LCNB Corp. Reports Financial Results for the Three and Six Months Ended June 30, 2020

LCNB Corp. ("LCNB") (NASDAQ: LCNB) today announced net income of $5,057,000 (total basic and diluted earnings per share of $0.39) and $10,083,000 (total basic and diluted earnings per share of $0.78) for the three and six months ended June 30, 2020, respectively. This compares to 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 same three and six month periods in 2019.

Commenting on the financial results, LCNB President and Chief Executive Officer Eric Meilstrup said, "We are pleased to report strong financial results for the second quarter and first half of 2020, despite the challenging conditions resulting from the COVID-19 pandemic. Gross loans increased $92.0 million or 7.4% since December 31, 2019, including $45.5 million in Paycheck Protection Program ("PPP") loans. Total assets increased $96.0 million or 5.9% during the same period. LCNB's return on average assets was 1.19% and 1.21% for the respective three and six month periods in 2020 and return on average equity for the same periods was 8.63% and 8.69%."

Net interest income for the three and six months ended June 30, 2020 was, respectively, $408,000 and $1,195,000 greater than the comparable periods in 2019, due to growth in the average balance of LCNB's loan portfolio, partially offset by a decrease in the average rate earned on that portfolio. Also contributing to the increase in net interest income was a decrease in the average rate paid on deposits. These net favorable items were partially offset by a decrease in average investment securities.

The provision for loan losses for the three months ended June 30, 2020 was $38,000 less than the comparable period in 2019 and the six month period was $1,240,000 greater than the comparable period in 2019. Approximately 69% of the increase in the provision for the six month period was due to an adjustment to the allowance for potential impacts from the economic recession caused by the COVID-19 pandemic. Non-accrual loans and loans past due 90 days or more and still accruing interest increased $928,000, from $2,986,000 or 0.24% of total loans at June 30, 2019 to $3,914,000 or 0.29% of total loans at June 30, 2020.

Non-interest income for the three and six months ended June 30, 2020 was, respectively, $321,000 and $1,388,000 greater than the comparable periods in 2019 primarily due to increases in fiduciary income, gains from sales of loans, and increases in income from bank owned life insurance, partially offset by a decrease in service charges and fees on deposit accounts. The increase for the six month period included gains from the sale of equity securities, which is recorded in other operating income in the consolidated condensed statements of income, and gains from the sale of debt securities. Income from bank owned life insurance increased partially due to new policies purchased in the third quarter 2019 and partially due to a mortality benefit received during the first quarter 2020.

Non-interest expense for the three and six months ended June 30, 2020 was, respectively, $283,000 and $655,000 greater than the comparable periods in 2019, primarily due to increases in salaries and employee benefits, partially offset by decreases in marketing expense and FDIC insurance premiums. Salaries and employee benefits increased primarily due to salary and wage increases and newly hired employees, including additional business development positions. An increase in health insurance costs also contributed to the increase in salaries and employee benefits. FDIC insurance premiums decreased due to a small bank assessment credit received during the first and second quarters 2020. LCNB has used the credit in full and anticipates subsequent quarterly premium payments will return to normal levels.

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, 2019, 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. the significant risks and uncertainties for LCNB's business, results of operations and financial condition, as well as its regulatory capital and liquidity ratios and other regulatory requirements, caused by the COVID-19 pandemic, which will depend on several factors, including the scope and duration of the pandemic, its influence on financial markets, the effectiveness of LCNB's work from home arrangements and staffing levels in operational facilities, the impact of market participants on which LCNB relies and actions taken by governmental authorities and other third parties in response to the pandemic;
3. LCNB’s ability to integrate recent and future acquisitions may be unsuccessful, or may be more difficult, time-consuming or costly than expected;
4. LCNB may incur increased charge-offs in the future;
5. LCNB may face competitive loss of customers;
6. 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;
7. changes in general economic conditions and increased competition could adversely affect LCNB’s operating results;
8. changes in regulations and government policies affecting bank holding companies and their subsidiaries, including changes in monetary policies, could negatively impact LCNB’s operating results;
9. LCNB may experience difficulties growing loan and deposit balances;
10. 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;
11. 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;
12. 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;
13. adverse weather events and natural disasters and global and/or national epidemics; and
14. 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
		6/30/2020				3/31/2020			12/31/2019			9/30/2019			6/30/2019			6/30/2020			6/30/2019
Condensed Income Statement
Interest income		$	15,957			16,556			16,424			16,329			16,328			32,513			32,441
Interest expense		1,959				2,378			2,577			2,751			2,738			4,337			5,460
Net interest income		13,998				14,178			13,847			13,578			13,590			28,176			26,981
Provision (credit) for loan losses		16				1,173			(6)			264			54			1,189			(51)
Net interest income after provision		13,982				13,005			13,853			13,314			13,536			26,987			27,032
Non-interest income		3,319				3,839			3,222			3,356			2,998			7,158			5,770
Non-interest expense		11,116				11,072			11,007			10,982			10,833			22,188			21,533
Income before income taxes		6,185				5,772			6,068			5,688			5,701			11,957			11,269
Provision for income taxes		1,128				746			1,238			961			973			1,874			1,914
Net income		$	5,057			5,026			4,830			4,727			4,728			10,083			9,355
Amort/Accret income on acquired loans		$	294			667			400			302			355			961			579
Amort/Accret expenses on acquired interest-bearing liabilities		$	2			3			3			4			142			4			286
Tax-equivalent net interest income		$	14,006			14,254			13,937			13,679			13,700			28,319			27,236
Per Share Data
Dividends per share		$	0.18			0.18			0.18			0.17			0.17			0.36			0.34
Basic earnings per common share		$	0.39			0.39			0.37			0.36			0.36			0.78			0.71
Diluted earnings per common share		$	0.39			0.39			0.37			0.36			0.36			0.78			0.71
Book value per share		$	18.27			18.00			17.63			17.44			17.18			18.27			17.18
Tangible book value per share		$	13.47			13.18			12.78			12.57			12.31			13.47			12.31
Weighted average common shares outstanding:
Basic		12,940,975				12,926,077			12,912,106			12,932,950			13,192,691			12,933,528			13,237,909
Diluted		12,941,001				12,927,666			12,916,000			12,937,145			13,196,665			12,934,158			13,241,752
Shares outstanding at period end		12,975,879				12,969,076			12,936,783			12,927,463			12,978,554			12,975,879			12,978,554
Selected Financial Ratios
Return on average assets		1.19		%		1.23	%		1.17	%		1.13	%		1.16	%		1.21	%		1.15	%
Return on average equity		8.63		%		8.75	%		8.42	%		8.33	%		8.46	%		8.69	%		8.47	%
Return on average tangible equity		11.74		%		12.00	%		11.63	%		11.57	%		11.87	%		11.92	%		11.84	%
Dividend payout ratio		46.15		%		46.15	%		48.65	%		47.22	%		47.22	%		46.15	%		47.89	%
Net interest margin (tax equivalent)		3.70		%		3.92	%		3.76	%		3.67	%		3.72	%		3.81	%		3.71	%
Efficiency ratio (tax equivalent)		63.94		%		61.19	%		64.15	%		64.47	%		64.87	%		62.54	%		65.24	%
Selected Balance Sheet Items
Cash and cash equivalents		$	42,736			24,795			20,765			22,826			23,185
Debt and equity securities		194,883				183,123			219,791			239,730			246,701
Loans:
Commercial and industrial		$	125,492			85,356			78,306			71,576			79,513
Commercial, secured by real estate		833,286				829,461			804,953			797,842			793,863
Residential real estate		334,349				318,009			322,533			320,703			326,029
Consumer		32,859				28,955			25,232			23,918			19,649
Agricultural		11,071				10,519			11,509			11,525			10,843
Other, including deposit overdrafts		283				436			1,193			456			373
Deferred net origination fees		(1,902)				(349)			(275)			(128)			(9)
Loans, gross		1,335,438				1,272,387			1,243,451			1,225,892			1,230,261
Less allowance for loan losses		5,016				5,008			4,045			4,167			4,112
Loans, net		$	1,330,422			1,267,379			1,239,406			1,221,725			1,226,149
Total earning assets		$	1,554,537			1,462,485			1,466,988			1,470,074			1,482,913
Total assets		1,735,332				1,636,280			1,639,308			1,644,447			1,642,012
Total deposits		1,438,921				1,345,872			1,348,280			1,355,383			1,357,959
		Three Months Ended																Six Months Ended
		6/30/2020				3/31/2020			12/31/2019			9/30/2019			6/30/2019			6/30/2020			6/30/2019
Selected Balance Sheet Items, continued
Long-term debt		33,998				35,996			40,994			41,990			41,986
Total shareholders’ equity		237,047				233,478			228,048			225,492			222,972
Equity to assets ratio		13.66		%		14.27	%		13.91	%		13.71	%		13.58	%
Loans to deposits ratio		92.81		%		94.54	%		92.22	%		90.45	%		90.60	%
Tangible common equity (TCE)		$	174,823			170,994			165,304			162,485			159,702
Tangible common assets (TCA)		1,673,108				1,573,796			1,576,564			1,581,440			1,578,742
TCE/TCA		10.45		%		10.87	%		10.49	%		10.27	%		10.12	%
Selected Average Balance Sheet Items
Cash and cash equivalents		$	46,292			25,101			26,501			28,293			29,523			35,712			27,332
Debt and equity securities		182,371				204,912			231,115			243,553			249,954			193,642			257,972
Loans		$	1,318,753			1,252,554			1,230,845			1,227,806			1,217,726			1,285,654			1,213,292
Less allowance for loan losses		4,998				3,938			4,076			3,986			4,088			4,468			4,081
Net loans		$	1,313,755			1,248,616			1,226,769			1,223,820			1,213,638			1,281,186			1,209,211
Total earning assets		$	1,528,610			1,462,946			1,469,469			1,480,096			1,479,225			1,495,779			1,479,924
Total assets		1,704,303				1,638,486			1,643,793			1,654,034			1,637,645			1,671,394			1,636,370
Total deposits		1,412,082				1,346,770			1,352,101			1,365,702			1,352,449			1,379,426			1,343,042
Short-term borrowings		82				1,415			622			468			243			749			11,675
Long-term debt		34,964				38,325			41,742			41,988			42,567			36,644			43,616
Total shareholders’ equity		235,587				231,058			227,595			225,216			224,203			233,322			222,844
Equity to assets ratio		13.82		%		14.10	%		13.85	%		13.62	%		13.69	%		13.96	%		13.62	%
Loans to deposits ratio		93.39		%		93.00	%		91.03	%		89.90	%		90.04	%		93.20	%		90.34	%
Asset Quality
Net charge-offs (recoveries)		$	8			210			115			209			68			218			(117)
Other real estate owned		0				0			197			197			197			0			197
Non-accrual loans		3,876				2,829			3,210			3,523			2,962			3,876			2,962
Loans past due 90 days or more and still accruing		38				39			—			—			24			38			24
Total nonperforming loans		$	3,914			2,868			3,210			3,523			2,986			3,914			2,986
Net charge-offs (recoveries) to average loans		0.00		%		0.07	%		0.04	%		0.07	%		0.02	%		0.03	%		(0.02)	%
Allowance for loan losses to total loans		0.38		%		0.39	%		0.33	%		0.34	%		0.33	%		0.38	%		0.33	%
Nonperforming loans to total loans		0.29		%		0.23	%		0.26	%		0.29	%		0.24	%		0.29	%		0.24	%
Nonperforming assets to total assets		0.23		%		0.18	%		0.21	%		0.23	%		0.19	%		0.23	%		0.19	%
Assets Under Management
LCNB Corp. total assets		$	1,735,332			1,636,280			1,639,308			1,644,447			1,642,012
Trust and investments (fair value)		516,076				455,974			435,664			411,724			382,462
Mortgage loans serviced		100,189				94,805			93,596			90,784			88,444
Cash management		116,615				77,471			75,948			117,530			71,973
Brokerage accounts (fair value)		255,276				235,278			268,059			262,038			260,202
Total assets managed		$	2,723,488			2,499,808			2,512,575			2,526,523			2,445,093

LCNB CORP. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in thousands)
		June 30, 2020 (Unaudited)				December 31, 2019
ASSETS:
Cash and due from banks		$	18,520			17,019
Interest-bearing demand deposits		24,216				3,746
Total cash and cash equivalents		42,736				20,765
Investment securities:
Equity securities with a readily determinable fair value, at fair value		2,163				2,312
Equity securities without a readily determinable fair value, at cost		2,099				2,099
Debt securities, available-for-sale, at fair value		153,529				178,000
Debt securities, held-to-maturity, at cost		27,237				27,525
Federal Reserve Bank stock, at cost		4,652				4,652
Federal Home Loan Bank stock, at cost		5,203				5,203
Loans, net		1,330,422				1,239,406
Premises and equipment, net		35,383				34,787
Operating leases right of use asset		5,532				5,444
Goodwill		59,221				59,221
Core deposit and other intangibles		3,558				4,006
Bank owned life insurance		41,596				41,667
Other assets		22,001				14,221
TOTAL ASSETS		$	1,735,332			1,639,308
LIABILITIES:
Deposits:
Noninterest-bearing		$	431,697			354,391
Interest-bearing		1,007,224				993,889
Total deposits		1,438,921				1,348,280
Long-term debt		33,998				40,994
Operating leases liability		5,558				5,446
Accrued interest and other liabilities		19,808				16,540
TOTAL LIABILITIES		1,498,285				1,411,260
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, 2020 and December 31, 2019; issued 14,150,906 and 14,111,810 shares at June 30, 2020 and December 31, 2019, respectively		142,181				141,791
Retained earnings		109,845				104,431
Treasury shares at cost, 1,175,027 shares at June 30, 2020 and December 31, 2019		(18,847)				(18,847)
Accumulated other comprehensive income, net of taxes		3,868				673
TOTAL SHAREHOLDERS' EQUITY		237,047				228,048
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		$	1,735,332			1,639,308

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,
		2020				2019			2020			2019
INTEREST INCOME:
Interest and fees on loans		$	14,822			14,662			30,049			29,200
Dividends on equity securities with a readily determinable fair value		13				15			27			32
Dividends on equity securities without a readily determinable fair value		12				16			28			32
Interest on debt securities, taxable		667				933			1,617			1,802
Interest on debt securities, non-taxable		254				417			539			961
Interest on interest-bearing time deposits		—				3			—			8
Other investments		189				282			253			406
TOTAL INTEREST INCOME		15,957				16,328			32,513			32,441
INTEREST EXPENSE:
Interest on deposits		1,732				2,464			3,849			4,750
Interest on short-term borrowings		—				2			7			221
Interest on long-term debt		227				272			481			489
TOTAL INTEREST EXPENSE		1,959				2,738			4,337			5,460
NET INTEREST INCOME		13,998				13,590			28,176			26,981
PROVISION (CREDIT) FOR LOAN LOSSES		16				54			1,189			(51)
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		13,982				13,536			26,987			27,032
NON-INTEREST INCOME:
Fiduciary income		1,201				1,058			2,304			2,092
Service charges and fees on deposit accounts		1,237				1,497			2,532			2,805
Net gains (losses) on sales of debt securities		—				1			221			(17)
Bank owned life insurance income		287				183			888			365
Gains from sales of loans		317				64			437			93
Other operating income		277				195			776			432
TOTAL NON-INTEREST INCOME		3,319				2,998			7,158			5,770
NON-INTEREST EXPENSE:
Salaries and employee benefits		6,648				6,243			13,416			12,405
Equipment expenses		289				278			576			544
Occupancy expense, net		723				744			1,405			1,507
State financial institutions tax		420				436			856			874
Marketing		258				297			435			599
Amortization of intangibles		260				260			520			517
FDIC insurance premiums, net		31				112			30			238
Contracted services		475				475			877			939
Other real estate owned		1				48			(9)			51
Merger-related expenses		—				20			—			87
Other non-interest expense		2,011				1,920			4,082			3,772
TOTAL NON-INTEREST EXPENSE		11,116				10,833			22,188			21,533
INCOME BEFORE INCOME TAXES		6,185				5,701			11,957			11,269
PROVISION FOR INCOME TAXES		1,128				973			1,874			1,914
NET INCOME		$	5,057			4,728			10,083			9,355
Dividends declared per common share		$	0.18			0.17			0.36			0.34
Earnings per common share:
Basic		0.39				0.36			0.78			0.71
Diluted		0.39				0.36			0.78			0.71
Weighted average common shares outstanding:
Basic		12,940,975				13,192,691			12,933,528			13,237,909
Diluted		12,941,001				13,196,665			12,934,158			13,241,752

 

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