LCNB CORP

NOTE 1 -BASIS OF PRESENTATION

BASIS OF PRESENTATION

The accompanying unaudited interim consolidated condensed financial statements include LCNB Corp. and its wholly-owned subsidiaries: LCNB National Bank and LCNB Risk Management, Inc., its captive insurance company. All material intercompany transactions and balances are eliminated in consolidation.

The unaudited interim consolidated condensed financial statements have been prepared in accordance with U.S. GAAP for interim financial information and the rules and regulations of the SEC. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules and regulations. In the opinion of management, the unaudited interim consolidated financial statements include all adjustments (consisting of normal, recurring accruals) considered necessary for a fair presentation of the Company's financial position, results of consolidated operations, and cash flows for the interim periods, as required by Regulation S-X, Rule 8-03.

The consolidated condensed balance sheet as of December 31, 2023 has been derived from the audited consolidated balance sheet as of that date.

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for the full year ending December 31, 2024. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements, accounting policies, and financial notes thereto included in LCNB's 2023 Annual Report on Form 10-K filed with the SEC.

ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS

Financial Accounting Standards (“FASB”) Accounting Standards Update (“ASU”) No. 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting"

ASU No. 2020-04 was issued in March 2020 and provides optional guidance for a limited period of time to ease the potential burden in accounting for or recognizing the effects of reference rate reform on financial reporting. The amendments provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. Originally, the amendments in this update were effective for all entities as of March 12, 2020 through December 31, 2022. ASU No. 2022-06, "Reference

Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848" extended the sunset date from December 31, 2022 to

December 31, 2024. LCNB has adopted the standard and utilized the LIBOR transition relief allowed under ASU 2020-04 and ASU 2020-06. The impact was immaterial, as all loans indexed to LIBOR were transitioned to another referenced index, predominately the Secured Overnight Financing Rate ("SOFR") for one, three, and six months. In all instances, LCNB was able to meet the criteria for the practical expedients and there was no impact on its results of consolidated operations or financial position.

NOTE 1 - BASIS OF PRESENTATION (continued)

ASU No. 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial

Instruments" ("ASC 326")

The Company adopted ASC 326 on January 1, 2023. It significantly changed guidance for recognizing impairment of financial instruments. Previous guidance required an "incurred loss" methodology for recognizing credit losses that delayed recognition until it was probable a loss had been incurred. ASC 326 replaced the incurred loss impairment methodology with a new "current expected credit loss" ("CECL") methodology that reflects expected credit losses over the lives of the credit instruments and requires consideration of a broader range of information to estimate credit losses. ASC 326 requires an organization to estimate all expected credit losses for financial assets measured at amortized cost, including loans and held-to-maturity debt securities, based on historical experience, current conditions, and reasonable and supportable forecasts. It also applies to off-balance sheet credit exposures, such as loan commitments, standby letters of credit, financial guarantees, and other similar instruments. ASC 326 also made changes to the accounting for credit losses on available-for-sale debt securities. Additional disclosures are required.

LCNB adopted ASC 326 using the modified retrospective method for all financial assets measured at amortized cost and off-balance sheet credit exposures. Results for reporting periods beginning after January 1, 2023 are presented under ASC 326, while prior period amounts continue to be reported in accordance with previously applicable guidance. The following table shows the impact of adopting ASC 326 on January 1, 2023 (in thousands):

Federal banking regulatory agencies allow an optional phase-in period of three years for banks to absorb the impact to regulatory capital of implementing CECL. LCNB has elected not to exercise this option and the full impact of adopting ASC 326 is included in regulatory capital as of March 31, 2024. Adoption of the ASC did not materially affect LCNB's regulatory capital ratios.

ASU No. 2022-02, "Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures"

ASU No. 2022-02 was issued in March 2022 and became effective for LCNB on January 1, 2023. These amendments eliminated previous TDR recognition and measurement guidance and, instead, required that an entity evaluate whether the modification represents a new loan or a continuation of an existing loan. The amendments also enhance disclosure requirements and introduce new disclosure requirements for certain modifications to borrowers experiencing financial difficulties. Additionally, the amendments require the disclosure of current-period gross charge-offs by year of origination. Adoption of ASU No. 2022-02 did not have a material impact on LCNB's results of consolidated operations or financial position.

NOTE 1 - BASIS OF PRESENTATION (continued)

ASU No. 2023-02, "Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (a Consensus of the Emerging Issues Task Force)"

ASU No. 2023-02 was issued in March 2023 and became effective for LCNB on January 1, 2024. It allows reporting entities the option to use the proportional amortization method to account for equity investments made primarily for the purpose of receiving income tax credits and other income tax benefits when certain requirements are met, regardless of the tax credit program from which the income tax credits are received. The proportional amortization method was previously limited to Low-Income Housing Tax Credit investments. Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the income tax credits and other income tax benefits received and recognizes the net amortization and income tax credits and other income tax benefits in the income statement as a component of income tax expense (benefit). Adoption of ASU No. 2023-02 did not have a material impact on LCNB's results of consolidated operations or financial position.

RECENT ACCOUNTING PRONOUNCEMENTS NOT YET EFFECTIVE

From time to time the FASB issues an ASU to communicate changes to U.S. GAAP. The following information provides brief summaries of newly issued but not yet effective ASUs that could have an effect on LCNB’s financial position or results of consolidated operations:

ASU No. 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures"

ASU No. 2023-07 was issued in November 2023 and changes the requirements for segment disclosures, primarily through enhancing disclosure requirements for significant segment expenses, enhancing interim disclosure requirements, clarifying circumstances in which an entity can disclose multiple segment measures of profit or loss, providing new segment disclosure requirements for entities with a single reportable segment, and modifying other disclosure requirements. A public entity should apply the amendments retrospectively to all prior periods presented in the financial statements. Upon transition, the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption. The amendments in this ASU are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted.

NOTE 2 -BUSINESS COMBINATIONS

Cincinnati Bancorp, Inc.

On November 1, 2023, LCNB acquired Cincinnati Bancorp, Inc. (“CNNB”), the holding company for Cincinnati Federal, a federally chartered stock savings and loan association. Under the terms of the definitive merger agreement, CNNB merged with and into LCNB Corp., immediately followed by the merger of Cincinnati Federal with and into LCNB National Bank. CNNB operated four full-service branch offices in Cincinnati, Ohio and 1 full-service office in Florence, Kentucky, which became offices of LCNB after the merger. The merger significantly increased LCNB’s existing presence in the Cincinnati market and expanded LCNB’s community banking franchise across the Ohio River into the Northern Kentucky market.

CNNB results of operations were included in LCNB's results beginning November 1, 2023.

Under the terms of the merger agreement, CNNB shareholders had the opportunity to elect to receive either 0.9274 shares of LCNB stock or $17.21 in cash for each share of CNNB common stock owned, subject to the limitation that 80% of the consideration be in the form of LCNB common stock and 20% of the consideration be in the form of cash. The fair value of the common stock issued as part of the consideration was determined on the basis of the closing price of LCNB's common stock on the acquisition date.

NOTE 2 - BUSINESS COMBINATIONS (continued)

The following table summarizes the fair value of the total consideration transferred as a part of the CNNB acquisition and the fair value of identifiable assets acquired and liabilities assumed as of the effective date of the transaction (in thousands):

The fair value and gross contractual amounts of non-PCD loans as of the acquisition date was $231.9 million and $258.6 million, respectively. LCNB recorded a provision for credit losses on these loans of $1,722,000.

As permitted by ASC No. 805-10-25, Business Combinations, the above estimated amounts may be adjusted up to one year after the closing date of the transaction to reflect any new information obtained about facts and circumstances existing at the acquisition date. As such, any changes in the estimated fair value of assets, including acquired loans, will be recognized in the period the adjustment is identified. Goodwill increased by $50,000 during the first quarter 2024 primarily due to valuation adjustments to other assets.

NOTE 2 - BUSINESS COMBINATIONS (continued)

The amount of goodwill recorded reflects LCNB's expansion in the Cincinnati market and related synergies that are expected to result from the acquisition and represents the excess purchase price over the estimated fair value of the net assets acquired. The goodwill will not be amortizable on LCNB's financial records and will not be deductible for tax purposes. Goodwill will be subject to an annual test for impairment and the amount impaired, if any, will be charged to expense at the time of impairment. The core deposit intangible will be amortized over the estimated weighted average economic life of the various core deposit types, which is ten years.

Direct expenses related to the CNNB acquisition totaled $477,000 during the three months ended March 31, 2024, were expensed as incurred, and are recorded as merger-related expenses in the consolidated statements of income.

Eagle Financial Bancorp, Inc.

On April 12, 2024, LCNB acquired Eagle Financial Bancorp, Inc. (“EFBI”), the holding company for EAGLE.bank. Under the terms of the definitive merger agreement, EFBI merged with and into LCNB Corp., immediately followed by the merger of EAGLE.bank with and into LCNB National Bank. EAGLE.bank operated three full-service banking offices in Cincinnati, Ohio, which became offices of LCNB after the merger. This transaction increases LCNB’s presence in the Cincinnati market.

Subject to the terms of the merger agreement, EFBI shareholders had the opportunity to elect to receive either 1.1401 shares of LCNB stock, $19.10 per share in cash for each share of EFBI common stock owned, or a combination thereof subject to at least 60%, but not more than 70%, of the shares of EFBI being exchanged for LCNB common stock. As of December 31, 2023, EFBI reported 1,342,275 shares of common stock outstanding, as well as 115,807 options with a weighted average strike price of $16.18 per share (each option carries that right to purchase one EFBI share). Any unexercised stock options of EFBI were canceled prior to the effective time of the merger in exchange for a cash payment per option equal to the difference between $19.10 and the exercise price of the option.

The following table summarizes the fair value of the total consideration transferred as a part of the EFBI acquisition (in thousands):

Calculation of the fair value of the net assets acquired in this merger transaction is in process.

EFBI had approximately $174.3 million in assets, $140.4 million in net loans, $136.7 million of deposits, and $26.0 million in consolidated stockholders’ equity as of December 31, 2023.

Direct expenses related to the EFBI acquisition totaled $298,000 during the three months ended March 31, 2024, were expensed as incurred, and are recorded as merger-related expenses in the consolidated statements of income.

NOTE 3 -INVESTMENT SECURITIES

The amortized cost and estimated fair value of debt securities at March 31, 2024 and December 31, 2023 are summarized as follows (in thousands):

The Company estimated the expected credit losses at March 31, 2024 and December 31, 2023 to be immaterial based on the composition of the securities portfolio.

Information concerning debt securities with gross unrealized losses at March 31, 2024 and December 31, 2023, aggregated by length of time that individual securities have been in a continuous loss position, is as follows (in thousands):

At March 31, 2024, LCNB’s securities portfolio consisted of 168 securities,161 of which were in an unrealized loss position. At December 31, 2023, LCNB's securities portfolio consisted of 207 securities,176 of which were in an unrealized loss position. After considering the issuers of the securities, LCNB management determined that that the unrealized losses were due to changing interest rate environments. As LCNB had no intent at March 31, 2024 to sell its debt securities before recovery of their cost basis and as it was more likely than not that it will not be required to sell its debt securities before recovery of the cost basis, no unrealized losses were deemed to represent credit losses.

Debt securities with a market value of $172.4 million and $124.4 million at March 31, 2024 and December 31, 2023, respectively, were pledged to secure public deposits and for other purposes required or as permitted by law.

Excluding holdings in U.S. Treasury securities and U.S. Government Agencies, there were no investments in securities of any issuer that exceeded 10% of LCNB's consolidated shareholders' equity at March 31, 2024.

Contractual maturities of debt securities at March 31, 2024 were as follows (in thousands). Actual maturities may differ from contractual maturities when issuers have the right to call or prepay obligations.

Certain information concerning the sale of debt securities available-for-sale for the three months ended March 31, 2024 and 2023 was as follows (in thousands):

Realized gains or losses from the sale of securities are computed using the specific identification method.

Equity securities with a readily determinable fair value are carried at fair value, with changes in fair value recognized in other operating income in the consolidated condensed statements of income. Equity securities without a readily determinable fair value are measured at cost minus impairment, if any, plus or minus any changes resulting from observable price changes in orderly transactions, as defined, for identical or similar investments of the same issuer. LCNB was not aware of any impairment or observable price change adjustments that needed to be made at March 31, 2024 on its investments in equity securities without a readily determinable fair value.

The amortized cost and estimated fair value of equity securities with a readily determinable fair value at March 31, 2024 and December 31, 2023 are summarized as follows (in thousands):

Certain information concerning changes in the fair value of equity securities with a readily determinable fair value for the three and three months ended March 31, 2024 and 2023 were as follows (in thousands):

NOTE 4 -LOANS

Major classifications of loans at March 31, 2024 and December 31, 2023 were as follows (in thousands):

Loans in the above table are shown net of deferred origination fees and costs. Deferred origination fees, net of related costs, were $583,000 and $181,000 at March 31, 2024 and December 31, 2023, respectively.

Non-accrual loans by class of receivable as of March 31, 2024 and December 31, 2023 were as follows (in thousands):

One commercial loan secured by real estate, non-owner occupied, was added to the non-accrual classification during the first quarter of 2024. Accrued inte rest reversed and charged against interest income for these loans totaled approximately $27,000.

The ratio of non-accrual loans to total loans outstanding at March 31, 2024 and December 31, 2023 was 0.16% and 0.00%, respectively.

ALLOWANCE FOR CREDIT LOSSES

The ACL is an estimate of the expected credit losses on financial assets measured at amortized cost, which is measured using relevant information about past events, including historical credit loss experience on financial assets with similar risk characteristics, current conditions, and reasonable and supportable forecasts that affect the collectability of the remaining cash flows over the contractual term of the financial assets. A provision for credit losses is charged to operations based on management’s periodic evaluation of these and other pertinent factors.

During the first quarter of 2023, the Company adopted ASU No. 2016-13, including the CECL methodology for estimating the ACL. This standard was adopted using a modified retrospective approach on January 1, 2023. See Note 1 - Basis of Presentation - Adoption of New Accounting Pronouncements for a summary of the impact adoption of ASU No. 2016-13 had on LCNB's ACL, retained earnings, and deferred taxes.

QUANTITATIVE CONSIDERATIONS

The ACL is primarily calculated utilizing a DCF model. Key inputs and assumptions used in this model are discussed below:

•Forecast model - For each portfolio segment, an LDA was performed in order to identify appropriate loss drivers and create a regression model for use in forecasting cash flows. The LDA utilized peer FFIEC Call Report data for all pools. The Company plans to update the LDA when materially relevant.

•Probability of default – PD is the probability that an asset will be in default within a given time frame. The Company has defined default as when a charge-off has occurred, a loan goes to non-accrual status, a loan is greater than 90 days past due, or financial difficulty modification status change. The forecast model is utilized to estimate PDs.

•Loss given default – LGD is the percentage of the asset not expected to be collected due to default. The LGD is derived from company specific and peer loss data.

•Prepayments and curtailments – Prepayments and curtailments are calculated based on the Company’s own data. This analysis is updated when materially relevant.

•Forecast and reversion – the Company as of December 31, 2023 established a two-quarter reasonable and supportable forecast period with a six-quarter straight line reversion to the long-term historical average. As of March 31, 2024, the Company established a three-quarter reasonable and supportable forecast period with a seven-quarter straight line reversion to the long-term historical average because management believes the economy has shown more stability and resiliency than previously assumed. Extending the forecast and reversion periods from previous quarters has differing effects on pools based on the economic indicators used and the relation of the selected forecast range to the historical average. For example, the historical average for the bank’s unemployment indicator is 5.85%, which is higher than the forecasted range utilized as of March 31, 2024. The extended forecast and reversion period ultimately decreases the reserve associated with the unemployment factor when compared to the historical average.

◦The historical averages for LCNB’s economic indicators are unemployment – 5.85%, change in Coincident Economic Activity – 1.83%, change in Commercial Real Estate Price Indexes – 5.50%, and change in Home Price Index – 3.42%

•Economic forecast – the Company utilizes a third party to provide economic forecasts under various scenarios, which are assessed against economic indicators and management’s observations in the market. As of December 31, 2023, the Company selected a forecast which forecasts unemployment between 4.21% and 4.55%, the change in Coincident Economic Activity between 0.62% and 1.91%, the change in Commercial Real Estate Price Indexes between -8.56% and -6.64%, and the change in the Home Price Index between 0.09% and 4.47% during the forecast periods. As of March 31, 2024, the Company selected a forecast which forecasts unemployment between 4.45% and 5.14%, the change in Coincident Economic Activity between -0.53% and 0.47%, the change in Commercial Real Estate Price Indexes between -10.17% and -3.82%, and the change in the Home Price Index between -3.92% and 2.19% during the forecast periods. Management believes that the resulting quantitative reserve appropriately balances economic indicators with identified risks.

QUALITATIVE CONSIDERATIONS

In addition to the quantitative model, management considers the need for qualitative adjustment for risks not considered in the DCF. Factors that are considered by management in determining loan collectability and the appropriate level of the ACL are listed below:

•Actual and expected changes in international, national, regional, and local economic and business conditions and developments in which the Company operates that affect the collectability of financial assets;

•The effect of other external factors such as the regulatory, legal and technological environments, competition, and events such as natural disasters or pandemics; and

•Model risk including statistical risk, reversion risk, timing risk, and model limitation risk.

•Changes in the nature and volume of the portfolio and terms of loans.

•Lending policies and procedures, including changes in underwriting standards and practices for collections, write-offs, and recoveries.

The following table presents activity in the allowance for credit losses by portfolio segment for the three months ended March 31, 2024 and 2023 (in thousands):

The ratio of the allowance for credit losses for loans to total loans at March 31, 2024 and December 31, 2023 was 0.64% and 0.61%, respectively.

For collateral dependent loans where management has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and repayment of the loan is to be provided substantially through the operation or sale of the collateral, the allowance for credit losses is measured based on the difference between the fair value of the collateral, less costs to sell, and the amortized cost basis of the loan as of the measurement date.

The following table presents the carrying value and related allowance of collateral dependent individually evaluated loans by class segment at the dates indicated (in thousands):

The risk characteristics of LCNB's material loan portfolio segments were as follows:

Commercial & Industrial Loans. LCNB’s commercial & industrial loan portfolio consists of loans for a variety of purposes, including, for example, loans to fund working capital requirements (such as inventory and receivables financing) and purchases of machinery and equipment. LCNB offers a variety of commercial & industrial loan arrangements, including term loans, balloon loans, and lines of credit. Commercial & industrial loans can have a fixed or variable rate, with maturities ranging fromone toten years. Commercial & industrial loans are offered to businesses and professionals for short and medium terms on both a collateralized and uncollateralized basis. Commercial & industrial loans typically are underwritten on the basis of the borrower’s ability to make repayment from the cash flow of the business. Collateral, when obtained, may include liens on furniture, fixtures, equipment, inventory, receivables, or other assets. As a result, such loans involve complexities, variables, and risks that require thorough underwriting and more robust servicing than other types of loans.

Commercial, Secured by Real Estate Loans. Commercial real estate loans include loans secured by a variety of commercial, retail and office buildings, religious facilities, hotels, multifamily (more than four-family) residential properties, construction and land development loans, and other land loans. Mortgage loans secured by owner-occupied agricultural property are included in this category. Commercial real estate loan products generally amortize over five totwenty-five years and are payable in monthly principal and interest installments. Some have balloon payments due withinone toten years after the origination date. The majority have adjustable interest rates with adjustment periods ranging fromone toten years, some of which are subject to established “floor” interest rates.

Commercial real estate loans are underwritten based on the ability of the property, in the case of income-producing property, or the borrower’s business to generate sufficient cash flow to amortize the debt. Secondary emphasis is placed upon global debt service, collateral value, financial strength and liquidity of any and all guarantors, and other factors. Commercial real estate loans are generally originated with a 75% to 85% maximum loan to appraised value ratio, depending upon borrower capacity.

Residential Real Estate Loans. Residential real estate loans include loans secured by first or second mortgage liens on one to four-family residential properties. Home equity lines of credit are also included in this category. First and second mortgage loans are generally amortized over five tothirty years with monthly principal and interest payments. Home equity lines of credit generally have afive year or less draw period with interest only payments followed by a repayment period with monthly payments based on the amount outstanding. LCNB offers both fixed and adjustable-rate mortgage loans. Adjustable-rate loans are available with adjustment periods ranging betweenone tofifteen years and adjust according to an established index plus a margin, subject to certain floor and ceiling rates. A substantial majority of home equity lines of credit have a variable rate of interest based on the Wall Street Journal prime rate plus a margin.

Residential real estate loans are underwritten primarily based on the borrower’s ability to repay, prior credit history, and the value of the collateral. LCNB generally requires private mortgage insurance for first mortgage loans that have a loan to appraised value ratio of greater than 80% or may require other credit enhancements for second lien mortgage loans.

Consumer Loans. LCNB’s portfolio of consumer loans generally includes secured and unsecured loans to individuals for household, family and other personal expenditures. Secured loans include loans to fund the purchase of automobiles, recreational vehicles, boats, and similar acquisitions. Consumer loans made by LCNB generally have fixed rates and terms ranging up to 72 months, depending upon the nature of the collateral, size of the loan, and other relevant factors. Consumer loans generally have higher interest rates, but pose additional risks of collectability and loss when compared to certain other types of loans. Collateral, if present, is generally subject to damage, wear, and depreciation. The borrower’s ability to repay is of primary importance in the underwriting of consumer loans.

Agricultural Loans. LCNB’s portfolio of agricultural loans includes loans for financing agricultural production and for financing the purchase of equipment used in the production of agricultural products. LCNB’s agricultural loans are generally secured by farm machinery, livestock, crops, vehicles, or other agricultural-related collateral.

Other Loans, Including Deposit Overdrafts. Other loans may include loans that do not fit in any of the other categories, but it is primarily composed of overdrafts from transaction deposit accounts. Overdraft payments are recorded as a recovery and overdrafts are generally written off after 34 days with a negative balance.

LCNB uses a risk-rating system to quantify loan quality. A loan is assigned to a risk category based on relevant information about the ability of the borrower to service the debt including, but not limited to, current financial information, historical payment experience, credit documentation, public information, and current economic trends. The categories used are:

•Pass – loans categorized in this category are higher quality loans that do not fit any of the other categories described below.

•Other Assets Especially Mentioned ("OAEM") – loans in this category are currently protected but are potentially weak. These loans constitute a risk but not to the point of justifying a classification of substandard. The credit risk may be relatively minor yet constitute an undue risk in light of the circumstances surrounding a specific asset.

•Substandard – loans in this category are inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the possibility that LCNB will sustain some loss if the deficiencies are not corrected.

•Doubtful – loans classified in this category have all the weaknesses inherent in loans classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

The following table presents the amortized cost basis of loans by vintage and credit quality indicators at March 31, 2024 and December 31, 2023 (in thousands):

A loan portfolio aging analysis by class segment at March 31, 2024 and December 31, 2023 is as follows (in thousands):

No residential consumer mortgage loans secured by residential real estate were in the process of foreclosure at March 31, 2024 or December 31, 2023.

From time to time, the terms of certain loans are modified when concessions are granted to borrowers experiencing financial difficulties. Each modification is separately negotiated with the borrower and includes terms and conditions that reflect the borrower's ability to pay the debt as modified. The modification of the terms of such loans may have included one, or a combination of, the following: a temporary or permanent reduction of the stated interest rate of the loan, an increase in the stated rate of interest lower than the current market rate for new debt with similar risk, forgiveness of principal, an extension of the maturity date, or a change in the payment terms.

The following table presents the amortized cost basis at March 31, 2024 of loan modifications made to borrowers experiencing financial difficulty, disaggregated by class of financing receivable and type of concession granted (in thousands):

The commercial, secured by real estate, non-owner occupied loan with an amortized balance of $2,642,000 shown in the table above subsequently defaulted on payment.

Mortgage loans sold to and serviced for the Federal Home Loan Mortgage Corporation and other investors are not included in the accompanying consolidated condensed balance sheets. The unpaid principal balances of those loans at March 31, 2024 and December 31, 2023 were approximately $386.5 million and $391.8 million, respectively.

NOTE 5 -AFFORDABLE HOUSING TAX CREDIT LIMITED PARTNERSHIP INVESTMENTS

LCNB is a limited partner in multiple limited partnerships that sponsor affordable housing projects utilizing the Low Income Housing Tax Credit pursuant to Section 42 of the Internal Revenue Code. The purpose of the investments is to achieve a satisfactory return on capital, to facilitate the sale of additional affordable housing product offerings, and to assist in achieving goals associated with the Community Reinvestment Act. The primary activities of the limited partnerships include the identification, development, and operation of multi-family housing that is leased to qualifying residential tenants.

The following table presents the balances of LCNB's affordable housing tax credit investments and related unfunded commitments at March 31, 2024 and December 31, 2023 (in thousands):

The net affordable housing tax credit investment is included in other assets and the unfunded commitment is included in accrued interest and other liabilities in the consolidated condensed balance sheets.

LCNB expects to fund the unfunded commitment over 9.0 years.

LCNB CORP. AND SUBSIDIARY

NOTE 5 - AFFORDABLE HOUSING TAX CREDIT LIMITED PARTNERSHIP INVESTMENTS (continued)

The following table presents other information relating to LCNB's affordable housing tax credit investments for the three months ended March 31, 2024 and 2023 (in thousands):

NOTE 6 -DEPOSITS

The following table presents the composition of LCNB's deposits at March 31, 2024 and December 31, 2023 (in thousands):

Contractual maturities of time deposits at March 31, 2024 were as follows (in thousands):

The aggregate amount of time deposits in denominations of $250,000 or more at March 31, 2024 and December 31, 2023 was $71.7 million and $50.2 million, respectively.

NOTE 7 –BORROWINGS

Long-term debt at March 31, 2024 and December 31, 2023 was as follows (dollars in thousands):

The term loan with a correspondent financial institution bears a fixed interest rate of 4.25%, amortizes quarterly, and has a final balloon payment due on June 15, 2025.

Contractual maturities of long-term debt at March 31, 2024 and December 31, 2023 were as follows ( in thousands):

Short-term borrowings at March 31, 2024 and December 31, 2023 were as follows (dollars in thousands):

At March 31, 2024, LCNB Corp. had a short-term revolving line of credit arrangement with a financial institution for a maximum amount of $5 million at an interest rate equal to the Wall Street Journal Prime Rate minus 25 basis points. This agreement expires on June 15, 2024.

At March 31, 2024, LCNB had overnight line of credit borrowing arrangements with three correspondent financial institutions. Under the terms of the first arrangement, LCNB can borrow up to $30 million at an interest rate equal to the lending institution’s federal funds rate plus a spread of 50 basis points. Under the terms of the second arrangement, LCNB can borrow up to $25 million at an interest rate equal to the FOMC rate plus a spread of 25 basis points. Under the terms of the third arrangement, LCNB can borrow up to $25 million at the interest rate in effect at the time of borrowing..

All long-term and short-term advances from the FHLB of Cincinnati are secured by a blanket pledge of LCNB's 1-4 family first lien mortgage loans in the amount of approximately $422 million and $417 million at March 31, 2024 and December 31, 2023, respectively. Remaining borrowing capacity with the FHLB, including both long-term and short-term borrowings, at March 31, 2024 was approximately $118.8 million.

NOTE 8 -LEASES

Lease expenses for offices are included in the consolidated condensed statements of income in net occupancy expense and lease expenses for equipment and ATMs are included in equipment expense. Components of lease expense for the three months ended March 31, 2024 were as follows (in thousands):

Other information related to leases at March 31, 2024 were as follows (dollars in thousands):

NOTE 9 –INCOME TAXES

A reconciliation between the statutory income tax and LCNB's effective tax rate on income from continuing operations follows:

NOTE 10 -COMMITMENTS AND CONTINGENT LIABILITIES

LCNB is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit. These financial instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheets. Exposure to credit loss in the event of nonperformance by the other parties to financial instruments for commitments to extend credit is represented by the contract amount of those instruments.

The Bounce Protection product, a customer deposit overdraft program, is offered as a service and does not constitute a contract between the customer and LCNB.

LCNB uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.

Financial instruments whose contract amounts represent off-balance-sheet credit risk at March 31, 2024 and December 31, 2023 were as follows (in thousands):

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Unused lines of credit include amounts not drawn on line of credit loans. Commitments to extend credit and unused lines of credit generally have fixed expiration dates or other termination clauses.

Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. These guarantees generally are fully secured and have varying maturities.

LCNB evaluates each customer's credit worthiness on a case-by-case basis. The amount of collateral obtained is based on management's credit evaluation of the borrower and may include accounts receivable; inventory, property, plant, and equipment; residential realty; and income-producing commercial properties.

NOTE 10 – COMMITMENTS AND CONTINGENT LIABILITIES (continued)

Activity in the allowance for credit losses on off-balance sheet credit exposures for the three months ended March 31, 2024 and 2023 is as follows (in thousands):

Capital expenditures include the construction or acquisition of new office buildings, improvements to LCNB's offices, purchases of furniture and equipment, and additions or improvements to LCNB's information technology system. Commitments outstanding for capital expenditures as of March 31, 2024 totaled approximately $2.3 million.

Management believes that LCNB has sufficient liquidity to fund its lending and capital expenditure commitments.

LCNB and its subsidiaries are parties to various claims and proceedings arising in the normal course of business. Management, after consultation with legal counsel, believes that the liabilities, if any, arising from such proceedings and claims will not be material to LCNB's consolidated financial position or results of operations.

NOTE 11 –ACCUMULATED OTHER COMPREHENSIVE LOSS

Changes in accumulated other comprehensive loss for the three months ended March 31, 2024 and 2023 were as follows (in thousands):

NOTE 11 – ACCUMULATED OTHER COMPREHENSIVE LOSS (continued)

Reclassifications out of accumulated other comprehensive loss during the three months ended March 31, 2024 and 2023 and the affected line items in the condensed consolidated statements of income were as follows (in thousands):

NOTE 12 –RETIREMENT PLANS

LCNB participates in a noncontributory defined benefit multi-employer retirement plan that covers substantially all regular full-time employees hired before January 1, 2009. Employees hired before this date who received a benefit reduction under certain amendments to the defined benefit retirement plan receive an automatic contribution of 5% or 7% of their annual compensation, depending on the sum of an employee's age and vesting service, into their defined contribution plans (401(k) plans), regardless of the contributions made by the employees. These contributions are made annually and these employees do not receive any employer matches to their 401(k) contributions.

Employees hired on or after January 1, 2009 receive a 50% employer match on their contributions into the 401(k) plan, up to a maximum LCNB contribution of 3% of each individual employee's annual compensation.

Funding and administrative costs of the qualified noncontributory defined benefit retirement plan and 401(k) plan charged to pension and other employee benefits in the consolidated condensed statements of income for the three-month period ended March 31, 2024 and 2023 were as follows (in thousands):

Certain highly compensated former employees participate in a nonqualified defined benefit retirement plan. The nonqualified plan ensures that participants receive the full amount of benefits to which they would have been entitled under the noncontributory defined benefit retirement plan in the absence of limits on benefit levels imposed by certain sections of the Internal Revenue Code. This plan is limited to the original participants and no new participants have been added.

The net periodic pension cost of the nonqualified defined benefit retirement plan consists solely of interest cost of $18,000 and $19,000 for the three months ended March 31, 2024 and 2023, respectively.

NOTE 13 –STOCK BASED COMPENSATION

The 2015 Ownership Incentive Plan (the "2015 Plan") was ratified by LCNB's shareholders at the annual meeting on April 28, 2015 and allows for stock-based awards to eligible employees, as determined by the Compensation Committee of the Board of Directors. Awards may be made in the form of stock options, appreciation rights, restricted shares, and/or restricted share units. The 2015 Plan provides for the issuance of up to 450,000 shares of common stock. The 2015 Plan will terminate on April 28, 2025 and could be subject to earlier termination by the Board Compensation Committee.

Stock-based awards may be in the form of treasury shares or newly issued shares.

Restricted stock awards granted under the 2015 Plan during the three months ended March 31, 2024 and 2023 were as follows:

The following table presents expense recorded in salaries and employee benefits for restricted stock awards and the related tax information for the three months ended March 31, 2024 and 2023 (in thousands):

Unrecognized compensation expense for restricted stock awards was $1,189,000 at March 31, 2024 and is expected to be recognized over a period of 4.9 years.

NOTE 14 –EARNINGS PER COMMON SHARE

LCNB has granted restricted stock awards with non-forfeitable dividend rights, which are considered participating securities. Accordingly, earnings per share is computed using the two-class method as required by ASC No. 260-10-45. Basic earnings per common share is calculated by dividing net income allocated to common shareholders by the weighted average number of common shares outstanding during the period, which excludes the participating securities. Diluted earnings per common share is adjusted for the dilutive effects of stock options, warrants, and restricted stock. The diluted average number of common shares outstanding has been increased for the assumed exercise of stock options and warrants with proceeds used to purchase treasury shares at the average market price for the period.

NOTE 14 - EARNINGS PER COMMON SHARE (continued)

Earnings per share for the three months ended March 31, 2024 and 2023 were calculated as follows (dollars in thousands, except share and per share data):

NOTE 15 -FAIR VALUE MEASUREMENTS

LCNB measures certain assets at fair value using various valuation techniques and assumptions, depending on the nature of the asset. Fair value is defined as the price that would be received from the sale of an asset in an orderly transaction between market participants at the measurement date.

The inputs to the valuation techniques used to measure fair value are assigned to one of three broad levels:

•Level 1 – quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the reporting date.

•Level 2 – inputs other than quoted prices included within level 1 that are observable for the asset or liability either directly or indirectly. Level 2 inputs may include quoted prices for similar assets in active markets, quoted prices for identical assets or liabilities in markets that are not active, inputs other than quoted prices (such as interest rates or yield curves) that are observable for the asset or liability, and inputs that are derived from or corroborated by observable market data.

•Level 3 – inputs that are unobservable for the asset or liability.

EQUITY SECURITIES WITH A READILY DETERMINABLE FAIR VALUE

Equity securities with a readily determinable fair value are reported at fair value with changes in fair value reported in other operating income in the consolidated condensed statements of income. Fair values for equity securities are determined based on market quotations (level 1). LCNB has an investment in a mutual fund that is measured at fair value using net asset values, which are considered level 1 because the net asset values are determined and published and are the basis for current transactions.

DEBT SECURITIES, AVAILABLE-FOR-SALE

The majority of LCNB's financial debt securities are classified as available-for-sale. The securities are reported at fair value with unrealized holding gains and losses reported net of income taxes in accumulated other comprehensive income. LCNB utilizes a pricing service for determining the fair values of its debt securities. Methods and significant assumptions used to estimate fair value were as follows:

•Fair values for U.S. Treasury notes are determined based on market quotations (level 1).

•Fair values for the other debt securities are calculated using the discounted cash flow method for each security. The discount rates for these cash flows are estimated by the pricing service using rates observed in the market (level 2). Cash flow streams are dependent on estimated prepayment speeds and the overall structure of the securities given existing market conditions.

ASSETS RECORDED AT FAIR VALUE ON A NONRECURRING BASIS

Assets that may be recorded at fair value on a nonrecurring basis include individually evaluated collateral dependent loans (or impaired loans prior to the adoption of ASC 326), other real estate owned, and other repossessed assets.

LCNB does not record loans at fair value on a recurring basis. However, from time to time, nonrecurring fair value adjustments to collateral dependent loans are recorded to reflect partial write-downs or specific reserves that are based on the observable market price or current estimated value of the collateral. These loans are reported in the nonrecurring table below at initial recognition of significant borrower distress and on an ongoing basis until recovery or charge-off. The fair values of distressed loans are determined using either the sales comparison approach or income approach. Respective unobservable inputs for the approaches consist of adjustments for differences between comparable sales and the utilization of appropriate capitalization rates.

The following table summarizes the valuation of LCNB's assets recorded at fair value by input levels as of March 31, 2024 and December 31, 2023 (in thousands):

The following table presents quantitative information about unobservable inputs used in nonrecurring level 3 fair value measurements at March 31, 2024 and December 31, 2023 (dollars in thousands):

Carrying amounts and estimated fair values of financial instruments as of March 31, 2024 and December 31, 2023 were as follows (in thousands):

The fair values of off-balance-sheet financial instruments such as loan commitments and letters of credit are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements. The fair values of such instruments were not material at March 31, 2024 and December 31, 2023.

Fair values of financial instruments are based on various assumptions, including the discount rate and estimates of future cash flows. Therefore, the fair values presented may not represent amounts that could be realized in actual transactions. In addition, because the required disclosures exclude certain financial instruments and all nonfinancial instruments, any aggregation of the fair value amounts presented would not represent the underlying value of LCNB.

NOTE 16 -SUBSEQUENT EVENT

During April 2024 LCNB decided to consolidate its Miami Heights Office, located at 7553 Bridgetown Road, Cincinnati, Ohio into its Bridgetown Road Office, located at 6415 Bridgetown Road, Cincinnati, Ohio. The consolidation will occur at the close of business on Wednesday, July 31, 2024. LCNB recently acquired the Miami Heights Office through the merger with CNNB and then acquired the Bridgetown Road Office through the merger with EFBI and they are in close proximity to each other. Deposit and loan accounts held at the Miami Heights Office will automatically be transferred to the Bridgetown Road Office. LCNB does not expect the consolidation will have a material impact on it results of consolidated operations or financial position. The Miami Heights Office building will be marketed for sale and the resulting gain or loss from the sale is not expected to be material.