LCNB (US:LCNB)2025-05-07 20:03PART I – FINANCIAL INFORMATION Item 1. Financial Statements Presents LCNB Corp.'s unaudited consolidated condensed financial statements for Q1 2025, including balance sheets, income, equity, and cash flows Consolidated Condensed Balance Sheets LCNB Corp.'s balance sheet as of March 31, 2025, shows stable total assets, increased deposits, and reduced long-term debt, with growing equity Consolidated Condensed Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $2,302,745 | $2,307,394 | | Total cash and cash equivalents | $37,670 | $35,744 | | Total investment securities | $305,644 | $306,794 | | Loans, net | $1,705,506 | $1,709,811 | | Goodwill | $90,310 | $90,310 | | Total Liabilities | $2,044,094 | $2,054,358 | | Total deposits | $1,921,649 | $1,878,292 | | Long-term debt | $104,637 | $155,153 | | Total Shareholders' Equity | $258,651 | $253,036 | Consolidated Condensed Statements of Income LCNB Corp. reported significantly increased net income for Q1 2025, driven by higher net interest income and reduced merger-related expenses Q1 2025 vs Q1 2024 Income Statement (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Interest Income | $16,299 | $13,895 | | Provision for Credit Losses | $197 | $125 | | Total Non-Interest Income | $5,222 | $3,929 | | Total Non-Interest Expense | $15,809 | $15,472 | | Net Income | $4,609 | $1,915 | | Diluted EPS | $0.33 | $0.15 | Consolidated Condensed Statements of Comprehensive Income Total comprehensive income for Q1 2025 substantially increased, primarily due to higher net income and a positive swing in unrealized gains on securities Q1 2025 vs Q1 2024 Comprehensive Income (in thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Income | $4,609 | $1,915 | | Other comprehensive income (loss), net of tax | $3,662 | $(1,118) | | Total Comprehensive Income | $8,271 | $797 | Consolidated Condensed Statements of Shareholders' Equity Shareholders' equity increased in Q1 2025, driven by net income and other comprehensive income, partially offset by common stock dividends - Total shareholders' equity increased by $5.6 million during Q1 202520 - Key changes included: +$4.6M Net Income, +$3.7M Other Comprehensive Income, and -$3.1M in dividends paid ($0.22 per share)20 Consolidated Condensed Statements of Cash Flows Cash and cash equivalents increased in Q1 2025, with positive operating cash flow, investing inflows, and financing outflows primarily from debt repayment Q1 2025 vs Q1 2024 Cash Flows (in thousands) | Cash Flow Category | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $2,212 | $(11,941) | | Net Cash from Investing Activities | $9,813 | $11,705 | | Net Cash from Financing Activities | $(10,099) | $(6,536) | | Net Change in Cash | $1,926 | $(6,772) | Notes to Consolidated Condensed Financial Statements The notes provide detailed explanations of the financial statements, covering basis of presentation, acquisition details, portfolio composition, credit losses, and fair value measurements - The acquisition of Eagle Financial Bancorp, Inc (EFBI) on April 12, 2024, increased LCNB's presence in the Cincinnati market. Adjustments to the initial valuation were made in Q1 2025, resulting in a final goodwill amount of $10.3 million3437 - The loan portfolio's allowance for credit losses (ACL) was 0.71% of total loans at March 31, 2025, slightly up from 0.70% at year-end 2024. Non-accrual loans were low at 0.27% of total loans5864 - The company's defined benefit multi-employer retirement plan was hard-frozen on March 1, 2025, meaning no further benefits will accrue to covered employees109 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2025 financial results, highlighting increased net income driven by higher net interest income and reduced merger expenses, covering financial condition and capital Results of Operations Q1 2025 net income significantly increased, driven by higher net interest income and non-interest income, with modest non-interest expense growth and no merger costs Key Performance Indicators - Q1 2025 vs Q1 2024 | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Income | $4.6 million | $1.9 million | | Diluted EPS | $0.33 | $0.15 | | Net Interest Income | $16.3 million | $13.9 million | | Tax Equivalent Net Interest Margin | 3.25% | 2.72% | Net Interest Income Net interest income increased in Q1 2025, primarily due to lower interest expense from reduced deposit rates and short-term borrowings, expanding the net interest margin - The increase in net interest income was primarily attributable to changes in rate ($2.3 million positive impact), while volume changes had a smaller positive impact ($0.1 million)157 - Interest expense on deposits and borrowings decreased significantly. Interest expense on interest-bearing demand and money market deposits fell by $1.6 million, and on short-term borrowings by $0.9 million159 Provision and Allowance For Credit Losses The company recorded a higher provision for credit losses in Q1 2025, covering loans and off-balance-sheet exposures, with minimal net charge-offs Credit Loss Provision and Charge-offs (in thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Provision for Credit Losses | $197 | $125 | | Net Charge-offs | $39 | $45 | Financial Condition Total assets remained stable in Q1 2025, with increased deposits and reduced long-term debt, while the loan portfolio remains concentrated in commercial real estate - Long-term debt decreased by 32.6% due to the early payoff of $50 million in FHLB advances, funded by an increase in lower-cost ICS deposits169174 - The commercial real estate loan portfolio, totaling $1.05 billion, is diversified by property type, with Multi-family (27%), Retail (15%), and Office (12%) being the largest segments173 - Accumulated other comprehensive loss decreased by 19.1% due to market-driven recoveries in the fair value of available-for-sale debt securities169174 Regulatory Capital LCNB and its bank subsidiary remained 'well-capitalized' as of March 31, 2025, with all capital ratios exceeding minimum regulatory requirements Bank Capital Ratios | Ratio | March 31, 2025 | Well-Capitalized Minimum | | :--- | :--- | :--- | | Common Equity Tier 1 Capital | 9.98% | 6.5% | | Tier 1 Capital | 9.98% | 8.0% | | Total Capital | 10.66% | 10.0% | | Leverage Ratio | 8.07% | 5.0% | Item 3. Quantitative and Qualitative Disclosures about Market Risk LCNB manages interest rate risk through asset/liability strategies, with models indicating that rising rates would negatively impact Net Interest Income and Economic Value of Equity within policy limits - A +200 basis point rate shock is projected to decrease Net Interest Income (NII) by 1.84% over one year186 - A +200 basis point rate shock is projected to decrease the Economic Value of Equity (EVE) by 7.89%187 - The company does not use derivatives like interest rate swaps, caps, or floors to hedge interest rate risk184 Item 4. Controls and Procedures LCNB's disclosure controls and procedures were effective as of March 31, 2025, with no material changes in internal control over financial reporting during the quarter - The CEO and CFO concluded that as of March 31, 2025, LCNB's disclosure controls and procedures were effective188 - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal controls189 PART II. OTHER INFORMATION Item 1. Legal Proceedings LCNB is not a party to any material pending legal proceedings beyond routine business litigation - The company reports no material pending legal proceedings192 Item 1A. Risk Factors No material changes to risk factors previously disclosed in the 2024 Annual Report on Form 10-K - Readers are referred to the risk factors disclosed in the 2024 Form 10-K193 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds LCNB did not sell unregistered equity securities or repurchase shares under its authorized plan during Q1 2025, with shares remaining available for purchase - No unregistered securities were sold during the reporting period194 - No shares were repurchased under the existing stock repurchase plan during the three months ended March 31, 2025. There are 315,047 shares that may still be purchased under the plan197 Item 3. Defaults Upon Senior Securities No defaults upon senior securities occurred during the period - There were no defaults upon senior securities198 Item 4. Mine Safety Disclosures This item is not applicable to the company's operations - This item is not applicable to the company199 Item 5. Other Information No director or officer trading arrangements under Rule 10b5-1 were adopted, modified, or terminated in Q1 2025 - No director or officer trading plans under Rule 10b5-1 were adopted, modified, or terminated in Q1 2025200 Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including merger agreements and CEO/CFO certifications - Exhibits include CEO and CFO certifications under Sections 302 and 906 of the Sarbanes-Oxley Act201