LCNB (LCNB) - 2025 Q2 - Quarterly Report

Filing Information Provides key registration details and corporate status of LCNB Corp Registrant Information | Detail | Value | | :--- | :--- | | Registrant Name | LCNB Corp. | | State of Incorporation | Ohio | | IRS Employer ID | 31-1626393 | | Principal Executive Offices | 2 North Broadway, Lebanon, Ohio 45036 | | Telephone Number | (513) 932-1414 | | Commission File Number | 001-35292 | | Common Stock Trading Symbol | LCNB | | Exchange Registered | NASDAQ | | Shares Outstanding (as of Aug 6, 2025) | 14,175,891 | | Filer Status | Accelerated filer | | Shell Company | No | | Reports Filed (past 12 months) | Yes | | Interactive Data File Posted | Yes | | Emerging Growth Company | No | Glossary of Abbreviations and Acronyms Defines 20 key financial and regulatory abbreviations essential for understanding the report's context - The glossary defines 20 key abbreviations and acronyms, including ACL (Allowance for Credit Losses), ASU (Accounting Standards Update), CECL (Current Expected Credit Losses), FASB (Financial Accounting Standards Board), FDIC (Federal Deposit Insurance Corporation), GAAP (Generally Accepted Accounting Principles), and SEC (Securities and Exchange Commission), which are crucial for understanding the financial and regulatory context of the report[8] PART I – FINANCIAL INFORMATION Presents LCNB Corp.'s unaudited consolidated financial statements and management's detailed analysis of financial performance and condition Item 1. Financial Statements This section includes the unaudited consolidated condensed financial statements of LCNB Corp. and its subsidiaries, comprising balance sheets, statements of income, comprehensive income, shareholders' equity, and cash flows, along with detailed notes explaining the basis of presentation, significant accounting policies, and specific financial line items Consolidated Condensed Balance Sheets Presents LCNB Corp.'s financial position, detailing assets, liabilities, and shareholders' equity at specific dates Consolidated Condensed Balance Sheets (Dollars in thousands) | Item | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | ASSETS: | | | | | | Total cash and cash equivalents | $49,778 | $35,744 | $14,034 | 39.26% | | Debt securities, available-for-sale | $253,320 | $258,327 | $(5,007) | (1.94)% | | Debt securities, held-to-maturity | $17,429 | $16,324 | $1,105 | 6.77% | | Loans, net | $1,700,902 | $1,709,811 | $(8,909) | (0.52)% | | TOTAL ASSETS | $2,307,800 | $2,307,394 | $406 | 0.02% | | LIABILITIES: | | | | | | Total deposits | $1,919,372 | $1,878,292 | $41,080 | 2.19% | | Long-term debt | $105,000 | $155,153 | $(50,153) | (32.32)% | | TOTAL LIABILITIES | $2,044,326 | $2,054,358 | $(10,032) | (0.49)% | | SHAREHOLDERS' EQUITY: | | | | | | TOTAL SHAREHOLDERS' EQUITY | $263,474 | $253,036 | $10,438 | 4.13% | Consolidated Condensed Statements of Income Details LCNB Corp.'s revenues, expenses, and net income over specific reporting periods Consolidated Condensed Statements of Income (Dollars in thousands, except per share data) | Item | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | TOTAL INTEREST INCOME | $25,939 | $26,965 | $51,255 | $51,723 | | TOTAL INTEREST EXPENSE | $8,398 | $11,748 | $17,415 | $22,611 | | NET INTEREST INCOME | $17,541 | $15,217 | $33,840 | $29,112 | | PROVISION FOR CREDIT LOSSES | $18 | $528 | $215 | $653 | | TOTAL NON-INTEREST INCOME | $5,248 | $4,080 | $10,470 | $8,009 | | TOTAL NON-INTEREST EXPENSE | $15,567 | $17,825 | $31,376 | $33,297 | | NET INCOME | $5,919 | $925 | $10,528 | $2,840 | | Basic EPS | $0.41 | $0.07 | $0.74 | $0.21 | | Diluted EPS | $0.41 | $0.07 | $0.74 | $0.21 | Consolidated Condensed Statements of Comprehensive Income Reports LCNB Corp.'s net income and other comprehensive income components, such as unrealized gains/losses on securities Consolidated Condensed Statements of Comprehensive Income (In thousands) | Item | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income | $5,919 | $925 | $10,528 | $2,840 | | Net unrealized gain (loss) on available-for-sale debt securities (net of tax) | $1,798 | $605 | $5,460 | $(682) | | Reclassification adjustment for net realized losses on sales of available-for-sale debt securities (net of tax) | — | — | — | $169 | | Other comprehensive income (loss), net of tax | $1,798 | $605 | $5,460 | $(513) | | TOTAL COMPREHENSIVE INCOME | $7,717 | $1,530 | $15,988 | $2,327 | Consolidated Condensed Statements of Shareholders' Equity Outlines changes in LCNB Corp.'s shareholders' equity, including net income, dividends, and other comprehensive income Changes in Shareholders' Equity (Six Months Ended June 30, 2025 vs. 2024, in thousands) | Item | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Balance at January 1 | $253,036 | $235,303 | | Net income | $10,528 | $2,840 | | Other comprehensive income (loss), net of taxes | $5,460 | $(513) | | Dividend Reinvestment and Stock Purchase Plan | $331 | $260 | | Stock issued for acquisition of Eagle Financial Bancorp, Inc. | — | $12,891 | | Repurchase of common stock | $(69) | — | | Common stock dividends | $(6,197) | $(5,974) | | Balance at June 30 | $263,474 | $245,214 | Consolidated Condensed Statements of Cash Flows Summarizes LCNB Corp.'s cash inflows and outflows from operating, investing, and financing activities Consolidated Condensed Statements of Cash Flows (Six Months Ended June 30, in thousands) | Item | 2025 | 2024 | | :--- | :--- | :--- | | NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES | $7,679 | $42,961 | | NET CASH FLOWS PROVIDED BY INVESTING ACTIVITIES | $21,363 | $33,051 | | NET CASH FLOWS USED IN FINANCING ACTIVITIES | $(15,008) | $(80,863) | | NET CHANGE IN CASH AND CASH EQUIVALENTS | $14,034 | $(4,851) | | CASH AND CASH EQUIVALENTS AT END OF PERIOD | $49,778 | $34,872 | Notes to Consolidated Condensed Financial Statements These notes provide detailed explanations and disclosures for the consolidated condensed financial statements, covering accounting policies, business combinations, investment securities, loans, deposits, borrowings, and other financial instruments, offering crucial context for understanding the reported figures NOTE 1 - BASIS OF PRESENTATION Explains the accounting principles, SEC rules, and management judgments used in preparing the financial statements - The financial statements are unaudited interim consolidated condensed statements prepared in accordance with U.S. GAAP and SEC rules, including all necessary adjustments for fair presentation[25][26] - Management's estimates and assumptions are critical to financial statement preparation, and actual results may differ[28] - Adoption of ASU 2023-09 (Income Tax Disclosures) and ASU 2024-01 (Stock Compensation) on January 1, 2025, did not have a material impact on the financial statements[31][32] NOTE 2 - BUSINESS COMBINATIONS Details the acquisition of Eagle Financial Bancorp, Inc., including consideration transferred and adjustments to acquired assets and liabilities - LCNB acquired Eagle Financial Bancorp, Inc. (EFBI) on April 12, 2024, to expand its presence in the Cincinnati market[35] EFBI Acquisition Summary (in thousands) | Item | June 30, 2024 (Originally Reported) | Adjustments | June 30, 2025 (Adjusted) | | :--- | :--- | :--- | :--- | | Fair value of total consideration transferred | $23,147 | $(787) | $22,360 | | Total identifiable assets acquired | $155,403 | $2,935 | $158,338 | | Total liabilities assumed | $146,256 | $(1) | $146,255 | | Goodwill Resulting From Merger | $14,000 | $(3,723) | $10,277 | - Management finalized the fair values of acquired assets and assumed liabilities as of April 11, 2025, within the 12-month post-acquisition period, leading to adjustments primarily related to EFBI's employee stock ownership plan and deferred taxes[39] - Direct expenses related to the EFBI acquisition were $140 thousand for the three and six months ended June 30, 2025, significantly lower than $2.3 million and $2.8 million for the same periods in 2024[41] NOTE 3 - INVESTMENT SECURITIES Provides a breakdown of LCNB Corp.'s debt and equity securities portfolio, including fair values and unrealized gains/losses Debt Securities Portfolio (in thousands) | Category | June 30, 2025 Fair Value | December 31, 2024 Fair Value | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Debt Securities, Available-for-Sale | $253,320 | $258,327 | $(5,007) | (1.94)% | | Debt Securities, Held-to-Maturity | $16,038 | $14,928 | $1,110 | 7.44% | | Total Debt Securities | $269,358 | $273,255 | $(3,897) | (1.42)% | - At June 30, 2025, LCNB's securities portfolio consisted of 158 securities, with 151 in an unrealized loss position, but no credit losses were determined to be present due to no credit quality deterioration[45][46] Equity Securities with Readily Determinable Fair Value (in thousands) | Category | June 30, 2025 Fair Value | December 31, 2024 Fair Value | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Mutual Funds | $1,308 | $1,265 | $43 | 3.40% | | Equity Securities | $97 | $98 | $(1) | (1.02)% | | Total | $1,405 | $1,363 | $42 | 3.08% | - Net gains recognized on equity securities with a readily determinable fair value were $22 thousand for the six months ended June 30, 2025, compared to net losses of $24 thousand for the same period in 2024[51] NOTE 4 - LOANS Details the composition of LCNB Corp.'s loan portfolio, non-accrual loans, and activity in the allowance for credit losses Major Classifications of Loans (in thousands) | Loan Type | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Commercial & industrial | $110,643 | $118,611 | $(7,968) | (6.72)% | | Commercial, secured by real estate | $908,966 | $912,272 | $(3,306) | (0.36)% | | Residential real estate | $460,288 | $457,099 | $3,189 | 0.70% | | Consumer | $18,476 | $20,498 | $(2,022) | (9.86)% | | Agricultural | $14,466 | $13,293 | $1,173 | 8.82% | | Loans, gross | $1,713,010 | $1,721,812 | $(8,802) | (0.51)% | | Less allowance for credit losses | $12,108 | $12,001 | $107 | 0.89% | | Loans, net | $1,700,902 | $1,709,811 | $(8,909) | (0.52)% | - Non-accrual loans totaled $4.5 million at June 30, 2025, remaining stable compared to December 31, 2024, with a ratio of non-accrual loans to total loans outstanding of 0.26%[55][56] Allowance for Credit Losses Activity (Six Months Ended June 30, in thousands) | Item | 2025 | 2024 | | :--- | :--- | :--- | | Balance, beginning of year | $12,001 | $10,525 | | Provision for (recovery of) credit losses | $225 | $(143) | | Losses charged off | $(148) | $(164) | | Recoveries | $30 | $101 | | Balance, end of period | $12,108 | $11,270 | - The ratio of the allowance for credit losses for loans to total loans increased slightly to 0.71% at June 30, 2025, from 0.70% at December 31, 2024[63] - Loan modifications for borrowers experiencing financial difficulty totaled $3.313 million for the six months ended June 30, 2025, primarily in commercial & industrial and commercial real estate loans, compared to $53 thousand in the prior year[81] NOTE 5 - PURCHASED CREDIT DETERIORATED LOANS Reports the accretable discount and related activity for purchased credit deteriorated loans Accretable Discount for PCD Loans (in thousands) | Item | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Accretable discount, beginning of period | $1,100 | $1,410 | $1,113 | $1,467 | | Accretable discount acquired through merger with EFBI | — | $253 | — | $253 | | Less loans transferred to held-for-sale | — | $396 | — | $396 | | Less accretion | $29 | $108 | $42 | $165 | | Accretable discount, end of period | $1,071 | $1,159 | $1,071 | $1,159 | NOTE 6 - AFFORDABLE HOUSING TAX CREDIT LIMITED PARTNERSHIP INVESTMENTS Summarizes LCNB Corp.'s investments in affordable housing tax credit limited partnerships and recognized tax benefits Affordable Housing Tax Credit Investments (in thousands) | Item | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net affordable housing tax credit investment | $14,105 | $12,906 | $1,199 | 9.29% | | Unfunded commitment | $5,263 | $4,426 | $837 | 18.91% | Tax Credits and Benefits Recognized (in thousands) | Item | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Tax credits and other tax benefits recognized | $487 | $445 | $972 | $888 | | Tax credit amortization expense | $401 | $368 | $801 | $740 | NOTE 7 - DEPOSITS Presents the composition of LCNB Corp.'s deposit base, including demand, interest-bearing, savings, and time deposits Composition of Deposits (in thousands) | Deposit Type | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Demand deposits (Noninterest-bearing) | $463,123 | $459,619 | $3,504 | 0.76% | | Interest-bearing demand and money fund deposits | $647,493 | $540,884 | $106,609 | 19.71% | | Savings deposits | $364,083 | $367,205 | $(3,122) | (0.85)% | | IRA and time certificates | $444,673 | $510,584 | $(65,911) | (12.91)% | | Total deposits | $1,919,372 | $1,878,292 | $41,080 | 2.19% | - The aggregate amount of time deposits in denominations of $250 thousand or more decreased to $93.4 million at June 30, 2025, from $107.8 million at December 31, 2024[90] NOTE 8 – BORROWINGS Details LCNB Corp.'s long-term debt, including term loans and FHLB advances, and available lines of credit Long-term Debt (in thousands) | Item | June 30, 2025 Amount | June 30, 2025 Weighted Average Interest Rate | December 31, 2024 Amount | December 31, 2024 Weighted Average Interest Rate | | :--- | :--- | :--- | :--- | :--- | | Term loan | $10,000 | 6.50% | $10,153 | 4.25% | | FHLB long-term advances | $95,000 | 4.83% | $145,000 | 4.62% | | Total | $105,000 | 4.99% | $155,153 | 4.60% | - Long-term debt decreased by $50.153 million (32.32%) from December 31, 2024, primarily due to the early payoff of $50 million in FHLB advances[92][204] - LCNB had no short-term borrowings outstanding at June 30, 2025, but maintained $10 million in a revolving line of credit and $105 million in short-term line of credit arrangements with correspondent financial institutions, all undrawn[93][94] NOTE 9 - LEASES Reports LCNB Corp.'s lease expenses, cash payments for operating leases, and key lease terms Total Lease Expense (in thousands) | Item | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Operating lease expense | $214 | $239 | $466 | $465 | | Short-term lease expense | — | $16 | $5 | $35 | | Variable lease expense | $16 | $16 | $36 | $20 | | Other | $9 | $11 | $20 | $18 | | Total lease expense | $239 | $282 | $527 | $538 | - As of June 30, 2025, LCNB reported $457 thousand in cash paid for operating leases, obtained $554 thousand in right-of-use assets, with a weighted average remaining lease term of 32.7 years and a weighted average discount rate of 3.71%[96] NOTE 10 – INCOME TAXES Provides a reconciliation of LCNB Corp.'s effective tax rate to the statutory rate, detailing contributing factors Effective Tax Rate Reconciliation | Item | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Statutory tax rate | 21.0% | 21.0% | 21.0% | 21.0% | | Increase (decrease) resulting from: | | | | | | Tax exempt interest | (0.4)% | (2.8)% | (0.5)% | (1.7)% | | Tax exempt income on bank-owned life insurance | (1.0)% | (7.6)% | (1.2)% | (4.4)% | | Captive insurance premium income | (0.9)% | (6.6)% | (1.0)% | (4.3)% | | Affordable housing tax credit limited partnerships | (1.2)% | (8.2)% | (1.3)% | (4.7)% | | Nondeductible merger-related expenses | 0.3% | 5.4% | 0.2% | 3.9% | | Other, net | 0.0% | 0.8% | 0.0% | 0.6% | | Effective tax rate | 17.8% | 2.0% | 17.2% | 10.4% | NOTE 11 - COMMITMENTS AND CONTINGENT LIABILITIES Outlines LCNB Corp.'s off-balance-sheet credit risk, including loan commitments and capital expenditure commitments Off-Balance-Sheet Credit Risk (in thousands) | Item | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Commercial loans commitments | $14,528 | $7,881 | $6,647 | 84.34% | | Other loans (fixed rate) commitments | $15,376 | $21,613 | $(6,237) | (28.86)% | | Unused lines of credit (adjustable rate) | $219,138 | $231,046 | $(11,908) | (5.15)% | | Total commitments | $280,887 | $290,512 | $(9,625) | (3.31)% | Allowance for Credit Losses on Off-Balance Sheet Exposures (in thousands) | Item | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Balance, beginning of period | $297 | $329 | $263 | $281 | | Acquisition of Eagle Financial Bancorp, Inc. | — | $48 | — | $48 | | Provision for (recovery of) credit losses | $(45) | $(15) | $(11) | $33 | | Balance, end of period | $252 | $362 | $252 | $362 | - LCNB had outstanding capital expenditure commitments of approximately $60 thousand as of June 30, 2025, and believes it has sufficient liquidity to fund these and lending commitments[104][105] NOTE 12 – ACCUMULATED OTHER COMPREHENSIVE LOSS Details changes in LCNB Corp.'s accumulated other comprehensive loss, primarily from available-for-sale debt securities Changes in Accumulated Other Comprehensive Loss (in thousands) | Item | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Balance at beginning of period | $(15,527) | $(23,454) | $(19,189) | $(22,336) | | Other comprehensive income (loss), net of taxes | $1,798 | $605 | $5,460 | $(682) | | Reclassifications | — | — | — | $169 | | Balance at end of period | $(13,729) | $(22,849) | $(13,729) | $(22,849) | - The improvement in AOCL was primarily driven by net unrealized gains on available-for-sale debt securities, net of taxes, which were $5.460 million for the six months ended June 30, 2025, compared to a loss of $682 thousand in the prior year[106] NOTE 13 – RETIREMENT PLANS Describes LCNB Corp.'s defined benefit and 401(k) retirement plans, including changes and associated costs - LCNB's noncontributory defined benefit multi-employer retirement plan was hard-frozen on March 1, 2025, meaning no further benefit increases will accrue[108] - Employees previously excluded from 401(k) employer matches due to defined benefit plan participation began receiving matches on March 1, 2025[109] Retirement Plan Costs (in thousands) | Plan Type | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Qualified noncontributory defined benefit retirement plan | $316 | $327 | $632 | $654 | | 401(k) plan | $223 | $200 | $483 | $420 | NOTE 14 – STOCK BASED COMPENSATION Details LCNB Corp.'s stock-based compensation plans, including restricted stock awards activity and unrecognized expense - The 2025 Ownership Incentive Plan, ratified on May 19, 2025, replaced the 2015 Plan, authorizing up to 600,000 shares for stock-based awards[113] Restricted Stock Awards Activity (Six Months Ended June 30) | Item | 2025 Shares | 2025 Weighted Average Grant Date Fair Value | 2024 Shares | 2024 Weighted Average Grant Date Fair Value | | :--- | :--- | :--- | :--- | :--- | | Nonvested at January 1 | 84,593 | $16.59 | 79,017 | $17.94 | | Granted | 38,950 | $14.60 | 41,703 | $13.87 | | Vested | (43,647) | $16.18 | (36,127) | $16.39 | | Nonvested at June 30 | 79,896 | $15.84 | 84,593 | $16.59 | - Unrecognized compensation expense for restricted stock awards was $1.1 million at June 30, 2025, expected to be recognized over 3.3 years[117] NOTE 15 – EARNINGS PER COMMON SHARE Presents LCNB Corp.'s basic and diluted earnings per common share calculations Earnings Per Common Share (Dollars in thousands, except share and per share data) | Item | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income allocated to common shareholders | $5,887 | $919 | $10,468 | $2,822 | | Adjusted weighted average number of shares outstanding | 14,085,764 | 13,948,671 | 14,070,417 | 13,526,261 | | Basic EPS | $0.41 | $0.07 | $0.74 | $0.21 | | Diluted EPS | $0.41 | $0.07 | $0.74 | $0.21 | NOTE 16 - FAIR VALUE MEASUREMENTS Explains the categorization of fair value measurements and provides a breakdown of assets measured at fair value - Fair value measurements are categorized into three levels based on the observability of inputs: Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[125] Fair Value Measurements of Assets (in thousands) | Item | June 30, 2025 Fair Value | Level 1 | Level 2 | Level 3 | | :--- | :--- | :--- | :--- | :--- | | Equity securities with readily determinable fair value | $1,405 | $1,405 | — | — | | Debt securities, available-for-sale | $253,320 | $64,522 | $188,798 | — | | Individually evaluated collateral dependent loans (nonrecurring) | $2,723 | — | — | $2,723 | | Total recurring fair value measurements | $254,725 | $65,927 | $188,798 | — | | Total nonrecurring fair value measurements | $2,723 | — | — | $2,723 | - The fair value of loans, net, was estimated at $1.643 billion at June 30, 2025, primarily using Level 3 unobservable inputs, consistent with the methodology for recent acquisitions[128][129] NOTE 17 - SEGMENT INFORMATION States that LCNB Corp. operates as a single reportable segment, focusing on banking operations - LCNB Corp. operates as a single reportable segment, primarily banking operations, with all activities being domestic[133] - Segment performance is evaluated using consolidated net income, with key revenue drivers being loans, investments, fiduciary income, and deposit service charges, while significant expenses include interest expense, credit loss provisions, and payroll[133][134] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on LCNB Corp.'s financial performance and condition, discussing forward-looking statements, critical accounting estimates, and detailed analyses of results of operations, net interest income, credit losses, non-interest income/expense, income taxes, financial condition, regulatory capital, and liquidity Forward Looking Statements Highlights that the report contains forward-looking statements subject to various risks and uncertainties - The report contains forward-looking statements regarding LCNB's financial condition, operations, and future performance, which are subject to various risks and uncertainties[137][138] - Key risk factors include the success of business strategies, integration of acquisitions, potential loan charge-offs, competitive pressures, changes in interest rates, general economic conditions, regulatory instability, difficulties in growing loan/deposit balances, geopolitical relations, technology/data security breaches, adverse weather, and government intervention in the financial system[139] Critical Accounting Estimates Discusses key accounting estimates requiring significant management judgment, such as business combinations and credit losses - Critical accounting estimates involve significant management judgment and are susceptible to revision, including those for business combinations (fair value of acquired assets/liabilities, goodwill), allowance for credit losses (collectability of loans), accounting for intangibles (goodwill impairment, core deposit intangible amortization), and fair value accounting for debt securities (unrealized losses)[141][142][144][149][151] Results of Operations Overview Provides a high-level summary of LCNB Corp.'s financial performance, including net income and net interest margin Key Financial Highlights (Dollars in thousands, except per share data) | Item | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income | $5,919 | $925 | $10,528 | $2,840 | | Basic and Diluted EPS | $0.41 | $0.07 | $0.74 | $0.21 | | Net interest income | $17,541 | $15,217 | $33,840 | $29,112 | | Provision for credit losses | $18 | $528 | $215 | $653 | | Non-interest income | $5,248 | $4,080 | $10,470 | $8,009 | | Non-interest expense | $15,567 | $17,825 | $31,376 | $33,297 | - Results for 2024 periods were significantly impacted by expenses from the EFBI and CNNB acquisitions[154] - LCNB's tax equivalent net interest margin for the first six months of 2025 was 3.36%, up from 2.80% in the same period last year[155] Net Interest Income Analysis Analyzes the components of LCNB Corp.'s net interest income, including interest rates and average balances Net Interest Income (Taxable-Equivalent Basis, in thousands) | Item | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net interest income | $17,541 | $15,217 | $33,840 | $29,112 | | Net interest rate spread | 2.94% | 2.27% | 2.82% | 2.19% | | Net interest margin | 3.47% | 2.86% | 3.36% | 2.80% | - For the three months ended June 30, 2025, total interest income decreased by $1.0 million, mainly due to a $99.3 million decrease in average loan balances, partially offset by a 7 basis point increase in the average loan rate[167][168] - Total interest expense decreased by $3.3 million due to a $150.6 million decrease in average interest-bearing liabilities and a 61 basis point decrease in the average rate paid[167][168] - For the six months ended June 30, 2025, total interest income decreased by $463 thousand, primarily from a $50.0 million decrease in average loan balances, partially offset by an 11 basis point increase in the average loan rate[176][177] - Total interest expense decreased by $5.2 million due to a $93.2 million decrease in average interest-bearing liabilities and a 50 basis point decrease in the average rate paid[176][177] Provision and Allowance For Credit Losses Analysis Examines LCNB Corp.'s provision for credit losses and net charge-offs, including factors influencing changes Provision for Credit Losses (in thousands) | Item | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Total provision for credit losses | $18 | $528 | $215 | $653 | | Provision for credit losses on loans | $63 | $542 | $225 | $620 | | Recovery (provision) on off-balance-sheet credit exposures | $(45) | $(16) | $(11) | $33 | - The 2024 provisions included $763 thousand for non-PCD loans from the EFBI merger and a $1.2 million increase for a commercial real estate loan[183][184] - The 2025 provisions benefited from a reversal of this $1.2 million increase due to a contract to sell the property[183][184] Net Charge-offs (in thousands) | Period | Net Charge-offs | | :--- | :--- | | 3 Months Ended Jun 30, 2025 | $79 | | 3 Months Ended Jun 30, 2024 | $18 | | 6 Months Ended Jun 30, 2025 | $118 | | 6 Months Ended Jun 30, 2024 | $63 | Non-Interest Income Analysis Reviews the sources and changes in LCNB Corp.'s non-interest income, such as fiduciary income and loan sales Non-Interest Income (in thousands) | Item | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Fiduciary income | $2,262 | $2,067 | $4,426 | $4,040 | | Service charges and fees on deposit accounts | $1,884 | $1,537 | $3,650 | $2,921 | | Net gains from sales of loans | $615 | $50 | $1,456 | $572 | | Other operating income (loss) | $134 | $85 | $239 | $31 | | Total non-interest income | $5,248 | $4,080 | $10,470 | $8,009 | - Fiduciary income increased due to higher fair values of managed trust and brokerage assets and new Wealth Management accounts[189] - Service charges and fees on deposit accounts rose due to increased Insured Cash Sweep product fees and overdraft fees[189] - Net gains from loan sales improved significantly, as 2024 included an $843 thousand pre-tax loss on the sale of below-market rate loans acquired from CNNB[189] Non-Interest Expense Analysis Analyzes LCNB Corp.'s non-interest expenses, including salaries, marketing, and merger-related costs Non-Interest Expense (in thousands) | Item | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Salaries and employee benefits | $8,872 | $9,006 | $18,044 | $17,560 | | Marketing | $281 | $210 | $596 | $384 | | Merger-related expenses | $140 | $2,320 | $140 | $3,095 | | Other non-interest expense | $2,892 | $2,938 | $5,792 | $5,560 | | Total non-interest expense | $15,567 | $17,825 | $31,376 | $33,297 | - Merger-related expenses decreased substantially from $2.3 million (3 months) and $3.1 million (6 months) in 2024 to $140 thousand for both periods in 2025[158][194] - Salaries and employee benefits increased for the six-month period due to wage/benefit increases, EFBI acquisition, and higher health insurance costs[194] - Marketing expenses increased due to a new brand awareness campaign[194] Income Taxes Analysis Explains LCNB Corp.'s effective tax rate and the factors causing deviations from the statutory rate Effective Tax Rate | Period | 2025 | 2024 | | :--- | :--- | :--- | | 3 Months Ended Jun 30 | 17.8% | 2.0% | | 6 Months Ended Jun 30 | 17.2% | 10.4% | - The difference from the 21% statutory rate is attributed to tax-exempt interest income, bank-owned life insurance earnings, captive insurance premium income, and affordable housing tax credits[192] - The lower 2024 rates were due to tax-exempt items not decreasing proportionally to overall earnings, partially offset by non-deductible merger expenses[192] Financial Condition Analysis Discusses changes in LCNB Corp.'s balance sheet items, including loans, deposits, and long-term debt Balance Sheet Changes (June 30, 2025 vs. December 31, 2024, in thousands) | Item | June 30, 2025 | December 31, 2024 | Difference ($) | Difference (%) | | :--- | :--- | :--- | :--- | :--- | | Total cash and cash equivalents | $49,778 | $35,744 | $14,034 | 39.26% | | Debt securities, available-for-sale | $253,320 | $258,327 | $(5,007) | (1.94)% | | Loans, net | $1,700,902 | $1,709,811 | $(8,909) | (0.52)% | | Total deposits | $1,919,372 | $1,878,292 | $41,080 | 2.19% | | Long-term debt | $105,000 | $155,153 | $(50,153) | (32.32)% | | Total Shareholders' Equity | $263,474 | $253,036 | $10,438 | 4.13% | - Loans, net, decreased primarily due to reductions in commercial and industrial loans, non-owner occupied commercial real estate loans, and multi-family commercial real estate loans, partially offset by an increase in owner-occupied commercial real estate loans[197] - Commercial real estate loans constitute approximately 65% of the total loan portfolio at June 30, 2025[201] Commercial Real Estate Loans by Property-Type (June 30, 2025, in thousands) | Property Type | Amount | % of Total | | :--- | :--- | :--- | | Multi-family & Multi-family Construction | $269,386 | 26% | | Retail | $158,584 | 15% | | Office | $123,749 | 12% | | Hotel/Motel | $95,187 | 9% | | Mixed Use | $94,889 | 9% | | Other | $67,603 | 7% | | Self storage | $51,976 | 5% | | Warehouse (one tenant) | $44,396 | 4% | | Farmland | $36,173 | 3% | | Light Industrial | $31,266 | 3% | | Warehouse (more than one tenant) | $25,096 | 2% | | Healthcare Facilities | $19,120 | 2% | | Manufacturing | $18,829 | 2% | | Dental | $11,832 | 1% | | Total | $1,048,086 | 100% | - Most commercial real estate loans are concentrated in Southwest and South-Central Ohio and Northern Kentucky, with Franklin County, Ohio, being the largest single concentration at 28%[206] Regulatory Capital Analysis Presents LCNB Corp.'s regulatory capital ratios and its status as a 'well-capitalized' institution Regulatory Capital Ratios (June 30, 2025 vs. December 31, 2024) | Ratio | June 30, 2025 | December 31, 2024 | Minimum Requirement with Capital Conservation Buffer | Well Capitalized Threshold | | :--- | :--- | :--- | :--- | :--- | | Common Equity Tier 1 Capital to risk-weighted assets | 10.21% | 9.94% | 7.0% | 6.5% | | Tier 1 Capital to risk-weighted assets | 10.21% | 9.94% | 8.5% | 8.0% | | Total Capital to risk-weighted assets | 10.88% | 10.60% | 10.5% | 10.0% | | Leverage Ratio | 8.32% | 7.94% | NA | 5.0% | - LCNB and its Bank were categorized as "well-capitalized" as of the most recent regulatory notification, and management believes this status has not changed[209] - LCNB did not qualify to use the simplified Community Bank Leverage Ratio framework for regulatory capital calculations[211] Liquidity Analysis Assesses LCNB Corp.'s liquidity position, including funding sources and available borrowing capacity - Primary funding sources include customer deposits, FHLB borrowings, and $115.0 million in line of credit arrangements with correspondent banks[212] - As of June 30, 2025, LCNB had approximately $148.1 million in remaining borrowing capacity with the FHLB and an additional $115.0 million available through correspondent bank lines of credit[213] - Off-balance sheet insured cash sweeps immediately available for liquidity totaled approximately $60.9 million[212] - Commitments to extend credit totaled $280.9 million at June 30, 2025, which management believes can be funded with existing liquidity[215] Item 3. Quantitative and Qualitative Disclosures about Market Risks LCNB Corp. primarily faces market risk from interest rate fluctuations, which it manages through asset/liability strategies without using derivatives for hedging. Both Interest Rate Sensitivity Analysis (IRSA) and Economic Value of Equity (EVE) analysis indicate that changes in interest rates are within acceptable limits - LCNB's primary market risk is interest rate risk, managed through asset/liability strategies without the use of derivatives for hedging[217] Interest Rate Sensitivity Analysis (IRSA) - Effect on NII (in thousands) | Rate Shock Scenario | $ Change in NII | % Change in NII | Limits | | :--- | :--- | :--- | :--- | | Up 300 bps | $(1,010) | (1.16)% | 15% | | Up 200 bps | $(462) | (0.53)% | 10% | | Up 100 bps | $(42) | (0.05)% | 5% | | Down 100 bps | $95 | 0.11% | 5% | | Down 200 bps | $519 | 0.60% | 10% | | Down 300 bps | $895 | 1.03% | 15% | Economic Value of Equity (EVE) Analysis (in thousands) | Rate Shock Scenario | $ Change in EVE | % Change in EVE | Limits | | :--- | :--- | :--- | :--- | | Up 300 bps | $(33,470) | (13.39)% | 25% | | Up 200 bps | $(18,935) | (7.57)% | 20% | | Up 100 bps | $(4,113) | (1.65)% | 15% | | Down 100 bps | $20,113 | 8.04% | 15% | | Down 200 bps | $32,777 | 13.11% | 20% | | Down 300 bps | $49,519 | 19.80% | 25% | Item 4. Controls and Procedures LCNB Corp.'s CEO and CFO evaluated the effectiveness of disclosure controls and procedures, concluding they were effective as of June 30, 2025. No material changes in internal control over financial reporting occurred during the reporting period - The CEO and CFO concluded that LCNB's disclosure controls and procedures were effective as of June 30, 2025[222] - No material changes in internal control over financial reporting occurred during the period covered by the report[223] PART II. OTHER INFORMATION Contains additional information not covered in the financial statements, including legal, risk, and equity matters Item 1. Legal Proceedings LCNB Corp. is not a party to any material pending legal proceedings, apart from routine litigation incidental to its business, and none of its property is subject to material proceedings - LCNB is not involved in any material pending legal proceedings, other than routine business litigation[226] Item 1A. Risk Factors This section refers readers to the comprehensive list of risk factors previously disclosed in LCNB's 2024 Annual Report on Form 10-K, advising careful consideration of these factors - Readers should refer to the risk factors disclosed in LCNB's Form 10-K for the year ended December 31, 2024, for a comprehensive understanding of potential risks[227] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds LCNB Corp. did not sell any unregistered securities during the reporting period. The company repurchased 4,125 common shares in April 2025 under its Issuer Stock Repurchase Plan, which authorizes up to 500,000 shares - LCNB did not sell any unregistered securities during the period[228] - The Board authorized an Issuer Stock Repurchase Plan on February 27, 2023, allowing repurchase of up to 500,000 common shares[231] Common Share Repurchases (Three Months Ended June 30, 2025) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs | | :--- | :--- | :--- | :--- | :--- | | April 1 - 30, 2025 | 4,125 | $16.59 | 4,125 | 310,922 | | May 1 - 31, 2025 | — | $— | — | 310,922 | | June 1 - 30, 2025 | — | $— | — | 310,922 | Item 3. Defaults Upon Senior Securities This section states that LCNB Corp. had no defaults upon senior securities during the reporting period - There were no defaults upon senior securities during the reporting period[232] Item 4. Mine Safety Disclosures This section indicates that mine safety disclosures are not applicable to LCNB Corp - Mine safety disclosures are not applicable to LCNB Corp[233] Item 5. Other Information This section states that no directors or officers adopted, modified, or terminated any "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" during the three months ended June 30, 2025 - No directors or officers reported adopting, modifying, or terminating Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2025[234] Item 6. Exhibits This section lists all exhibits filed as part of the Form 10-Q, including merger agreements, articles of incorporation, certifications, and financial information formatted in Extensible Business Reporting Language (XBRL) - The exhibits include merger agreements (Cincinnati Bancorp, Inc. and Eagle Financial Bancorp, Inc.), corporate governance documents (Amended and Restated Articles of Incorporation, Code of Regulations), Sarbanes-Oxley Act certifications (CEO and CFO), and financial information in XBRL format[236] SIGNATURES Confirms the official submission of the report with signatures from key executive officers - The report is signed by Eric J. Meilstrup (CEO and President) and Robert C. Haines, II (EVP and CFO) on August 6, 2025[240]