LCNB CORP

Previous wording

Business Combinations. Assets acquired, including identified intangible assets such as core deposit intangibles and liabilities assumed as a result of a merger or acquisition transaction, are recorded at their estimated fair values. The difference between the consideration paid and the net fair value of assets acquired and liabilities assumed is recorded as goodwill. Management engages third-party specialists to assist in the development of fair value estimates. Significant estimates and assumptions used to value acquired assets and liabilities assumed include, but are not limited to, projected cash flows, future growth rates, repayment rates, default rates and losses assuming default, discount rates, and realizable collateral values. The allowance for credit losses for PCD loans is recognized within acquisition accounting. The allowance for credit losses for non-PCD assets is recognized as provision for credit losses in the same reporting period as the merger or acquisition. Fair value adjustments are amortized or accreted into the income statement over the estimated lives of the acquired assets and assumed liabilities. The purchase date valuations and any subsequent adjustments determine the amount of goodwill recognized in connection with the merger or acquisition.

Current wording

Business Combinations. Assets acquired, including identified intangible assets such as core deposit intangibles and liabilities assumed as a result of a merger or acquisition transaction, are recorded at their estimated fair values. The difference between the consideration paid and the net fair value of assets acquired and liabilities assumed is recorded as goodwill. Management engages third-party specialists to assist in the development of fair value estimates. Significant estimates and assumptions used to value acquired assets and liabilities assumed include, but are not limited to, projected cash flows, future growth rates, repayment rates, default rates and losses assuming default, discount rates, and realizable collateral values. The allowance for credit losses for PCD loans is recognized within acquisition accounting. Under current guidance, the allowance for credit losses for non-PCD assets is recognized as a provision for credit losses in the same reporting period as the merger or acquisition. Fair value adjustments are amortized or accreted into the income statement over the estimated lives of the acquired assets and assumed liabilities. The purchase date valuations and any subsequent adjustments determine the amount of goodwill recognized in connection with the merger or acquisition.

Previous wording

Fair Value Accounting for Debt Securities. Debt securities classified as available-for-sale are recorded at fair value with unrealized gains and losses recorded in other comprehensive income (loss), net of tax. Available-for-sale debt securities in unrealized loss positions are evaluated to determine if the decline in fair value should be recorded in income or in other comprehensive income (loss). LCNB first determines if it intends to sell or if it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either criteria is met, the security's amortized cost basis is written down to fair value through income. If neither of these criteria is met, LCNB evaluates whether the decline in fair value resulted from credit factors. In making this determination, management considers, among other factors, the extent to which fair value is less than the amortized cost basis, any changes to the rating of the security by rating agencies, and any adverse conditions specifically related to the security or issuer. If the present value of cash flows expected to be collected is less than the amortized cost basis, a provision is recorded to the allowance for credit losses. Any decline in fair value not recorded through an allowance for credit losses is recognized in accumulated other comprehensive income (loss), net of applicable taxes.

Current wording

Fair Value Accounting for Debt Securities. Debt securities classified as available-for-sale are recorded at fair value with unrealized gains and losses recorded in other comprehensive income, net of tax. Available-for-sale debt securities in unrealized loss positions are evaluated to determine if the decline in fair value should be recorded in income or in other comprehensive income (loss). LCNB first determines if it intends to sell or if it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either criteria is met, the security's amortized cost basis is written down to fair value through income. If neither of these criteria is met, LCNB evaluates whether the decline in fair value resulted from credit factors. In making this determination, management considers, among other factors, the extent to which fair value is less than the amortized cost basis, any changes to the rating of the security by rating agencies, and any adverse conditions specifically related to the security or issuer. If the present value of cash flows expected to be collected is less than the amortized cost basis, a provision is recorded to the allowance for credit losses. Any decline in fair value not recorded through an allowance for credit losses is recognized in accumulated other comprehensive income, net of applicable taxes.

Previous wording

Net income for the respective three and six months ended June 30, 2025 was $5.9 million (total basic and diluted earnings per share of $0.41) and $10.5 million (total basic and diluted earnings per share of $0.74). This compares to net income of $0.9 million (total basic and diluted earnings per share of $0.07) and $2.8 million (total basic and diluted earnings per share of $0.21) for the same three and six-month periods in 2024. Results for the 2024 periods were affected by expenses incurred in connection with the acquisition of EFBI on April 12, 2024 and CNNB on November 1, 2023.

Current wording

Net income for the respective three and nine months ended September 30, 2025 was $6.9 million (total basic and diluted earnings per share of $0.49) and $17.5 million (total basic and diluted earnings per share of $1.23). This compares to net income of $4.5 million (total basic and diluted earnings per share of $0.31) and $7.4 million (total basic and diluted earnings per share of $0.53) for the same three and nine-month periods in 2024. Results for the 2024 periods were affected by expenses incurred in connection with the acquisition of EFBI on April 12, 2024 and CNNB on November 1, 2023.

Previous wording

Net interest income for the three and six months ended June 30, 2025 was $17.5 million and $33.8 million, respectively. This compares to net interest income of $15.2 million and $29.1 million for the same three and six-month periods in 2024. The growth in net interest income was primarily due to a decrease on the average rate paid on interest-bearing liabilities and a decrease in the average balances of these liabilities, partially offset by a decrease in the average balance of loans outstanding. LCNB's tax equivalent net interest margin for the first six months of 2025 was 3.36%, compared to 2.80% for the same period last year.

Current wording

Net interest income for the three and nine months ended September 30, 2025 was $18.1 million and $52.0 million, respectively. This compares to net interest income of $15.0 million and $44.1 million for the same three and nine-month periods in 2024. The growth in net interest income was primarily due to a decrease on the average rate paid on interest-bearing liabilities and a decrease in the average balances of these liabilities, partially offset by a decrease in the average balance of loans outstanding. LCNB's tax equivalent net interest margin for the first nine months of 2025 was 3.43%, compared to 2.81% for the same period last year.

Previous wording

LCNB recorded a provision for credit losses of $18 thousand and $215 thousand for the three and six months ended June 30, 2025. This compares to a provision of $528 thousand and $653 thousand for the same three and six-month periods in 2024. The provisions for 2024 included $763 thousand recognized on non-PCD loans acquired through the EFBI merger.

Current wording

LCNB recorded a provision for credit losses of $211 thousand and $426 thousand for the three and nine months ended September 30, 2025. This compares to a provision of $660 thousand and $1.3 million for the same three and nine-month periods in 2024. The provisions for the nine-month period in 2024 included $763 thousand recognized on non-PCD loans acquired through the EFBI merger.

Previous wording

Non-interest income for the three and six months ended June 30, 2025 was $5.2 million and $10.5 million, respectively. This compares to non-interest income of $4.1 million and $8.0 million for the same periods in 2024. The increases were primarily due to higher amounts of net gains from sales of loans, fiduciary income, service charges and fees on deposit accounts, and other income. Partially offsetting non-interest income during the three and six months ended June 30, 2024 was an $843 thousand pretax loss on the sale of approximately $48.9 million of below market rate loans acquired from CNNB.

Current wording

Non-interest income for the three and nine months ended September 30, 2025 was $5.7 million and $16.2 million, respectively. This compares to non-interest income of $6.4 million and $14.4 million for the same periods in 2024. The increase for the nine-month period was primarily due to higher fiduciary income, service charges and fees on deposit accounts, and other income. Partially offsetting non-interest income during the nine months ended September 30, 2024 was an $843 thousand pretax loss on the sale of approximately $48.9 million of below market rate loans acquired from CNNB.

Previous wording

Non-interest expense for the three and six months ended June 30, 2025 was $15.6 million and $31.4 million, respectively. This compares to non-interest expense of $17.8 million and $33.3 million for the same three and six-month periods in 2024. The decreases were primarily due to lower merger related expenses, partially offset by operating expenses associated with the EFBI acquisition during April 2024 and increased marketing expenses compared to the same period last year. LCNB had $2.3 million and $3.1 million of one-time merger-related expenses that occurred during the three and six months ended June 30 2024, respectively, compared to $140 thousand of such expenses for the three and six months ended June 30, 2025.

Current wording

Non-interest expense for the three and nine months ended September 30, 2025 was $15.1 million and $46.5 million, respectively. This compares to non-interest expense of $15.4 million and $48.7 million for the same three and nine-month periods in 2024. The decreases were primarily due to lower merger related expenses. LCNB had $281 thousand and $3.4 million of one-time merger-related expenses that occurred during the three and nine months ended September 30 2024, respectively, compared to $140 thousand of such expenses for the nine months ended September 30, 2025.

Previous wording

Net interest income on a fully taxable-equivalent basis for the three months ended June 30, 2025 totaled $17.6 million, an increase of $2.3 million from the comparable period in 2024. Total interest expense decreased $3.3 million, partially offset by a $1.0 million decrease in total interest income .

Current wording

Net interest income on a fully taxable-equivalent basis for the three months ended September 30, 2025 totaled $18.2 million, an increase of $3.2 million from the comparable period in 2024. Total interest expense decreased $3.2 million, slightly offset by a $93 thousand decrease in total interest income.

Previous wording

The $1.0 million decrease in total interest income was primarily due to a $1.0 million decrease in loan interest income. The decrease in loan interest income was primarily due to a $99.3 million decrease in average loan balances, partially offset by a 7 basis point (a basis point equals 0.01%) increase in the average rate earned on the loan portfolio.

Current wording

The $93 thousand decrease in total interest income was primarily due to a $179 thousand decrease in loan interest income due to a $64.0 million decrease in average loan balances, partially offset by a 15 basis point (a basis point equals 0.01%) increase in the average rate earned on the loan portfolio.

Previous wording

The $3.3 million decrease in total interest expense was primarily due to a $150.6 million decrease in average interest-bearing liabilities and to a 61 basis point decrease in the average rate paid for these liabilities.

Current wording

The $3.2 million decrease in total interest expense was primarily due to a $125.6 million decrease in average interest-bearing liabilities and to a 63 basis point decrease in the average rate paid for these liabilities.

Previous wording

Six Months Ended June 30, 2025 vs. June 30, 2024

Current wording

Nine Months Ended September 30, 2025 vs. September 30, 2024

Previous wording

The following table presents, for the six months ended June 30, 2025 and June 30, 2024, 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.

Current wording

The following table presents, for the nine months ended September 30, 2025 and September 30, 2024, 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 wording

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 six months ended June 30, 2025 as compared to the same period in 2024. 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.

Current wording

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, 2025 as compared to the same period in 2024. 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 wording

Net interest income on a fully taxable-equivalent basis for the six months ended June 30, 2025 totaled $33.9 million, an increase of $4.7 million from the comparable period in 2024. Total interest income decreased $463 thousand and total interest expense decreased $5.2 million.

Current wording

Net interest income on a fully taxable-equivalent basis for the nine months ended September 30, 2025 totaled $52.1 million, an increase of $7.9 million from the comparable period in 2024. Total interest income decreased $557 thousand and total interest expense decreased $8.4 million.

Previous wording

The $463 thousand decrease in total interest income was primarily due to a $499 thousand decrease in loan interest income. The decrease in loan interest income was primarily due to a $50.0 million decrease in average loan balances, partially offset by an 11 basis point increase in the average rate earned on the loan portfolio.

Current wording

The $557 thousand decrease in total interest income was primarily due to a $678 thousand decrease in loan interest income. The decrease in loan interest income was primarily due to a $54.7 million decrease in average loan balances, partially offset by a 13 basis point increase in the average rate earned on the loan portfolio.

Previous wording

The $5.2 million decrease in total interest expense was primarily due to a $93.2 million decrease in average interest-bearing liabilities and to a 50 basis point decrease in the average rate paid for these liabilities.

Current wording

The $8.4 million decrease in total interest expense was primarily due to a $104.1 million decrease in average interest-bearing liabilities and to a 54 basis point decrease in the average rate paid for these liabilities.

Previous wording

LCNB recorded a provision for credit losses of $18 thousand for the second quarter of 2025, compared to $528 thousand for the comparable period in 2024. The provision for the 2025 period included a provision for credit losses on loans of $63 thousand and a recovery on off-balance-sheet credit exposures of $45 thousand. The provision for the 2024 period included a provision for credit losses on loans of $542 thousand and a net recovery for off-balance-sheet credit exposures of $16 thousand. For the six months ended June 30, 2025, LCNB recorded a provision for credit losses of $215 thousand, compared to a provision of $653 thousand for the comparable period in 2024. The provision for the six months ended June 30, 2025 included a provision for credit losses on loans of $225 thousand and a recovery on off-balance-sheet credit exposures of $11 thousand. The provision for the 2024 six-month period included a provision for credit losses on loans of $620 thousand and a provision for off-balance-sheet credit exposures of $33 thousand.

Current wording

LCNB recorded a provision for credit losses of $211 thousand for the third quarter of 2025, compared to $660 thousand for the comparable period in 2024. The provision for the 2025 period included a provision for credit losses on loans of $231 thousand and a recovery on off-balance-sheet credit exposures of $26 thousand. The provision for the 2024 period included a provision for credit losses on loans of $681 thousand and a net recovery for off-balance-sheet credit exposures of $21 thousand. For the nine months ended September 30, 2025, LCNB recorded a provision for credit losses of $426 thousand, compared to a provision of $1.3 million for the comparable period in 2024. The provision for the nine months ended September 30, 2025 included a provision for credit losses on loans of $457 thousand and a recovery on off-balance-sheet credit exposures of $37 thousand. The provision for the 2024 nine-month period included a provision for credit losses on loans of $1.3 million and a provision for off-balance-sheet credit exposures of $11 thousand.

Previous wording

The provisions for credit losses on loans during the three and six-month 2024 periods included $763,000 recognized on non-PCD loans acquired through the EFBI merger and the six-month period included 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 loss rates and a decrease in loan balances caused by a transfer to the loans held-for-sale category.

Current wording

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 due to a decrease in loss rates and a decrease in loan balances caused by a transfer to the loans held-for-sale category.

Previous wording

Net charge-offs for the three and six months ended June 30, 2025 totaled $79 thousand and $118 thousand, respectively, compared to net charge-offs of $18 thousand and $63 thousand for the same respective periods in 2024.

Current wording

Net charge-offs for the three and nine months ended September 30, 2025 totaled $169 thousand and $287 thousand, respectively, compared to net charge-offs of $84 thousand and $147 thousand for the same respective periods in 2024.

Previous wording

A comparison of non-interest income for the three and six months ended June 30, 2025 and June 30, 2024 is as follows (in thousands):

Current wording

A comparison of non-interest income for the three and nine months ended September 30, 2025 and September 30, 2024 is as follows (in thousands):

Previous wording

A comparison of non-interest expense for the three and six months ended June 30, 2025 and June 30, 2024 is as follows (in thousands):

Current wording

A comparison of non-interest expense for the three and nine months ended September 30, 2025 and September 30, 2024 is as follows (in thousands):

Previous wording

LCNB's effective tax rate for the three and six months ended June 30, 2025 was 17.8% and 17.2%, respectively, compared to 2.0% and 10.4% for the same respective periods 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 rates for 2024 were lower due to tax-exempt items not decreasing in proportion to the overall decrease in earnings, partially offset by the tax effect of non-deductible merger-related expenses.

Current wording

LCNB's effective tax rate for the three and nine months ended September 30, 2025 was 18.2% and 17.6%, respectively, compared to 15.0% and 13.3% for the same respective periods 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 rates for 2024 were lower due to tax-exempt items not decreasing in proportion to the overall decrease in earnings, partially offset by the tax effect of non-deductible merger-related expenses.

Previous wording

Most of LCNB's commercial real estate loans are made within its general market area of Southwest and South-Central Ohio and Northern Kentucky. The following table provides a breakdown of amortized cost of commercial real estate loans by real estate collateral location as of June 30, 2025, excluding loans which are junior in lien or covered by collateral secured with varying classes of assets (dollars in thousands):

Current wording

Most of LCNB's commercial real estate loans are made within its general market area of Southwest and Central Ohio and Northern Kentucky. The following table provides a breakdown of amortized cost of commercial real estate loans by real estate collateral location as of September 30, 2025, excluding loans which are junior in lien or covered by collateral secured with varying classes of assets (dollars in thousands):

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 $60.9 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 FHLB, 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 $71.2 million in off-balance sheet ICS immediately available for liquidity.

Previous wording

Total remaining borrowing capacity with the Federal Home Loan Bank at June 30, 2025 was approximately $148.1 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 FHLB at September 30, 2025 was approximately $154.7 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 June 30, 2025 totaled $280.9 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 September 30, 2025 totaled $273.0 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.