LCNB Corp. Reports Financial Results for the Three and Twelve Months Ended December 31, 2019

LCNB Corp. ("LCNB") (NASDAQ: LCNB) today announced net income of $4,830,000 (total basic and diluted earnings per share of $0.37) and $18,912,000 (total basic and diluted earnings per share of $1.44) for the three and twelve months ended December 31, 2019, respectively. This compares to net income of $5,193,000 (total basic and diluted earnings per share of $0.40) and $14,845,000 (total basic and diluted earnings per share of $1.24) for the same three and twelve 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 twelve months ended December 31, 2019. Return on average assets for 2019 was 1.15% and return on average equity was 8.42%, compared to respective ratios of 1.00% and 7.90% for 2018. Net income during 2019 was $4,067,000 greater than during 2018, fueled by a $6,237,000 increase in net interest income that resulted primarily from a $44.8 million, or 3.7%, increase in our net loan portfolio during 2019. Part of the increase in net interest income was also due to a full year of net earnings on loans, deposits, and borrowings obtained through our merger with Columbus First Bancorp, Inc. and its wholly-owned subsidiary, Columbus First Bank (collectively "CFB") on May 31, 2018. Positive earnings growth allowed for increased shareholder dividends, from $0.65 per share for 2018 to $0.69 per share for 2019."

Net interest income for the three and twelve months ended December 31, 2019 was, respectively, $337,000 and $6,237,000 greater than the comparable periods in 2018, due to growth in the average balance of LCNB's loan portfolio and to an increase in the average rate earned on that portfolio, partially offset by a decrease in average investment securities and increases in average deposits and long-term borrowings and increases in the average rates paid for the deposits and borrowings. Loans, deposits, and long-term borrowings obtained through the merger with CFB were considerable components 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 twelve months ended December 31, 2019 was, respectively, $33,000 greater and $716,000 less than the comparable periods in 2018. Non-accrual loans and loans past due 90 days or more and still accruing interest increased $110,000, from $3,100,000 or 0.26% of total loans at December 31, 2018 to $3,210,000 or 0.26% of total loans at December 31, 2019.

Non-interest income for the three and twelve months ended December 31, 2019 was, respectively, $520,000 and $1,298,000 greater than the comparable periods in 2018, primarily due to increases in fiduciary income, service charges and fees on deposit accounts, and bank owned life insurance income. Also contributing to the increase were market-driven increases in the fair value of equity security investments, which were recorded in other operating income in the consolidated statements of income.

Non-interest expense for the three and twelve months ended December 31, 2019 was, respectively, $1,082,000 and $3,020,000 greater than the comparable periods in 2018, primarily due to increases in salaries and employee benefits and state financial institutions tax. Increases in marketing and contracted services expenses also contributed to the increase for the twelve-month period. Salaries and employee benefits increased primarily due to salary and wage increases and newly hired employees, including additional business development positions and CFB employees retained. An increase in health insurance costs also contributed to the increase in salaries and employee benefits. 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. Contracted services increased due to additional fees paid for loan and deposit system upgrades and improvements and to general price increases on other contracted services. A decrease in merger related expenses and the absence of losses recognized on the sale of two of LCNB's office buildings during 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 any 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. United States trade relations with foreign countries could negatively impact the financial condition of LCNB's customers, which could adversely affect LCNB 's operating results and financial condition;
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 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																Year Ended
		12/31/2019				9/30/2019			6/30/2019			3/31/2019			12/31/2018			12/31/2019			12/31/2018
Condensed Income Statement
Interest income		$	16,424			16,329			16,328			16,113			15,844			65,194			54,594
Interest expense		2,577				2,751			2,738			2,722			2,334			10,788			6,425
Net interest income		13,847				13,578			13,590			13,391			13,510			54,406			48,169
Provision (credit) for loan losses		(6		)		264			54			(105	)		(39	)		207			923
Net interest income after provision		13,853				13,314			13,536			13,496			13,549			54,199			47,246
Non-interest income		3,222				3,356			2,998			2,772			2,702			12,348			11,050
Non-interest expense		11,007				10,982			10,833			10,700			9,925			43,522			40,502
Income before income taxes		6,068				5,688			5,701			5,568			6,326			23,025			17,794
Provision for income taxes		1,238				961			973			941			1,133			4,113			2,949
Net income		$	4,830			4,727			4,728			4,627			5,193			18,912			14,845
Amort/Accret income on acquired loans		$	400			302			355			224			229			1,281			567
Amort/Accret expenses on acquired interest-bearing liabilities		$	3			4			142			144			149			293			363
Tax-equivalent net interest income		$	13,937			13,679			13,700			13,536			13,680			54,852			48,883
Per Share Data
Dividends per share		$	0.18			0.17			0.17			0.17			0.17			0.69			0.65
Basic earnings per common share		$	0.37			0.36			0.36			0.35			0.40			1.44			1.24
Diluted earnings per common share		$	0.37			0.36			0.36			0.35			0.40			1.44			1.24
Book value per share		$	17.63			17.44			17.18			16.83			16.47			17.63			16.47
Tangible book value per share		$	12.78			12.57			12.31			12.05			11.67			12.78			11.67
Weighted average common shares outstanding:
Basic		12,912,106				12,932,950			13,192,691			13,283,634			13,285,386			13,078,920			11,935,350
Diluted		12,916,000				12,937,145			13,196,665			13,287,338			13,290,499			13,082,893			11,942,253
Shares outstanding at period end		12,936,783				12,927,463			12,978,554			13,314,148			13,295,276			12,936,783			13,295,276
Selected Financial Ratios
Return on average assets		1.17		%		1.13	%		1.16	%		1.15	%		1.27	%		1.15	%		1.00	%
Return on average equity		8.42		%		8.33	%		8.46	%		8.47	%		9.55	%		8.42	%		7.90	%
Dividend payout ratio		48.65		%		47.22	%		47.22	%		48.57	%		42.50	%		47.92	%		52.42	%
Net interest margin (tax equivalent)		3.76		%		3.67	%		3.72	%		3.71	%		3.69	%		3.71	%		3.63	%
Efficiency ratio (tax equivalent)		64.15		%		64.47	%		64.87	%		65.61	%		60.58	%		64.76	%		67.58	%
Selected Balance Sheet Items
Cash and cash equivalents		$	20,765			22,826			23,185			19,527			20,040
Debt and equity securities		219,791				239,730			246,701			264,559			282,813
Loans:
Commercial and industrial		$	78,306			71,576			79,513			79,725			77,740
Commercial, secured by real estate		804,953				797,842			793,863			764,424			740,647
Residential real estate		322,533				320,703			326,029			334,227			349,127
Consumer		25,232				23,918			19,649			17,409			17,283
Agricultural		11,509				11,525			10,843			10,900			13,297
Other, including deposit overdrafts		1,193				456			373			409			450
Deferred net origination costs (fees)		(275		)		(128	)		(9	)		40			79
Loans, gross		1,243,451				1,225,892			1,230,261			1,207,134			1,198,623
Less allowance for loan losses		4,045				4,167			4,112			4,126			4,046
Loans, net		$	1,239,406			1,221,725			1,226,149			1,203,008			1,194,577
Total earning assets		$	1,466,988			1,470,074			1,482,913			1,476,862			1,483,166
Total assets		1,639,308				1,644,447			1,642,012			1,632,387			1,636,927
Total deposits		1,348,280				1,355,383			1,357,959			1,347,857			1,300,919
		Three Months Ended																Year Ended
		12/31/2019				9/30/2019			6/30/2019			3/31/2019			12/31/2018			12/31/2019			12/31/2018
Selected Balance Sheet Items, continued
Short-term borrowings		—				—			—			—			56,230
Long-term debt		40,994				41,990			41,986			42,982			47,032
Total shareholders’ equity		228,048				225,492			222,972			224,018			218,985
Equity to assets ratio		13.91		%		13.71	%		13.58	%		13.72	%		13.38	%
Loans to deposits ratio		92.22		%		90.45	%		90.60	%		89.56	%		92.14	%
Tangible common equity (TCE)		$	165,304			162,485			159,702			160,488			155,197
Tangible common assets (TCA)		1,576,564				1,581,440			1,578,742			1,568,857			1,573,139
TCE/TCA		10.49		%		10.27	%		10.12	%		10.23	%		9.87	%
Selected Average Balance Sheet Items
Cash and cash equivalents		$	26,501			28,293			29,523			25,080			20,685			27,321			23,910
Debt and equity securities		231,115				243,553			249,954			266,081			291,433			247,569			303,839
Loans		$	1,230,845			1,227,806			1,217,726			1,208,809			1,177,061			1,221,375			1,038,159
Less allowance for loan losses		4,076				3,986			4,088			4,074			4,016			4,056			3,822
Net loans		$	1,226,769			1,223,820			1,213,638			1,204,735			1,173,045			1,217,319			1,034,337
Total earning assets		$	1,469,469			1,480,096			1,479,225			1,480,634			1,471,650			1,477,333			1,347,162
Total assets		1,643,793				1,654,034			1,637,645			1,635,416			1,626,029			1,642,591			1,488,941
Total deposits		1,352,101				1,365,702			1,352,449			1,333,529			1,333,673			1,351,036			1,258,075
Short-term borrowings		622				468			243			23,235			36,348			6,064			13,967
Long-term debt		41,742				41,988			42,567			44,676			25,536			42,733			16,789
Total shareholders’ equity		227,595				225,216			224,203			221,470			215,739			224,639			187,915
Equity to assets ratio		13.85		%		13.62	%		13.69	%		13.54	%		13.27	%		13.68	%		12.62	%
Loans to deposits ratio		91.03		%		89.90	%		90.04	%		90.65	%		88.26	%		90.40	%		82.52	%
Asset Quality
Net charge-offs (recoveries)		$	115			209			68			(185	)		(68	)		207			280
Other real estate owned		197				197			197			244			244			197			244
Non-accrual loans		3,210				3,523			2,962			2,845			2,951			3,210			2,951
Loans past due 90 days or more and still accruing		—				—			24			177			149			—			149
Total nonperforming loans		$	3,210			3,523			2,986			3,022			3,100			3,210			3,100
Net charge-offs (recoveries) to average loans		0.04		%		0.07	%		0.02	%		(0.06	)%		(0.02	)%		0.02	%		0.03	%
Allowance for loan losses to total loans		0.33		%		0.34	%		0.33	%		0.34	%		0.34	%		0.33	%		0.34	%
Nonperforming loans to total loans		0.26		%		0.29	%		0.24	%		0.25	%		0.26	%		0.26	%		0.26	%
Nonperforming assets to total assets		0.21		%		0.23	%		0.19	%		0.20	%		0.20	%		0.21	%		0.20	%
Assets Under Management
LCNB Corp. total assets		$	1,639,308			1,644,447			1,642,012			1,632,387			1,636,927
Trust and investments (fair value)		435,664				411,724			382,462			367,649			337,549
Mortgage loans serviced		93,596				90,784			88,444			89,049			97,685
Cash management		75,948				117,530			71,973			55,981			48,906
Brokerage accounts (fair value)		268,059				262,038			260,202			245,758			233,751
Total assets managed		$	2,512,575			2,526,523			2,445,093			2,390,824			2,354,818
Non-GAAP Financial Measures
Net income		$	4,830			4,727			4,728			4,627			5,193			18,912			14,845
Add: merger-related expenses, net of tax		0				21			16			53			148			90			1,753
Adjusted net income		$	4,830			4,748			4,744			4,680			5,341			19,002			16,598
Basic adjusted earnings per share		0.37				0.37			0.36			0.36			0.41			1.46			1.39
Diluted adjusted earnings per share		0.37				0.37			0.36			0.36			0.41			1.46			1.39
Adjusted return on average assets		1.17		%		1.14	%		1.16	%		1.16	%		1.30	%		1.16	%		1.11	%
Adjusted return on average equity		8.42		%		8.36	%		8.49	%		8.57	%		9.82	%		8.46	%		8.83	%

LCNB CORP. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in thousands)
		December 31, 2019 (Unaudited)				December 31, 2018
ASSETS:
Cash and due from banks		$	17,019			18,310
Interest-bearing demand deposits		3,746				1,730
Total cash and cash equivalents		20,765				20,040
Interest-bearing time deposits		—				996
Investment securities:
Equity securities with a readily determinable fair value, at fair value		2,312				2,078
Equity securities without a readily determinable fair value, at cost		2,099				2,099
Debt securities, available-for-sale, at fair value		178,000				238,421
Debt securities, held-to-maturity, at cost		27,525				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		1,239,406				1,194,577
Premises and equipment, net		34,787				32,627
Operating leases right of use asset		5,444				—
Goodwill		59,221				59,221
Core deposit and other intangibles		4,006				5,042
Bank owned life insurance		41,667				28,723
Other assets		14,221				13,884
TOTAL ASSETS		$	1,639,308			1,636,927
LIABILITIES:
Deposits:
Noninterest-bearing		$	354,391			322,571
Interest-bearing		993,889				978,348
Total deposits		1,348,280				1,300,919
Short-term borrowings		—				56,230
Long-term debt		40,994				47,032
Operating leases liability		5,446				—
Accrued interest and other liabilities		16,540				13,761
TOTAL LIABILITIES		1,411,260				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 December 31, 2019 and 2018; issued 14,111,810 and 14,070,303 shares at December 31, 2019 and 2018, respectively		141,791				141,170
Retained earnings		104,431				94,547
Treasury shares at cost, 1,175,027 and 775,027 shares at December 31, 2019 and 2018, respectively		(18,847		)		(12,013	)
Accumulated other comprehensive income (loss), net of taxes		673				(4,719	)
TOTAL SHAREHOLDERS' EQUITY		228,048				218,985
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		$	1,639,308			1,636,927

LCNB CORP. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
(Unaudited)
		Three Months Ended December 31,							Year Ended December 31,
		2019				2018			2019			2018
INTEREST INCOME:
Interest and fees on loans		$	14,937			14,010			59,009			47,489
Dividends on equity securities with a readily determinable fair value		15				17			62			65
Dividends on equity securities without a readily determinable fair value		17				17			65			39
Interest on debt securities, taxable		881				900			3,601			3,666
Interest on debt securities, non-taxable		337				641			1,677			2,686
Interest on interest-bearing time deposits		—				24			11			58
Other investments		237				235			769			591
TOTAL INTEREST INCOME		16,424				15,844			65,194			54,594
INTEREST EXPENSE:
Interest on deposits		2,301				1,976			9,526			5,753
Interest on short-term borrowings		3				223			227			311
Interest on long-term debt		273				135			1,035			361
TOTAL INTEREST EXPENSE		2,577				2,334			10,788			6,425
NET INTEREST INCOME		13,847				13,510			54,406			48,169
PROVISION (CREDIT) FOR LOAN LOSSES		(6		)		(39	)		207			923
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		13,853				13,549			54,199			47,246
NON-INTEREST INCOME:
Fiduciary income		1,139				971			4,354			3,958
Service charges and fees on deposit accounts		1,454				1,420			5,875			5,590
Net losses on sales of debt securities		(4		)		—			(41	)		(8	)
Bank owned life insurance income		289				185			943			738
Gains from sales of loans		121				41			328			223
Other operating income		223				85			889			549
TOTAL NON-INTEREST INCOME		3,222				2,702			12,348			11,050
NON-INTEREST EXPENSE:
Salaries and employee benefits		6,512				5,488			25,320			21,279
Equipment expenses		343				341			1,209			1,138
Occupancy expense, net		703				742			2,961			2,861
State financial institutions tax		362				299			1,669			1,197
Marketing		310				321			1,319			1,119
Amortization of intangibles		263				263			1,043			922
FDIC insurance premiums, net		—				130			225			419
Contracted services		471				454			1,865			1,547
Other real estate owned		1				16			53			20
Merger-related expenses		—				164			114			2,123
Other non-interest expense		2,042				1,707			7,744			7,877
TOTAL NON-INTEREST EXPENSE		11,007				9,925			43,522			40,502
INCOME BEFORE INCOME TAXES		6,068				6,326			23,025			17,794
PROVISION FOR INCOME TAXES		1,238				1,133			4,113			2,949
NET INCOME		$	4,830			5,193			18,912			14,845
Dividends declared per common share		$	0.18			0.17			0.69			0.65
Earnings per common share:
Basic		0.37				0.40			1.44			1.24
Diluted		0.37				0.40			1.44			1.24
Weighted average common shares outstanding:
Basic		12,912,106				13,285,386			13,078,920			11,935,350
Diluted		12,916,000				13,290,499			13,082,893			11,942,253

 

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