LCNB CORP
For the period ended Mar 31, 2025. Filed May 7, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 7, 2025
LCNB$19.59+0.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-06.
0001437749-24-033634
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-07.
0001437749-25-015116
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 73 previous paragraphs and 61 current paragraphs.
41 unchanged; 15 reworded; 5 added; 13 removed; 4 previous and 0 current paragraphs rearranged.
Tables are not compared: 42 previous and 37 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (5)
Current report
See Note 1- Basis of Presentation - Adoption of New Accounting Pronouncements in the 2024 Annual Report on Form 10-K for further detailed descriptions of LCNB's estimation process and methodology related to the allowance. See also Note 4 – Loans in this Quarterly Report on Form 10-Q for further information regarding LCNB's loan portfolio and allowance.
Current report
Net interest income for the three months ended March 31, 2025 was $16.3 million. This compares to net interest income of $13.9 million for the same three-month period in 2024. The growth in net interest income was primarily due to the reduction in average interest rates paid on interest-bearing liabilities and higher average rates earned on loans. LCNB’s tax equivalent net interest margin was 3.25% for the first quarter 2025, compared to 2.72% for the same period last year.
Current report
LCNB recorded a provision for credit losses of $197 thousand for the three months ended March 31, 2025. This compares to a provision of $125 thousand for the same three-month period in 2024.
Current report
Non-interest income for the three months ended March 31, 2025 was $5.2 million. This compares to non-interest income of $3.9 million for the same period in 2024. The increase was primarily due to higher amounts of net gains from sales of loans, fiduciary income, service charges and fees on deposit accounts, and other income.
Current report
Non-interest expense for the three months ended March 31, 2025 was $15.8 million, compared to $15.5 million for the same three-month period in 2024. The $300 thousand increase was primarily due to higher operating expenses associated with the Eagle acquisition during April 2024 and increased marketing expenses, partially offset by the lack of merger-related expenses compared to the same period last year. LCNB had $775 thousand of one-time merger-related expenses that occurred in the first quarter of 2024.
Removed paragraphs (13)
Previous report
Loans Held-For-Sale. Loans held-for-sale (“LHFS”) represent mortgage loans intended to be sold in the secondary market and other loans that management has an active plan to sell. LHFS are carried at the lower-of-cost-or-fair value as determined on an aggregate basis by type of loan. Any writedowns to fair value upon the transfer of loans to LHFS are reflected in loan charge-offs. Any further decreases are recognized in non-interest income and increases in fair value above the loan cost basis are not recognized until the loans are sold.
Previous report
Net interest income for the three and nine months ended September 30, 2024 was $14,970,000 and $44,082,000, respectively. This compares to net interest income of $13,571,000 and $41,690,000 for the same respective three and nine-month periods in 2023. The increase in net interest income was primarily due to increased loan interest income caused by higher average loan balances and an increase in the average rate earned on the loan portfolio. This increase was partially offset by increased interest expense recognized on higher amounts of average interest-bearing demand and money market deposits, IRA and time certificates, and long-term borrowings and to higher interest expense paid for these liabilities. The higher average loan and deposit balances during the 2024 periods were due to the acquisition of EFBI and CNNB. The increases in average rates earned on loans and paid for deposits and debt is associated with the rapid increase in the Effective Federal Funds Rate. LCNB's tax equivalent net interest margin for the first nine months of 2024 was 2.81%, compared to 3.20% for the same period last year.
Previous report
LCNB recorded a provision for credit losses of $660,000 and $1,313,000 for the three and nine months ended September 30, 2024, respectively. This compares to net recoveries of credit losses of $114,000 and $141,000 for the same respective three and nine month periods in 2023. The provision for the nine months ended September 30, 2024 includes $763,000 recognized on non-PCD loans acquired through the Eagle Financial Bancorp merger.
Previous report
Non-interest income for the three and nine months ended September 30, 2024 was $6,407,000 and $14,416,000, respectively. This compares to non-interest income of $3,578,000 and $10,805,000 for the same respective periods in 2023. The increase for both the three and nine-month periods was primarily due to higher amounts of fiduciary income, service charges and fees on deposit accounts, bank-owned life insurance income, and net gains recognized on the sale of residential mortgage loans. Partially offsetting non-interest income during the nine months ended September 30, 2024 was an $843,000 pretax loss on the sale of approximately $48.9 million of below market rate loans acquired from Cincinnati Bancorp during the second quarter.
Previous report
Non-interest expense for the three and nine months ended September 30, 2024 was $15,387,000 and $48,684,000, respectively, compared to $12,244,000 and $36,847,000 for the same three and nine-month periods in 2023. The increases were primarily due to higher expenses associated with the additional personnel and offices resulting from the acquisitions of Eagle Financial Bancorp and Cincinnati Bancorp and, for the nine month comparative periods, the increase in one-time expenses associated with the two acquisitions.
Previous report
The $5,331,000 increase in total interest expense was primarily due to a $708,000 increase in interest expense for interest-bearing demand and money market deposits, a $4,299,000 increase in interest expense for IRA and time certificates, and a $1,009,000 increase in interest expense for long-term debt. Interest expense on interest-bearing demand and money market deposits increased primarily due to a 36 basis point increase in the average rate paid for these deposits and secondarily to a $44.3 million increase in average deposit balances. Interest expense on IRA and time certificates increased due to a $308.0 million increase in average deposit balances and to a 121 basis point increase in the average rate paid. Deposit balances increased due to a combination of organic growth and to balances obtained in the mergers with EFBI and CNNB.
Previous report
Interest expense on long-term debt increased primarily due to a $85.9 million increase in the average balance outstanding caused by new FHLB advances, which were used to pay down short-term borrowings, promote loan growth, and increase liquidity.
Previous report
Market rates were consistent throughout the beginning two months of the quarter as the targeted federal funds rate remained unchanged for the previous ten months. In September of 2024, the FOMC decreased the targeted federal funds rate by 50 basis points.
Previous report
The $21,813,000 increase in total interest income was primarily due to a $21,079,000 increase in loan interest income. The increase in loan interest income was primarily due to a $354.7 million increase in average loan balances and secondarily to a 62 basis point increase in the average rate earned on the loan portfolio due to higher market rates. Loan balances increased primarily due to loans acquired in the mergers with EFBI and CNNB.
Previous report
Interest expense on long-term debt increased primarily due to a $120.2 million increase in the average balance outstanding caused by new FHLB advances, which were used to pay down short-term borrowings, promote loan growth, and increase liquidity.
Previous report
The provisions for credit losses on loans during the nine-month 2024 period included $763,000 recognized on non-PCD loans acquired through the EFBI merger and a $1.2 million increase for a commercial real estate, non-owner occupied loan that was individually evaluated for the first time during the first quarter 2024. These increases were largely offset by a recovery of credit losses in the pooled real estate mortgage loan category. The residential real estate mortgage loan category had a recovery of credit losses primarily due to a decrease in loan balances caused by a transfer to the loans held-for-sale category.
Previous report
LCNB Corp. depends on dividends from the Bank for the majority of its liquid assets, including the cash needed to pay dividends to its shareholders. Federal banking law limits the amount of dividends the Bank may pay to the sum of retained net income for the current year plus retained net income for the previous two years. Prior approval from the OCC, the Bank's primary regulator, is necessary for the Bank to pay dividends in excess of this amount. If dividends exceed net income for a year, a bank is generally not required to carry forward the negative amount resulting from such excess if the bank can attribute the excess to the preceding two years. If the excess is greater than the Bank's previously undistributed net income for the preceding two years, prior OCC approval of the dividend is required and a negative amount would be carried forward in future dividend calculations. In addition, dividend payments may not reduce capital levels below minimum regulatory guidelines.
Previous report
At December 31, 2023, the Bank had paid $650,000 in excess of the previous two years' Bank net income to the holding company due to an $8.75 million dividend for the acquisition of CNNB. In addition, dividend payments during 2024 were also in excess of the previous two years' Bank net income due to a $10.5 million dividend for the acquisition of EFBI. The Company does not expect the excess dividends will result in any adverse supervisory action by the OCC.
Reworded paragraphs (15)
Previous wording
Accounting rules require LCNB to determine the fair value of all the assets and liabilities of an acquired entity and to record their fair values on the date of acquisition. LCNB employs a variety of means in determining fair values, including the use of discounted cash flow analysis, market comparisons and projected future revenue streams. For those items for which management concludes that LCNB has the appropriate expertise to determine fair value, management may choose to use its own calculation of fair value. In other cases, where the fair value is not readily determined, consultation with outside parties is used to determine fair value. Once valuations have been determined, the net difference between the price paid for the acquired entity and the fair value of the balance sheet is recorded as goodwill. Goodwill is assessed at least annually for impairment, with any such impairment recognized in the period identified. A more frequent assessment is performed if there are material changes in the market place or within the organizational structure.
Current wording
Accounting rules require LCNB to determine the fair value of all the assets and liabilities of an acquired entity and to record their fair values on the date of acquisition. LCNB employs a variety of means in determining fair values, including the use of discounted cash flow analysis, market comparisons and projected future revenue streams. For those items for which management concludes that LCNB has the appropriate expertise to determine fair value, management may choose to use its own calculation of fair value. In other cases, where the fair value is not readily determined, consultation with outside parties is used to determine fair value. Once valuations have been determined, the net difference between the price paid for the acquired entity and the fair value of the balance sheet is recorded as goodwill. Goodwill is assessed at least annually for impairment, with any such impairment recognized in the period identified. A more frequent assessment is performed if there are material changes in the marketplace or within the organizational structure.
Previous wording
Net income for the respective three and nine months ended September 30, 2024 was $4,532,000 (total basic and diluted earnings per share of $0.31) and $7,372,000 (total basic and diluted earnings per share of $0.53). This compares to net income of $4,070,000 (total basic and diluted earnings per share of $0.37) and $12,921,000 (total basic and diluted earnings per share of $1.16) for the same respective three and nine-month periods in 2023. Results for the 2024 periods were affected by the expenses incurred in connection with the acquisition of Eagle Financial Bancorp, Inc. on April 12, 2024 and Cincinnati Bancorp, Inc. on November 1, 2023.
Current wording
Net income for the three months ended March 31, 2025 was $4.6 million (total basic and diluted earnings per share of $0.33). This compares to net income of $1.9 million (total basic and diluted earnings per share of $0.15) for the same three-month periods in 2024. Results for the 2024 periods were affected by the expenses incurred in connection with the acquisition of Eagle Financial Bancorp, Inc. on April 12, 2024 and Cincinnati Bancorp, Inc. on November 1, 2023.
Previous wording
Net interest income on a fully taxable-equivalent basis for the three months ended September 30, 2024 totaled $15,013,000, an increase of $1,396,000 from the comparable period in 2023. Total interest income increased $6,727,000, which was partially offset by an increase in total interest expense of $5,331,000.
Current wording
Net interest income on a fully taxable-equivalent basis for the three months ended March 31, 2025 totaled $16.3 million, an increase of $2.4 million from the comparable period in 2024. Total interest income increased $559 thousand and total interest expense decreased $1.8 million.
Previous wording
The $6,727,000 increase in total interest income was primarily due to a $6,467,000 increase in loan interest income. The increase in loan interest income was primarily due to a $319.2 million increase in average loan balances and secondarily to a 58 basis point (a basis point equals 0.01%) increase in the average rate earned on the loan portfolio due to consistent market rates. Loan balances increased primarily due to loans acquired in the mergers with EFBI and CNNB.
Current wording
The $559 thousand increase in total interest income was primarily due to a $499 thousand increase in loan interest income. The increase in loan interest income was primarily due to a 16 basis point (a basis point equals 0.01%) increase in the average rate earned on the loan portfolio, slightly offset by a $674 thousand decrease in average loan balances.
Previous wording
The $19,440,000 increase in total interest expense was primarily due to a $5,358,000 increase in interest expense for interest-bearing demand and money market deposits, an $11,498,000 increase in interest expense for IRA and time certificates, and a $4,225,000 increase in interest expense for long-term debt. Interest expense on interest-bearing demand and money market deposits increased primarily due to a 93 basis point increase in the average rate paid for these deposits and secondarily to a $102.9 million increase in average deposit balances. Interest expense on IRA and time certificates increased due to a $257.0 million increase in average deposit balances and to a 165 basis point increase in the average rate paid. Deposit balances increased due to a combination of organic growth and to balances obtained in the mergers with EFBI and CNNB.
Current wording
The $1.8 million decrease in total interest expense was primarily due to a $1.6 million decrease in interest expense for interest-bearing demand deposits, money market deposits, and short-term borrowings The decrease was partially offset by an increase in interest expense for IRA and time certificates. Interest expense on interest-bearing demand and money market deposits decreased primarily due to a 79 basis point decrease in the average rate paid for these deposits and secondarily to a $72.7 million decrease in average deposit balances. Interest expense associated with short-term borrowings decreased due to payoffs of short-term borrowings during 2024. Interest expense increased on IRA and time certificates due to increased balances, primarily from acquisition activity, and was partially offset by a 32 basis point decrease in the average rate paid for these deposits.
Previous wording
LCNB recorded a provision for credit losses of $660,000 for the third quarter of 2024, compared to a recovery of credit losses of $114,000 for the comparable period in 2023. The provision for the 2024 period included a provision for credit losses on loans of $681,000 and a recovery of credit losses for off-balance-sheet credit exposures of $22,000. The provision for the 2023 period included a provision for credit losses on loans of $9,000 and a recovery of credit losses for off-balance-sheet credit exposures of $123,000. For the nine months ended September 30, 2024, LCNB recorded a provision for credit losses of $1,313,000, compared to a recovery of credit losses of $141,000 for the comparable period in 2023. The provision for the 2024 nine-month period included a provision for credit losses on loans of $1,300,000 and a provision for off-balance-sheet credit exposures of $11,000. The recovery of credit losses for the 2023 nine-month period included a provision for credit losses on loans of $173,000 and a recovery of credit losses for off-balance-sheet credit exposures of $123,000.
Current wording
LCNB recorded a provision for credit losses of $197 thousand for the first quarter of 2025, compared to $125 thousand for the comparable period in 2024. The provision for the 2025 period included a provision for credit losses on loans of $162 thousand and a provision for off-balance-sheet credit exposures of $34 thousand. The provision for the 2024 period included a provision for credit losses on loans of $77 thousand and a provision for off-balance-sheet credit exposures of $48 thousand.
Previous wording
Net charge-offs for the three and nine months ended September 30, 2024 totaled $84,000 and $147,000, respectively, compared to net charge-offs of $34,000 and $83,000 for the respective periods in 2023.
Current wording
Net charge-offs for the three months ended March 31, 2025 totaled $39 thousand, compared to net charge-offs of $45 thousand for the same period in 2024.
Previous wording
A comparison of non-interest income for the three and nine months ended September 30, 2024 and September 30, 2023 is as follows (in thousands):
Current wording
A comparison of non-interest income for the three months ended March 31, 2025 and March 31, 2024 is as follows (in thousands):
Previous wording
A comparison of non-interest expense for the three and nine months ended September 30, 2024 and September 30, 2023 is as follows (in thousands):
Current wording
A comparison of non-interest expense for the three months ended March 31, 2025 and March 31, 2024 is as follows (in thousands):
Previous wording
LCNB's effective tax rate for the three and nine months ended September 30, 2024 was 15.0% and 13.3%, respectively, compared to 18.9% and 18.2% for the same respective periods in 2023. The difference between the statutory rate of 21% and the effective tax rates is primarily due to tax-exempt interest income from municipal securities, tax-exempt earnings from bank-owned life insurance, tax-exempt earnings from LCNB Risk Management, Inc., and tax credits and losses related to investments in affordable housing tax credit limited partnerships. The effective tax rates for 2024 were lower due to tax-exempt items not decreasing in proportion to the overall decrease in earnings.
Current wording
LCNB's effective tax rate for the three months ended March 31, 2025 was 16.4%, compared to 14.0% for the same period in 2024. The difference between the statutory rate of 21% and the effective tax rates is primarily due to tax-exempt interest income from municipal securities, tax-exempt earnings from bank-owned life insurance, tax-exempt earnings from LCNB Risk Management, Inc., and tax credits and losses related to investments in affordable housing tax credit limited partnerships. The effective tax rate for 2024 was lower due to tax-exempt items not decreasing in proportion to the overall decrease in earnings.
Previous wording
LCNB's loan portfolio represents its largest asset category and is its most significant source of interest income. Loan classifications have been identified as Commercial & Industrial, Commercial Real Estate, Residential Real Estate, Consumer, Agricultural, and Other. Commercial real estate is the largest classification in LCNB's loan portfolio, comprising about 64% of total loans at September 30, 2024.
Current wording
LCNB's loan portfolio represents its largest asset category and is its most significant source of interest income. Loan classifications have been identified as Commercial & Industrial, Commercial Real Estate, Residential Real Estate, Consumer, Agricultural, and Other. Commercial real estate is the largest classification in LCNB's loan portfolio, comprising about 65% of total loans at March 31, 2025.
Previous wording
Qualifications for community banking organizations to use a simplified measure of capital adequacy approach include having a tier 1 leverage ratio of greater than 9%, less than $10 billion in total consolidated assets, and limited amounts of off-balance-sheet exposures and trading assets and liabilities. A qualifying community banking organization that opts into the Community Bank Leverage Ratio framework and meets all requirements under the framework will be considered to have met the well-capitalized ratio requirements under the Prompt Corrective Action regulations and will not be required to report or calculate risk-based capital. LCNB qualifies to use the simplified measure, but did not opt in for the September 30, 2024 regulatory capital calculations.
Current wording
Qualifications for community banking organizations to use a simplified measure of capital adequacy approach include having a tier 1 leverage ratio of greater than 9%, less than $10 billion in total consolidated assets, and limited amounts of off-balance-sheet exposures and trading assets and liabilities. A qualifying community banking organization that opts into the Community Bank Leverage Ratio framework and meets all requirements under the framework will be considered to have met the well-capitalized ratio requirements under the Prompt Corrective Action regulations and will not be required to report or calculate risk-based capital. LCNB did not qualify to use the simplified measure for the March 31, 2025 or December 31, 2024 regulatory capital calculations.
Previous wording
Effective liquidity management ensures that cash is available to meet the cash flow needs of borrowers and depositors, pay dividends to shareholders, and meet LCNB's operating cash needs. Primary funding sources include customer deposits with the Bank, short-term and long-term borrowings from the Federal Home Loan Bank, line of credit arrangements totaling $115.0 million with three correspondent banks, and interest and repayments received from LCNB's loan and investment portfolios. In addition, LCNB has approximately $162 million in off-balance sheet insured cash sweeps immediately available for liquidity.
Current wording
Effective liquidity management ensures that cash is available to meet the cash flow needs of borrowers and depositors, pay dividends to shareholders, and meet LCNB's operating cash needs. Primary funding sources include customer deposits with the Bank, short-term and long-term borrowings from the Federal Home Loan Bank, line of credit arrangements totaling $115.0 million with three correspondent banks, and interest and repayments received from LCNB's loan and investment portfolios. In addition, LCNB has approximately $108 million in off-balance sheet insured cash sweeps immediately available for liquidity.
Previous wording
Total remaining borrowing capacity with the Federal Home Loan Bank at September 30, 2024 was approximately $120.9 million. Additional borrowings of approximately $115.0 million were available through line of credit arrangements with correspondent banks.
Current wording
Total remaining borrowing capacity with the Federal Home Loan Bank at March 31, 2025 was approximately $144.3 million. Additional borrowings of approximately $115.0 million were available through line of credit arrangements with correspondent banks.
Previous wording
Commitments to extend credit at September 30, 2024 totaled $349.8 million and are more fully described in Note 11 - Commitments and Contingent Liabilities to LCNB's condensed consolidated financial statements. Since many commitments to extend credit may expire without being drawn upon, the total commitment amount does not necessarily represent future cash required to satisfy the commitment reported prior to its expiration.
Current wording
Commitments to extend credit at March 31, 2025 totaled $291.5 million and are more fully described in Note 11 - Commitments and Contingent Liabilities to LCNB's condensed consolidated financial statements. Since many commitments to extend credit may expire without being drawn upon, the total commitment amount does not necessarily represent future cash required to satisfy the commitment reported prior to its expiration.
Rearranged previous paragraphs (4)
Previous report — wording carried elsewhere
Nine Months Ended September 30, 2024 vs. September 30, 2023
Previous report — wording carried elsewhere
The following table presents, for the nine months ended September 30, 2024 and September 30, 2023, average balances for interest-earning assets and interest-bearing liabilities, the income or expense related to each item, and the resulting average yields earned or rates paid.
Previous report — wording carried elsewhere
The following table presents the changes in taxable-equivalent basis interest income and expense for each major category of interest-earning assets and interest-bearing liabilities and the amount of change attributable to volume and rate changes for the nine months ended September 30, 2024 as compared to the same period in 2023. Changes not solely attributable to rate or volume have been allocated to volume and rate changes in proportion to the relationship of absolute dollar amounts of the changes in each.
Previous report — wording carried elsewhere
Net interest income on a fully taxable-equivalent basis for the nine months ended September 30, 2024 totaled $44,202,000, an increase of $2,373,000 from the comparable period in 2023. Total interest income increased $21,813,000, which was partially offset by an increase in total interest expense of $19,440,000.