Market Overview

LCNB Corp. Reports Financial Results for the Three and Nine Months Ended September 30, 2018

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LCNB Corp. ("LCNB") (NASDAQ:LCNB) today announced net income of
$4,201,000 (total basic and diluted earnings per share of $0.32) and
$9,652,000 (total basic and diluted earnings per share of $0.84) for the
three and nine months ended September 30, 2018, respectively. This
compares to net income of $3,106,000 (total basic and diluted earnings
per share of $0.31) and $9,355,000 (total basic and diluted earnings per
share of $0.93) for the same three and nine month periods in 2017. Items
significantly affecting net income during the 2018 periods were:

  • expenses relating to the merger with Columbus First Bancorp, Inc.
    ("Columbus First") totaled $346,000 and $1,959,000 for the three and
    nine month periods, respectively,
  • a $645,000 premises impairment charge recognized during the second
    quarter 2018, and
  • a reduction in LCNB's federal tax rate from 34% to 21% as a result of
    the Tax Cuts and Jobs Act that was signed into law on December 22,
    2017.

Commenting on the financial results, LCNB Chief Executive Officer Steve
Foster said, "We are pleased to report our financial results for the
three and nine months ended September 30, 2018. Net income for the three
and nine months ended September 30, 2018 was greater than the comparable
periods in 2017, despite merger-related expenses recognized for the
acquisition of Columbus First. Return of average assets equaled 1.03%
and 0.89% for the three and nine month periods in 2018. Eliminating
merger-related expenses from the income statement produces pro-forma net
income of $4,475,000 and $11,257,000 for the three and nine month
periods in 2018, respectively. Pro-forma return on average asset ratios
for the three and nine month periods were 1.09% and 1.04%, respectively.
The pro-forma results equate to respective increases of $1,369,000 and
$1,902,000 in net income over the same three and nine month periods in
2017."

Mr. Foster continued, "As previously announced, Eric J. Meilstrup was
promoted from Executive Vice President to President of LCNB National
Bank and LCNB Corp., effective October 1, 2018. Eric and I have worked
closely over the years and he has been a strong contributor to LCNB. I
look forward to continuing to work with him in his new position."

Net interest income for the three and nine months ended September 30,
2018 was, respectively, $2,956,000 and $4,452,000 greater than the
comparable periods in 2017, primarily due to growth in LCNB's loan
portfolio, partially offset by a decrease in average investment
securities and increases in deposits and long-term borrowings. Also
offsetting the growth in the loan portfolio was a market-driven increase
in average rates paid on deposits. Loans, deposits, and long-term
borrowings obtained through the merger with Columbus First were a
significant component of LCNB's loan portfolio growth and the increases
in deposits and long-term borrowings.

The provision for loan losses for the three and nine months ended
September 30, 2018 was, respectively, $671,000 and $737,000 greater than
the comparable periods in 2017. Non-accrual loans and loans past due 90
days or more and still accruing interest decreased $361,000, from
$2,965,000 or 0.35% of total loans at December 31, 2017, to $2,604,000
or 0.22% of total loans at September 30, 2018.

Non-interest income for the three and nine months ended September 30,
2018 was, respectively, $262,000 and $469,000 greater than the
comparable periods in 2017 primarily due to increases in fiduciary
income and service charges and fees on deposit accounts, partially
offset by a decrease in net gains (losses) from sales of securities.

Non-interest expense for the three and nine months ended September 30,
2018 was, respectively, $1,645,000 and $5,326,000 greater than the
comparable periods in 2017 primarily due to increases in salaries and
employee benefits and merger-related expenses. Also contributing to the
increase during the nine month period was an impairment charge
recognized on one of LCNB's office buildings. Merger-related expenses
increased due to costs connected to the acquisition of Columbus First.

The merger with Columbus First was accounted for using the acquisition
method of accounting and, accordingly, assets acquired, liabilities
assumed, and consideration paid were recorded at their estimated fair
values as of the merger date. Any changes in the estimated fair values
based on new information about facts that existed at the merger date
will be recognized in the period the adjustment is identified.

LCNB Corp. is a financial holding company headquartered in Lebanon,
Ohio. Through its subsidiary, LCNB National Bank (the "Bank"), it serves
customers and communities in Southwest and South Central Ohio. A
financial institution with a long tradition for building strong
relationships with customers and communities, the Bank offers convenient
banking locations in Butler, Clermont, Clinton, Fayette, Franklin,
Hamilton, Montgomery, Preble, Ross, and Warren Counties, Ohio. The Bank
continually strives to exceed customer expectations and provides an
array of services for all personal and business banking needs including
checking, savings, online banking, personal lending, business lending,
agricultural lending, business support, deposit and treasury, investment
services, trust and IRAs and stock purchases. LCNB Corp. common shares
are traded on the NASDAQ Capital Market Exchange® under the symbol
"LCNB." Learn more about LCNB Corp. at www.lcnb.com.

Certain statements made in this news release regarding LCNB's
financial condition, results of operations, plans, objectives, future
performance and business, are "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended,
Section 21E of the Securities Exchange Act of 1934, as amended, and the
Private Securities Litigation Reform Act of 1995.
These
forward-looking statements are identified by the fact they are not
historical facts and include words such as "anticipate", "could", "may",
"feel", "expect", "believe", "plan", and similar expressions.
Please
refer to LCNB's Annual Report on Form 10-K for the year ended December
31, 2017, as well as its other filings with the SEC, for a more detailed
discussion of risks, uncertainties and factors that could cause actual
results to differ from those discussed in the forward-looking statements.

These forward-looking statements reflect management's current
expectations based on all information available to management and its
knowledge of LCNB's business and operations.
Additionally, LCNB's
financial condition, results of operations, plans, objectives, future
performance and business are subject to risks and uncertainties that may
cause actual results to differ materially.
These factors include,
but are not limited to:

1. the success, impact, and timing of the implementation of
LCNB's business strategies;

2. LCNB's ability to integrate recent and future acquisitions,
including the recent merger with Columbus First, may be unsuccessful, or
may be more difficult, time-consuming or costly than expected;

3. LCNB may incur increased charge-offs in the future;

4. LCNB may face competitive loss of customers;

5. changes in the interest rate environment may have results
on LCNB's operations materially different from those anticipated by
LCNB's market risk management functions;

6. changes in general economic conditions and increased
competition could adversely affect LCNB's operating results;

7. changes in other regulations and government policies
affecting bank holding companies and their subsidiaries, including
changes in monetary policies, could negatively impact LCNB's operating
results;

8. LCNB may experience difficulties growing loan and deposit
balances;

9. the current economic environment poses significant
challenges for us and could adversely affect our
financial
condition and results of operations;

10. deterioration in the financial condition of the U.S.
banking system may impact the valuations of investments LCNB has made in
the securities of other financial institutions resulting in either
actual losses or other than temporary impairments on such investments;

11. difficulties with technology or data security breaches,
including cyberattacks, that could negatively affect LCNB's ability to
conduct business and its relationships with customers, vendors, and
others; and

12. government intervention in the U.S. financial system,
including the effects of recent legislative, tax, accounting and
regulatory actions and reforms, including the Dodd-Frank Wall Street
Reform and Consumer Protection Act (the "Dodd-Frank Act"), the Jumpstart
Our Business Startups Act, the Consumer Financial Protection Bureau, the
capital ratios of Basel III as adopted by the federal banking
authorities, and the Tax Cuts and Jobs Act.

Forward-looking statements made herein reflect management's
expectations as of the date such statements are made.
Such
information is provided to assist shareholders and potential investors
in understanding current and anticipated financial operations of LCNB
and is included pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995.
LCNB undertakes no
obligation to update any forward-looking statement to reflect events or
circumstances that arise after the date such statements are made.

   

LCNB Corp. and Subsidiaries

Financial Highlights

(Dollars in thousands, except per share amounts)

(Unaudited)

 
Three Months Ended Nine Months Ended
9/30/2018   6/30/2018   3/31/2018   12/31/2017   9/30/2017 9/30/2018   9/30/2017

Condensed Income Statement

Interest income $ 15,070 12,538 11,142 11,610 11,055 38,750 32,853
Interest expense 1,967   1,170   954   953   908   4,091   2,646  
Net interest income 13,103 11,368 10,188 10,657 10,147 34,659 30,207
Provision for loan losses 659   224   79   (10 ) (12 ) 962   225  
Net interest income after provision 12,444 11,144 10,109 10,667 10,159 33,697 29,982
Non-interest income 2,921 2,791 2,636 2,579 2,659 8,348 7,879
Non-interest expense 10,317   10,711   9,549   8,612   8,672   30,577   25,251  
Income before income taxes 5,048 3,224 3,196 4,634 4,146 11,468 12,610
Provision for income taxes 847   486   483   1,017   1,040   1,816   3,255  
Net income $ 4,201   2,738   2,713   3,617   3,106   9,652   9,355  
Amort/Accret income on acquired loans $ 198 44 96 606 90 340 490
Amort/Accret expenses on acquired interest-bearing liabilities $ 214 214
Tax-equivalent net interest income $ 13,281 11,549 10,375 11,062 10,569 35,203 31,487
 

Per Share Data

Dividends per share $ 0.16 0.16 0.16 0.16 0.16 0.48 0.48
Basic earnings per common share $ 0.32 0.25 0.27 0.37 0.31 0.84 0.93
Diluted earnings per common share $ 0.32 0.25 0.27 0.36 0.31 0.84 0.93
Book value per share $ 16.05 15.97 14.80 14.99 14.94 16.05 14.94
Tangible book value per share $ 11.18 11.14 11.47 11.64 11.57 11.18 11.57
Weighted average common shares outstanding:
Basic 13,285,203 11,099,485 10,020,611 10,013,777 10,008,807 11,480,390 10,002,812
Diluted 13,290,665 11,105,014 10,028,588 10,020,566 10,015,204 11,486,051 10,009,942
Shares outstanding at period end 13,304,976 13,299,235 10,041,152 10,023,059 10,018,507 13,304,976 10,018,507
 

Selected Financial Ratios

Return on average assets 1.03 % 0.78 % 0.85 % 1.11 % 0.94 % 0.89 % 0.95 %
Return on average equity 7.76 % 6.46 % 7.33 % 9.49 % 8.22 % 7.23 % 8.48 %
Dividend payout ratio 50.00 % 64.00 % 59.26 % 43.24 % 51.61 % 57.14 % 51.61 %
Net interest margin (tax equivalent) 3.60 % 3.63 % 3.59 % 3.73 % 3.52 % 3.61 % 3.53 %
Efficiency ratio (tax equivalent) 63.68 % 74.69 % 73.39 % 63.13 % 65.56 % 70.21 % 64.14 %
 

Selected Balance Sheet Items

Cash and cash equivalents $ 19,812 24,901 17,494 25,386 21,203
Investment securities and stock 299,786 311,047 310,009 317,413 353,634
 

Loans:

Commercial and industrial $ 78,002 81,778 37,118 36,057 36,049
Commercial, secured by real estate 704,987 705,978 542,890 527,947 510,158
Residential real estate 347,920 339,435 246,487 251,582 253,530
Consumer 17,505 17,705 17,176 17,450 17,956
Agricultural 13,280 13,390 12,217 15,194 15,677
Other, including deposit overdrafts 498 583 506 539 570
Deferred net origination costs 133   229   263   291   264  
Loans, gross 1,162,325 1,159,098 856,657 849,060 834,204
Less allowance for loan losses 4,016   3,603   3,529   3,403   3,407  
Loans, net $ 1,158,309   1,155,495   853,128   845,657   830,797  
                 
Total earning assets $ 1,465,787 1,471,923 1,168,204 1,170,700 1,193,648
Total assets 1,620,134 1,631,442 1,288,791 1,295,638 1,314,319
Total deposits 1,371,023 1,380,884 1,123,463 1,085,821 1,121,523
Short-term borrowings 0 0 0 47,000 30,000
 
 
Three Months Ended Nine Months Ended
9/30/2018 6/30/2018 3/31/2018 12/31/2017 9/30/2017 9/30/2018 9/30/2017

Selected Balance Sheet Items, continued

Long-term debt 23,079 27,085 6,219 303 363
Total shareholders' equity 213,515 212,366 148,584 150,271 149,713
Equity to assets ratio 13.18 % 13.02 % 11.53 % 11.60 % 11.39 %
Loans to deposits ratio 84.78 % 83.94 % 76.25 % 78.20 % 74.38 %
 
Tangible common equity (TCE) $ 148,733 147,705 114,801 116,289 115,527
Tangible common assets (TCA) 1,555,352 1,566,781 1,255,008 1,261,656 1,280,133
TCE/TCA 9.56 % 9.43 % 9.15 % 9.22 % 9.02 %
 

Selected Average Balance Sheet Items

Cash and cash equivalents $ 25,920 27,319 21,820 18,787 21,609 25,011 27,289
Investment securities and stock 304,112 306,366 313,689 332,225 363,039 308,020 367,598
 
Loans $ 1,155,846 961,726 853,152 840,526 824,183 991,350 816,361
Less allowance for loan losses 3,622   4,245   3,401   3,407   3,324   3,757   3,404  
Net loans $ 1,152,224 957,481 849,751 837,119 820,859 987,593 812,957
 
Total earning assets $ 1,465,510 1,276,176 1,170,708 1,175,180 1,190,860 1,305,211 1,193,800
Total assets 1,623,016 1,409,698 1,292,375 1,295,293 1,313,476 1,442,896 1,314,476
Total deposits 1,367,950 1,212,104 1,114,979 1,096,966 1,133,072 1,232,599 1,135,605
Short-term borrowings 1,833 3,491 14,086 34,440 17,936 6,425 20,450
Long-term debt 25,757 13,252 2,255 323 383 13,841 453
Total shareholders' equity 214,769 170,077 150,058 151,154 150,032 178,539 147,530
Equity to assets ratio 13.23 % 12.06 % 11.61 % 11.67 % 11.42 % 12.37 % 11.22 %
Loans to deposits ratio 84.49 % 79.34 % 76.52 % 76.62 % 72.74 % 80.43 % 71.89 %
 

Asset Quality

Net charge-offs (recoveries) $ 245 150 (47 ) (7 ) (36 ) 348 394
Other real estate owned 35 35 35
 
Non-accrual loans 2,603 4,065 2,744 2,965 4,387 2,603 4,387
Loans past due 90 days or more and still accruing 1   5   146     95   1   95  
Total nonperforming loans $ 2,604 4,070 2,890 2,965 4,482 2,604 4,482
 
Net charge-offs (recoveries) to average loans 0.08 % 0.06 % (0.02 )% 0.00 % (0.02 )% 0.05 % 0.06 %
Allowance for loan losses to total loans 0.35 % 0.31 % 0.41 % 0.40 % 0.41 % 0.35 % 0.41 %
Nonperforming loans to total loans 0.22 % 0.35 % 0.34 % 0.35 % 0.54 % 0.22 % 0.54 %
Nonperforming assets to total assets 0.16 % 0.25 % 0.22 % 0.23 % 0.34 % 0.16 % 0.34 %
 

Assets Under Management

LCNB Corp. total assets $ 1,620,134 1,631,442 1,288,791 1,295,638 1,314,319
Trust and investments (fair value) 386,582 370,587 359,766 362,486 326,642
Mortgage loans serviced 115,647 114,536 90,630 92,818 96,241
Cash management 36,502 48,369 72,372 84,344 77,780
Brokerage accounts (fair value) 247,175   238,651   230,168   229,006   219,960  
Total assets managed $ 2,406,040   2,403,585   2,041,727   2,064,292   2,034,942  
 

Non-GAAP Financial Measures

Net income $ 4,201 2,738 2,713 3,617 3,106 9,652 9,355
Add: merger-related expenses, net of tax 274   710   621   87     1,605    
Adjusted net income $ 4,475   3,448   3,334   3,704   3,106   11,257   9,355  
Basic adjusted earnings per share 0.34 0.31 0.33 0.37 0.31 0.98 0.94
Diluted adjusted earnings per share 0.34 0.31 0.33 0.37 0.31 0.98 0.93
Adjusted return on average assets 1.09 % 0.98 % 1.05 % 1.16 % 0.94 % 1.04 % 0.95 %
Adjusted return on average equity 8.27 % 8.13 % 9.01 % 9.94 % 8.22 % 8.43 % 8.48 %
 
   

LCNB CORP. AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS
 

(Dollars in thousands)

 
September 30,
2018 December 31,
(Unaudited) 2017
ASSETS:
Cash and due from banks $ 16,136 21,159
Interest-bearing demand deposits 3,676   4,227  
Total cash and cash equivalents 19,812 25,386
Interest-bearing time deposits 6,873
Investment securities:
Equity securities with a readily determinable fair value, at fair
value
2,200 2,160
Equity securities without a readily determinable fair value, at cost 2,099 1,099
Debt securities, available-for-sale, at fair value 247,437 275,213
Debt securities, held-to-maturity, at cost 31,679 32,571
Federal Reserve Bank stock, at cost 4,653 2,732
Federal Home Loan Bank stock, at cost 4,845 3,638
Loans, net 1,158,309 845,657
Premises and equipment, net 33,533 34,927
Premises held for sale, net
Goodwill 59,952 30,183
Core deposit and other intangibles 5,306 3,799
Bank owned life insurance 28,539 27,985
Other assets 14,897   10,288  
TOTAL ASSETS $ 1,620,134   1,295,638  
 
LIABILITIES:
Deposits:
Noninterest-bearing $ 333,440 283,212
Interest-bearing 1,037,583   802,609  
Total deposits 1,371,023 1,085,821
Short-term borrowings 47,000
Long-term debt 23,079 303
Accrued interest and other liabilities 12,517   12,243  
TOTAL LIABILITIES 1,406,619   1,145,367  
 
COMMITMENTS AND CONTINGENT LIABILITIES
 
SHAREHOLDERS' EQUITY:
Preferred shares – no par value, authorized 1,000,000 shares, none
outstanding

Common shares – no par value, authorized 19,000,000 shares at
September 30, 2018 and December 31, 2017; issued 14,058,603 and
10,776,686 shares at September 30, 2018 and December 31, 2017,
respectively

140,996 76,977
Retained earnings 91,617 87,301
Treasury shares at cost, 753,627 shares at September 30, 2018 and
December 31, 2017
(11,665 ) (11,665 )
Accumulated other comprehensive loss, net of taxes (7,433 ) (2,342 )
TOTAL SHAREHOLDERS' EQUITY 213,515   150,271  
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,620,134   1,295,638  
 
   
LCNB CORP. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(Dollars in thousands, except per share data)

(Unaudited)

 
 
Three Months Ended Nine Months Ended
September 30, September 30,
2018   2017 2018   2017
INTEREST INCOME:
Interest and fees on loans $ 13,363 9,095 33,479 26,833
Dividends on equity securities with a readily determinable fair value 17 13 48 44
Dividends on equity securities without a readily determinable fair
value
7 6 22 17
Interest on debt securities, taxable 901 1,089 2,766 3,289
Interest on debt securities, non-taxable 661 783 2,045 2,377
Other short-term investments 121   69   390   293
TOTAL INTEREST INCOME 15,070   11,055   38,750   32,853
INTEREST EXPENSE:
Interest on deposits 1,810 850 3,777 2,539
Interest on short-term borrowings 12 55 88 97
Interest on long-term debt 145   3   226   10
TOTAL INTEREST EXPENSE 1,967   908   4,091   2,646
NET INTEREST INCOME 13,103 10,147 34,659 30,207
PROVISION FOR LOAN LOSSES 659   (12 ) 962   225
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 12,444   10,159   33,697   29,982
NON-INTEREST INCOME:
Fiduciary income 1,081 871 2,987 2,604
Service charges and fees on deposit accounts 1,439 1,352 4,170 3,886
Net gains (losses) on sales of securities (7 ) 78 (8 ) 218
Bank owned life insurance income 185 190 553 676
Gains from sales of loans 63 34 182 136
Other operating income 160   134   464   359
TOTAL NON-INTEREST INCOME 2,921   2,659   8,348   7,879
NON-INTEREST EXPENSE:
Salaries and employee benefits 5,686 4,678 15,791 13,907
Equipment expenses 276 361 797 836
Occupancy expense, net 734 685 2,119 1,889
State financial institutions tax 299 281 898 851
Marketing 382 282 798 641
Amortization of intangibles 286 189 659 562
FDIC insurance premiums 91 108 289 320
Contracted services 387 307 1,093 930
Other real estate owned 1 3 4 8
Merger-related expenses 346 1,959
Other non-interest expense 1,829   1,778   6,170   5,307
TOTAL NON-INTEREST EXPENSE 10,317   8,672   30,577   25,251
INCOME BEFORE INCOME TAXES 5,048 4,146 11,468 12,610
PROVISION FOR INCOME TAXES 847   1,040   1,816   3,255
NET INCOME $ 4,201   3,106   9,652   9,355
 
Dividends declared per common share $ 0.16 0.16 0.48 0.48
Earnings per common share:
Basic 0.32 0.31 0.84 0.93
Diluted 0.32 0.31 0.84 0.93
Weighted average common shares outstanding:
Basic 13,285,203 10,008,807 11,480,390 10,002,812
Diluted 13,290,665 10,015,204 11,486,051 10,009,942
 

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