CONSUMERS BANCORP INC OH

To the Shareholders and Board of Directors

Consumers Bancorp, Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Consumers Bancorp, Inc and its subsidiaries (the “Company”) as of June 30, 2024 and 2023; 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, 2024 and 2023, and the results of its operations and its cash flows for each of the years then ended in conformity with accounting principles generally accepted in the United States of America.

Change in Accounting Principle

As discussed in Note 1 to the financial statements, the Company has changed its method of accounting for credit losses effective July 1, 2023 due to the adoption of Accounting Standards Codification 326,Financial Instruments - Credit Losses(ASC 326). The Company adopted the new credit loss standard using the modified retrospective method such that prior period amounts are not adjusted and continue to be reported in accordance with previously applicable generally accepted accounting principles.

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 audits. 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 audits 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 consolidated 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 audits, 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 audits 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 audits 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 audits provide 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 Credit Losses on Collectively Evaluated Loans - Refer to Notes 1 and 3 to the financial*** Statements***

Critical Audit Matter Description

Management’s estimate of the allowance for credit losses (ACL) includes a reserve on collectively evaluated loans. The reserve on collectively evaluated loans is based on historical loss rates adjusted for changes in macroeconomic conditions and qualitative factors. In defining historical loss rates, the Company utilized regional peer data. Management’s adjustments for qualitative factors include actual and expected changes in international, national, regional, and local economic and business conditions in which the Company operates that affect the collectability of financial assets; changes in the nature and volume of the Company’s loan portfolio; and the effect of other external factors such as regulatory, legal and technological environments.

Significant judgment was required by management in the selection and application of key metrics used to derive the quantitative portion of the ACL. Accordingly, performing audit procedures to evaluate the Company’s estimated ACL involved a high degree of auditor judgment and required significant effort, including the involvement of professionals with specialized skill and knowledge.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the Company’s estimate of the ACL included, but were not limited to, the

following:

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

/s/ Plante & Moran, PLLC

Cleveland, Ohio

September 6, 2024

As of June 30, 2024 and 2023

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’** EQUITY**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024 and 2023

NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation: The consolidated financial statements include the accounts of Consumers Bancorp, Inc. (Company) and its wholly owned subsidiary, Consumers National Bank (Bank), together referred to as the Company. 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, Mahoning, Stark, and Summit counties in Ohio. Its market includes these counties as well as the 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 Company 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 inone segment, banking.

**Acquisition:**At the date of acquisition the Company 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 Company’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 waszero at June 30, 2024 and 2023.

Securities: Debt 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 management has the positive intent and ability to hold to maturity. Available-for-sale securities are those management 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 or 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.

The Company has made a policy election to exclude accrued interest income from the amortized cost basis of debt securities and report accrued interest separately in other assets in the Consolidated Balance Sheets. A debt security is placed on nonaccrual status at the time we no longer expect to receive all contractual amounts due, which is generally at 90 days past due. Accrued interest for a security placed on nonaccrual is reversed against interest income. Accordingly, we do not recognize an allowance for credit loss against accrued interest receivable.

Allowance for Credit Losses–** Held-to-Maturity (HTM) Debt Securities**: The Company measures expected credit losses on HTM debt securities on a collective basis by major security type. Any allowance for credit losses on HTM securities would be a contra asset valuation account that would be deducted from the carrying amount of HTM securities to present the net amount expected to be collected and would be charged off against the allowance for credit losses when deemed uncollectible. Adjustments to the allowance for credit losses would be reported in the Company’s Consolidated Statements of Income in the provision for credit losses. Since all the HTM securities are non-rated municipal securities to local customers, management considers the financial condition of the issuer and whether the issuers continue to make timely principal and interest payments under the contractual terms of the securities.

Allowance for Credit Losses–** Available-for-Sale (AFS) Debt Securities**: For AFS securities in an unrealized loss position, management determines whether the Company intends to sell or if it is more likely than not that the Company will be required to sell the security before recovery of the amortized cost basis. If either of the criteria is met, the security’s amortized cost basis is written down to fair value through income. For AFS securities with unrealized losses not meeting these criteria, management evaluates whether any decline in fair value is due to credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the issuer of the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of the cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Changes in the allowance for credit losses are recorded as credit loss expense (or reversal). Losses are charged against the allowance when the collectability of an AFS debt security is confirmed or when either of the criteria regarding intent or requirement to sell is met. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income, net of income taxes.

Prior to the adoption of ASC 326 and the current expected credit loss model on July 1, 2023, management evaluated securities for other-than-temporary impairment (OTTI). The evaluation of securities included consideration given to the length of time and the extent to which the fair value had 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 Company had the intent to sell the security or it was more likely than not it would be required to sell the security before recovery of its amortized cost basis.

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 its regional Federal Reserve Bank and the FHLB system. FHLB 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. Federal Reserve Bank and 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. 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 mortgage banking activity income.

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 credit 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 and mortgage 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 unless the loan is in the process of collection. 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.

**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, Mahoning, Stark, Summit, and contiguous counties in Ohio. Therefore, the Company’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.

Adoption of ASC 326: Effective July 1, 2023, the Company adopted Accounting Standard Codification 326 (ASC 326), Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments using the modified retrospective method. Results for the periods beginning after July 1, 2023 are presented under the new Current Expected Credit Losses (CECL) methodology under ASC 326, while prior period amounts continue to be reported in accordance with the incurred loss methodology under previously applicable accounting standards.

Allowance for Credit Losses: The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. The allowance for credit losses is evaluated on a regular basis and established through charges to earnings in the form of a provision for credit losses. When a loan or portion of a loan is determined to be uncollectible, the portion deemed uncollectible is charged against the allowance and subsequent recoveries, if any, are credited to the allowance. The Company has made the accounting policy election to exclude accrued interest receivable on loans from the estimate of credit losses.

The allowance balance is estimated using relevant available information, from internal and external sources, related to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience of our peer group provides the basis for the estimation of expected credit losses. Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments.

The allowance for credit losses consists of general and specific components. The general component includes loans with similar risk characteristics that are collectively evaluated for credit losses. The allowance for credit losses for the general portfolio segments is evaluated based upon periodic quantitative review of the collectability of the loans that correlates historical loss experience with reasonable and supportable forecasts using forward looking information. The Company utilizes a discounted cash flow (loss rate, expected loss) method to estimate the quantitative portion of the allowance for credit losses for all portfolio segments.

For each portfolio segment, a loss driver analysis (LDA) is performed to identify appropriate loss indicators and create a regression model for use in forecasting cash flows. The LDA analysis utilizes peer data from the Federal Financial Institutions Examination Council’s (FFIEC) Call Report data for all segments. The Company has established a one-year reasonable and supportable forecast period with a one-year straight-line reversion to the long-term historical average. Key inputs into the discounted cash flow model include loan-level detail, including the amortized cost basis of individual loans, payment structure, and forecasted loss drivers. Since the Company has had very limited loss experience, management elected to utilize benchmark peer loss history data to estimate historical loss rates. Management worked with a third-party advisory firm to identify an appropriate peer group for each loan segment that shares similar characteristics. The Company uses the central tendency seasonally adjusted civilian unemployment rate forecast from the FOMC for all portfolio segments. Other key assumptions include a maturity assumption for loans without maturity dates and prepayment / curtailment rates specific to each loan segment. Prepayment and curtailment rates are calculated based on the Company’s own data.

The Company has identified six portfolio segments of loans including Commercial & Industrial, Commercial Real Estate, Farmland, Land Development, 1 – 4 Family Residential Real Estate, and Consumer loans. Each segment has a distinct set of risk characteristics that are monitored by management. Below are the risk characteristics of the loan segments.

Commercial & Industrial: Commercial & Industrial 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 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 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, including agriculture, primarily in the areas where the Bank operates.

Commercial Real Estate: Commercial real estate loans include mortgage loans to owners of owner-occupied commercial properties, commercial investment properties, and multi-family investment properties as well as loans originated to finance the construction of owner occupied and investment properties. 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 or the business conducted on the property securing the loan. Current and projected cash flows are evaluated to determine the ability of the borrower to repay their obligations as agreed. Loans secured by existing commercial real estate have fixed or variable rates with amortization periods of up to 25 years.

Commercial construction loans generally adjust with the prime rate during the construction period and may convert to amortizing loans with maturities up to 25 years. Loan proceeds are disbursed in increments as construction progresses and as inspections warrant, and regular inspections are required to monitor the progress of construction through completion. The property owner’s and/or guarantor’s financial strength, expertise, credit history, and the projected cash flow of the property are considered during underwriting of construction loans. Construction financing is considered to involve a higher degree of credit risk than long-term financing on improved, owner-occupied real estate. Risk of loss on a construction loan is dependent largely upon the accuracy of the initial estimate of the property’s value at completion of construction compared to the estimated cost (including interest) of construction. If the estimate of value proves to be inaccurate, there may not be sufficient funds to complete the project, or a completed project with an insufficient value to assure full repayment. We attempt to reduce such risks on construction loans by including a contingency amount in the financing package, through inspections of construction progress on the property, by reviewing the owner’s financial strength, the success of the owners’ and / or contractor’s past projects, and by requiring personal guarantees of the owners.

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 Company’s commercial real estate portfolio are diverse in terms of type and are primarily located in our immediate and surrounding market area. This diversity helps reduce the Company’s exposure to adverse economic events that may affect any single market or industry. The three largest collateral concentrations within the commercial real estate non-owner-occupied portfolio are retail rental, office rental, and nursing home/assisted living facilities. The office rental segment includes a high percentage of medical facilities that require special build outs that would make it more costly for a tenant to change locations. Also, personal guarantees are typically obtained on commercial real estate loans. Commercial real estate loans are originated primarily in the area in which the bank operates. Management monitors and evaluates commercial real estate loans based on collateral, geography and risk grade criteria.

Farmland: Farmland loans include loans to finance or refinance the acquisition or improvement of land used for agricultural purposes. The loans are secured by mortgages on the land and buildings, contain fixed and variable rates, and amortize over periods up to 30 years. The portfolio is concentrated within the bank’s primary market area and is diversified across a number of agricultural segments with grain, dairy, and beef cattle operations comprising the largest segments. Current and projected cash flows are evaluated to determine the ability of the borrower to repay their obligations as agreed. Agriculture lending is largely dependent on the successful management and operation of the farm and may be adversely affected by volatile commodity prices, weather, rising farm production costs, and fluctuating land value.

Land Development: Land Development loans include loans to finance the land acquisition and the infrastructure improvements necessary to develop saleable residential lots located within our primary market area. Land development loans are adjustable-rate loans with interest only periods generally up to three years. Principal payments are tied to the sale of the developed lots to related or third-party residential builders, or individual borrowers. Loan proceeds are disbursed in increments as development progresses and as inspections warrant, and regular inspections are required to monitor the progress of development through completion. In underwriting construction loans, we consider the property owner’s and/or guarantor’s financial strength, expertise, credit history, and the projected cash flow of the saleable lots.

Land development financing is considered to involve a higher degree of credit risk than long-term financing on improved real estate. Risk of loss on a development loan is dependent largely upon the accuracy of the initial estimate of development costs and of the respective values of the completed lots. If the estimate of value proves to be inaccurate, we may be confronted with a project, when completed, having a value which is insufficient to assure full repayment. We attempt to reduce such risks on development loans by including a contingency amount in the financing package, through inspections of construction progress on the property, by reviewing the developers financial strength and past projects, and requiring personal guarantees.

1-4 Family Residential Real Estate: Residential real estate loans are secured by one to four family residential properties and include owner occupied, non-owner occupied, construction, 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 purchases private mortgage insurance. Residential mortgage loans to purchase or refinance existing homes are fixed or variable rate and contain amortization periods of up to thirty years. Residential construction loans are secured by mortgages on the subdivided lot, have a fixed rate interest only period of up to 18-months, and may convert to a fixed or variable rate loan with amortization periods of up to thirty years.

Consumer: The Company 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 as compared to real estate mortgage loans, and 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 and economic conditions. Consumer loans generally have fixed rates and amortization periods up to 84 months.

In some cases, management may determine that an individual loan exhibits unique risk characteristics which differentiate the loan from other loans within the loan segments. In such cases, the loans are evaluated for expected credit losses on an individual basis and excluded from the general component. Specific reserves in the allowance for credit losses are determined by analyzing the borrower's ability to repay amounts owed, collateral deficiencies, the relative risk grade of the loan and economic conditions affecting the borrower's industry, among other things. A loan is considered to be collateral dependent when, based upon management's assessment, the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. In such cases, expected credit losses are based on the fair value of the collateral at the measurement date, adjusted for estimated selling costs if satisfaction of the loan depends on the sale of the collateral. The fair value of collateral supporting collateral dependent loans is evaluated on a quarterly basis.

Individually evaluated loans include the third-party residential mortgage warehouse line-of-credit, nonaccrual loans, modified loans to borrowers experiencing financial difficulty, and other loans deemed appropriate by management. Specific reserves on non-performing loans are typically based on management’s best estimate of the fair value of collateral securing these loans, adjusted for selling costs as appropriate.

The Company qualitatively adjusts model results for risk factors that are not inherently captured in the general component but are nonetheless relevant in assessing the expected credit losses within the loan portfolio. These adjustments may increase or decrease the estimate of expected credit losses based upon the assessed level of risk for each qualitative factor. Management's adjustments to the quantitative evaluation may be for trends in delinquencies, trends in the volume of loans, changes in underwriting standards, changes in the value of underlying collateral, the existence and effect of portfolio concentration, regulatory environment, economic conditions, Company management and the status of portfolio administration including the Company’s loan review function.

Allowance for Loan Losses: Prior to the adoption of ASC 326 and the current expected credit loss model on July 1, 2023, the Company maintained an allowance for loan losses in accordance with the incurred loss model under previously applicable accounting standards. The allowance for loan losses was a valuation allowance for probable incurred credit losses. Loan losses were charged against the allowance when management believed the uncollectability of a loan balance was confirmed. Subsequent recoveries, if any, were credited to the allowance. Management estimated 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 were made for specific loans, but the entire allowance was available for any loan that, in management’s judgment, should be charged-off.

The allowance consisted of specific and general components. The specific component related to loans that were individually classified as impaired. The general component covered non-classified loans and was based on historical loss experience adjusted for current factors.

A loan was considered impaired when it was probable that the Company would be unable to collect all amounts due according to the contractual terms of the loan agreement. Loans, for which the terms had been modified, resulting in a concession, and for which the borrower was experiencing financial difficulties, were considered troubled debt restructurings, and classified as impaired. Factors considered by management in determining impairment included payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experienced insignificant payment delays and payment shortfalls generally were not classified as impaired. Management determined 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 was 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 was impaired, a portion of the allowance was allocated so the loan was 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 was expected from the collateral. Loans were evaluated for impairment when payments were delayed, typically 90 days or more, or when it was probable that not all principal and interest amounts would be collected according to the original terms of the loan. Troubled debt restructurings were separately identified for impairment disclosures and were measured at the present value of estimated future cash flows using the loan’s effective interest rate at inception. If a troubled debt restructuring was considered a collateral dependent loan, the loan was reported, net, at the fair value of the collateral. For troubled debt restructurings that subsequently defaulted, the Company determined the amount of reserve in accordance with the accounting policy for the allowance for loan losses.

The general component covered non-impaired loans and was based on historical loss experience adjusted for current factors based on the risks present for each portfolio segment. The historical loss experience was determined by portfolio segment and was based on the actual loss history experienced by the Company over the most recent three-year period, depending on loan segment. This actual loss experience was supplemented with economic and other factors based on the risks present for each portfolio segment. These factors included 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.

Allowance for Credit Losses - Off-Balance Sheet Credit Exposures: The allowance for credit losses on off-balance sheet credit exposures is a liability account representing expected credit losses over the contractual period for which the Company is exposed to credit risk resulting from a contractual obligation to extend credit. No allowance is recognized if the Company has the unconditional right to cancel the obligation. Off-balance sheet credit exposures primarily consist of amounts available under outstanding lines of credit and letters of credit. For the period of exposure, the estimate of expected credit losses considers both the likelihood that funding will occur, and the amount expected to be funded over the estimated remaining life of the commitment or other off-balance sheet exposure. The likelihood and expected amount of funding are based on historical utilization rates. The amount of the allowance represents management's best estimate of expected credit losses on commitments expected to be funded over the contractual life of the commitment. The allowance for off-balance sheet credit exposures is adjusted through the income statement as a component of provision for credit losses.

Low Income Housing Tax Credits (LIHTC): The Company has invested in LIHTCs through funds that assist corporations in investing in limited partnerships and limited liability companies that own, develop and operate low-income residential rental properties for purposes of qualifying for the LIHTCs. These investments are accounted for under the proportional amortization method which recognizes the amortization of the investment in proportion to the tax credit and other tax benefits received.

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 Company, 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 Company 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 tothirty-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, 2024, the Bank had policies with total death benefits of $19,215 and total cash surrender values of $10,500. As of June 30, 2023, the Bank had policies with total death benefits of $19,167 and total cash surrender values of $10,222. 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 Company 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 Company’s balance sheet.

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 Company 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 Company 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 Company 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 Company’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. Forfeitures are recognized as incurred.

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 Company’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 14 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, 2023 financial statements to be comparable to the June 30, 2024 presentation. The reclassifications had no impact on prior year net income or shareholders’ equity.

Accounting Pronouncements Adopted in Fiscal Year 2024: 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 added a new Topic 326 to the codification and removed 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 U.S. generally accepted accounting principles, companies generally recognized credit losses when it is probable that the loss had been incurred. ASU 2016-13 removes all current loss recognition thresholds and requires 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. The new guidance also amended the credit loss measurement guidance for available-for-sale debt securities and beneficial interests in securitized financial assets.

This guidance became effective for the Company on July 1, 2023 and was adopted using the modified retrospective method for all financial assets measured at amortized cost and off-balance sheet credit exposures. The Company’s results for periods beginning after July 1, 2023 are presented under ASC 326 while results for prior periods are presented in accordance with previously applicable accounting standards.

At adoption, the Company recognized an incremental allowance for credit losses on loans of $52 and a liability for off-balance sheet unfunded commitments of $308. Additionally, a $285 decrease to the retained earnings account associated with the increased estimated credit losses was recorded along with the $75 tax impact portion being recorded as part of the deferred tax asset in other assets on our Consolidated Balance Sheet.

In March 2022, FASB issued ASU 2022-02, Financial Instruments – Credit Losses (ASC 326): Troubled Debt Restructurings (TDRs) and Vintage Disclosures. The guidance amended ASC 326 to eliminate the accounting guidance for TDRs by creditors, while enhancing disclosure requirements for certain loan refinancing and restructuring activities by creditors when a borrower is experiencing financial difficulty. Specifically, rather than applying TDR recognition and measurement guidance, creditors are required to determine whether a modification results in a new loan or continuation of the existing loan. The ASU requires enhanced disclosures related to certain modifications of receivables made to borrowers experiencing financial difficulty and requires that an entity disclose current-period gross write-offs by year of origination within the vintage disclosures. The Company adopted ASU 2022-02 on July 1, 2023. The adoption of this ASU did not have a material impact on the Company’s financial statements.

Recently Issued Accounting Pronouncements Not Yet Effective: In December 2023, FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09). The FASB issued ASU 2023-09 to address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. ASU 2023-09 is to be applied on a prospective basis and is effective for annual periods beginning after December 15, 2024 with early adoption permitted. ASU 2023-09 will impact income tax disclosures, and the Company does not expect a material impact to the Company’s consolidated financial statements.

NOTE 2—SECURITIES

The following tables summarize the amortized cost, fair value, and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive loss on the Company’s debt securities available-for-sale and gross unrecognized losses on the Company’s debt securities held-to-maturity as of June 30, 2024 and June 30, 2023:

Proceeds from sales of available-for-sale securities during fiscal year 2024 and fiscal year 2023 were as follows:

The income tax benefit related to the net realized losses amounted to $17 in fiscal year 2024 and the income tax provision related to the net realized gains amounted to $3 in fiscal year 2023.

The amortized cost and fair values of debt securities at June 30, 2024 by expected maturity are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date, primarily mortgage-backed securities and collateralized mortgage obligations, are shown separately.

Securities with a carrying value of approximately $153,908 and $137,896 were pledged at June 30, 2024 and 2023, respectively, to secure public deposits and commitments as required or permitted by law. At June 30, 2024 and 2023, 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, 2024 and 2023, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position:

As of June 30, 2024, there were 410 available-for-sale securities, of which 385 were in an unrealized loss position. Also, there were four held-to-maturity securities all of which were in an unrecognized loss position as of June 30, 2024. The Company evaluates all securities in an unrealized loss position on a quarterly basis to determine if an ACL and corresponding impairment charge should be recorded. Consideration is given to the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, and the intent and ability of the Company to retain its investment for a period of time sufficient to allow for any anticipated recovery in fair value of the amortized cost. No ACL was recorded in the year ended June 30, 2024 and no other-than-temporary impairment charges were recorded in the year ended June 30, 2023.

The Company’s mortgage-backed securities and collateralized mortgage obligations were issued by U.S. government-sponsored entities and agencies. The Company does not own any private label mortgage-backed securities. The Company’s municipal bond portfolio consists of tax-exempt and taxable general obligation and revenue bonds to a broad range of counties, towns, school districts, and other essential service providers. As of June 30, 2024, 98.2% of the municipal bonds held in the available-for-sale portfolio had a S&P or Moody’s investment grade rating, and 1.8% were non-rated issues. The municipal bonds in the held-to-maturity portfolio are all non-rated issues to local entities that are also deposit customers. The other debt securities consist of subordinated notes issued by other bank holding companies. The issuers of all securities owned by the Company continue to make timely principal and interest payments under the securities’ contractual terms. The unrealized losses related to these securities have not been recognized into income because the decline in fair value is not attributed to credit quality, management does not intend to sell the securities, and it is not likely that management will be required to sell the securities prior to their anticipated recovery. The unrealized losses on these securities are primarily due to increases in market interest rates over the yields available at the time the underlying securities were purchased and increased credit spreads. The securities’ fair value is expected to recover as the securities approach their maturity date or repricing date or if market yields for such investments decline.

As of June 30, 2024, the Company 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, 2024 and 2023. There wereno realized gains or losses on the sale of equity securities during the periods presented.

NOTE 3—LOANS AND ALLOWANCE FOR CREDIT LOSSES

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

The following table presents the activity in the allowance for credit losses by portfolio segment for year ended June 30, 2024.

Upon adoption of ASC 326, the Company updated its classifications of loans and its determination of credit losses. For the year ended June 30, 2023, Farmland and Land Development loans were included within Commercial Real Estate. For the year ended June 30, 2024, these loan classes have been separately presented.

The following table presents the activity in the allowance for loan losses by portfolio segment for the year ended June 30, 2023:

The following table presents the amortized cost of non-accrual loans by class as of June 30, 2024:

The following table presents the recorded investment of non-accrual loans by class as of June 30, 2023:

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

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

The following table presents the aging of the recorded investment in past due loans as of June 30, 2023 by class of loans:

The above table of past due loans includes the recorded investment in non-accrual loans of $54 in the 90 days or greater category. Also, included in the recorded investment in loans is $1,598 of accrued interest receivable.

Credit Quality Indicators:

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

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

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

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

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

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

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

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

As of June 30, 2023 the recorded investment by risk category of loans by class of loans was as follows:

Modifications to Borrowers Experiencing Financial Difficulty

Occasionally, the Company modifies loans to borrowers experiencing financial difficulty to maximize collection of loan balances by providing principal forgiveness, term extension, an other-than insignificant payment delay, or an interest rate reduction. In some cases, the Company may provide multiple types of concessions on one loan. If principal forgiveness is provided, the amount of forgiveness is charged-off against the allowance for credit losses. There were no modifications of loans to borrowers in financial distress completed during the twelve-month period ended June 30, 2024.

As of June 30, 2023, under previous accounting guidance for troubled debt restructurings (TDRs), the Company had $351 of loans classified as TDRs. There were no specific reserves allocated to these loans and TDRs were also included as impaired loans. For the year ended June 30, 2023, there were no loans modified that were classified as a TDR and there were no loans classified as TDRs for which there was a payment default within 12 months following the modification. A loan was considered in payment default once it was 90 days contractually past due under the modified terms.

Collateral Dependent Loans

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

Impaired Loans

The following impaired loan information relates to required disclosures under the previous incurred loan loss methodology and are only presented with prior period information.

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, 2023. Included in the recorded investment in loans is $1,598 of accrued interest receivable.

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, 2023:

NOTE 4—PREMISES AND EQUIPMENT

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

Depreciation expenses were $1,095 and $1,051 for the years ended June 30, 2024 and 2023, respectively.

As of June 30, 2024, the Company 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 7.25 years as of June 30, 2024 and the weighted-average discount rate was 1.94%.

Rent expense for all the operating leases was $245 and $254 for the twelve-month periods ended June 30, 2024 and 2023, respectively. As of June 30, 2024, the right-of-use asset, included inpremises and equipment, was $777 and the lease liability, included inother liabilities, was $809.

Total estimated rental commitments for the operating leases with a term over 12 months were as follows as of June 30, 2024:

NOTE 5–** GOODWILL AND ACQUIRED INTANGIBLE ASSETS**

The balance of goodwill was $2,452 as of June 30, 2024 and 2023. The following table summarizes the Company’s acquired intangible assets as of June 30, 2024 and 2023.

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 Company is the only reporting unit. Management performed a quantitative impairment assessment at April 30, 2024. The assessment estimated fair value on an income approach that incorporated a discounted cash flow model that involved management assumptions based upon future growth and earnings projections. The results of the assessment indicatedno impairment as of the measurement date. Goodwill is the only intangible asset on the Company’s balance sheet with an indefinite life. Management will continue to monitor its goodwill for possible impairment.

The core deposit intangible asset is amortized on a straight-line basis overten years. The Company recorded intangible amortization expense of $57 in 2024 and $56 in 2023. The intangible amortization expense is expected to be $57 per year for each of the next four fiscal years and $129 thereafter.

NOTE 6—DEPOSITS

Interest-bearing deposits as of June 30, 2024 and 2023 were as follows:

Scheduled maturities of time deposits at June 30, 2024 were as follows:

NOTE 7—SHORT-TERM BORROWINGS

Short-term borrowings consisted of federal funds purchased, repurchase agreements, a loan from the Federal Reserve Bank’s Bank Term Funding Program, and a line of credit for the Company. Information concerning all short-term borrowings at June 30, 2024 and 2023, maturing in less than one year is summarized as follows:

In fiscal year 2024, the Company obtained a loan from the Federal Reserve Bank’s Bank Term Funding Program for $10,000. Also, the Company has an unsecured $5,000 line of credit to provide capital support to the holding company. The outstanding balance on the line of credit waszero as of June 30, 2024 and $1,200 as of June 30, 2023. 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. Available-for-sale securities pledged for repurchase agreements as of June 30, 2024 and 2023 are presented in the following table:

Total interest expense on short-term borrowings was $702 and $397 for the years ended June 30, 2024 and 2023, respectively.

NOTE 8—FEDERAL HOME LOAN BANK ADVANCES

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

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, 2024:

Pursuant to collateral agreements with 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 $182,257 and $169,993 of first mortgage and multi-family loans under a blanket lien arrangement at June 30, 2024 and 2023, respectively. Based on this collateral, the Bank was eligible to borrow up to a total of $99,814 in additional advances at June 30, 2024.

NOTE 9—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 90 days of service and are at least 18 years of age are eligible to participate. Amounts charged to operations were $417 and $390 for the years ended June 30, 2024 and 2023, 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 Company. The estimated present value of future benefits to be paid to certain current and former executives totaled $3,997 as of June 30, 2024 and $3,687 as of June 30, 2023 and is included in other liabilities. For purposes of calculating the present value of future benefits, a discount rate of 6.0% was used to project the liability through June 30, 2024 and 5.75% was used at June 30, 2023. For the years ended June 30, 2024 and 2023, $452 and $256, respectively, have been charged to expense in connection with the SCP. Distributions to participants were $142 for the fiscal year ended June 30, 2024 and $133 for the fiscal year ended June 30, 2023.

The Amended and Restated 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 Company’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 Company. The 2010 Plan was approved by the Company’s shareholders. The Compensation Committee of the Company’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.

Under the 2010 Plan, the Company 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 Company, as defined in the 2010 Plan, all outstanding awards immediately vest.

The Company has granted restricted stock awards and restricted stock units to certain employees and directors. Restricted stock units and awards are issued at no cost to the recipient and can be settled in shares or cash at the end of the vesting period depending on the type of award. Restricted stock awards are made at the end of the measurement period once certain specified performance targets as established by the Compensation Committee are achieved with some awards fully vesting on the date of grant and others vesting 25% on the grant date, with the remaining vesting 25% per year over athree-year period. Restricted stock awards provide the holder with 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. Restricted stock units begin to vest at the end of the measurement period once certain specified performance targets as established by the Compensation Committee are achieved. Some units, primarily the awards made to directors and senior management, are 100% vested at the end of the measurement period. For other unit awards, primarily the awards made to executive management,25% vest at the end of the performance period, with the remaining vesting 25% per year over athree-year period. The fair value of the restricted stock units and awards, which is used to measure compensation expense, is the closing market price of the Company’s common stock on the date of the grant and compensation expense is recognized over the vesting period. All dividends are forfeitable in the event the shares do not vest.

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

There was $229 in expense recognized in fiscal year 2024 and $579 in expense recognized in fiscal year 2023 in connection with the restricted stock units and awards. As of June 30, 2024, there was $240 of total unrecognized compensation expense related to non-vested shares and a weighted-average expense recognition period of 1.3 years.

NOTE 10—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%:

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

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:

The effective tax rate was 17.7% for the year ended June 30, 2024 compared to 17.4% for the year ended June 30, 2023. At June 30, 2024 and June 30, 2023, the Company hadno unrecognized tax benefits recorded. The Company does not expect the total amount of unrecognized tax benefits to significantly increase within the next twelve months. There wereno interest or penalties recorded for the years ended June 30, 2024 and 2023 and there wereno amounts accrued for interest and penalties at June 30, 2024 and 2023.

The Company and the Bank are subject to U.S. federal income tax as an income-based tax and a capital-based financial institutions tax in the State of Ohio. The Company and the Bank are no longer subject to examination by taxing authorities for years before 2020.

NOTE 11—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, 2024 of related party loans were as follows:

Deposits from executive officers, directors and their affiliates totaled $5,569 at June 30, 2024 and $6,100 at June 30, 2023.

NOTE 12—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 2024 and 2023, the Company 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, 2024, 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, 2024 and June 30, 2023 for the Bank:

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 Company’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, 2024 the Bank could, without prior approval, declare a dividend of approximately $18,593.

NOTE 13—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 $144,616 and $142,767 as of June 30, 2024 and 2023, respectively. As of June 30, 2024, $130,955 of the commitments carried variable rates and $13,661 carried fixed rates with interest rates ranging from 3.05% to 10.50% with maturity dates from July 2024 to January 2056. As of June 30, 2023, $126,698 of the commitments carried variable rates and $16,069 carried fixed rates with interest rates ranging from 3.05% to 11.00% with maturity dates from July 2023 to August 2060. Financial standby letters of credit were $1,180 and $1,178 as of June 30, 2024 and 2023, respectively. In addition, commitments to extend credit of $11,298 and $11,834 as of June 30, 2024 and 2023, 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 14—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:

There were no transfers between Level 1 and Level 2 during the 2024 or the 2023 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:

**Collateral Dependent Loans:**The fair value of collateral dependent loans with specific allocations of the allowance for credit losses is generally based on recent real estate appraisals. Collateral dependent individually evaluated loans carried at fair value generally receive specific allocations of the allowance for loan losses or are charged down to their fair value. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. There were no collateral dependent individually evaluated loans measured at fair value on a non-recurring basis at June 30, 2024. There were no impaired loans measured at fair value on a non-recurring basis at June 30, 2023.

Other Real Estate and Repossessed Assets Owned: Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. Subsequent to their initial recognition, these assets are remeasured at fair value, which is the lower of cost or fair value less estimated costs to sell, through a write-down included in other non-interest expenses. Real estate owned properties and other repossessed assets, which are primarily vehicles, are evaluated on a quarterly basis for additional impairment and adjusted accordingly. There were no such fair value measurement adjustments recorded during June 30, 2024 or June 30, 2023. As of June 30, 2024 there wereno other real estate owned and other repossessed assets. As of June 30, 2023 the balance of other real estate owned was $124.

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

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

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

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

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

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

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

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

Time deposits: Fair value of fixed-maturity certificates of deposit was estimated using the rates offered at June 30, 2024 and 2023 for deposits of similar remaining maturities, resulting in Level 2 classification. Estimated fair value does not include the benefit that results from low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market.

Federal Home Loan Bank advances: Fair value of Federal Home Loan Bank advances was estimated using current rates at June 30, 2024 and 2023 for similar financing resulting in a Level 2 classification.

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

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

NOTE 15—AFFORDABLE HOUSING TAX CREDIT PARTNERSHIP

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

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

The following table summarizes the balances of the affordable housing tax credit investment and related unfunded commitment at June 30, 2024 and June 30, 2023.

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

NOTE 16—PARENT COMPANY FINANCIAL STATEMENTS

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

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 and restricted stock units. There were 6,642 shares of restricted stock and 6,051 restricted stock units that were anti-dilutive for the year ending June 30, 2024. There were 14,800 shares of restricted stock and 9,078 restricted stock units that were anti-dilutive for the year ending June 30, 2023. The following table details the calculation of basic and diluted earnings per share:

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, 2024 and June 30, 2023, were as follows:

(a)Securities gain, net

(b)Income tax expense

NOTE 19–REVENUE RECOGNITION

The Company 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 Company's revenue from contracts with customers is recognized within noninterest income.

*Service charges on deposit accounts:*The Company 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 Company 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 Company 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 Company 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 Company's sources of noninterest income for the years ended June 30, 2024 and 2023.