CONSUMERS BANCORP INC /OH/

Consumers Bancorp, Inc. operates as a bank holding company under the Bank Holding Company Act of 1956, as amended, and is a registered bank holding company incorporated under Ohio law in 1994 ¹. The Company's activities have been limited primarily to holding the common stock of Consumers National Bank, a national bank chartered under the laws of the United States ². The Bank is a community-oriented financial institution offering a wide range of commercial and consumer loan and deposit products, as well as mortgage, financial planning, and investment services to individuals, farmers, and small and medium sized businesses ³. The Bank's market area consists primarily of Carroll, Columbiana, Jefferson, Mahoning, Stark, and Summit counties in Ohio, as well as contiguous counties in northeast Ohio, western Pennsylvania, and northern West Virginia ⁴. As of June 30, 2026, the Bank operated 23 full-service branch locations and one loan production office ⁵.

The Bank seeks to be the provider of choice for financial solutions to customers who value exceptional personalized service, local decision making, and modern banking technology ⁶. The Bank's business involves attracting deposits from businesses and individual customers and using such deposits to originate commercial, mortgage, and consumer loans in its market area ⁷. The Bank also invests in securities consisting primarily of obligations of U.S. government-sponsored agencies, municipal obligations, and mortgage-backed securities issued by U.S. government sponsored entities ⁸. CNB Investment Co. (CNBI), a wholly-owned subsidiary of the Bank formed in November 2024, invests primarily in municipal securities and is disclosed as part of the Bank ⁹.

Net income increased by $2,497, or 28.8%, to $11,164 for fiscal year 2026 compared with $8,667 for fiscal year 2025 ¹⁰. Net interest income increased by $5,672, or 16.6%, in fiscal year 2026, primarily as a result of an $89.5 million, or 8.5%, increase in average interest-earning assets and an increase in the yield on average interest earning assets as loans and securities repriced to current market rates ¹¹. Noninterest income increased by $611, or 11.2%, in fiscal year 2026 from the same prior year period primarily because of an increase in debit card interchange income of $209, or 8.4%, an increase in mortgage banking activity income of $121, or 30.3%, and $106 of revenue recognized on interest rate swaps ¹². Total noninterest expenses increased by $3,382, or 12.0%, in fiscal year 2026 due to increases in salaries, incentives, occupancy and equipment, and debit card processing expenses ¹³. Return on average equity and return on average assets were 13.11% and 0.92%, respectively, for fiscal year 2026 compared with 12.05% and 0.78%, respectively, for the same period last year ¹⁴.

Net interest income, the difference between interest income earned on interest-earning assets and interest expense incurred on interest-bearing liabilities, is the largest component of the Company's earnings ¹⁵. Net interest income for fiscal year 2026 was $39,779 compared with $34,107 for fiscal year 2025 ¹⁶. On a fully taxable equivalent basis, net interest income was $40,351 for fiscal year 2026, an increase of $6,154 or 18.0%, from $34,197 in fiscal year 2025 ¹⁷. The Company's tax equivalent net interest margin was 3.45% for fiscal year 2026 and 3.15% for fiscal year 2025 ¹⁸. FTE interest income for fiscal year 2026 was $60,000, an increase of $6,861, or 12.9%, from fiscal year 2025, primarily because of an $89,491, or 8.5%, increase in average interest-earning assets and a 24-basis point increase in the yield on interest earning assets ¹⁹. The yield on average interest-earning assets was 5.14% for fiscal year 2026 compared with 4.90% for the same period last year ²⁰. Interest expense for fiscal year 2026 was $19,649, an increase of $707 from fiscal year 2025, due to a $68,627, or 8.6% increase in average interest-bearing liabilities, partially offset by a decline in the cost of time deposits and short-term borrowings ²¹. The average cost of funds was 2.27% for fiscal year 2026 compared with 2.37% for the same prior year period ²².

The Bank's loan portfolio includes commercial, mortgage, and consumer loans ²³. The Bank also invests in securities consisting primarily of U.S. government-sponsored agencies, municipal obligations, agency issued mortgage-backed and collateralized mortgage obligations ²⁴. The Bank's primary source of revenue is net interest income, which is the difference between interest income earned on interest-earning assets and interest expense incurred on interest-bearing liabilities ²⁵. Noninterest income includes debit card interchange income, mortgage banking activity income, and revenue from interest rate swaps ²⁶.

The Company implemented a clawback policy on December 13, 2018, which was further revised and adopted by the Compensation Committee of the Company's Board of Directors effective March 12, 2024 ²⁷. As of June 30, 2026, the Bank employed 190 full-time and 11 part-time employees, none of whom are represented by a collective bargaining group ²⁸. The Company had 3,156,730 common shares outstanding on June 30, 2026, with 651 shareholders of record and an estimated 805 additional beneficial holders whose stock was held in nominee name ²⁹. The common shares of Consumers Bancorp, Inc. are quoted on the OTCQX® Best Market under the symbol CBKM ³⁰. There were no repurchases of the Company's securities during fiscal year 2026 ³¹.

The Company's management is currently committed to continuing to pay regular cash dividends; however, there can be no assurance as to future dividends because they are dependent on the Company's future earnings, capital requirements, and financial condition ³². The Company's principal source of funds for dividend payment is dividends received from the Bank ³³. Banking regulations limit the amount of dividends that may be paid without prior approval of regulatory agencies ³⁴.

Management intends to elect the community bank leverage ratio (CBLR) framework effective September 30, 2026, as the leverage capital ratio minimum requirement needed to qualify for the CBLR election was lowered to 8% effective July 1, 2026 ³⁵. Based on the Company's capital levels and other qualifying criteria, management believes the Bank will qualify for the CBLR framework upon election ³⁶.

The Bank's growth strategy includes increasing average interest-earning assets, which increased by $89.5 million, or 8.5%, in fiscal year 2026 ³⁷. The Bank also formed CNB Investment Co. in November 2024 for the primary purpose of investing in municipal securities, which positively impacted the tax-equivalent yield on nontaxable securities in fiscal year 2026 ³⁸.

The provision for credit losses on unfunded commitments increased in fiscal year 2026 primarily because of an increase in commercial and residential construction projects during the fiscal year ³⁹.

The Bank's cost of funds declined to 2.27% for fiscal year 2026 compared with 2.37% for the same prior year period, reflecting a decline in the cost of time deposits and short-term borrowings ⁴⁰.

The Company's management is committed to continuing to pay regular cash dividends, with cash dividends paid per share of $0.21 for each quarter of fiscal year 2026 ⁴¹.

The Bank's earnings are affected by general and local economic conditions and by the policies of various governmental regulatory authorities, particularly the Federal Reserve Board's monetary policies, which have had a significant effect on the interest income and interest expense of commercial banks ⁴².

The Bank faces competitive pressures on product pricing and services, and changes in consumer spending, borrowing, and savings habits could affect its business ⁴³.

The Bank's cybersecurity risk management program is designed to identify, assess, and mitigate risks across various aspects of the company, including financial, operational, regulatory, reputational, and legal ⁴⁴.

The Bank's earnings are affected by general and local economic conditions and by the policies of various governmental regulatory authorities, particularly the Federal Reserve Board's monetary policies, which have had a significant effect on the interest income and interest expense of commercial banks ⁴⁵. Rapid fluctuations in market interest rates could result in changes in fair market valuations and a decline in net interest income ⁴⁶. The Bank faces competitive pressures on product pricing and services ⁴⁷. The Bank's cybersecurity risk management program is designed to mitigate risks, but the threat posed by cyber-attacks is severe, attacks are sophisticated and increasing in volume, and attackers respond rapidly to changes in defensive measures ⁴⁸. The Bank's provision for credit losses on unfunded commitments increased in fiscal year 2026 primarily because of an increase in commercial and residential construction projects during the fiscal year ⁴⁹.

Management's message emphasizes the Company's commitment to being the provider of choice for financial solutions to customers who value exceptional personalized service, local decision making, and modern banking technology ⁵⁰. The Company's strategic priorities include growing net interest income, managing credit quality, and maintaining strong capital levels ⁵¹. Management believes the Bank will qualify for the CBLR framework upon election, which would simplify regulatory capital compliance ⁵².