Business Wire | Jul 20, 2020 06:04PM EDT

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

Jul. 20, 2020

LEBANON, Ohio--(BUSINESS WIRE)--Jul. 20, 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(r) 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:

* the success, impact, and timing of the implementation of LCNB's business strategies; * 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; * LCNB's ability to integrate recent and future acquisitions may be unsuccessful, or may be more difficult, time-consuming or costly than expected; * LCNB may incur increased charge-offs in the future; * LCNB may face competitive loss of customers; * 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; * changes in general economic conditions and increased competition could adversely affect LCNB's operating results; * 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; * LCNB may experience difficulties growing loan and deposit balances; * 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; * 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; * 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; * adverse weather events and natural disasters and global and/or national epidemics; and * 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 13,998 14,178 13,847 13,578 13,590 28,176 26,981 income

Provision(credit) for 16 1,173 (6) 264 54 1,189 (51) loan losses

Net interestincome after 13,982 13,005 13,853 13,314 13,536 26,987 27,032 provision

Non-interest 3,319 3,839 3,222 3,356 2,998 7,158 5,770 income

Non-interest 11,116 11,072 11,007 10,982 10,833 22,188 21,533 expense

Income before 6,185 5,772 6,068 5,688 5,701 11,957 11,269 income taxes

Provision for 1,128 746 1,238 961 973 1,874 1,914 income taxes

Net income $ 5,057 5,026 4,830 4,727 4,728 10,083 9,355

Amort/Accretincome on $ 294 667 400 302 355 961 579 acquired loans

Amort/Accretexpenses onacquired $ 2 3 3 4 142 4 286 interest-bearingliabilities

Tax-equivalentnet interest $ 14,006 14,254 13,937 13,679 13,700 28,319 27,236 income



Per Share Data

Dividends per $ 0.18 0.18 0.18 0.17 0.17 0.36 0.34 share

Basic earnings $ 0.39 0.39 0.37 0.36 0.36 0.78 0.71 per common share

Diluted earnings $ 0.39 0.39 0.37 0.36 0.36 0.78 0.71 per common share

Book value per $ 18.27 18.00 17.63 17.44 17.18 18.27 17.18 share

Tangible book $ 13.47 13.18 12.78 12.57 12.31 13.47 12.31 value per share

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

Sharesoutstanding at 12,975,879 12,969,076 12,936,783 12,927,463 12,978,554 12,975,879 12,978,554 period end



Selected Financial Ratios

Return on 1.19 % 1.23 % 1.17 % 1.13 % 1.16 % 1.21 % 1.15 %average assets

Return on 8.63 % 8.75 % 8.42 % 8.33 % 8.46 % 8.69 % 8.47 %average equity

Return onaverage tangible 11.74 % 12.00 % 11.63 % 11.57 % 11.87 % 11.92 % 11.84 %equity

Dividend payout 46.15 % 46.15 % 48.65 % 47.22 % 47.22 % 46.15 % 47.89 %ratio

Net interestmargin (tax 3.70 % 3.92 % 3.76 % 3.67 % 3.72 % 3.81 % 3.71 %equivalent)

Efficiency ratio 63.94 % 61.19 % 64.15 % 64.47 % 64.87 % 62.54 % 65.24 %(tax equivalent)



Selected Balance Sheet Items

Cash and cash $ 42,736 24,795 20,765 22,826 23,185 equivalents

Debt and equity 194,883 183,123 219,791 239,730 246,701 securities



Loans:

Commercial and $ 125,492 85,356 78,306 71,576 79,513 industrial

Commercial,secured by real 833,286 829,461 804,953 797,842 793,863 estate

Residential real 334,349 318,009 322,533 320,703 326,029 estate

Consumer 32,859 28,955 25,232 23,918 19,649

Agricultural 11,071 10,519 11,509 11,525 10,843

Other, includingdeposit 283 436 1,193 456 373 overdrafts

Deferred net (1,902) (349) (275) (128) (9) origination fees

Loans, gross 1,335,438 1,272,387 1,243,451 1,225,892 1,230,261

Less allowance 5,016 5,008 4,045 4,167 4,112 for loan losses

Loans, net $ 1,330,422 1,267,379 1,239,406 1,221,725 1,226,149



Total earning $ 1,554,537 1,462,485 1,466,988 1,470,074 1,482,913 assets

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

Totalshareholders' 237,047 233,478 228,048 225,492 222,972 equity

Equity to assets 13.66 % 14.27 % 13.91 % 13.71 % 13.58 % ratio

Loans to 92.81 % 94.54 % 92.22 % 90.45 % 90.60 % deposits ratio



Tangible common $ 174,823 170,994 165,304 162,485 159,702 equity (TCE)

Tangible common 1,673,108 1,573,796 1,576,564 1,581,440 1,578,742 assets (TCA)

TCE/TCA 10.45 % 10.87 % 10.49 % 10.27 % 10.12 %







Selected AverageBalance Sheet Items

Cash and cash $ 46,292 25,101 26,501 28,293 29,523 35,712 27,332 equivalents

Debt and equity 182,371 204,912 231,115 243,553 249,954 193,642 257,972 securities



Loans $ 1,318,753 1,252,554 1,230,845 1,227,806 1,217,726 1,285,654 1,213,292

Less allowance 4,998 3,938 4,076 3,986 4,088 4,468 4,081 for loan losses

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 $ 1,528,610 1,462,946 1,469,469 1,480,096 1,479,225 1,495,779 1,479,924 assets

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 82 1,415 622 468 243 749 11,675 borrowings

Long-term debt 34,964 38,325 41,742 41,988 42,567 36,644 43,616

Totalshareholders' 235,587 231,058 227,595 225,216 224,203 233,322 222,844 equity

Equity to assets 13.82 % 14.10 % 13.85 % 13.62 % 13.69 % 13.96 % 13.62 %ratio

Loans to 93.39 % 93.00 % 91.03 % 89.90 % 90.04 % 93.20 % 90.34 %deposits ratio



Asset Quality

Net charge-offs $ 8 210 115 209 68 218 (117) (recoveries)

Other real 0 0 197 197 197 0 197 estate owned



Non-accrual 3,876 2,829 3,210 3,523 2,962 3,876 2,962 loans

Loans past due90 days or more 38 39 - - 24 38 24 and still accruing

Totalnonperforming $ 3,914 2,868 3,210 3,523 2,986 3,914 2,986 loans



Net charge-offs(recoveries) to 0.00 % 0.07 % 0.04 % 0.07 % 0.02 % 0.03 % (0.02) %average loans

Allowance forloan losses to 0.38 % 0.39 % 0.33 % 0.34 % 0.33 % 0.38 % 0.33 %total loans

Nonperformingloans to total 0.29 % 0.23 % 0.26 % 0.29 % 0.24 % 0.29 % 0.24 %loans

Nonperformingassets to total 0.23 % 0.18 % 0.21 % 0.23 % 0.19 % 0.23 % 0.19 %assets



Assets Under Management

LCNB Corp. total $ 1,735,332 1,636,280 1,639,308 1,644,447 1,642,012 assets

Trust andinvestments 516,076 455,974 435,664 411,724 382,462 (fair value)

Mortgage loans 100,189 94,805 93,596 90,784 88,444 serviced

Cash management 116,615 77,471 75,948 117,530 71,973

Brokerageaccounts (fair 255,276 235,278 268,059 262,038 260,202 value)

Total assets $ 2,723,488 2,499,808 2,512,575 2,526,523 2,445,093 managed



LCNB CORP. AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS



(Dollars in thousands)

June 30, 2020 December (Unaudited) 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 2,163 2,312 fair value, at fair value

Equity securities without a readily determinable 2,099 2,099 fair value, at cost

Debt securities, available-for-sale, at fair 153,529 178,000 value

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, authorized19,000,000 shares at June 30, 2020 and December31, 2019; issued 14,150,906 and 14,111,810 shares 142,181 141,791 at June 30, 2020 and December 31, 2019,respectively

Retained earnings 109,845 104,431

Treasury shares at cost, 1,175,027 shares at June (18,847) (18,847) 30, 2020 and December 31, 2019

Accumulated other comprehensive income, net of 3,868 673 taxes

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 Six Months Ended June 30, June 30,

2020 2019 2020 2019

INTEREST INCOME:

Interest and fees $ 14,822 14,662 30,049 29,200 on loans

Dividends on equitysecurities with areadily 13 15 27 32 determinable fairvalue

Dividends on equitysecurities withouta readily 12 16 28 32 determinable fairvalue

Interest on debt 667 933 1,617 1,802 securities, taxable

Interest on debtsecurities, 254 417 539 961 non-taxable

Interest oninterest-bearing - 3 - 8 time deposits

Other investments 189 282 253 406

TOTAL INTEREST 15,957 16,328 32,513 32,441 INCOME

INTEREST EXPENSE:

Interest on 1,732 2,464 3,849 4,750 deposits

Interest onshort-term - 2 7 221 borrowings

Interest on 227 272 481 489 long-term debt

TOTAL INTEREST 1,959 2,738 4,337 5,460 EXPENSE

NET INTEREST INCOME 13,998 13,590 28,176 26,981

PROVISION (CREDIT) 16 54 1,189 (51) FOR LOAN LOSSES

NET INTEREST INCOMEAFTER PROVISION FOR 13,982 13,536 26,987 27,032 LOAN LOSSES

NON-INTEREST INCOME:

Fiduciary income 1,201 1,058 2,304 2,092

Service charges andfees on deposit 1,237 1,497 2,532 2,805 accounts

Net gains (losses)on sales of debt - 1 221 (17) securities

Bank owned life 287 183 888 365 insurance income

Gains from sales of 317 64 437 93 loans

Other operating 277 195 776 432 income

TOTAL NON-INTEREST 3,319 2,998 7,158 5,770 INCOME

NON-INTEREST EXPENSE:

Salaries and 6,648 6,243 13,416 12,405 employee benefits

Equipment expenses 289 278 576 544

Occupancy expense, 723 744 1,405 1,507 net

State financial 420 436 856 874 institutions tax

Marketing 258 297 435 599

Amortization of 260 260 520 517 intangibles

FDIC insurance 31 112 30 238 premiums, net

Contracted services 475 475 877 939

Other real estate 1 48 (9) 51 owned

Merger-related - 20 - 87 expenses

Other non-interest 2,011 1,920 4,082 3,772 expense

TOTAL NON-INTEREST 11,116 10,833 22,188 21,533 EXPENSE

INCOME BEFORE 6,185 5,701 11,957 11,269 INCOME TAXES

PROVISION FOR 1,128 973 1,874 1,914 INCOME TAXES

NET INCOME $ 5,057 4,728 10,083 9,355



Dividends declared $ 0.18 0.17 0.36 0.34 per common share

Earnings per common share:

Basic 0.39 0.36 0.78 0.71

Diluted 0.39 0.36 0.78 0.71

Weighted averagecommon 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

View source version on businesswire.com: https://www.businesswire.com/news/home/20200720005806/en/

CONTACT: LCNB Corp. Eric J. Meilstrup, CEO and President, 800-344-BANK Robert C. Haines II, Executive Vice President and CFO, 800-344-BANK