LCNB CORP. Reports Financial Results for the Three and Nine Months Ended September 30, 2020

LCNB Corp. ("LCNB") (NASDAQ: LCNB) today announced financial results for the three and nine months ended September 30, 2020.

Net income for the third quarter 2020 was $4,250,000, compared to $4,727,000 for the same period last year. Earnings per basic and diluted share for the third quarter 2020 were $0.33, compared to $0.36 for the same period last year. Net income for the nine-month period ended September 30, 2020 was $14,333,000, compared to $14,082,000 for the same period last year. Earnings per basic and diluted share for the nine-month period ended September 30, 2020 were $1.11 compared to $1.07 for the same period last year.

Earnings, before provisions for loan losses and income taxes, increased 3.4% to $6,154,000 for the third quarter 2020 compared to $5,952,000 for the same period last year. For the nine-month period ended September 30, 2020, earnings, before provisions for loan losses and income taxes, increased 12.4% to $19,300,000, compared to $17,170,000 for the nine-month period ended September 30, 2019.

Commenting on the financial results, LCNB President and Chief Executive Officer Eric Meilstrup said, “LCNB’s third quarter financial results demonstrate the resiliency of our business, employees, customers, and communities, as we navigate the unprecedented impacts of the COVID-19 pandemic. While our asset quality remains relatively stable, we prudently increased our allowance for loan and lease losses to account for uncertainty regarding the long-term economic impacts of the COVID-19 crisis. I am encouraged that our core earnings before provision and tax expenses increased 3.4% during the third quarter and are up 12.4% year-to-date, as we benefit from our diverse non-interest income generating businesses and improvements in our cost of funds. Third quarter non-interest income increased 27.5% over the prior year period, and now represents 21.8% of total revenues, compared to 17.0% of total revenues in the 2019 third quarter primarily due to strong residential mortgage demand and higher fiduciary income.”

Mr. Meilstrup continued, “We are working hard to support our local communities and I am encouraged by the growth we experienced in net loans and total deposits which increased 7.6% and 6.1%, respectively, since December 31, 2019. Since the COVID-19 pandemic began, we have also supported our communities by offering customers impacted by the COVID-19 crisis the ability to defer certain loan payments and over the past three months we have experienced a material decline in the amount of deferrals. Overall, I am pleased with the underlying performance of our loan portfolio as third quarter 2020 net charge-offs were only $18,000, compared to $209,000 for the same period last year.”

“As we enter the fourth quarter, we remain focused on providing our communities with personalized financial services and we have started assisting our Paycheck Protection Program loan customers through the Small Business Administration forgiveness process. I am extremely proud of the continued dedication and hard work of LCNB’s employees and the positive contributions they provide our customers and communities,” concluded Mr. Meilstrup.

Net interest income for the three months ended September 30, 2020 was $13,529,000, compared to $13,578,000 for the comparable period in 2019. The slight decline for the three-month period was primarily due to market driven decreases in the average rates earned on loans and investments, partially offset by growth in the average balance of the loan portfolio. Net interest income for the nine-month period ended September 30, 2020 increased $1,146,000 to $41,705,000, as compared to the nine month period ended September 30, 2019. The increase for the nine-month period was primarily 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. Favorably contributing to the variances for both the three and nine month periods were market driven decreases in the average rates paid on deposits.

The provision for loan losses for the three and nine months ended September 30, 2020 were, respectively, $712,000 and $1,952,000 greater than the comparable periods in 2019 partially due to adjustments for estimated impacts from the economic downturn caused by the COVID-19 pandemic. Non-accrual loans and loans past due 90 days or more and still accruing interest increased $994,000, from $3,210,000, or 0.26%, of total loans at December 31, 2019 to $4,204,000, or 0.31%, of total loans at September 30, 2020. The increase was primarily due to three loans that were newly classified during 2020.

Non-interest income for the three and nine months ended September 30, 2020 was, respectively, $922,000 and $2,310,000 greater than the comparable periods in 2019 primarily due to increases in fiduciary income and gains from sales of loans, partially offset by a decrease in service charges and fees on deposit accounts. The increase for the nine month period included gains from the sale of equity securities, which is recorded in other operating income in the consolidated condensed statements of income, gains from the sale of debt securities, and an increase in income from bank owned life insurance. Income from bank owned life insurance increased year-to-date 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 nine months ended September 30, 2020 was, respectively, $671,000 and $1,326,000 greater than the comparable periods in 2019, primarily due to increases in salaries and employee benefits and other non-interest expenses. 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 employee benefits. Partially offsetting the increase for the nine month period was a decrease in FDIC insurance premiums due to a small bank assessment credit received during both the first and second quarters 2020. LCNB used the credit in full during those two quarters and the premium payment returned to a normal level for the third quarter 2020.

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																Nine Months Ended
	9/30/2020				6/30/2020			3/31/2020			12/31/2019			9/30/2019			9/30/2020			9/30/2019
Condensed Income Statement
Interest income	$	15,322			15,957			16,556			16,424			16,329			47,835			48,770
Interest expense	1,793				1,959			2,378			2,577			2,751			6,130			8,211
Net interest income	13,529				13,998			14,178			13,847			13,578			41,705			40,559
Provision (credit) for loan losses	976				16			1,173			(6)			264			2,165			213
Net interest income after provision	12,553				13,982			13,005			13,853			13,314			39,540			40,346
Non-interest income	4,278				3,319			3,839			3,222			3,356			11,436			9,126
Non-interest expense	11,653				11,116			11,072			11,007			10,982			33,841			32,515
Income before income taxes	5,178				6,185			5,772			6,068			5,688			17,135			16,957
Provision for income taxes	928				1,128			746			1,238			961			2,802			2,875
Net income	$	4,250			5,057			5,026			4,830			4,727			14,333			14,082
Amort/Accret income on acquired loans	$	181			294			667			400			302			1,142			881
Amort/Accret expenses on acquired interest-bearing liabilities	$	—			2			3			3			4			5			290
Tax-equivalent net interest income	$	13,594			14,066			14,254			13,937			13,679			41,914			40,915
Per Share Data
Dividends per share	$	0.18			0.18			0.18			0.18			0.17			0.54			0.51
Basic earnings per common share	$	0.33			0.39			0.39			0.37			0.36			1.11			1.07
Diluted earnings per common share	$	0.33			0.39			0.39			0.37			0.36			1.11			1.07
Book value per share	$	18.46			18.27			18.00			17.63			17.44			18.46			17.44
Tangible book value per share	$	13.66			13.47			13.18			12.78			12.57			13.66			12.57
Weighted average common shares outstanding:
Basic	12,937,865				12,940,975			12,926,077			12,912,106			12,932,950			12,934,987			13,135,134
Diluted	12,937,901				12,941,001			12,927,666			12,916,000			12,937,145			12,935,388			13,139,100
Shares outstanding at period end	12,926,686				12,975,879			12,969,076			12,936,783			12,927,463			12,926,686			12,927,463
Selected Financial Ratios
Return on average assets	0.97		%		1.19	%		1.23	%		1.17	%		1.13	%		1.13	%		1.15	%
Return on average equity	7.08		%		8.63	%		8.75	%		8.42	%		8.33	%		8.14	%		8.42	%
Return on average tangible equity	9.56		%		11.74	%		12.00	%		11.63	%		11.57	%		11.07	%		11.75	%
Dividend payout ratio	54.55		%		46.15	%		46.15	%		48.65	%		47.22	%		48.65	%		47.66	%
Net interest margin (tax equivalent)	3.47		%		3.70	%		3.92	%		3.76	%		3.67	%		3.69	%		3.70	%
Efficiency ratio (tax equivalent)	65.20		%		63.94	%		61.19	%		64.15	%		64.47	%		63.43	%		64.98	%
Selected Balance Sheet Items
Cash and cash equivalents	$	24,485			42,736			24,795			20,765			22,826
Debt and equity securities	199,044				194,883			183,123			219,791			239,730
Loans:
Commercial and industrial	$	124,628			125,492			85,356			78,306			71,576
Commercial, secured by real estate	843,943				833,286			829,461			804,953			797,842
Residential real estate	327,689				334,349			318,009			322,533			320,703
Consumer	36,504				32,859			28,955			25,232			23,918
Agricultural	8,920				11,071			10,519			11,509			11,525
Other, including deposit overdrafts	403				283			436			1,193			456
Deferred net origination fees	(1,927)				(1,902)			(349)			(275)			(128)
Loans, gross	1,340,160				1,335,438			1,272,387			1,243,451			1,225,892
Less allowance for loan losses	5,974				5,016			5,008			4,045			4,167
Loans, net	$	1,334,186			1,330,422			1,267,379			1,239,406			1,221,725
Total earning assets	$	1,547,538			1,554,537			1,462,485			1,466,988			1,470,074
Total assets	1,725,615				1,735,332			1,636,280			1,639,308			1,644,447
Total deposits	1,430,394				1,438,921			1,345,872			1,348,280			1,355,383
	Three Months Ended																Nine Months Ended
	9/30/2020				6/30/2020			3/31/2020			12/31/2019			9/30/2019			9/30/2020			9/30/2019
Selected Balance Sheet Items, continued
Long-term debt	31,999				33,998			35,996			40,994			41,990
Total shareholders’ equity	238,585				237,047			233,478			228,048			225,492
Equity to assets ratio	13.83		%		13.66	%		14.27	%		13.91	%		13.71	%
Loans to deposits ratio	93.69		%		92.81	%		94.54	%		92.22	%		90.45	%
Tangible common equity (TCE)	$	176,624			174,823			170,994			165,304			162,485
Tangible common assets (TCA)	1,663,654				1,673,108			1,573,796			1,576,564			1,581,440
TCE/TCA	10.62		%		10.45	%		10.87	%		10.49	%		10.27	%
Selected Average Balance Sheet Items
Cash and cash equivalents	$	42,661			46,292			25,101			26,501			28,293			37,988			27,600
Debt and equity securities	197,788				182,371			204,912			231,115			243,553			195,033			253,113
Loans	$	1,339,608			1,318,753			1,252,554			1,230,845			1,227,806			1,303,770			1,218,183
Less allowance for loan losses	5,250				4,998			3,938			4,076			3,986			4,730			4,049
Net loans	$	1,334,358			1,313,755			1,248,616			1,226,769			1,223,820			1,299,040			1,214,134
Total earning assets	$	1,558,886			1,528,610			1,462,946			1,469,469			1,480,096			1,516,967			1,479,983
Total assets	1,741,998				1,704,303			1,638,486			1,643,793			1,654,034			1,695,103			1,642,186
Total deposits	1,445,573				1,412,082			1,346,770			1,352,101			1,365,702			1,401,636			1,350,678
Short-term borrowings	0				82			1,415			622			468			497			7,898
Long-term debt	33,020				34,964			38,325			41,742			41,988			35,427			43,067
Total shareholders’ equity	238,990				235,587			231,058			227,595			225,216			235,225			223,644
Equity to assets ratio	13.72		%		13.82	%		14.10	%		13.85	%		13.62	%		13.88	%		13.62	%
Loans to deposits ratio	92.67		%		93.39	%		93.00	%		91.03	%		89.90	%		93.02	%		90.19	%
Asset Quality
Net charge-offs	$	18			8			210			115			209			236			92
Other real estate owned	—				—			—			197			197			—			197
Non-accrual loans	4,110				3,876			2,829			3,210			3,523			4,110			3,523
Loans past due 90 days or more and still accruing	94				38			39			—			—			94			—
Total nonperforming loans	$	4,204			3,914			2,868			3,210			3,523			4,204			3,523
Net charge-offs to average loans	0.01		%		0.00	%		0.07	%		0.04	%		0.07	%		0.02	%		0.01	%
Allowance for loan losses to total loans	0.45		%		0.38	%		0.39	%		0.33	%		0.34	%		0.45	%		0.34	%
Nonperforming loans to total loans	0.31		%		0.29	%		0.23	%		0.26	%		0.29	%		0.31	%		0.29	%
Nonperforming assets to total assets	0.24		%		0.23	%		0.18	%		0.21	%		0.23	%		0.24	%		0.23	%
Assets Under Management
LCNB Corp. total assets	$	1,725,615			1,735,332			1,636,280			1,639,308			1,644,447
Trust and investments (fair value)	524,502				516,076			455,974			435,664			411,724
Mortgage loans serviced	120,546				100,189			94,805			93,596			90,784
Cash management	119,520				116,615			77,471			75,948			117,530
Brokerage accounts (fair value)	267,307				255,276			235,278			268,059			262,038
Total assets managed	$	2,757,490			2,723,488			2,499,808			2,512,575			2,526,523

LCNB CORP. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (Dollars in thousands)
	September 30, 2020 (Unaudited)				December 31, 2019
ASSETS:
Cash and due from banks	$	16,151			17,019
Interest-bearing demand deposits	8,334				3,746
Total cash and cash equivalents	24,485				20,765
Investment securities:
Equity securities with a readily determinable fair value, at fair value	2,213				2,312
Equity securities without a readily determinable fair value, at cost	2,099				2,099
Debt securities, available-for-sale, at fair value	157,936				178,000
Debt securities, held-to-maturity, at cost	26,941				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	1,334,186				1,239,406
Premises and equipment, net	35,309				34,787
Operating leases right of use asset	5,729				5,444
Goodwill	59,221				59,221
Core deposit and other intangibles	3,539				4,006
Bank owned life insurance	41,871				41,667
Interest receivable	9,559				3,926
Other assets	12,672				10,295
TOTAL ASSETS	$	1,725,615			1,639,308
LIABILITIES:
Deposits:
Noninterest-bearing	$	426,989			354,391
Interest-bearing	1,003,405				993,889
Total deposits	1,430,394				1,348,280
Long-term debt	31,999				40,994
Operating lease liabilities	5,790				5,446
Accrued interest and other liabilities	18,847				16,540
TOTAL LIABILITIES	1,487,030				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; issued 14,157,303 and 14,111,810 shares at September 30, 2020 and December 31, 2019, respectively; outstanding 12,926,686 and 12,936,783 shares at September 30, 2020 and December 31, 2019, respectively	142,310				141,791
Retained earnings	111,760				104,431
Treasury shares at cost, 1,230,617 and 1,175,027 shares at September 30, 2020 and December 31, 2019, respectively	(19,639)				(18,847)
Accumulated other comprehensive income, net of taxes	4,154				673
TOTAL SHAREHOLDERS' EQUITY	238,585				228,048
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	1,725,615			1,639,308

LCNB CORP. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Dollars in thousands, except per share data) (Unaudited)
	Three Months Ended September 30,							Nine Months Ended September 30,
	2020				2019			2020			2019
INTEREST INCOME:
Interest and fees on loans	$	14,379			14,872			44,428			44,072
Dividends on equity securities with a readily determinable fair value	13				15			40			47
Dividends on equity securities without a readily determinable fair value	5				16			33			48
Interest on debt securities, taxable	633				918			2,250			2,720
Interest on debt securities, non-taxable	249				379			788			1,340
Interest on interest-bearing time deposits	—				3			—			11
Other investments	43				126			296			532
TOTAL INTEREST INCOME	15,322				16,329			47,835			48,770
INTEREST EXPENSE:
Interest on deposits	1,567				2,475			5,416			7,225
Interest on short-term borrowings	—				3			7			224
Interest on long-term debt	226				273			707			762
TOTAL INTEREST EXPENSE	1,793				2,751			6,130			8,211
NET INTEREST INCOME	13,529				13,578			41,705			40,559
PROVISION FOR LOAN LOSSES	976				264			2,165			213
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	12,553				13,314			39,540			40,346
NON-INTEREST INCOME:
Fiduciary income	1,275				1,123			3,579			3,215
Service charges and fees on deposit accounts	1,506				1,616			4,038			4,421
Net gains (losses) on sales of debt securities	—				(20)			221			(37)
Bank owned life insurance income	275				289			1,163			654
Gains from sales of loans	999				114			1,436			207
Other operating income	223				234			999			666
TOTAL NON-INTEREST INCOME	4,278				3,356			11,436			9,126
NON-INTEREST EXPENSE:
Salaries and employee benefits	6,863				6,403			20,279			18,808
Equipment expenses	341				322			917			866
Occupancy expense, net	740				751			2,145			2,258
State financial institutions tax	424				433			1,280			1,307
Marketing	471				410			906			1,009
Amortization of intangibles	263				263			783			780
FDIC insurance premiums, net	112				(13)			142			225
Contracted services	435				455			1,312			1,394
Other real estate owned	2				1			(7)			52
Merger-related expenses	—				27			—			114
Other non-interest expense	2,002				1,930			6,084			5,702
TOTAL NON-INTEREST EXPENSE	11,653				10,982			33,841			32,515
INCOME BEFORE INCOME TAXES	5,178				5,688			17,135			16,957
PROVISION FOR INCOME TAXES	928				961			2,802			2,875
NET INCOME	$	4,250			4,727			14,333			14,082
Dividends declared per common share	$	0.18			0.17			0.54			0.51
Earnings per common share:
Basic	0.33				0.36			1.11			1.07
Diluted	0.33				0.36			1.11			1.07
Weighted average common shares outstanding:
Basic	12,937,865				12,932,950			12,934,987			13,135,134
Diluted	12,937,901				12,937,145			12,935,388			13,139,100

 

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