plan was established to promote alignment between key employees’ performance and the Corporation’s shareholder interests by motivating performance through the award of stock-based compensation. The purpose of the 2010 Plan was to attract, retain, and motivate talented employees and compensate outside directors for their service to the Corporation. The 2010 Plan was approved by the Corporation’s shareholders. The Compensation Committee of the Corporation’s Board of Directors has sole authority to select the employees, establish the awards to be issued, and approve the terms and conditions of each award contract.

47

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Under the 2010 Plan, the Corporation could grant, among other things, nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, or any combination thereof to any employee and outside director. Each award was evidenced by an award agreement that specifies the number of shares awarded, the vesting period, the performance requirements, and such other provisions as the Compensation Committee determines. Upon a change-in-control of the Corporation, as defined in the 2010 Plan, all outstanding awards immediately vest.

The Corporation has granted restricted stock awards to certain employees and directors. Restricted stock awards are issued at no cost to the recipient and can be settled only in shares at the end of the vesting period. Awards are made at the end of the measurement period of certain specified performance targets once those performance targets as established by the Compensation Committee are achieved. Some awards, primarily the awards made to directors, vest on the date of grant. For other awards, primarily the awards made to executive management, 25 % vest on the grant date, which is the end of the performance period, with the remaining vesting 25 % per year over a three -year period. Restricted stock awards provide the holder with full voting rights and dividends during the vesting period. Cash dividends are reinvested into shares of stock and are subject to the same restrictions and vesting as the initial award. All dividends are forfeitable in the event the shares do not vest. The fair value of the restricted stock awards, which is used to measure compensation expense, is the closing market price of the Corporation’s common stock on the date of the grant and compensation expense is recognized over the vesting period of the awards.

The following table summarizes the status of the restricted stock awards:

		Restricted Stock Awards				Weighted-Average Grant Date Fair Value Per Share
Outstanding at June 30, 2021			11,461			$	17.14
Granted			20,571				22.00
Vested			( 14,963	)			20.62
Non-vested at June 30, 2022			17,069			$	19.95

There was $ 361 in expense recognized in fiscal year 2022 and $ 168 in expense recognized in fiscal year 2021 in connection with the restricted stock awards. As of June 30, 2022, there was $ 222 of total unrecognized compensation expense related to non-vested shares and the expense is expected to be recognized over the next three years.

NOTE 11 — INCOME TAXES

The provision for income taxes consisted of the following for the years ended June 30, calculated utilizing a statutory federal income tax rate of 21.0%:

		2022				2021
Current income taxes		$	2,193			$	2,170
Deferred income tax expense (benefit)			146				( 320	)
Total income tax expense		$	2,339			$	1,850

48

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The net deferred income tax asset (liability) consisted of the following components at June 30:

		2022				2021
Deferred tax assets:
Allowance for loan losses		$	1,504			$	1,317
Deferred compensation			999				896
Deferred income			18				32
Non-accrual loan interest income			29				54
Net unrealized securities loss			5,876				—
Other			6				1
Gross deferred tax asset			8,432				2,300
Deferred tax liabilities:
Depreciation			( 821	)			( 718	)
Loan fees			( 582	)			( 498	)
FHLB stock dividends			( 102	)			( 102	)
Prepaid expenses			( 150	)			( 56	)
Intangible assets			( 209	)			( 88	)
Net unrealized securities gain			—				( 944	)
Gross deferred tax liabilities			( 1,864	)			( 2,406	)
Net deferred asset (liability)		$	6,568			$	( 106	)

The difference between the provision for income taxes and amounts computed by applying the statutory income tax rate of 21.0% to income before taxes consisted of the following for the years ended June 30:

		2022				2021
Income taxes computed at the statutory rate on pretax income		$	2,842			$	2,276
Tax exempt income			( 431	)			( 360	)
Cash surrender value income			( 54	)			( 55	)
Tax credit			( 22	)			( 22	)
Other non-deductible expenses			4				11
Total income tax expense		$	2,339			$	1,850

The effective tax rate was 17.3 % for the year ended June 30, 2022 compared to 17.1 % for the year ended June 30, 2021. At June 30, 2022 and June 30, 2021, the Corporation had no unrecognized tax benefits recorded. The Corporation does not expect the total amount of unrecognized tax benefits to significantly increase within the next twelve months. There were no interest or penalties recorded for the years ended June 30, 2022 and 2021 and there were no amounts accrued for interest and penalties at June 30, 2022 and 2021.

The Corporation and the Bank are subject to U.S. federal income tax as an income-based tax and a capital-based franchise tax in the State of Ohio. The Corporation and the Bank are no longer subject to examination by taxing authorities for years before 2018.

NOTE 12 — RELATED PARTY TRANSACTIONS

In the ordinary course of business, the Bank has granted loans to certain executive officers, directors, and their affiliates. A summary of activity during the year ended June 30, 2022 of related party loans were as follows:

Principal balance, July 1		$	2,336
New loans, net of refinancing			355
Repayments			( 145	)
Principal balance, June 30		$	2,546

Deposits from executive officers, directors and their affiliates totaled $ 6,781 at June 30, 2022 and $ 5,500 at June 30, 2021.

49

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 — REGULATORY MATTERS

Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking 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. Capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk weightings, and other factors and the regulators can lower classifications in certain cases. Failure to meet various capital requirements can initiate regulatory action that could have a direct material effect on the financial statements.

The prompt corrective action regulations provide five classifications, including well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and plans for capital restoration are required.

As of fiscal year-end 2022 and 2021, the Corporation met the definition of a Small Bank Holding Company and, therefore, was exempt from maintaining consolidated regulatory capital ratios. Instead, regulatory capital ratios only apply at the subsidiary bank level. The Basel III Capital Rules include a capital conservation buffer of 2.5 % that is designed to absorb losses during periods of economic stress. Banking institutions with a ratio of Common Equity Tier 1 capital to risk-weighted assets above the minimum but below the conservation buffer will face constraints on dividends, equity repurchases, and compensation based on the amount of the shortfall. The net unrealized gain or loss on available for sale securities is not included in computing regulatory capital. Management believes as of June 30, 2022, the Bank met all capital adequacy requirements to which it was subject.

The following table presents actual and required capital ratios as of June 30, 2022 and June 30, 2021 for the Bank:

		Actual								Minimum Capital Required – Basel III (1)								Minimum Required To Be Considered Well Capitalized
		Amount				Ratio				Amount				Ratio				Amount				Ratio
June 30, 2022
Common equity Tier 1 to risk-weighted assets		$	74.1				11.39	%		$	29.3				4.50	%		$	42.3				6.50	%
Tier 1 capital to risk weighted assets			74.1				11.39				39.0				6.00				52.1				8.00
Total capital to risk weighted assets			81.3				12.49				52.1				8.00				65.1				10.00
Tier 1 capital to average assets			74.1				7.39				40.1				4.00				50.1				5.00

		Actual								Minimum Capital Required - Basel III (1)								Minimum Required To Be Considered Well Capitalized
		Amount				Ratio				Amount				Ratio				Amount				Ratio
June 30, 2021
Common equity Tier 1 to risk-weighted assets		$	64.7				11.87	%		$	24.5				4.50	%		$	35.4				6.50	%
Tier 1 capital to risk weighted assets			64.7				11.87				32.7				6.00				43.6				8.00
Total capital to risk weighted assets			71.2				13.06				43.6				8.00				54.5				10.00
Tier 1 capital to average assets			64.7				7.83				33.1				4.00				41.3				5.00

( 1 )

These amounts exclude the capital conservation buffer.

As of the latest regulatory examination, the Bank was categorized as well capitalized. There are no conditions or events since that examination that management believes may have changed the Bank’s category.

The Corporation’s principal source of funds for dividend payment is dividends received from the Bank. Banking regulations limit the amount of dividends that may be paid without prior approval of regulatory agencies. Under these regulations, the amount of dividends that may be paid in any calendar year is limited to the current year’s net profits, combined with the retained net profits of the preceding two years, subject to the capital requirements described above. As of June 30, 2022 the Bank could, without prior approval, declare a dividend of approximately $ 14,695 .

50

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 — COMMITMENTS WITH OFF-BALANCE SHEET RISK

The Bank is a party to commitments to extend credit in the normal course of business to meet the financing needs of its customers. Commitments are agreements to lend to customers providing that there are no violations of any condition established in the contract. Commitments to extend credit have a fixed expiration date or other termination clause. These instruments involve elements of credit and interest rate risk more than the amount recognized in the statements of financial position. The Bank uses the same credit policies in making commitments to extend credit as it does for on-balance sheet instruments.

The Bank evaluates each customer’s credit on a case-by-case basis. The amount of collateral obtained is based on management’s credit evaluation of the customer. The amount of commitments to extend credit and the exposure to credit loss for non-performance by the customer (before considering collateral) was $ 148,390 and $ 118,284 as of June 30, 2022 and 2021, respectively. As of June 30, 2022, $ 119,637 of the commitments carried variable rates and $ 28,753 carried fixed rates with interest rates ranging from 2.62 % to 8.25 % with maturity dates from July 2022 to December 2053. As of June 30, 2021, $ 93,030 of the commitments carried variable rates and $ 25,254 carried fixed rates with interest rates ranging from 2.99 % to 6.75 % and maturity dates from July 2021 to July 2052. Financial standby letters of credit were $ 1,110 and $ 1,015 as of June 30, 2022 and 2021, respectively. In addition, commitments to extend credit of $ 11,621 and $ 10,634 as of June 30, 2022 and 2021, respectively, were available to checking account customers related to the overdraft protection program. Since some loan commitments expire without being used, the amount does not necessarily represent future cash commitments.

NOTE 15 — FAIR VALUE

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

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

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

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

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

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

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

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

51

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

		Fair Value Measurements at June 30, 2021 Using
Assets:		Balance at June 30, 2021				Level 1				Level 2				Level 3
Obligations of U.S. government-sponsored entities and agencies		$	15,033				—			$	15,033				—
Obligations of states and political subdivisions			76,499				—				76,499				—
U.S. government-sponsored mortgage-backed securities - residential			90,517				—				90,517				—
U.S. government-sponsored mortgage-backed securities – commercial			8,845				—				8,845				—
U.S. government-sponsored collateralized mortgage obligations			16,374				—				16,374				—
Other debt securities			492				—				492				—
Equity securities			424				—				424				—

There were no transfers between Level 1 and Level 2 during the 2022 or the 2021 fiscal year.

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

Impaired Loans: At the time a loan is considered impaired, it is valued at the lower of cost or fair value. Impaired loans carried at fair value generally receive specific allocations of the allowance for loan losses or are charged down to their fair value. For collateral dependent loans, fair value is commonly based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.

Other Real Estate 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. There was no other real estate owned or other repossessed assets being carried at fair value as of June 30, 2022 or June 30, 2021.

There were no assets measured at fair value on a non-recurring basis at June 30, 2022 or 2021 and there was no impact to the provision for loan losses for the twelve months ended June 30, 2022 or 2021.

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

		2022								2021
		Carrying Amount				Estimated Fair Value				Carrying Amount				Estimated Fair Value
Financial Assets:
Level 1 inputs:
Cash and cash equivalents		$	20,952			$	20,952			$	18,529			$	18,529
Level 2 inputs:
Certificates of deposit in other financial institutions			3,781				3,847				5,825				5,955
Loans held for sale			1,165				1,188				1,457				1,488
Accrued interest receivable			2,703				2,703				2,077				2,077
Level 3 inputs:
Securities held-to-maturity			7,874				7,831				7,996				8,352
Loans, net			604,683				577,708				559,956				560,208
Financial Liabilities:
Level 2 inputs:
Demand and savings deposits			784,181				784,181				639,310				639,310
Time deposits			102,381				102,622				87,539				88,147
Short-term borrowings			21,295				21,295				12,203				12,203
Federal Home Loan Bank advances			8,256				7,215				18,050				18,247
Accrued interest payable			49				49				51				51

52

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16 — PARENT COMPANY FINANCIAL STATEMENTS

The condensed financial information of Consumers Bancorp. Inc. (parent company only) follows:

Condensed Balance Sheets		June 30, 2022				June 30, 2021
Assets:
Cash		$	76			$	226
Equity securities, at fair value			400				424
Other assets			17				38
Investment in subsidiary			54,823				69,267
Total assets		$	55,316			$	69,955
Liabilities and Shareholders’ Equity:
Short-term borrowings		$	1,270			$	55
Other liabilities			76				—
Shareholders’ equity			53,970				69,900
Total liabilities & shareholders’ equity		$	55,316			$	69,955

Condensed Statements of Income and Comprehensive Income		Year Ended June 30, 2022				Year Ended June 30, 2021
Cash dividends from Bank subsidiary		$	195			$	2,050
Dividend income			33				17
Net change in market value of equity securities			( 24	)			24
Other income			2				5
Interest expense			( 31	)			—
Other expense			( 258	)			( 281	)
Income (loss) before income taxes and equity in undistributed net income of subsidiary			( 83	)			1,815
Income tax benefit			( 63	)			( 49	)
Income (loss) before equity in undistributed net income of Bank subsidiary			( 20	)			1,864
Equity in undistributed net income of subsidiary			11,212				7,124
Net income		$	11,192			$	8,988
Comprehensive income (loss)		$	( 14,464	)		$	8,278

Condensed Statements of Cash Flows		Year Ended June 30, 2022				Year Ended June 30, 2021
Cash flows from operating activities:
Net income		$	11,192			$	8,988
Equity in undistributed net income of Bank subsidiary			( 11,212	)			( 7,124	)
Net change in market value of equity securities			24				( 24	)
Change in other assets and liabilities			24				146
Net cash flows from operating activities			28				1,986
Cash flows from investing activities:
Purchase of equity securities			—				( 400	)
Disposal of premises and equipment			18				—
Net cash flows from investing activities			18				( 400	)
Cash flows from financing activities:
Dividend paid			( 1,949	)			( 1,785	)
Net change in short-term borrowings			1,270				—
Proceeds from dividend reinvestment and stock purchase plan			174				—
Issuance of treasury stock for stock awards			309				167
Net cash flows from financing activities			( 196	)			( 1,618	)
Change in cash and cash equivalents			( 150	)			( 32	)
Beginning cash and cash equivalents			226				258
Ending cash and cash equivalents		$	76			$	226

53

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 17 — 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 7,991 shares of restricted stock that were anti-dilutive for the year ending June 30, 2022. There were 1,711 shares of restricted stock that were anti-dilutive for the year ending June 30, 2021. The following table details the calculation of basic and diluted earnings per share:

		For the year Ended June 30,
		2022				2021
Basic:
Net income available to common shareholders		$	11,192			$	8,988
Weighted average common shares outstanding			3,039,607				3,019,118
Basic income per share		$	3.68			$	2.98
Diluted:
Net income available to common shareholders		$	11,192			$	8,988
Weighted average common shares outstanding			3,039,607				3,019,118
Dilutive effect of restricted stock			246				—
Total common shares and dilutive potential common shares			3,039,853				3,019,118
Dilutive income per share		$	3.68			$	2.98

NOTE 18 – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The components of other comprehensive income related to unrealized gains (losses) on available-for-sale securities for the periods ended June 30, 2022 and June 30, 2021, were as follows:

		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 loss on available-for-sale securities arising during the period			( 886	)			187				( 699	)
Amounts reclassified from accumulated other comprehensive income			( 14	)			3				( 11	)		(a)(b)
Net current period other comprehensive loss			( 900	)			190				( 710	)
Balance as of June 30, 2021		$	4,493			$	( 943	)		$	3,550
Unrealized holding loss on available-for-sale securities arising during the period		$	( 32,469	)		$	6,818			$	( 25,651	)
Amounts reclassified from accumulated other comprehensive income			( 6	)			1				( 5	)		(a)(b)
Net current period other comprehensive loss			( 32,475	)			6,819				( 25,656	)
Balance as of June 30, 2022		$	( 27,982	)		$	5,876			$	( 22,106	)

(a) Securities gain, net

(b) Income tax expense

54

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 19 – REVENUE RECOGNITION

The Corporation accounts for revenues from contracts with customers under ASC 606, Revenue from Contracts with Customers. Interest income, net securities gains (losses), gains from the sale of mortgage loans and bank-owned life insurance are not included within the scope of ASC 606. For the revenue streams in the scope of ASC 606, service charges on deposits and electronic banking fees, there are no significant judgments related to the amount and timing of revenue recognition. All the Corporation's revenue from contracts with customers is recognized within noninterest income.

Service charges on deposit accounts: The Corporation earns fees from its deposit customers for transaction-based, account maintenance and overdraft services. Transaction-based fees, which include services such as stop payment charges, statement rendering and other fees, are recognized at the time the transaction is executed as that is the point in time the Corporation fulfills the customer's request. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period over which the Corporation satisfies the performance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges on deposits are withdrawn from the customer's account balance.

Interchange income: The Corporation earns interchange income from cardholder transactions conducted through the various payment networks. Interchange income from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder. The gross amount of these fees are processed through noninterest income.

Other income : Other noninterest income consists of other recurring revenue streams such as check order fees, wire transfer fees, and other miscellaneous revenue streams. Check order income mainly represents fees charged to customers for checks. Wire transfer fees represent revenue from processing wire transfers.

The following table presents the Corporation's sources of noninterest income for the year ended June 30, 2022 and 2021.

		For the year Ended June 30,
		2022				2021
Noninterest income
In scope of Topic 606:
Service charges on deposit accounts		$	1,460			$	1,220
Debit card interchange income			2,069				1,891
Other income			335				304
Noninterest income (in scope of Topic 606)			3,864				3,415
Noninterest income (out-of-scope of Topic 606)			871				1,051
Total noninterest income		$	4,735			$	4,466

Note 20 – COVID- 19

In December 2019, a novel strain of coronavirus surfaced in Wuhan, China, and has spread around the world, resulting in business and social disruption. The coronavirus was declared a Pandemic by the World Health Organization on March 11, 2020. While vaccinations (including booster shots) have created optimism in the community, some uncertainty remains due to the continued concern over increased infection rates from various variants of COVID- 19. The operations and business results of the Corporation could be materially adversely affected. The extent to which the coronavirus may impact future business activity or investment results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus and the actions required to contain the coronavirus or treat its impact, among others. The economic impacts related to the COVID- 19 pandemic continue to linger due to supply chain disruptions, additional employee costs, rising inflationary pressures and the prospects of recession, all which may impact the ability of our customers to make payments on loans, resulting in elevated loan losses and an increase in the Corporation’s allowance for loan losses.

55

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Item 9 — Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None.

Item 9A — Controls and Procedures

Evaluation of Disclosure Controls and Procedures

With the participation of the Corporation’s management, including the Chief Executive Officer and Chief Financial Officer, an evaluation of the effectiveness of the Corporation’s disclosure controls and procedures (as defined under Rule 13a-15(e) of the Securities Exchange Act of 1934) was performed, as of the end of the period covered by this Annual Report on Form 10-K. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Corporation’s disclosure controls and procedures were effective.

Management ’ s Report on Internal Control Over Financial Reporting

The management of Consumers Bancorp, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by the board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

Management assessed the effectiveness of our internal control over financial reporting as of June 30, 2022 based on the criteria for effective internal control over financial reporting established in “Internal Control-Integrated Framework,” issued by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission in 2013. Based on that assessment, we have concluded that, as of June 30, 2022, our internal control over financial reporting is effective based on those criteria.

This annual report does not include an attestation report of the Corporation’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Corporation’s registered public accounting firm pursuant to rules of the SEC that permit the Corporation to provide only management’s report in this annual report.

Changes In Internal Control Over Financial Reporting

There were no changes in the Corporation’s internal controls over financial reporting that occurred during the fourth quarter of fiscal year 2022 that have materially affected, or are reasonably likely to materially affect, the Corporation’s internal controls over financial reporting.

Item 9B — Other Information

None.

Item 9C — Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not Applicable.

PART III

Item 10 — Directors, Executive Officers and Corporate Governance

The information required by this item is set forth in the Corporation’s Proxy Statement dated September 15, 2022, under the captions “Election of Directors,” “Directors and Executive Officers,” “The Board of Directors and its Committees,” “Delinquent Section 16(a) Reports,” and “Certain Transactions and Relationships and Legal Proceedings,” and is incorporated herein by reference.

The Corporation’s Code of Ethics Policy, which is applicable to all directors, officers and employees of the Corporation, and its Code of Ethics for Principal Financial Officers, which is applicable to the principal executive officer and the principal financial officer, are each available on the Investor Relations section under Governance Documents of the Corporation’s website (www.consumers.bank). Copies of either of the Code of Ethics Policies are also available in print to shareholders upon request, addressed to the Corporate Secretary at Consumers Bancorp, Inc., 614 East Lincoln Way, Minerva, Ohio 44657. The Corporation intends to post amendments to or waivers from either of its Code of Ethics Policies on its website.

Item 11 — Executive Compensation

The information required by this item is set forth in the Corporation’s Proxy Statement dated September 15, 2022 under the captions “Director Compensation,” “Executive Compensation,” “Defined Contribution Plan,” “Outstanding Equity Awards at Fiscal Year-End,” and “Salary Continuation Program,” and is incorporated herein by reference.

Item 12 — Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Equity Compensation Plan Information

The following table sets forth information about common stock authorized for issuance, segregated between stock-based compensation plans approved by shareholders and stock-based compensation plans not approved by shareholders, as of June 30, 2022. Additional information regarding stock-based compensation plans is presented in Note 10 - Employee Benefit Plans to the Consolidated Financial Statements located elsewhere in this report.

Plan Category

Number of securities to be issued upon exercise of outstanding options, warrants, and rights

Weighted-average exercise price of outstanding options, warrants and rights

Number of securities remaining available for future issuance under equity compensation plans (excluding securities issuable under outstanding options, warrants and rights)

Plans approved by shareholders

—

—

—

Plans not approved by shareholders

—

—

—

Total

—

—

—

The remaining information required by this item is set forth in the Corporation’s Proxy Statement, dated September 15, 2022, under the caption “Security Ownership of Certain Beneficial Owners,” and is incorporated herein by reference.

Item 13 — Certain Relationships and Related Transactions, and Director Independence

The information required by this item is set forth in the Corporation’s Proxy Statement, dated September 15, 2022, under the caption “Certain Transactions and Relationships and Legal Proceedings,” and is incorporated herein by reference.

PART IV

Item 15 — Exhibit and Financial Statement Schedules

(a)	The following documents are filed as part of this report:

(1)

The report of independent registered accounting firm and the consolidated financial statements appearing in Item 8.

(2)

Financial statement schedules are omitted as they are not required or are not applicable, or the required information is included in the financial statements.

(3)

The exhibits required by this item are listed in the Exhibit Index of this Form 10-K.

(b)	The exhibits to this Form 10-K begin on page 59 of this report.

(c)	See Item 15(a)(2) above.

Item 16 — Form 10-K Summary

Not applicable.

EXHIBIT INDEX

Exhibit Number		Description of Document
2.1		Agreement and Plan of Merger by and among Consumers Bancorp, Inc., Consumers National Bank, Peoples Bancorp of Mt. Pleasant, Inc., and The Peoples National Bank of Mount Pleasant, dated June 14, 2019. Reference is made to the Registration Statement on S-4 (File No. 333-233306) filed on August 15, 2019.
3.1		Amended and Restated Articles of Incorporation of the Corporation. Reference is made to Form 10-Q (File No. 033-79130) of the Corporation filed November 8, 2019, which is incorporated herein by reference.
3.2		Amended and Restated Code of Regulations of the Corporation. Reference is made to Form 10-K (File No. 033-79130) of the Corporation filed September 15, 2008, which is incorporated herein by reference.
4		Form of Certificate of Common Shares. Reference is made to Form 10-KSB (File No. 033-79130) of the Corporation filed September 30, 2002, which is incorporated herein by reference.
4.1		Description of Securities of Consumers Bancorp, Inc. Reference is made to Form 10-K of the Corporation filed September 23, 2020, which is incorporated herein by reference.
10.3		Lease Agreement entered into between Furey Holdings, LLC and Consumers National Bank on December 23, 2005. Reference is made to Form 10-Q (File No. 033-79130) of the Corporation filed February 14, 2006, which is incorporated herein by reference.
10.8		Consumers Bancorp 2010 Omnibus Incentive Plan Form of Restricted Stock Award Agreement. Reference is made to Form 8-K (File No. 033-79130) of the Corporation filed September 16, 2011, which is incorporated herein by reference.
10.10		First Amendment dated June 13, 2018, to Lease Agreement entered into between Furey Holdings, LLC and Consumers National Bank on December 23, 2005. Reference is made to Form 8-K (File No. 033-79130) of the Corporation filed June 15, 2018, which is incorporated herein by reference.
10.11		Form of Salary Continuation Agreement. Reference is made to Form 8-K (File No. 033-79130) of the Corporation filed December 29, 2020, which is incorporated herein by reference.
10.12		Branch Purchase and Assumption Agreement entered into with CFBank National Association on December 29, 2020. Reference is made to Form 10-Q (File No. 033-79130) of the Corporation filed February 12, 2021, which is incorporated herein by reference.
21		Subsidiaries of Consumers Bancorp, Inc. Filed with this Annual Report on Form 10-K.
23		Consent of Plante & Moran, PLLC
31.1		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of Chief Financial Officer and Treasurer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		Inline XBRL Instance Document (The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document) (1)
101.SCH		Inline XBRL Taxonomy Extension Schema Document (1)
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document (1)
101.DEF		Inline XBRL Taxonomy Extension Definitions Linkbase Document (1)
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document (1)
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document (1)
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101.1)
(1)		These interactive date files shall not be deemed filed for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, or Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under those sections.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.
Date: September 15, 2022	By:	/s/ Ralph J. Lober, II
		President and Chief Executive Officer (principal executive officer)
	By:	/s/ Renee K. Wood
		Chief Financial Officer and Treasurer (principal financial officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on September 15, 2022.

Signatures		Signatures
/s/ Laurie L. McClellan		/s/ Ralph J. Lober, II
Laurie L. McClellan Chairman of the Board of Directors		Ralph J. Lober, II President, Chief Executive Officer and Director (principal executive officer)
/s/ Renee K. Wood		/s/ John P. Furey
Renee K. Wood Chief Financial Officer and Treasurer (principal financial officer)		John P. Furey Director
/s/ Bradley Goris		/s/ Richard T. Kiko, Jr.
Bradley Goris Director		Richard T. Kiko, Jr. Director
/s/ Shawna L’Italien		/s/ Frank L. Paden
Shawna L ’ Italien Director		Frank L. Paden Director
/s/ John W. Parkinson		/s/ Harry W. Schmuck, Jr.
John W. Parkinson Director		Harry W. Schmuck, Jr. Director
/s/ Michael A. Wheeler
Michael A. Wheeler Director