LCNB CORP

(Unaudited)

NOTE1 - 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, Rule8-03.

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 thethree andnine months ended* September 30, 2024* arenot 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's2023 Annual Report on Form10-K filed with the SEC.

ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS

ASUNo.* 2016-13, "Financial Instruments - Credit Losses (Topic326): Measurement of Credit Losses on Financial Instruments" ("ASC326")*

The Company adopted ASC326 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. ASC326* 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. ASC326 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. ASC326 also made changes to the accounting for credit losses on available-for-sale debt securities, requiring additional disclosures.

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NOTE1 - BASIS OF PRESENTATION (continued)

LCNB adopted ASC326 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, 2023are presented under ASC326,* while prior period amounts continue to be reported in accordance with previously applicable guidance. The following table shows the impact of adopting ASC326 on* January 1, 2023 (*in thousands):

Federal banking regulatory agencies allow an optional phase-in period ofthree years for banks to absorb the impact to regulatory capital of implementing CECL. LCNB has electednot to exercise this option, and the full impact of adopting ASC326 is included in regulatory capital as of* September 30, 2024*. Adoption of the ASC didnot materially affect LCNB's regulatory capital ratios.

ASUNo.* 2022-02, "Financial Instruments - Credit Losses (Topic326): Troubled Debt Restructurings and Vintage Disclosures"*

ASUNo. 2022-02 was issued in* March 2022and 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 ASUNo.* 2022-02 didnot have a material impact on LCNB's results of consolidated operations or financial position.

ASUNo.* 2023-02, "Investments - Equity Method and Joint Ventures (Topic323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (a Consensus of the Emerging Issues Task Force)"*

ASUNo. 2023-02 was issued in* March 2023and 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 ASUNo.* 2023-02 didnot have a material impact on LCNB's results of consolidated operations or financial position.

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NOTE1 - BASIS OF PRESENTATION (continued)

RECENT ACCOUNTING PRONOUNCEMENTSNOT 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 butnot yet effective ASUs that could have an effect on LCNB’s financial position or results of consolidated operations:

ASUNo.* 2023-07, "Segment Reporting (Topic280): Improvements to Reportable Segment Disclosures"*

ASUNo. 2023-07 was issued in* November 2023and 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. LCNB doesnot* expect adoption of ASUNo. 2023-02 will have a material impact on its results of consolidated operations or financial position.

ASU2023*-09 “Income Taxes (Topic740): Improvements to Income Tax Disclosures.” *

ASUNo. 2023-09 was issued in* December 2023.The amendments require that public business entities on an annual basis (1) disclose specific categories in the rate reconciliation, and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than5* percent of the amount computed by multiplying pretax income (or loss) by the applicable statutory income tax rate). The amendments require that all entities disclose on an annual basis the following information about income taxes paid: (1) the amount of income taxes paid (net of refunds received) disaggregated by federal (national), state, and foreign taxes; and (2) the amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than5 percent of total income taxes paid (net of refunds received). The amendments also require that all entities disclose the following information: (1) income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign; and (2) income tax expense (or benefit) from continuing operations disaggregated by federal (national), state, and foreign. The ASU is effective for public business entities for annual periods beginning after* December 15, 2024.Early adoption is permitted for annual financial statements that havenot* yet been issued or made available for issuance. LCNB will adopt this ASU for the reporting period beginning* January 1, 2025,and doesnot* expect the amendments to have a material impact to the financial statements of the Company.

ASU2024*-01 “Compensation - Stock Compensation (Topic718) - Scope Application of Profits Interest and Similar Awards,” *

ASUNo. 2024-01 was issued in* March 2024and clarifies how an entity determines whether a profits interest or similar award is within the scope of Topic718* or isnot a share-based payment arrangement and, therefore, is within the scope of other guidance. ASU2024-01 provides an illustrative example with multiple fact patterns and also amends certain language in the “Scope” and “Scope Exceptions” sections of Topic718 to improve its clarity and operability without changing the guidance. Entities can apply the amendments either retrospectively to all prior periods presented in the financial statements or prospectively to profits interest and similar awards granted or modified on or after the date of adoption. If prospective application is elected, an entity must disclose the nature of and reason for the change in accounting principle. ASU2024-01 is effective* January 1, 2025,including interim periods, and isnot* expected to have a material impact to the financial statements of the Company.

NOTE2 - 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. During the quarter ended September 30, 2024,LCNB consolidatedone* of the full-service branches acquired from Cincinnati Federal with a full-service branch acquired from EAGLE.Bank resulting in the closure ofone branch office in Cincinnati, Ohio.

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 Corp. 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 Corp. 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 Corp.'s common stock on the acquisition date.

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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 originally reported at* December 31, 2023* and as adjusted at* September 30, 2024* (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 ASCNo. 805-10-25, Business Combinations, the above estimated amounts* maybe adjusted up toone* year after the closing date of the transaction to reflect any new information obtained about facts and circumstances existing at the acquisition date. While the Bank believes that the information available on the merger date provided a reasonable basis for estimating fair value, additional information and evidence* maybe provided during thefourth* quarter of2024 which will be utilized to finalize all valuations and record final adjustments during theone year subsequent measurement period. These adjustments* may*include: (i) changes in deferred tax assets or liabilities related to fair value estimates and changes in the expected realization of items considered to be net operating loss carryforwards due to tax calculations still in process, and (ii) changes in goodwill as a result of the net effect of any adjustments. As such, any changes in the estimated fair value of assets, including acquired loans, will be recognized in the period the adjustment is identified.

The loan adjustment in the table above was due to a fair value adjustment to deferred fees and costs on loans acquired. The other assets, operating lease liabilities and resulting deferred tax adjustments in the table above were related to the updated fair value adjustments.

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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 willnot be amortizable on LCNB's financial records and willnot be deductible for tax purposes. Total 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 isten years.

Direct expenses related to the CNNB acquisition totaled $10,000 and $332,000 during thethree andnine months ended* September 30, 2024*, respectively, and totaled$290,000 and $705,000 during thethree andnine months ended* September 30, 2023*, respectively. They 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, an Ohio state-chartered 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 increased 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 Corp. stock, $19.10 per share in cash for each share of EFBI common stock owned, or a combination thereof subject to at least 60%, butnot more than 70%, of the shares of EFBI being exchanged for LCNB common stock. 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.

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The following table summarizes the fair value of the total consideration transferred as a part of the EFBI acquisition and the fair value of identifiable assets acquired and liabilities assumed as originally reported at* June**30,* 2024 and as adjusted at* September 30, 2024* (in thousands):

The fair value and gross contractual amounts of non-PCD loans as of the acquisition date was $101.7 million and $112.5 million, respectively. LCNB recorded a provision for credit losses on these loans of $763,000.

As permitted by ASCNo. 805-10-25, Business Combinations, the above estimated amounts* maybe adjusted up toone* year after the closing date of the transaction to reflect any new information obtained about facts and circumstances existing at the acquisition date. While the Company believes that the information available on the merger date provided a reasonable basis for estimating fair value, additional information and evidence* maybe provided during thefourth* quarter of2024 or later which will be utilized to finalize all valuations and record final adjustments during theone year subsequent measurement period. These adjustments* may*include: (i) changes in deferred tax assets or liabilities related to fair value estimates and changes in the expected realization of items considered to be net operating loss carryforwards due to tax calculations still in process, and (ii) changes in goodwill as a result of the net effect of any adjustments. As such, any changes in the estimated fair value of assets will be recognized in the period the adjustment is identified.

The consideration adjustments are associated with the unearned portion of Eagle.bank's employee stock ownership plan. The other assets, other liabilities and resulting deferred tax adjustments in the table above were related to the updated fair value adjustments.

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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 willnot be amortizable on LCNB's financial records and willnot be deductible for tax purposes. Total 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 isnine years.

Direct expenses related to the EFBI acquisition totaled$271,000 and $3,044,000 during thethree andnine months ended* September 30, 2024*, respectively, and totaled $12,000 and $37,000 during thethree andnine months ended* September 30, 2023*, respectively. They were expensed as incurred and are recorded as merger-related expenses in the consolidated statements of income.

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NOTE3 - INVESTMENT SECURITIES

The amortized cost and estimated fair value of debt securities at* September 30, 2024* and* December 31, 2023* are summarized as follows (in thousands):

The amortized cost of debt securities in the above table excludes accrued interest of $1.23 million and $1.07 million at* September 30, 2024and December 31, 2023,*respectively, that is recorded inother assets on the consolidated balance sheets.

The Company estimated the expected credit losses at* September 30, 2024* and* December 31, 2023* to be immaterial based on the composition of the securities portfolio.

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Information concerning debt securities with gross unrealized losses at* September 30, 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* September 30, 2024*, LCNB’s securities portfolio consisted of 167 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. LCNB hadno intent at* September 30, 2024* to sell its debt securities before recovery of their cost basis and as it was more likely thannot that it willnot be required to sell its debt securities before recovery of their cost basis.

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Each quarter, LCNB performs an analysis to determine if any of the unrealized losses on available-for-sale debt securities are comprised of credit losses as compared to unrealized losses due to market interest rate adjustments. The assessment includes a review of the unrealized loss for each security issuance held; the financial condition and near-term prospects of the issuer, including external credit ratings and recent downgrades; and LCNB's ability and intent to hold the security for a period of time sufficient for a recovery in value. LCNB also considers the extent to which the securities are issued by the federal government or its agencies and any guarantee of issued amounts by those agencies. The portfolio continues to consist of a mix of fixed and floating-rate, high quality securities, largely rated AA (or better), displaying an overall effective duration of approximately 3.3 years.No credit losses were determined to be present as of* September 30, 2024*, as there wasno credit quality deterioration noted. Therefore, no provision for credit losses on available-for-sale debt securities was recognized for thethird quarter of2024.

Debt securities with a market value of $148.7 million and $124.4 million at* September 30, 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 wereno investments in securities of any issuer that exceeded10% of LCNB's consolidated shareholders' equity at* September 30, 2024*.

Contractual maturities of debt securities at* September 30, 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 thethree andnine months ended* September 30, 2024and2023* was as follows (in thousands):

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

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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 wasnot aware of any impairment or observable price change adjustments that needed to be made at* September 30, 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* September 30, 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 thethree andnine months ended* September 30, 2024and2023* were as follows (in thousands):

LCNB is a member of the FHLB system and its regional FRB. Members are required to own a certain amount of stock based on predetermined formulas. FHLB and FRB stock are carried at cost, which is equal to par value, and periodically evaluated for impairment based on ultimate recovery of par value.

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NOTE4 - LOANS

Major classifications of loans at* September 30, 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 $861,000 and $181,000 at* September 30, 2024* and* December 31, 2023*, respectively. Accrued interest receivable of $8.22 million and $7.33 million are excluded from the balances above as of* September 30, 2024and December 31, 2023,*respectively, that are recorded in other assets on the consolidated balance sheets.

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Non-accrual loans by class of receivable as of* September 30, 2024* and* December 31, 2023* were as follows (in thousands):

Interest income recognized on nonaccrual loans totaled approximately $67,000 and $1,000 during thenine months ended* September 30, 2024* and2023, respectively. Accrued interest reversed and charged against interest income for these loans totaled approximately $36,000 and $0 during thenine months ended* September 30, 2024* and2023, respectively.

The ratio of non-accrual loans to total loans outstanding at* September 30, 2024* and* December 31, 2023* was 0.17% 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 thefirst quarter of2023, the Company adopted ASUNo. 2016-13, including the CECL methodology for estimating the ACL. This standard was adopted using a modified retrospective approach on* January 1, 2023.See Note1* - Basis of Presentation - Adoption of New Accounting Pronouncements for a summary of the impact adoption of ASUNo. 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:

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QUALITATIVE CONSIDERATIONS

In addition to the quantitative model, management considers the need for qualitative adjustment for risksnot considered in the DCF. Factors that are considered by management in determining loan collectability and the appropriate level of the ACL are listed below:

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The following table presents activity in the allowance for credit losses by portfolio segment for thethree andnine months ended* September 30, 2024and2023* (in thousands):

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The ratio of the allowance for credit losses for loans to total loans at* September 30, 2024* and* December 31, 2023* was 0.69% 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):

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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 thanfour-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 byfirst orsecond mortgage liens onone tofour-family residential properties. Home equity lines of credit are also included in this category. First andsecond 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 forfirst mortgage loans that have a loan to appraised value ratio of greater than 80% or* mayrequire other credit enhancements forsecond* 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 to72 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* mayinclude loans that donot* 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 after34 days with a negative balance.

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LCNB’s management monitors the credit quality of its loans on an ongoing basis. This monitoring includes annual reviews for loans with a principal balance greater than*$1* million and bi-annual reviews for loans with a principal balance of more than*$500,000* through*$1* million. LCNB also has a loan grade monitoring system in place to track and report loan grades and classifications, enabling the identification and management of non-performing loans. ​ Major factors used in determining loan grades vary based on the nature of the loan, but commonly include factors such as debt service coverage, internal cash flow, liquidity, leverage, operating performance, debt burden, FICO scores, occupancy, interest rate sensitivity, and expense burden. ​Commercial real estate loans rated OAEM or worse are reviewed at least quarterly for credit deterioration.

A loan is assigned to a risk category based on relevant information about the ability of the borrower to service the debt including, butnot limited to, current financial information, historical payment experience, credit documentation, public information, and current economic trends. The categories used are:

An independent consultant is contracted to conduct a review of LCNB's loan portfolio on an annual basis. The independent review examines LCNB's underwriting activities, documentation, credit quality, and includes an assessment of proper risk ratings. Loans selected for review include all loans meeting certain pre-determined criteria and a sample of other loans. The independent review provides assurance that LCNB’s loan portfolio and credit quality complies with the policies set forth by the board of directors and senior management and with regulatory requirements.

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The following table presents the amortized cost basis of loans by vintage and credit quality indicators at* September 30, 2024* and* December 31, 2023* (in thousands):

(1) - for the nine months ended September 30, 2024.

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(2) - for the year ended December 31, 2023.

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A loan portfolio aging analysis by class segment at* September 30, 2024* and* December 31, 2023* is as follows (in thousands):

Residential consumer mortgage loans secured by residential real estate in the process of foreclosure at* September 30, 2024* totaled $54,000. No residential consumer mortgage loans secured by residential real estate were in the process of foreclosure at* December 31, 2023*.

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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* September 30, 2024* of all loan modifications made to borrowers experiencing financial difficulty, disaggregated by class of financing receivable and type of concession granted (in thousands):

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The amortized cost basis of loan modifications made to borrowers experiencing financial difficulty during2023 waszero at* September 30, 2023.*

Mortgage loans sold to and serviced for the Federal Home Loan Mortgage Corporation and other investors arenot included in the accompanying consolidated condensed balance sheets. The unpaid principal balances of those loans at* September 30, 2024* and* December 31, 2023* were approximately $335.1 million and $391.8 million, respectively.

NOTE5 - PURCHASED CREDIT DETERIORATED LOANS

LCNB acquired loans through the merger with EFBI for which there was, at acquisition, evidence of more than insignificant deterioration of credit quality since origination. The carrying amount of these loans at acquisition on* April 12, 2024*is as follows (in thousands):

The following table provides, as of* September 30, 2024*, the major classifications of purchased credit deteriorated loans acquired from EFBI (in thousands):

The following table provides the outstanding balance and related carrying amount for purchased credit deteriorated loans acquired from EFBI as of* September 30, 2024* (in thousands):

Activity during2024 for the accretable discount related to purchased credit deteriorated loans acquired from EFBI and CNNB is as follows (in thousands):

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NOTE6 - 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 Section42 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* September 30, 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 anticipates to fund the unfunded commitment over 12.0 years.

The following table presents other information relating to LCNB's affordable housing tax credit investments for thethree andnine months ended* September 30, 2024and2023* (in thousands):

NOTE7 - DEPOSITS

The following table presents the composition of LCNB's deposits at* September 30, 2024* and* December 31, 2023* (in thousands):

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NOTE7 - DEPOSITS** (continued)******

Contractual maturities of time deposits at* September 30, 2024* were as follows (in thousands):

The aggregate amount of time deposits in denominations of*$250,000* or more at* September 30, 2024* and* December 31, 2023* was $110.0 million and $50.2 million, respectively. While the acquisition of EFBI contributed to the increase in the total amount of time deposits in denominations of*$250,000* or more, most of the growth was generated organically. LCNB had a special rate promotion for time deposits, accompanied by a bonus rate promotion for new deposits, during much of the2024 period.

NOTE8 – BORROWINGS

Long-term debt at* September 30, 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* September 30, 2024* and* December 31, 2023* were as follows (in thousands):

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NOTE8 – BORROWINGS** (continued)******

Short-term borrowings at* September 30, 2024* and* December 31, 2023* were as follows (dollars in thousands):

At* September 30, 2024*, LCNB had a short-term revolving line of credit arrangement with a financial institution for a maximum amount of $10 million at an interest rate equal to the Wall Street Journal Prime Rate minus 25 basis points. This agreement expires on* June 15, 2025.*

At* September 30, 2024*, LCNB had overnight line of credit borrowing arrangements withthree correspondent financial institutions. Under the terms of thefirst 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 thesecond arrangement, LCNB can borrow up to $50 million at an interest rate equal to the FOMC targeted federal funds rate plus a spread of 25 basis points. Under the terms of thethird 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's1-4 familyfirst lien mortgage loans in the amount of approximately $452 million and $417 million at* September 30, 2024* and* December 31, 2023*, respectively. Remaining borrowing capacity with the FHLB, including both long-term and short-term borrowings, at* September 30, 2024* was approximately $120.9 million.

NOTE9 - 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 thethree andnine months ended* September 30, 2024* were as follows (in thousands):

Other information related to leases at* September 30, 2024* were as follows (dollars in thousands):

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NOTE10 – INCOME TAXES

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

NOTE11 - 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 and involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated condensed 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.

In addition to such commitments to extend credit, LCNB* mayhave services for customers in place that, though they obligate LCNB to provide credit on certain terms, donot* constitute commitments to extend credit for purposes of this Note11. For example, the Bounce Protection product, LCNB's deposit overdraft program, is offered as a service by the Bank and doesnot 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.

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NOTE11 – COMMITMENTS AND CONTINGENT LIABILITIES** (continued)******

Financial instruments whose contract amounts represent off-balance-sheet credit risk at* September 30, 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 isno violation of any condition established in the contract. Unused lines of credit include amountsnot 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 athird 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.

Activity in the allowance for credit losses on off-balance sheet credit exposures, recorded in other liabilities on the consolidated balance sheets, for thethree andnine months ended* September 30, 2024and2023* 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* September 30, 2024* totaled approximately $92,000.

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 willnot be material to LCNB's consolidated financial position or results of operations.

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NOTE12 – ACCUMULATED OTHER COMPREHENSIVE LOSS

Changes in accumulated other comprehensive loss for thethree andnine months ended* September 30, 2024and2023* were as follows (in thousands):

Reclassifications out of accumulated other comprehensive loss during thethree andnine months ended* September 30, 2024and2023* and the affected line items in the condensed consolidated statements of income were as follows (in thousands):

NOTE13 – 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 donot* receive any employer matches to their401(k) contributions.

Employees hired on or after* January 1, 2009receive a 50% employer match on their contributions into the401*(k) plan, up to a maximum LCNB contribution of 3% of each individual employee's annual compensation.

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NOTE13 – RETIREMENT PLANS** (continued)******

Funding and administrative costs of the qualified noncontributory defined benefit retirement plan and401(k) plan charged to pension and other employee benefits in the consolidated condensed statements of income for thethree andnine-month period ended* September 30, 2024and2023* 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 andno 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 $54,000 for thethree andnine months ended* September 30, 2024*, respectively, and $19,000 and $57,000 for thethree andnine months ended* September 30, 2023*, respectively.

NOTE14 – STOCK BASED COMPENSATION

The2015 Ownership Incentive Plan (the*"2015* Plan") was ratified by LCNB Corp.'s shareholders at the annual meeting on* April 28, 2015and allows for stock-based awards to eligible employees, as determined by the Compensation Committee of the Board of Directors. Awards maybe made in the form of stock options, appreciation rights, restricted shares, and/or restricted share units. The2015* Plan provides for the issuance of up to 450,000 shares of common stock. The2015 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 the2015 Plan during thethree andnine months ended* September 30, 2024and2023* were as follows:

At* September 30, 2024*, there were 84,593 restricted stock awards outstanding with an approximate stock value of $1,275,000 based on that day's closing stock price. At* September 30, 2023*, there were 79,017 restricted stock awards outstanding with an approximate stock value of $1,166,000 based on that day's closing stock price. The fair value of restricted stock awards was $578,000 on the grant date of* March 4, 2024and $788,000 on the grant date of January 23, 2023.*Grants to officers of LCNB vest over a period offive years while grants to members of the board of directors vest immediately. The grant date fair value is recognized ratably into expense over the vesting period.

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NOTE14 – STOCK BASED COMPENSATION** (continued)******

The following table presents expense recorded in salaries and employee benefits for restricted stock awards and the related tax information for thethree andnine months ended* September 30, 2024and2023* (in thousands):

Unrecognized compensation expense for restricted stock awards was $988,000 at* September 30, 2024* and is expected to be recognized over a period of 4.5 years.

NOTE15 – 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 thetwo-class method as required by ASCNo. 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.

Earnings per share for thethree andnine months ended* September 30, 2024and2023* were calculated as follows (dollars in thousands, except share and per share data):

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NOTE16 - 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 toone ofthree broad levels:

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 (level1). LCNB has an investment in a mutual fund that is measured at fair value using net asset values, which are considered level1 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:

ASSETS RECORDED AT FAIR VALUE ON A NONRECURRING BASIS

Assets that* maybe recorded at fair value on a nonrecurring basis include individually evaluated collateral dependent loans (or impaired loans prior to the adoption of ASC326*), other real estate owned, and other repossessed assets.

LCNB doesnot record loans at fair value on a recurring basis, except for loans held-for-sale. 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.

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NOTE16 - FAIR VALUE MEASUREMENTS** (continued)******

The following table summarizes the valuation of LCNB's assets recorded at fair value by input levels as of* September 30, 2024* and* December 31, 2023* (in thousands):

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NOTE16 - FAIR VALUE MEASUREMENTS** (continued)******

The following table presents quantitative information about unobservable inputs used in nonrecurring level3 fair value measurements at* September 30, 2024* and* December 31, 2023* (dollars in thousands):

Carrying amounts and estimated fair values of financial instruments as of* September 30, 2024* and* December 31, 2023* were as follows (in thousands):

The methodology to derive the fair value of loans at September 30, 2024 is consistent with the methodology utilized to determine the fair value of loans acquired in the Company’s recent acquisitions of CNNB and EFBI

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 September 30, 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 wouldnot represent the underlying value of LCNB.

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NOTE17 - SUBSEQUENT EVENT

On* September 20, 2024,LCNB received a non-binding letter of intent from athird* party intending to purchase a pool of loans with an unpaid principal balance of $39.5 million. The sale of these loans is expected to close in* Novemberof2024* and isnot expected to result in a material gain or loss.

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