LCNB (US:LCNB)2024-11-06 21:27Financial Performance - Net income for the three and nine months ended September 30, 2024, was $4,532,000 and $7,372,000, respectively, compared to $4,070,000 and $12,921,000 for the same periods in 2023[187]. - Non-interest income for the three and nine months ended September 30, 2024, was $6,407,000 and $14,416,000, respectively, up from $3,578,000 and $10,805,000 in 2023, driven by higher fiduciary income and service charges[190]. - Non-interest expense for the three and nine months ended September 30, 2024, was $15,387,000 and $48,684,000, respectively, compared to $12,244,000 and $36,847,000 in 2023, primarily due to increased personnel and office expenses from acquisitions[191]. - A pretax loss of $843,000 was recorded on the sale of approximately $48.9 million of below market rate loans acquired from Cincinnati Bancorp during the second quarter[190]. Interest Income and Expense - Net interest income for the three and nine months ended September 30, 2024, was $14,970,000 and $44,082,000, respectively, an increase from $13,571,000 and $41,690,000 in 2023, primarily due to higher average loan balances and increased rates[188]. - Total interest income increased by $6,727,000, primarily due to a $6,467,000 increase in loan interest income attributed to a $319.2 million increase in average loan balances[197]. - Total interest expense rose by $5,331,000, driven by a $708,000 increase in interest expense for interest-bearing demand and money market deposits[198]. - Interest expense for IRA and time certificates increased by $4,299,000, due to a $308.0 million increase in average deposit balances and a 121 basis point increase in the average rate paid[198]. - The net interest rate spread decreased to 2.25% from 2.52% in the previous year[194]. Credit Losses - A provision for credit losses of $660,000 and $1,313,000 was recorded for the three and nine months ended September 30, 2024, compared to net recoveries of $114,000 and $141,000 in 2023[189]. - LCNB recorded a provision for credit losses of $660,000 for Q3 2024, compared to a recovery of credit losses of $114,000 for the same period in 2023[211]. - For the nine months ended September 30, 2024, LCNB recorded a provision for credit losses of $1,313,000, compared to a recovery of credit losses of $141,000 for the same period in 2023[211]. - The provision for credit losses on loans during the nine-month 2024 period included $763,000 recognized on non-PCD loans acquired through the EFBI merger[212]. - Net charge-offs for the three and nine months ended September 30, 2024, totaled $84,000 and $147,000, respectively, compared to net charge-offs of $34,000 and $83,000 for the respective periods in 2023[213]. Assets and Deposits - Total assets as of September 30, 2024, were $2,365,676,000, compared to $1,971,269,000 in the previous year[194]. - Total assets increased to $2,346,908,000 as of September 30, 2024, from $2,291,592,000 at December 31, 2023, a difference of $55,316,000, or 2.41%[220]. - Total deposits rose to $1,917,005,000 as of September 30, 2024, from $1,824,389,000 at December 31, 2023, an increase of $92,616,000, or 5.08%[220]. - The increase in average loan and deposit balances during 2024 was attributed to the acquisitions of Eagle Financial Bancorp and Cincinnati Bancorp[188]. Mergers and Acquisitions - LCNB incurred expenses related to the acquisition of Eagle Financial Bancorp on April 12, 2024, and Cincinnati Bancorp on November 1, 2023, impacting net income[187]. - The increase in loan interest income was primarily due to loans acquired in the mergers with EFBI and CNNB[206]. - Goodwill increased primarily due to the merger with EFBI, contributing to a rise in core deposits and intangibles[55]. - Total remaining borrowing capacity with the Federal Home Loan Bank was approximately $120.9 million as of September 30, 2024[236]. Regulatory and Capital Ratios - Regulatory capital ratios as of September 30, 2024: Common Equity Tier 1 Capital to risk-weighted assets at 9.81% and Total Capital at 10.46%[232]. - Management believes that no conditions have occurred that would change LCNB's "well-capitalized" status under regulatory guidelines[231]. Interest Rate Sensitivity - The Bank's interest rate sensitivity analysis indicates that a 100 basis point increase in interest rates would negatively impact net interest income[241]. - The IRSA indicates that a 300 basis point increase in interest rates would result in a decrease of $1,332 thousand in net interest income (NII), representing a decline of 1.75%[242]. - A 200 basis point increase in interest rates would lead to a decrease of $901 thousand in NII, or 1.19%[242]. - The EVE analysis shows that a 300 basis point increase in interest rates would decrease the economic value of equity (EVE) by $36,037 thousand, or 18.50%[243]. Internal Controls and Procedures - LCNB's disclosure controls and procedures were evaluated as effective as of September 30, 2024[245]. - There were no changes in internal control over financial reporting that materially affected LCNB during the reporting period[246]. - LCNB does not use derivatives to hedge interest rate risk and has not entered into market risk instruments for trading purposes[240].