LCNB Corp. Reports Financial Results for the Three and Six Months Ended June 30, 2019

LCNB Corp. ("LCNB") (NASDAQ: LCNB) today announced net income of $4,728,000 (total basic and diluted earnings per share of $0.36) and $9,355,000 (total basic and diluted earnings per share of $0.71) for the three and six months ended June 30, 2019, respectively. This compares to net income of $2,738,000 (total basic and diluted earnings per share of $0.25) and $5,451,000 (total basic and diluted earnings per share of $0.52) for the same three and six month periods in 2018.

Commenting on the financial results, LCNB Chief Executive Officer Eric Meilstrup said, "We are pleased to report strong earnings for the three and six months ended June 30, 2019. Net income for the first half of 2019 was $3,904,000 greater than the first half of 2018, fueled by a $5,425,000 increase in net interest income that resulted primarily from a $70.7 million increase in our net loan portfolio, from $1.155 billion at June 30, 2018 to $1.226 billion at June 30, 2019. Our return on average assets for the first half of 2019 was 1.15% and our return on average equity was 8.47%. Additionally, positive earnings growth allowed for increased shareholder dividends, from $0.32 per share for the first half of 2018 to $0.34 per share for the same period in 2019. LCNB remains committed to enhancing shareholder value. In addition to increased earnings and dividends, LCNB commenced a new share repurchase program during the second quarter 2019 that authorizes the repurchase of up to 500,000 shares of our outstanding common stock. Under this new program, we repurchased 342,085 shares during the second quarter."

Net interest income for the three and six months ended June 30, 2019 was, respectively, $2,222,000 and $5,425,000 greater than the comparable periods in 2018, primarily due to growth in the average balance of LCNB's loan portfolio, partially offset by a decrease in average investment securities and increases in average deposits and long-term borrowings. Also offsetting the positive effect on net interest income from growth in the loan portfolio was a market-driven increase in average rates paid on deposits. Loans, deposits, and long-term borrowings obtained through the merger with Columbus First Bancorp ("CFB") on May 31, 2018 were a considerable component of the growth in the average balance of LCNB's loan portfolio and the increases in the average balances of deposits and long-term borrowings.

The provision for loan losses for the three and six months ended June 30, 2019 was, respectively, $170,000 and $354,000 less than the comparable periods in 2018. Non-accrual loans and loans past due 90 days or more and still accruing interest decreased $114,000, from $3,100,000 or 0.26% of total loans at December 31, 2018 to $2,986,000 or 0.24% of total loans at June 30, 2019.

Non-interest income for the three and six months ended June 30, 2019 was, respectively, $207,000 and $343,000 greater than the comparable periods in 2018, primarily due to increases in fiduciary income and service charges and fees on deposit accounts. Market-driven increases in the fair value of equity security investments contributed to the increase in other operating income for the six-month period, but the effect on the three-month period was negligible.

Non-interest expense for the three and six months ended June 30, 2019 was, respectively, $122,000 and $1,273,000 greater than the comparable periods in 2018, primarily due to increases in salaries and employee benefits, state financial institutions tax, marketing, amortization of intangibles, contracted services expenses and other real estate owned expenses. Salaries and employee benefits increased primarily due to salary and wage increases and newly hired employees, including CFB employees retained. State financial institutions tax expense increased due to a larger capital base (Ohio financial institutions tax is based on capital, not income), largely caused by stock issued to CFB stockholders as merger consideration. Marketing expense increased primarily due to promotion costs for new checking products introduced in 2018, increased marketing activities in the Columbus area, and expanded use of broadcast and digital media. Amortization of intangibles increased due to amortization of the core deposit intangible recorded as part of the acquisition of CFB. Other real estate owned expense increased due to an impairment charge recognized during the second quarter 2019. A decrease in merger related expenses and the absence of an impairment charge recognized on one of LCNB's office buildings during the second quarter 2018 partially offset these increases.

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

Certain statements made in this news release regarding LCNB’s financial condition, results of operations, plans, objectives, future performance and business, are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. These forward-looking statements are identified by the fact they are not historical facts and include words such as “anticipate”, “could”, “may”, “feel”, “expect”, “believe”, “plan”, and similar expressions. Please refer to LCNB’s Annual Report on Form 10-K for the year ended December 31, 2018, as well as its other filings with the SEC, for a more detailed discussion of risks, uncertainties and factors that could cause actual results to differ from those discussed in the forward-looking statements.

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

1. the success, impact, and timing of the implementation of LCNB’s business strategies;
2. LCNB’s ability to integrate recent and future acquisitions may be unsuccessful, or may be more difficult, time-consuming or costly than expected;
3. LCNB may incur increased charge-offs in the future;
4. LCNB may face competitive loss of customers;
5. changes in the interest rate environment may have results on LCNB’s operations materially different from those anticipated by LCNB’s market risk management functions;
6. changes in general economic conditions and increased competition could adversely affect LCNB’s operating results;
7. changes in other regulations and government policies affecting bank holding companies and their subsidiaries, including changes in monetary policies, could negatively impact LCNB’s operating results;
8. LCNB may experience difficulties growing loan and deposit balances;
9. the current economic environment poses significant challenges for us and could adversely affect LCNB's financial condition and results of operations;
10. deterioration in the financial condition of the U.S. banking system may impact the valuations of investments LCNB has made in the securities of other financial institutions resulting in either actual losses or other than temporary impairments on such investments;
11. difficulties with technology or data security breaches, including cyberattacks, that could negatively affect LCNB's ability to conduct business and its relationships with customers, vendors, and others; and
12. government intervention in the U.S. financial system, including the effects of recent legislative, tax, accounting and regulatory actions and reforms, including the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Jumpstart Our Business Startups Act, the Consumer Financial Protection Bureau, the capital ratios of Basel III as adopted by the federal banking authorities, and the Tax Cuts and Jobs Act.

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

LCNB Corp. and Subsidiaries
Financial Highlights
(Dollars in thousands, except per share amounts)
(Unaudited)
	Three Months Ended																	Six Months Ended
	6/30/2019					3/31/2019			12/31/2018			9/30/2018			6/30/2018			6/30/2019			6/30/2018
Condensed Income Statement
Interest income	$		16,328			16,113			15,844			15,070			12,538			32,441			23,680
Interest expense			2,738			2,722			2,334			1,967			1,170			5,460			2,124
Net interest income			13,590			13,391			13,510			13,103			11,368			26,981			21,556
Provision (credit) for loan losses			54			(105	)		(39	)		659			224			(51	)		303
Net interest income after provision			13,536			13,496			13,549			12,444			11,144			27,032			21,253
Non-interest income			2,998			2,772			2,702			2,921			2,791			5,770			5,427
Non-interest expense			10,833			10,700			9,925			10,317			10,711			21,533			20,260
Income before income taxes			5,701			5,568			6,326			5,048			3,224			11,269			6,420
Provision for income taxes			973			941			1,133			847			486			1,914			969
Net income	$		4,728			4,627			5,193			4,201			2,738			9,355			5,451
Amort/Accret income on acquired loans	$		355			224			229			198			44			579			140
Amort/Accret expenses on acquired interest-bearing liabilities	$		142			144			149			214			—			286			—
Tax-equivalent net interest income	$		13,700			13,536			13,680			13,279			11,549			27,236			21,924
Per Share Data
Dividends per share	$		0.17			0.17			0.17			0.16			0.16			0.34			0.32
Basic earnings per common share	$		0.36			0.35			0.40			0.32			0.25			0.71			0.52
Diluted earnings per common share	$		0.36			0.35			0.40			0.32			0.25			0.71			0.52
Book value per share	$		17.18			16.83			16.47			16.05			15.97			17.18			15.97
Tangible book value per share	$		12.31			12.05			11.67			11.23			11.14			12.31			11.14
Weighted average common shares outstanding:
Basic			13,192,691			13,283,634			13,285,386			13,285,203			11,099,485			13,237,909			10,563,030
Diluted			13,196,665			13,287,338			13,290,499			13,290,665			11,105,014			13,241,752			10,568,792
Shares outstanding at period end			12,978,554			13,314,148			13,295,276			13,304,976			13,299,235			12,978,554			13,299,235
Selected Financial Ratios
Return on average assets			1.16	%		1.15	%		1.27	%		1.03	%		0.78	%		1.15	%		0.81	%
Return on average equity			8.46	%		8.47	%		9.55	%		7.76	%		6.46	%		8.47	%		6.87	%
Dividend payout ratio			47.22	%		48.57	%		42.50	%		50.00	%		64.00	%		47.89	%		61.54	%
Net interest margin (tax equivalent)			3.72	%		3.71	%		3.69	%		3.59	%		3.63	%		3.71	%		3.61	%
Efficiency ratio (tax equivalent)			64.87	%		65.61	%		60.58	%		63.69	%		74.69	%		65.24	%		74.07	%
Selected Balance Sheet Items
Cash and cash equivalents	$		23,185			19,527			20,040			19,812			24,901
Debt and equity securities			246,701			264,559			282,813			299,786			311,047
Loans:
Commercial and industrial	$		79,513			79,725			77,740			78,002			81,778
Commercial, secured by real estate			793,863			764,424			740,647			704,987			705,978
Residential real estate			326,029			334,227			349,127			347,920			339,435
Consumer			19,649			17,409			17,283			17,505			17,705
Agricultural			10,843			10,900			13,297			13,280			13,390
Other, including deposit overdrafts			373			409			450			498			583
Deferred net origination costs (fees)			(9	)		40			79			133			229
Loans, gross			1,230,261			1,207,134			1,198,623			1,162,325			1,159,098
Less allowance for loan losses			4,112			4,126			4,046			4,016			3,603
Loans, net	$		1,226,149			1,203,008			1,194,577			1,158,309			1,155,495
Total earning assets	$		1,482,913			1,476,862			1,483,166			1,465,787			1,471,923
Total assets			1,642,012			1,632,387			1,636,927			1,620,299			1,631,442
Total deposits			1,357,959			1,347,857			1,300,919			1,371,023			1,380,884
	Three Months Ended																	Six Months Ended
	6/30/2019					3/31/2019			12/31/2018			9/30/2018			6/30/2018			6/30/2019			6/30/2018
Selected Balance Sheet Items, continued
Short-term borrowings			0			0			56,230			0			0
Long-term debt			41,986			42,982			47,032			23,079			27,085
Total shareholders’ equity			222,972			224,018			218,985			213,515			212,366
Equity to assets ratio			13.58	%		13.72	%		13.38	%		13.18	%		13.02	%
Loans to deposits ratio			90.60	%		89.56	%		92.14	%		84.78	%		83.94	%
Tangible common equity (TCE)	$		159,702			160,488			155,197			149,398			147,705
Tangible common assets (TCA)			1,578,742			1,568,857			1,573,139			1,556,182			1,566,781
TCE/TCA			10.12	%		10.23	%		9.87	%		9.60	%		9.43	%
Selected Average Balance Sheet Items
Cash and cash equivalents	$		29,523			25,080			20,685			25,920			27,319			27,332			24,601
Debt and equity securities			249,954			266,081			291,433			304,112			306,366			257,972			310,007
Loans	$		1,217,726			1,208,809			1,177,061			1,155,846			961,726			1,213,292			907,739
Less allowance for loan losses			4,088			4,074			4,016			3,622			4,245			4,081			3,825
Net loans	$		1,213,638			1,204,735			1,173,045			1,152,224			957,481			1,209,211			903,914
Total earning assets	$		1,479,225			1,480,634			1,471,650			1,465,510			1,276,176			1,479,924			1,223,733
Total assets			1,637,645			1,635,416			1,626,029			1,623,016			1,409,698			1,636,370			1,351,355
Total deposits			1,352,449			1,333,529			1,333,673			1,367,950			1,212,104			1,343,042			1,163,810
Short-term borrowings			243			23,235			36,348			1,833			3,491			11,675			8,759
Long-term debt			42,567			44,676			25,536			25,757			13,252			43,616			7,784
Total shareholders’ equity			224,203			221,470			215,739			214,769			170,077			222,844			160,123
Equity to assets ratio			13.69	%		13.54	%		13.27	%		13.23	%		12.06	%		13.62	%		11.85	%
Loans to deposits ratio			90.04	%		90.65	%		88.26	%		84.49	%		79.34	%		90.34	%		78.00	%
Asset Quality
Net charge-offs (recoveries)	$		68			(185	)		(68	)		245			150			(117	)		103
Other real estate owned			197			244			244			35			35			197			35
Non-accrual loans			2,962			2,845			2,951			2,603			4,065			2,962			4,065
Loans past due 90 days or more and still accruing			24			177			149			1			5			24			5
Total nonperforming loans	$		2,986			3,022			3,100			2,604			4,070			2,986			4,070
Net charge-offs (recoveries) to average loans			0.02	%		(0.06	)%		(0.02	)%		0.08	%		0.06	%		(0.02	)%		0.02	%
Allowance for loan losses to total loans			0.33	%		0.34	%		0.34	%		0.35	%		0.31	%		0.33	%		0.31	%
Nonperforming loans to total loans			0.24	%		0.25	%		0.26	%		0.22	%		0.35	%		0.24	%		0.35	%
Nonperforming assets to total assets			0.19	%		0.20	%		0.20	%		0.16	%		0.25	%		0.19	%		0.25	%
Assets Under Management
LCNB Corp. total assets	$		1,642,012			1,632,387			1,636,927			1,620,299			1,631,442
Trust and investments (fair value)			382,462			367,649			337,549			386,582			370,587
Mortgage loans serviced			88,444			89,049			97,685			115,647			114,536
Cash management			71,973			55,981			48,906			36,502			48,369
Brokerage accounts (fair value)			260,202			245,758			233,751			247,175			238,651
Total assets managed	$		2,445,093			2,390,824			2,354,818			2,406,205			2,403,585
Non-GAAP Financial Measures
Net income	$		4,728			4,627			5,193			4,201			2,738			9,355			5,451
Add: merger-related expenses, net of tax			16			53			148			274			710			69			1,331
Adjusted net income	$		4,744			4,680			5,341			4,475			3,448			9,424			6,782
Basic adjusted earnings per share			0.36			0.36			0.41			0.34			0.31			0.71			0.64
Diluted adjusted earnings per share			0.36			0.36			0.41			0.34			0.31			0.71			0.64
Adjusted return on average assets			1.16	%		1.16	%		1.30	%		1.09	%		0.98	%		1.16	%		1.01	%
Adjusted return on average equity			8.49	%		8.57	%		9.82	%		8.27	%		8.13	%		8.53	%		8.54	%

LCNB CORP. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in thousands)
	June 30, 2019 (Unaudited)					December 31, 2018
ASSETS:
Cash and due from banks	$		17,234			18,310
Interest-bearing demand deposits			5,951			1,730
Total cash and cash equivalents			23,185			20,040
Interest-bearing time deposits			498			996
Investment securities:
Equity securities with a readily determinable fair value, at fair value			2,246			2,078
Equity securities without a readily determinable fair value, at cost			2,099			2,099
Debt securities, available-for-sale, at fair value			198,660			238,421
Debt securities, held-to-maturity, at cost			33,343			29,721
Federal Reserve Bank stock, at cost			4,652			4,653
Federal Home Loan Bank stock, at cost			5,203			4,845
Loans, net			1,226,149			1,194,577
Premises and equipment, net			33,013			32,627
Operating leases right of use asset			5,686			—
Goodwill			59,221			59,221
Core deposit and other intangibles			4,494			5,042
Bank owned life insurance			29,088			28,723
Other assets			14,475			13,884
TOTAL ASSETS	$		1,642,012			1,636,927
LIABILITIES:
Deposits:
Noninterest-bearing	$		335,474			322,571
Interest-bearing			1,022,485			978,348
Total deposits			1,357,959			1,300,919
Short-term borrowings	—					56,230
Long-term debt			41,986			47,032
Operating leases liability			5,615			—
Accrued interest and other liabilities			13,480			13,761
TOTAL LIABILITIES			1,419,040			1,417,942
COMMITMENTS AND CONTINGENT LIABILITIES	—					—
SHAREHOLDERS' EQUITY:
Preferred shares – no par value, authorized 1,000,000 shares, none outstanding	—					—
Common shares – no par value, authorized 19,000,000 shares at June 30, 2019 and December 31, 2018; issued 14,095,666 and 14,070,303 shares at June 30, 2019 and December 31, 2018, respectively			141,479			141,170
Retained earnings			99,400			94,547
Treasury shares at cost, 1,117,112 and 775,027 shares at June 30, 2019 and December 31, 2018			(17,854	)		(12,013	)
Accumulated other comprehensive loss, net of taxes			(53	)		(4,719	)
TOTAL SHAREHOLDERS' EQUITY			222,972			218,985
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$		1,642,012			1,636,927

LCNB CORP. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
(Unaudited)
	Three Months Ended June 30,									Six Months Ended June 30,
	2019						2018			2019			2018
INTEREST INCOME:
Interest and fees on loans	$			14,662			10,703			29,200			20,116
Dividends on equity securities with a readily determinable fair value				15			16			32			31
Dividends on equity securities without a readily determinable fair value				16			8			32			15
Interest on debt securities, taxable				933			934			1,802			1,865
Interest on debt securities, non-taxable				417			680			961			1,384
Other short-term investments				285			197			414			269
TOTAL INTEREST INCOME				16,328			12,538			32,441			23,680
INTEREST EXPENSE:
Interest on deposits				2,464			1,096			4,750			1,967
Interest on short-term borrowings				2			7			221			76
Interest on long-term debt				272			67			489			81
TOTAL INTEREST EXPENSE				2,738			1,170			5,460			2,124
NET INTEREST INCOME				13,590			11,368			26,981			21,556
PROVISION (CREDIT) FOR LOAN LOSSES				54			224			(51	)		303
NET INTEREST INCOME AFTER PROVISION (CREDIT) FOR LOAN LOSSES				13,536			11,144			27,032			21,253
NON-INTEREST INCOME:
Fiduciary income				1,058			942			2,092			1,906
Service charges and fees on deposit accounts				1,497			1,426			2,805			2,731
Net gains (losses) on sales of debt securities				1			(1	)		(17	)		(1	)
Bank owned life insurance income				183			182			365			368
Gains from sales of loans				64			97			93			119
Other operating income				195			145			432			304
TOTAL NON-INTEREST INCOME				2,998			2,791			5,770			5,427
NON-INTEREST EXPENSE:
Salaries and employee benefits				6,243			5,128			12,405			10,105
Equipment expenses				278			268			544			521
Occupancy expense, net				744			658			1,507			1,385
State financial institutions tax				436			296			874			599
Marketing				297			284			599			416
Amortization of intangibles				260			188			517			373
FDIC insurance premiums				112			99			238			198
Contracted services				475			391			939			706
Other real estate owned				48			1			51			3
Merger-related expenses				20			855			87			1,613
Other non-interest expense				1,920			2,543			3,772			4,341
TOTAL NON-INTEREST EXPENSE				10,833			10,711			21,533			20,260
INCOME BEFORE INCOME TAXES				5,701			3,224			11,269			6,420
PROVISION FOR INCOME TAXES				973			486			1,914			969
NET INCOME	$			4,728			2,738			9,355			5,451
Dividends declared per common share	$			0.17			0.16			0.34			0.32
Earnings per common share:
Basic				0.36			0.25			0.71			0.52
Diluted				0.36			0.25			0.71			0.52
Weighted average common shares outstanding:
Basic				13,192,691			11,099,485			13,237,909			10,563,030
Diluted				13,196,665			11,105,014			13,241,752			10,568,792

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20190722005760/en/