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What changed in LCNB CORP's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of LCNB CORP's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+180 added−175 removedSource: 10-K (2025-03-12) vs 10-K (2024-03-15)

Top changes in LCNB CORP's 2024 10-K

180 paragraphs added · 175 removed · 146 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

48 edited+3 added−8 removed106 unchanged
Biggest changeAND SUBSIDIARIES Loan Portfolio The following table summarizes loan maturities and sensitivities to interest rate change at December 31, 2023 (in thousands): Commercial & Industrial Commercial, Secured by Real Estate Residential Real Estate Consumer Agricultural Other Totals Maturing in one year or less $ 18,820 39,071 8,113 1,824 7,035 82 74,945 Maturing after one year through five years 74,559 131,584 14,743 17,457 2,172 — 240,515 Maturing after five years through 15 years 27,162 452,686 143,891 6,319 1,793 — 631,851 Maturing after 15 years — 482,303 293,857 — — — 776,160 Totals $ 120,541 1,105,644 460,604 25,600 11,000 82 1,723,471 Loans maturing beyond one year: Fixed rate $ 45,638 349,387 223,198 23,776 3,044 — 645,043 Variable rate 56,083 717,186 229,293 — 921 — 1,003,483 Totals $ 101,721 1,066,573 452,491 23,776 3,965 — 1,648,526 Allocation of the Allowance for Credit Losses on Loans The following table presents the allocation of the allowance for credit losses on loans: At December 31, 2023 2022 2021 Amount Percent of Loans in Each Category to Total Loans Amount Percent of Loans in Each Category to Total Loans Amount Percent of Loans in Each Category to Total Loans (Dollars in thousands) Commercial and industrial $ 1,039 7.0 % $ 1,300 8.6 % $ 1,095 7.4 % Commercial, secured by real estate 5,414 64.3 % 3,609 66.9 % 3,607 64.9 % Residential real estate 3,816 26.6 % 624 21.8 % 665 24.4 % Consumer 238 1.5 % 86 2.0 % 105 2.5 % Agricultural 18 0.6 % 22 0.7 % 30 0.8 % Other loans, including deposit overdrafts — — % 5 — % 4 — % Total $ 10,525 100.0 % $ 5,646 100.0 % $ 5,506 100.0 % Ratio of the allowance for credit losses to total loans outstanding 0.61 % 0.40 % 0.40 % Ratio of the allowance for credit losses to total non-accrual loans 13,090.42 % 1,443.99 % 371.71 % Deposits The statistical information regarding average amounts and average rates paid for the deposit categories is included in the "Distribution of Assets, Liabilities and Shareholders' Equity" table included in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations.
Biggest changeAND SUBSIDIARIES Loan Portfolio The following table summarizes loan maturities and sensitivities to interest rate change at December 31, 2024 (in thousands): Commercial, Commercial Secured by Residential & Industrial Real Estate Real Estate Consumer Agricultural Other Totals Maturing in one year or less $ 24,339 71,187 4,990 1,842 9,486 179 112,023 Maturing after one year through five years 69,550 148,425 15,188 13,797 2,294 — 249,254 Maturing after five years through 15 years 24,722 452,340 117,823 4,859 1,513 — 601,257 Maturing after 15 years — 440,180 319,098 — — — 759,278 Totals $ 118,611 1,112,132 457,099 20,498 13,293 179 1,721,812 Loans maturing beyond one year: Fixed rate $ 41,945 342,195 219,630 18,656 2,332 — 624,758 Variable rate 52,327 698,750 232,479 — 1,475 — 985,031 Totals $ 94,272 1,040,945 452,109 18,656 3,807 — 1,609,789 Allocation of the Allowance for Credit Losses on Loans The following table presents the allocation of the allowance for credit losses on loans: At December 31, 2024 2023 2022 Percent Percent Percent of Loans of Loans of Loans in Each in Each in Each Category Category Category to Total to Total to Total Amount Loans Amount Loans Amount Loans (Dollars in thousands) Commercial and industrial $ 1,573 6.9 % 1,039 7.0 % 1,300 8.6 % Commercial, secured by real estate 6,537 64.6 % 5,414 64.3 % 3,609 66.9 % Residential real estate 3,634 26.5 % 3,816 26.6 % 624 21.8 % Consumer 220 1.2 % 238 1.5 % 86 2.0 % Agricultural 24 0.8 % 18 0.6 % 22 0.7 % Other loans, including deposit overdrafts 13 — % — — % 5 — % Total $ 12,001 100.0 % 10,525 100.0 % 5,646 100.0 % Ratio of the allowance for credit losses to total loans outstanding 0.70% 0.61 % 0.40 % Ratio of the allowance for credit losses to total non-accrual loans 265.04% 13,090.42 % 1,443.99 % Deposits The statistical information regarding average amounts and average rates paid for the deposit categories is included in the "Distribution of Assets, Liabilities and Shareholders' Equity" table included in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations.
Actual maturities may differ from contractual maturities when issuers have the right to call or prepay obligations. Weighted average yield is based on amortized cost. Available-for-Sale Held-to-Maturity Amortized Cost Fair Value Weighted Average Yield Amortized Cost Fair Value Weighted Average Yield (Dollars in thousands) U.S.
Actual maturities may differ from contractual maturities when issuers have the right to call or prepay obligations. Weighted average yield is based on amortized cost. Available-for-Sale Held-to-Maturity Weighted Weighted Amortized Fair Average Amortized Fair Average Cost Value Yield Cost Value Yield (Dollars in thousands) U.S.
AND SUBSIDIARIES Community Reinvestment Act of 1977 The CRA subjects a bank to regulatory assessment to determine if the institution meets the credit needs of its entire community, including low-and moderate-income neighborhoods served by the bank, and to take that determination into account in its evaluation of any application made by such bank for, among other things, approval of the acquisition or establishment of a branch or other depository facility, an office relocation, a merger, or the acquisition of shares of capital stock of another financial institution.
Community Reinvestment Act of 1977 The CRA subjects a bank to regulatory assessment to determine if the institution meets the credit needs of its entire community, including low-and moderate-income neighborhoods served by the bank, and to take that determination into account in its evaluation of any application made by such bank for, among other things, approval of the acquisition or establishment of a branch or other depository facility, an office relocation, a merger, or the acquisition of shares of capital stock of another financial institution.
Consumer Financial Protection Bureau The Dodd-Frank Act created an independent federal agency called the Consumer Financial Protection Bureau, which is granted broad rulemaking, supervisory, and enforcement powers under various federal consumer financial protection laws, including the Equal Credit Opportunity Act, Truth in Lending Act, Real Estate Settlement Procedures Act, Fair Credit Reporting Act, Fair Debt Collection Act, the Consumer Financial Privacy provisions of the Gramm-Leach-Bliley Act, and certain other statutes.
AND SUBSIDIARIES Consumer Financial Protection Bureau The Dodd-Frank Act created an independent federal agency called the Consumer Financial Protection Bureau, which is granted broad rulemaking, supervisory, and enforcement powers under various federal consumer financial protection laws, including the Equal Credit Opportunity Act, Truth in Lending Act, Real Estate Settlement Procedures Act, Fair Credit Reporting Act, Fair Debt Collection Act, the Consumer Financial Privacy provisions of the Gramm-Leach-Bliley Act, and certain other statutes.
AND SUBSIDIARIES Under the Basel III Rules, the minimum capital ratios effective as of January 1, 2015 are: (i) 4.5% CET1 to risk-weighted assets; (ii) 6.0% tier 1 capital to risk-weighted assets; (iii) 8.0% total capital to risk-weighted assets; and (iv) 4.0% tier 1 capital to average consolidated assets as reported on consolidated financial statements (known as the “leverage ratio”).
Under the Basel III Rules, the minimum capital ratios effective as of January 1, 2015 are: (i) 4.5% CET1 to risk-weighted assets; (ii) 6.0% tier 1 capital to risk-weighted assets; (iii) 8.0% total capital to risk-weighted assets; and (iv) 4.0% tier 1 capital to average consolidated assets as reported on consolidated financial statements (known as the “leverage ratio”).
Availability of Financial Information LCNB files unaudited quarterly financial reports on Form 10-Q, annual financial reports on Form 10-K, current reports on Form 8-K, and amendments to these reports are filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 with the SEC.
AND SUBSIDIARIES Availability of Financial Information LCNB files unaudited quarterly financial reports on Form 10-Q, annual financial reports on Form 10-K, current reports on Form 8-K, and amendments to these reports are filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 with the SEC.
AND SUBSIDIARIES The ability to access and use technology is an increasingly competitive factor in the financial services industry. Technology relating to the delivery of financial services, the security and privacy of customer information, and the processing of information is evolving rapidly. LCNB must continually make technology investments to remain competitive in the financial services industry.
The ability to access and use technology is an increasingly competitive factor in the financial services industry. Technology relating to the delivery of financial services, the security and privacy of customer information, and the processing of information is evolving rapidly. LCNB must continually make technology investments to remain competitive in the financial services industry.
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”, "might", “plan”, and similar expressions. 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.
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”, “might”, “plan”, and similar expressions. 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.
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. global geopolitical relations and/or conflicts could create financial market uncertainty and have negative impacts on commodities and currency, which could adversely affect LCNB's operating results and financial condition; 11. difficulties with technology or data security breaches, including cyberattacks, could negatively affect LCNB's ability to conduct business and its relationships with customers, vendors, and others; 12. adverse weather events and natural disasters and global and/or national epidemics could negatively affect LCNB's customers given its concentrated geographic scope, which could impact LCNB's operating results; and 13. government intervention in the U.S. financial system, including the effects of legislative, tax, accounting, and regulatory actions and reforms, including the Dodd-Frank 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, changes in deposit insurance premium levels, and any such future regulatory actions or reforms.
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. global and/or geopolitical relations and/or conflicts could create financial market uncertainty and have negative impacts on commodities, currency, and stability, which could adversely affect LCNB's operating results and financial condition; 11. difficulties with technology or data security breaches, including cyberattacks or widespread outages, could negatively affect LCNB's ability to conduct business and its relationships with customers, vendors, and others; 12. adverse weather events and natural disasters and global and/or national epidemics could negatively affect LCNB's customers given its concentrated geographic scope, which could impact LCNB's operating results; and 13. government intervention in the U.S. financial system, including the effects of legislative, tax, accounting, and regulatory actions and reforms, including the Jumpstart Our Business Startups Act, the Consumer Financial Protection Bureau, the capital ratios of Basel III as adopted by the federal banking authorities, changes in deposit insurance premium levels, and any such future regulatory actions or reforms.
LCNB's incentive compensation arrangements must provide employees with incentives that appropriately balance risk and reward and do not encourage imprudent risk, be compatible with effective controls and risk managements, and be supported by strong corporate governance, including active and effective oversight by LCNB's board of directors. -11- Table of Contents LCNB CORP.
LCNB's incentive compensation arrangements must provide employees with incentives that appropriately balance risk and reward and do not encourage imprudent risk, be compatible with effective controls and risk managements, and be supported by strong corporate governance, including active and effective oversight by LCNB's board of directors. -10- Table of Contents LCNB CORP.
Certain provisions affecting LCNB include: • Simplifying regulatory capital requirements by providing that banks with less than $10 billion in total consolidated assets that meet a to-be-developed community bank leverage ratio of tangible equity to average consolidated assets between eight and ten percent will be deemed to be in compliance with risk-based capital and leverage requirements. • Changing how federal financial institution regulators classify certain municipal securities assets under the liquidity coverage ratio rule; • Exempting certain reciprocal deposits from treatment as brokered deposits under the FDIC's brokered deposits rule; • Exempting banks with less than $10 billion in total consolidated assets from certain provisions under the Volcker Rule; and • Authorizing new banking procedures to better facilitate online transactions.
Certain provisions affecting LCNB include: • Simplifying regulatory capital requirements by providing that banks with less than $10 billion in total consolidated assets that meet a to-be-developed community bank leverage ratio of tangible equity to average consolidated assets between eight and ten percent will be deemed to be in compliance with risk-based capital and leverage requirements. • Changing how federal financial institution regulators classify certain municipal securities assets under the liquidity coverage ratio rule; • Exempting certain reciprocal deposits from treatment as brokered deposits under the FDIC's brokered deposits rule; • Exempting banks with less than $10 billion in total consolidated assets from certain provisions under the Volcker Rule; and • Authorizing new banking procedures to better facilitate online transactions. -11- Table of Contents LCNB CORP.
The election to be treated as a financial holding company increases LCNB's ability to offer financial products and services that historically it was either unable to provide or was only able to provide on a limited basis. As a result, LCNB will face increased competition in the markets for any new financial products and services that it may offer.
The election to be treated as a financial holding company increases LCNB's ability to offer financial products and services that historically it was either unable to provide or was only able to provide on a limited basis. As a result, LCNB faces increased competition in the markets for any new financial products and services that it may offer.
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 loan charge-offs in the future and the allowance for credit losses may be inadequate; 4.
LCNB’s ability to integrate recent and future acquisitions, including CNNB and EFBI, may be unsuccessful, or may be more difficult, time-consuming, or costly than expected; 3. LCNB may incur increased loan charge-offs in the future and the allowance for credit losses may be inadequate; 4.
LCNB may experience difficulties maintaining and growing loan and deposit balances; 9.
LCNB may experience difficulties growing loan and deposit balances; 9.
AND SUBSIDIARIES Described below are some of the laws and regulations that apply when either LCNB Corp. or the Bank pay or is paid dividends.
Described below are some of the laws and regulations that apply when either LCNB Corp. or the Bank pay or are paid dividends.
LCNB Risk Management, Inc., a captive insurance agency, was incorporated in Nevada by LCNB Corp. during the second quarter of 2017. -5- Table of Contents LCNB CORP. AND SUBSIDIARIES Loan products offered include commercial and industrial loans, commercial and residential real estate loans, agricultural loans, construction loans, various types of consumer loans, and Small Business Administration loans.
LCNB Risk Management, Inc., a captive insurance agency, was incorporated in Nevada by LCNB Corp. during the second quarter of 2017. Loan products offered include commercial and industrial loans, commercial and residential real estate loans, agricultural loans, construction loans, various types of consumer loans, and Small Business Administration loans.
“In danger of default” is defined generally as the existence of certain conditions indicating that a default is likely to occur in the absence of regulatory assistance. LCNB has never received an "in danger of default" categorization. Dividends LCNB Corp. is a legal entity separate and distinct from the Bank.
“In danger of default” is defined generally as the existence of certain conditions indicating that a default is likely to occur in the absence of regulatory assistance. LCNB has never received an "in danger of default" categorization. -8- Table of Contents LCNB CORP. AND SUBSIDIARIES Dividends LCNB Corp. is a legal entity separate and distinct from the Bank.
The table analyzing changes in interest income and expense by volume and rate is included in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations. -15- Table of Contents LCNB CORP. AND SUBSIDIARIES Contractual maturities of debt securities at December 31, 2023, were as follows.
The table analyzing changes in interest income and expense by volume and rate is included in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations. -14- Table of Contents LCNB CORP. AND SUBSIDIARIES Contractual maturities of debt securities at December 31, 2024, were as follows.
LCNB may face competitive loss of customers; 5. changes in the interest rate environment, which may include further interest rate increases, 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 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 face competitive loss of customers; 5. changes in the interest rate environment, either by interest rate increases or decreases, 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 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 undertakes no obligation to update any forward-looking statement to reflect events or circumstances that arise after the date such statements are made. DESCRIPTION OF LCNB'S BUSINESS General Description LCNB Corp., an Ohio corporation formed in December 1998, is a financial holding company headquartered in Lebanon, Ohio.
LCNB undertakes no obligation to update any forward-looking statement to reflect events or circumstances that arise after the date such statements are made. -5- Table of Contents LCNB CORP. AND SUBSIDIARIES DESCRIPTION OF LCNB'S BUSINESS General Description LCNB Corp., an Ohio corporation formed in December 1998, is a financial holding company headquartered in Lebanon, Ohio.
LCNB Corp. and the Bank have not opted to use the community bank leverage ratio framework, but may make such an election in the future. Prompt Corrective Action A banking organization’s capital plays an important role in connection with regulatory enforcement as well.
LCNB Corp. and the Bank have not opted to use the community bank leverage ratio framework, but may make such an election in the future. -9- Table of Contents LCNB CORP. AND SUBSIDIARIES Prompt Corrective Action A banking organization’s capital plays an important role in connection with regulatory enforcement as well.
Additional benefits include a matching 401-K plan, a performance bonus plan, and tuition reimbursement plans. -14- Table of Contents LCNB CORP. AND SUBSIDIARIES LCNB has an active Wellness Committee comprised of employees from across the Bank. The committee promotes activities, education, and consultation that improve the health and lives of employees and their families.
Additional benefits include a matching 401(k) plan, a performance bonus plan, and tuition reimbursement plans. LCNB has an active Wellness Committee comprised of employees from across the Bank. The committee promotes activities, education, and consultation that improve the health and lives of employees and their families.
Competition among financial institutions is based upon interest rates offered on deposit accounts, interest rates charged on loans and other credit and service charges, availability of electronic banking services, the quality and scope of the services rendered, and the convenience of banking facilities and electronic banking technologies. -6- Table of Contents LCNB CORP.
Competition among financial institutions is based upon interest rates offered on deposit accounts, interest rates charged on loans and other credit and service charges, availability of electronic banking services, the quality and scope of the services rendered, and the convenience of banking facilities and electronic banking technologies.
Government Agencies, there were no investments in securities of any issuer that exceeded 10% of LCNB's consolidated shareholders' equity at December 31, 2023. -16- Table of Contents LCNB CORP.
Government Agencies, there were no investments in securities of any issuer that exceeded 10% of LCNB's consolidated shareholders' equity at December 31, 2024. -15- Table of Contents LCNB CORP.
Human Capital As of December 31, 2023, LCNB employed 345 full-time and 35 part-time employees working throughout the ten Ohio counties and one Kentucky county in which LCNB operates. LCNB considers these individuals the most important influence contributing to the Bank’s success and is committed to investing in their ongoing growth and development.
AND SUBSIDIARIES Human Capital As of December 31, 2024, LCNB employed 346 full-time and 47 part-time employees working throughout the ten Ohio counties and one Kentucky county in which LCNB operates. LCNB considers these individuals the most important influence contributing to the Bank’s success and is committed to investing in their ongoing growth and development.
LCNB elected to become a financial holding company on April 11, 2000. As a financial holding company, LCNB has very broad discretion to affiliate with securities firms and insurance companies, provide merchant banking services, and engage in other activities that the Federal Reserve Board has deemed financial in nature.
As a financial holding company, LCNB has very broad discretion to affiliate with securities firms and insurance companies, provide merchant banking services, and engage in other activities that the Federal Reserve Board has deemed financial in nature.
The Bank will do the same in 2024 along with some smaller scheduled group meetings at various locations within our market areas to further communicate important initiatives and information. In addition, senior management is available to participate in department and branch staff meetings upon request.
The Bank will do the same in 2025 along with some smaller scheduled group meetings at various locations within our market areas to further communicate important initiatives and information. In addition, senior management is available to participate in department and branch staff meetings upon request. -13- Table of Contents LCNB CORP.
LCNB Corp. receives most of its revenue from dividends paid to it by the Bank. During the years ended December 31, 2023, 2022, and 2021, dividends paid by LCNB National Bank to LCNB Corp. totaled $29,000,000, $16,950,000, and $15,000,000, respectively. -8- Table of Contents LCNB CORP.
LCNB Corp. receives most of its revenue from dividends paid to it by the Bank. During the years ended December 31, 2024, 2023, and 2022, dividends paid by LCNB National Bank to LCNB Corp. totaled $21,950,000, $29,000,000, and $16,950,000, respectively.
The final rule takes effect on April 1, 2024 with staggered compliance dates of January 1, 2026 and January 1, 2027.
The final rule became effective on April 1, 2024 with staggered compliance dates of January 1, 2026 and January 1, 2027.
LCNB Corp. does not have any non-cumulative perpetual preferred stock or subordinated notes. -9- Table of Contents LCNB CORP.
LCNB Corp. does not have any non-cumulative perpetual preferred stock or subordinated notes.
Through an ongoing partnership with the National Conference for Community and Justice of Greater Dayton, its employee-based DE&I Council is working to expand education and sharing experiences; to acknowledge, celebrate, and encourage diverse backgrounds interests, and lifestyles; to broaden recruitment efforts with a focus on growing diverse talent; and to communicate and share LCNB's overall commitment to diversity, equity and inclusion.
Through an ongoing collaboration with a local non-profit organization, The National Conference for Community and Justice (NCCJ) in Dayton, Ohio, and its employee committee is working to expand education and sharing experiences; to acknowledge, celebrate, and encourage diverse backgrounds interests, and lifestyles; to broaden recruitment efforts with a focus on growing diverse talent; and to communicate and share LCNB's overall commitment to diversity, equity and inclusion.
The Hunter Office, located in Warren County, closed at the end of the business day on January 12, 2023. Competition The Bank faces strong competition both in making loans and attracting deposits.
The Florence Office, located in Boone County, Kentucky, closed at the end of the business day on February 27, 2025. Competition The Bank faces strong competition both in making loans and attracting deposits.
The estimated amount of uninsured deposits including related interest accrued and unpaid was $203.9 million and $212.7 million at December 31, 2023 and 2022, respectively. -17- Table of Contents LCNB CORP.
The estimated amount of uninsured deposits including related interest accrued and unpaid was $245.8 million and $203.9 million at December 31, 2024 and 2023, respectively.
At December 31, 2023, the Bank had: • 34 offices, including a main office in Warren County, Ohio and branch offices in Warren, Butler, Clinton, Clermont, Fayette, Franklin, Hamilton, Montgomery, Preble, and Ross Counties in Ohio and one office in Boone County, Kentucky, • an Operations Center in Warren County, Ohio, • a lot currently undergoing construction for a future office that will replace the current downtown Chillicothe, Ohio office, • and 38 ATMs.
At December 31, 2024, the Bank had: • 36 offices, including a main office in Warren County, Ohio and branch offices in Warren, Butler, Clinton, Clermont, Fayette, Franklin, Hamilton, Montgomery, Preble, and Ross Counties in Ohio and one office in Boone County, Kentucky, • an Operations Center in Warren County, Ohio, • and 39 ATMs.
Management believes the commitment of the Bank to personal service, innovation, and involvement in the communities and primary market areas it serves, as well as its commitment to quality community banking service, are factors that contribute to its competitive advantage. Supervision and Regulation Both federal and state laws extensively regulate bank holding companies, financial holding companies, and banks.
Management believes the commitment of the Bank to personal service, innovation, and involvement in the communities and primary market areas it serves, as well as its commitment to quality community banking service, are factors that contribute to its competitive advantage. -6- Table of Contents LCNB CORP.
Under current regulations, the Bank was “well capitalized” as of December 31, 2023. -10- Table of Contents LCNB CORP.
Under current regulations, the Bank was “well capitalized” as of December 31, 2024.
For this purpose, derivative transactions include any contract, agreement, swap, warrant, note or option that is based in whole or in part on the value of, any interest in, or any quantitative measure or the occurrence of any event relating to, one or more commodity securities, currencies, interest or other rates, indices, or other assets; -12- Table of Contents LCNB CORP.
For this purpose, derivative transactions include any contract, agreement, swap, warrant, note or option that is based in whole or in part on the value of, any interest in, or any quantitative measure or the occurrence of any event relating to, one or more commodity securities, currencies, interest or other rates, indices, or other assets; • requirement that the amount of any interchange fee charged by a debit card issuer with respect to a debit card transaction must be reasonable and proportional to the cost incurred by the issuer.
These laws (and the regulations promulgated thereunder) are primarily intended to protect depositors and the DIF of the FDIC. The following information describes particular laws and regulatory provisions relating to financial holding companies and banks. This discussion is qualified in its entirety by reference to the particular laws and regulatory provisions.
AND SUBSIDIARIES Supervision and Regulation Both federal and state laws extensively regulate bank holding companies, financial holding companies, and banks. These laws (and the regulations promulgated thereunder) are primarily intended to protect depositors and the DIF of the FDIC. The following information describes particular laws and regulatory provisions relating to financial holding companies and banks.
A change in statutes, regulations, or regulatory policies applicable to LCNB and the Bank could have a material effect on LCNB’s business, financial condition, and results of operations. At this time, LCNB and the Bank do not expect material costs and effects to result from any federal, state, or local environmental laws that may be enacted.
A change in statutes, regulations, or regulatory policies applicable to LCNB and the Bank could have a material effect on LCNB’s business, financial condition, and results of operations.
Through a blend of strong internal talent and diverse new talent, the Bank has been able to successfully navigate the ongoing challenges related to talent depth. As LCNB grows and develops new products and services, the Bank continues to seek innovative, cost effective, and efficient ways to educate and develop its employees.
As LCNB grows and develops new products and services, the Bank continues to seek innovative, cost effective, and efficient ways to educate and develop its employees.
Finally, the final rule requires creditors to retain evidence of compliance with the rule for three years after a covered loan is consummated. This rule became effective January 10, 2014. -13- Table of Contents LCNB CORP.
Finally, the final rule requires creditors to retain evidence of compliance with the rule for three years after a covered loan is consummated. This rule became effective January 10, 2014. Monetary Policy Banks are affected by the credit policies of monetary authorities, including the Federal Reserve Board, that affect the national supply of credit.
Agency mortgage-backed securities 81,634 72,790 2.22 % — — — % Totals $ 304,805 276,601 1.66 % 16,863 15,679 4.58 % (1) Yields on tax-exempt obligations are computed on a taxable-equivalent basis based upon a 21.0% statutory Federal income tax rate. Excluding holdings in U.S. Treasury securities and U.S.
Agency mortgage-backed securities 78,869 69,546 4.59 % — — — % Totals $ 282,620 258,327 2.37 % 16,329 14,933 3.02 % (1) Yields on tax-exempt obligations are computed on a taxable-equivalent basis based upon a 21.0% statutory Federal income tax rate. Excluding holdings in U.S. Treasury securities and U.S.
AND SUBSIDIARIES The following table presents an estimate of the contractual maturities of time deposits that exceed the FDIC insurance limit of $250,000 at December 31, 2023: (In thousands) Maturity within 3 months $ 1,661 After 3 but within 6 months 9,236 After 6 but within 12 months 17,339 After 12 months 8,475 $ 36,711
The following table presents an estimate of the contractual maturities of time deposits that exceed the FDIC insurance limit of $250,000 at December 31, 2024: (In thousands) Maturity within 3 months $ 15,871 After 3 but within 6 months 13,209 After 6 but within 12 months 39,241 After 12 months 7,330 $ 75,651 -16- Table of Contents LCNB CORP.
A financial holding company is essentially a bank holding company with significantly expanded powers.
Bank Holding Companies and Financial Holding Companies LCNB elected to become a financial holding company on April 11, 2000. A financial holding company is essentially a bank holding company with significantly expanded powers.
LCNB places a high priority on training and development and has enjoyed a long history of promoting from within the organization, as evidenced by the executive management team, which averages 23 years of tenure with LCNB.
LCNB places a high priority on training and development and has enjoyed a long history of promoting from within the organization, as evidenced by the executive management team. Through a blend of strong internal talent and diverse new talent, the Bank has been able to successfully navigate the ongoing challenges related to talent depth.
A change in any of these laws or regulations may have a material effect on our business and the business of our subsidiaries. Bank Holding Companies and Financial Holding Companies Historically, the activities of bank holding companies were limited to the business of banking and activities closely related or incidental to banking.
This discussion is qualified in its entirety by reference to the particular laws and regulatory provisions. A change in any of these laws or regulations or in their enforcement may have a material effect on our business and the business of our subsidiaries.
Treasury notes: Within one year $ 6,591 6,418 0.83 % $ — — — % One to five years 67,813 61,784 1.08 % — — — % Five to ten years — — — % — — — % After ten years — — — % — — — % Total U.S.
Treasury notes: Within one year $ 18,259 17,884 0.65 % — — — % One to five years 52,675 48,296 1.19 % — — — % Five to ten years — — — % — — — % After ten years — — — % — — — % Total U.S.
Agency notes: Within one year 9,037 8,705 0.44 % — — — % One to five years 74,970 67,641 1.05 % — — — % Five to ten years 4,971 4,555 2.87 % — — — % After ten years — — — % — — — % Total U.S.
Agency notes: Within one year 8,001 7,749 0.55 % — — — % One to five years 66,875 61,437 1.12 % — — — % Five to ten years 8,894 8,331 3.55 % — — — % After ten years — — — % — — — % Total U.S.
Removed
Bank holding companies were generally prohibited from acquiring control of any company that was not a bank and from engaging in any business other than the business of banking or managing and controlling banks.
Added
At this time, LCNB and the Bank do not expect material costs and effects to result from any federal, state, or local environmental laws that may be enacted. -12- Table of Contents LCNB CORP.
Removed
The Gramm-Leach-Bliley Act, which took effect on March 12, 2000, dismantled many Depression-era restrictions against affiliations between banking, securities, and insurance firms by permitting bank holding companies to engage in a broader range of financial activities, so long as certain safeguards are observed.
Added
Treasury notes 70,934 66,180 1.05 % — — — % U.S.
Removed
Specifically, bank holding companies may elect to become “financial holding companies” that may affiliate with securities firms and insurance companies and engage in other activities that are financial in nature or incidental to a financial activity.
Added
Agency notes 83,770 77,517 1.32 % — — — % Corporate bonds: Within one year — — — % — — — % One to five years — — — % — — — % Five to ten years 8,200 7,756 4.61 % — — — % After ten years — — — % — — — % Total corporate bonds 8,200 7,756 4.61 % — — — % Municipal securities, tax-exempt (1): Within one year — — — % 64 63 3.26 % One to five years 3,163 3,043 2.35 % 851 830 3.19 % Five to ten years 1,085 939 2.93 % 9,439 8,838 4.81 % After ten years — — — % 2,846 2,547 4.56 % Total Municipal securities 4,248 3,982 2.50 % 13,200 12,278 4.64 % Municipal securities, taxable: Within one year 3,732 3,684 1.30 % — — — % One to five years 20,318 18,658 2.04 % 140 131 3.85 % Five to ten years 12,549 11,004 2.19 % 199 169 2.30 % After ten years — — — % 2,790 2,355 6.45 % Total Municipal securities 36,599 33,346 2.01 % 3,129 2,655 6.07 % U.S.
Removed
Thus, with the enactment of the Gramm-Leach-Bliley Act, banks, security firms, and insurance companies find it easier to acquire or affiliate with each other and cross-sell financial products. The Gramm-Leach-Bliley Act permits a single financial services organization to offer a more complete array of financial products and services than historically was permitted.
Removed
AND SUBSIDIARIES • requirement that the amount of any interchange fee charged by a debit card issuer with respect to a debit card transaction must be reasonable and proportional to the cost incurred by the issuer.
Removed
AND SUBSIDIARIES Monetary Policy Banks are affected by the credit policies of monetary authorities, including the Federal Reserve Board, that affect the national supply of credit.
Removed
Treasury notes 74,404 68,202 1.06 % — — — % U.S.
Removed
Agency notes 88,978 80,901 1.09 % — — — % Corporate bonds: Within one year — — — % — — — % One to five years — — — % — — — % Five to ten years 7,450 6,534 4.24 % — — — % After ten years — — — % — — — % Total corporate bonds 7,450 6,534 4.24 % — — — % Municipal securities, tax-exempt (1): Within one year 837 830 3.01 % 1,469 1,442 3.08 % One to five years 3,262 3,208 2.75 % 1,319 1,270 3.16 % Five to ten years 3,317 3,133 2.38 % 2,456 2,339 4.63 % After ten years — — — % 8,336 7,661 4.48 % Total Municipal securities 7,416 7,171 2.62 % 13,580 12,712 4.23 % Municipal securities, taxable: Within one year 2,731 2,685 2.59 % — — — % One to five years 23,370 21,790 2.20 % — — — % Five to ten years 18,822 16,528 2.15 % 393 348 2.96 % After ten years — — — % 2,890 2,619 6.45 % Total Municipal securities 44,923 41,003 2.20 % 3,283 2,967 6.03 % U.S.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

31 edited+0 added−7 removed79 unchanged
Biggest changeLCNB’s success depends, in part, on economic and political conditions, local and national, as well as governmental fiscal and monetary policies.
Biggest changeRisks Related to Economic and Market Conditions Weakness in the economy and in the real estate market, including weakness specific to LCNB's geographic footprint, may negatively affect its financial condition and earnings. LCNB’s success depends, in part, on economic and political conditions, local and national, as well as governmental fiscal and monetary policies.
Additionally, a general, industry-wide decline in the fair value of municipal securities could significantly affect LCNB’s financial condition and results of operations. LCNB investments in equity securities with readily determinable fair values are recorded at fair value with changes in fair value recognized in earnings. Accordingly, declines in the fair value of LCNB's equity investments will immediately decrease net income.
Additionally, a general, industry-wide decline in the fair value of municipal securities could significantly affect LCNB’s financial condition and results of operations. LCNB's investments in equity securities with readily determinable fair values are recorded at fair value with changes in fair value recognized in earnings. Accordingly, declines in the fair value of LCNB's equity investments will immediately decrease net income.
For example, LCNB may occasionally change the proportion of loan originations that are sold in the secondary market and instead add a greater proportion to its loan portfolio. -21- Table of Contents LCNB CORP. AND SUBSIDIARIES Banking competition is intense. The banking industry and related financial service providers operate in a highly competitive market.
For example, LCNB may occasionally change the proportion of loan originations that are sold in the secondary market and instead add a greater proportion to its loan portfolio. -20- Table of Contents LCNB CORP. AND SUBSIDIARIES Banking competition is intense. The banking industry and related financial service providers operate in a highly competitive market.
Conditions such as inflation, recession, unemployment, changes in interest rates, fiscal and monetary policy and other factors beyond LCNB’s control may affect its deposit levels and composition, demand for loans, the ability of borrowers to repay their loans, and the value of the collateral securing the loans it makes.
Conditions such as inflation, recession, unemployment, changes in interest rates, fiscal and monetary policy, tariffs and trade policy, and other factors beyond LCNB’s control may affect its deposit levels and composition, demand for loans, the ability of borrowers to repay their loans, and the value of the collateral securing the loans it makes.
LCNB conducts its operations from offices that are located in nine Southwestern Ohio counties, in Franklin County, Ohio, and in Boone County, Kentucky, from which substantially all of its customer base is drawn. Because of this geographic concentration of operations and customer base, LCNB's financial performance is heavily influenced by economic conditions in these areas.
LCNB conducts its operations from offices that are located in nine Southwestern Ohio counties and Franklin County, Ohio, from which substantially all of its customer base is drawn. Because of this geographic concentration of operations and customer base, LCNB's financial performance is heavily influenced by economic conditions in these areas.
Because LCNB has a significant amount of commercial and residential real estate loans, decreases in real estate values could adversely affect the value of property used as collateral. As a result, LCNB may need to increase its allowance for credit losses, negatively affecting earnings. LCNB’s earnings are significantly affected by market interest rates.
Because LCNB has a significant amount of commercial and residential real estate loans, decreases in real estate values could adversely affect the value of property used as collateral. As a result, LCNB may need to increase its allowance for credit losses, negatively affecting earnings. LCNB ’ s earnings are significantly affected by market interest rates.
AND SUBSIDIARIES Natural disasters, including severe weather events of increasing strength and frequency due to climate change, acts of war or terrorism, and other adverse external events could have a significant impact on LCNB’s ability to conduct business or upon third parties who perform operational services for LCNB or its customers.
Natural disasters, including severe weather events of increasing strength and frequency due to climate change, acts of war or terrorism, political instability, and other adverse external events could have a significant impact on LCNB’s ability to conduct business or upon third parties who perform operational services for LCNB or its customers.
Recessions, periods of unemployment, changes in interest rates, inflationary pressures, money supply, and other factors beyond LCNB’s control may adversely affect its asset quality, deposit levels, loan demand, and earnings. Inflationary pressures directly affect the level of interest rates earned from loans and investments and paid for deposits and borrowings.
Recessions, periods of unemployment, changes in interest rates, inflationary pressures, money supply, tariffs and trade policy, and other factors beyond LCNB’s control may adversely affect its asset quality, deposit levels, loan demand, and earnings. Inflationary pressures directly affect the level of interest rates earned from loans and investments and paid for deposits and borrowings.
Climate change presents multi-faceted risks, including operational risk from the physical effects of climate events on LCNB and its customers’ facilities and other assets; credit risk from borrowers with significant exposure to climate risk; risks associated with the transition to a less carbon-dependent economy; and reputational risk from stakeholder concerns about our practices related to climate change, LCNB’s carbon footprint, and LCNB’s business relationships with clients who operate in carbon-intensive industries. -24- Table of Contents LCNB CORP.
Climate change presents multi-faceted risks, including operational risk from the physical effects of climate events on LCNB and its customers’ facilities and other assets; credit risk from borrowers with significant exposure to climate risk; risks associated with the transition to a less carbon-dependent economy; and reputational risk from stakeholder concerns about our practices related to climate change, LCNB’s carbon footprint, and LCNB’s business relationships with clients who operate in carbon-intensive industries.
If, as a result of general economic conditions or a decrease in asset quality, management determines that additional increases in the allowance for credit losses are necessary, LCNB will incur additional expenses. -22- Table of Contents LCNB CORP. AND SUBSIDIARIES The fair value of LCNB’s investments could decline. Most of LCNB’s investment securities portfolio is designated as available-for-sale.
If, as a result of general economic conditions or a decrease in asset quality, management determines that additional increases in the allowance for credit losses are necessary, LCNB will incur additional expenses. -21- Table of Contents LCNB CORP. AND SUBSIDIARIES The fair value of LCNB ’ s investments could decline. Most of LCNB’s investment securities portfolio is designated as available-for-sale.
Any failure or circumvention of LCNB’s controls and procedures or failure to comply with regulations related to its controls and procedures could have a material adverse effect on LCNB’s business, results of operations, and financial condition. -19- Table of Contents LCNB CORP. AND SUBSIDIARIES LCNB’s information systems may experience an interruption, cyberattack, or other breach in security.
Any failure or circumvention of LCNB’s controls and procedures or failure to comply with regulations related to its controls and procedures could have a material adverse effect on LCNB’s business, results of operations, and financial condition. -18- Table of Contents LCNB CORP. AND SUBSIDIARIES LCNB ’ s information systems may experience an interruption, cyberattack, or other breach in security.
Competitors include other commercial bank and trust companies, brokerage firms, investment advisory firms, mutual fund companies, accountants, and attorneys. LCNB’s Wealth Management business is directly affected by conditions in the debt and equity securities markets.
Competition for wealth management business is intense. Competitors include other commercial bank and trust companies, brokerage firms, investment advisory firms, mutual fund companies, accountants, and attorneys. LCNB’s Wealth Management business is directly affected by conditions in the debt and equity securities markets.
LCNB’s ability to attract and retain talented employees may be affected by these restrictions or any new executive compensation limits or regulations. Risk factors related to LCNB’s Wealth Management business. LCNB's Wealth Management business is subject to intense competition, general market risk, and inherent risks to the business of managing trust accounts. Competition for wealth management business is intense.
LCNB’s ability to attract and retain talented employees may be affected by these restrictions or any new executive compensation limits or regulations. Risk factors related to LCNB ’ s Wealth Management business. LCNB's Wealth Management business is subject to intense competition, general market risk, and inherent risks to the business of managing trust accounts.
LCNB’s ability to pay cash dividends is limited. LCNB is dependent upon the earnings of the Bank for funds to pay dividends on its common shares. The payment of dividends by LCNB and the Bank is subject to certain regulatory restrictions.
LCNB ’ s ability to pay cash dividends is limited. LCNB is dependent upon the earnings of the Bank for funds to pay dividends on its common shares. The payment of dividends by LCNB and the Bank is subject to certain regulatory restrictions.
A lack of liquidity may be caused by an inability to favorably liquidate assets or obtain adequate financing on a timely basis, at a reasonable cost and on other reasonable terms, and within acceptable risk tolerances. LCNB’s controls and procedures may fail or be circumvented.
A lack of liquidity may be caused by an inability to favorably liquidate assets or obtain adequate financing on a timely basis, at a reasonable cost and on other reasonable terms, and within acceptable risk tolerances. LCNB ’ s controls and procedures may fail or be circumvented.
Such future legislation and/or changes in regulations could increase or decrease the cost of doing business, limit or expand permissible activities, or affect the competitive balance among banks, savings associations, credit unions, and other financial institutions. The likelihood of any major changes in the future and their effects are impossible to predict.
Such future legislation and/or changes in regulations could increase or decrease the cost of doing business, limit or expand permissible activities, or affect the competitive balance among banks, savings associations, credit unions, and other financial institutions. The likelihood of any major changes in the future and their effects are impossible to predict. -22- Table of Contents LCNB CORP.
Such mistakes may give rise to surcharge actions by beneficiaries, with damages substantially in excess of the fees earned from management of the accounts. -20- Table of Contents LCNB CORP. AND SUBSIDIARIES General Risk Factors Failure to meet regulatory capital requirements could adversely affect LCNB’s business.
Such mistakes may give rise to surcharge actions by beneficiaries, with damages substantially in excess of the fees earned from management of the accounts. -19- Table of Contents LCNB CORP. AND SUBSIDIARIES General Risk Factors Failure to meet regulatory capital requirements could adversely affect LCNB ’ s business.
The loss of these revenue streams and the lower cost of deposits as a source of funds could have a material adverse effect on our financial condition and results of operations. Climate change, severe weather, natural disasters, acts of war or terrorism, epidemics and other external events could significantly impact LCNB’s business .
The loss of these revenue streams and the lower cost of deposits as a source of funds could have a material adverse effect on our financial condition and results of operations. Climate change, severe weather, natural disasters, acts of war or terrorism, political instability, epidemics and other external events could significantly impact LCNB ’ s business .
The fluctuations in national, regional and local economic conditions, including those related to local residential, commercial real estate and construction markets, may result in increased charge-offs. These fluctuations are -18- Table of Contents LCNB CORP. AND SUBSIDIARIES not predictable, cannot be controlled, and may have a material impact on LCNB's operations and financial condition even if other favorable events occur.
The fluctuations in national, regional and local economic conditions, including those related to local residential, commercial real estate and construction markets, may result in increased charge-offs. These fluctuations are not predictable, cannot be controlled, and may have a material impact on LCNB's operations and financial condition even if other favorable events occur.
LCNB cannot fully eliminate credit risk and, as a result, credit losses may increase in the future. Risks Related to LCNB's Operations LCNB’s loan portfolio includes a substantial amount of commercial and industrial loans and commercial real estate loans, which may have more risks than residential or consumer loans.
LCNB cannot fully eliminate credit risk and, as a result, credit losses may increase in the future. -17- Table of Contents LCNB CORP. AND SUBSIDIARIES Risks Related to LCNB's Operations LCNB ’ s loan portfolio includes a substantial amount of commercial and industrial loans and commercial real estate loans, which may have more risks than residential or consumer loans.
Such events could affect the stability of LCNB’s deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, result in lost revenue, or cause LCNB to incur additional expenses. Item 1B. Unresolved Staff Comments None.
Such events could affect the stability of LCNB’s deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, result in lost revenue, or cause LCNB to incur additional expenses.
In order to mitigate these heightened risks, LCNB continually evaluates and monitors these types of loans. Approximately 98.2% of our total commercial loans or about 64.3% of our total loans relate to commercial real estate.
In order to mitigate these heightened risks, LCNB continually evaluates and monitors these types of loans. Approximately 89.4% of our total commercial loans or about 64.6% of our total loans relate to commercial real estate.
If the strength of the United States economy in general and the strength of the local economies in which LCNB conducts operations, which are primarily in Southwestern and South Central Ohio and Northern Kentucky, decline, this could result in, among other things, a deterioration of credit quality or a reduced demand for credit, including a resultant effect on the loan portfolio and allowance for credit losses.
If the strength of the United States economy in general and the strength of the local economies in which LCNB conducts operations weakens, this could result in, among other things, a deterioration of credit quality or a reduced demand for credit, including a resultant effect on the loan portfolio and allowance for credit losses.
These restrictions and other consequences of public health issues resulted in significant adverse effects for many different types of businesses, and resulted in a significant number of layoffs and furloughs of employees nationwide and in the regions in which we operate, which, in turn, impacted our customer base.
Government imposed restrictions and other consequences of public health issues may result in significant adverse effects for many different types of businesses, and result in a significant number of layoffs and furloughs of employees nationwide and in the regions in which we operate, which, in turn, can impact our customer base.
Risks Related to Economic and Market Conditions Outbreaks of communicable diseases, (such as COVID-19 and its variants), have led to periods of significant volatility in financial and other markets, adversely affected our ability to conduct normal business, adversely affected our clients, and may harm our businesses, financial condition and results of operations.
Outbreaks of communicable diseases have led to periods of significant volatility in financial and other markets, adversely affected our ability to conduct normal business, adversely affected our clients, and may harm our businesses, financial condition and results of operations.
Deposits of LCNB are insured up to statutory limits by the FDIC and, accordingly, LCNB and other banks and financial institutions pay quarterly premiums to the FDIC to maintain the DIF.
AND SUBSIDIARIES FDIC deposit insurance assessments may materially increase in the future. Deposits of LCNB are insured up to statutory limits by the FDIC and, accordingly, LCNB and other banks and financial institutions pay quarterly premiums to the FDIC to maintain the DIF.
Pandemics and widespread outbreaks of communicable diseases (such as COVID-19, influenza and other respiratory diseases) have caused and may continue to cause significant disruption in the international and United States economies and financial markets, including in the regions in which the Company operates.
Pandemics and widespread outbreaks of communicable diseases may cause significant disruption in the international and United States economies and financial markets, including in the regions in which the Company operates.
The spread of these diseases, including COVID variants, has caused illness and death and led to quarantines, cancellation of events and travel, business shutdowns, reduction in business activity and financial transactions, supply chain interruptions, and overall economic and financial market instability.
The spread of these diseases may lead to the cancellation of events and travel, business shutdowns, reduction in business activity and financial transactions, supply chain interruptions, and overall economic and financial market instability.
The FOMC increased the Federal Funds target range by 425 basis points during 2022 in an effort to dampen increasing inflation rates and by another 100 basis points during 2023. Further rate increases may occur during 2024. Fluctuations in interest rates may negatively impact LCNB’s profitability.
The FOMC decreased the Federal Funds target range by 100 basis points during 2024 after increasing the range by 100 basis points during 2023. Fluctuations in interest rates may negatively impact LCNB’s profitability.
These enforcement actions may include, but are not limited to, the assessment of civil money penalties, the issuance of cease-and-desist or removal orders, and the imposition of written agreements. -23- Table of Contents LCNB CORP.
These enforcement actions may include, but are not limited to, the assessment of civil money penalties, the issuance of cease-and-desist or removal orders, and the imposition of written agreements. Proposals to change the laws governing financial institutions are periodically introduced in Congress and proposals to change regulations are periodically considered by the regulatory bodies.
To the extent similar widespread health related events occur in the future, we could experience material and adverse effects on our business, operations, operating results, financial condition, liquidity, and capital levels as a result. . Weakness in the economy and in the real estate market, including weakness specific to LCNB's geographic footprint, may negatively affect it's financial condition and earnings.
To the extent widespread health related events occur in the future, we could experience material and adverse effects on our business, operations, operating results, financial condition, liquidity, and capital levels as a result. -23- Table of Contents LCNB CORP. AND SUBSIDIARIES Item 1B. Unresolved Staff Comments None.
Removed
In response to the COVID-19 pandemic, the governments of the states in which we have branches, and most other states, periodically took preventative or protective actions, such as imposing restrictions on travel and business operations, advising or requiring individuals to limit or forego their time outside of their homes, and ordering temporary closures of businesses that have been deemed to be non-essential.
Removed
AND SUBSIDIARIES Proposals to change the laws governing financial institutions are periodically introduced in Congress and proposals to change regulations are periodically considered by the regulatory bodies.
Removed
Risks Related to Recent Events Impacting the Financial Services Industry Recent events impacting the financial services industry, including the failures of Silicon Valley Bank, Signature Bank, and First Republic Bank, have led to a decrease in confidence in banks among consumer and commercial depositors, other counterparties and investors, as well as caused significant disruption, volatility, and reduced valuations of equity and other securities of banks and bank holding companies in the capital markets.
Removed
These events are occurring during a period of continued rises to interest rates which, among other things, have resulted in unrealized losses in longer-duration securities and loans held by banks, increased competition for bank deposits, and the possibility of an increase in the risk of a potential recession.
Removed
These recent events have, and could continue to have, an adverse impact on the market price and volatility of LCNB's common stock.
Removed
These recent events may also result in potentially adverse changes to laws and/or regulations governing banks and bank holding companies or result in the imposition of restrictions through supervisory or enforcement activities, including higher capital requirements, which could have a material impact on LCNB's business.
Removed
LCNB may be impacted by concerns from depositors, investors, and other counterparties regarding the soundness or creditworthiness of other financial institutions, which could cause substantial and cascading disruption within the financial markets and increase Company expenses. FDIC deposit insurance assessments may materially increase in the future.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

12 edited+1 added−1 removed0 unchanged
Biggest changeEmployees play a crucial role in maintaining a vigilant stance, while external partners contribute specialized expertise to enhance our overall cybersecurity posture. This collaborative approach strengthens our defense mechanisms against evolving cyber threats. Internal and external audits serve as essential tools to evaluate the efficacy of our cybersecurity processes.
Biggest changeLCNB’s first line of defense against cybersecurity threats involves leveraging its workforce and engaging various Third Parties. Employees play a crucial role in maintaining a vigilant stance, while external partners contribute specialized expertise to enhance the overall cybersecurity posture. This collaborative approach strengthens LCNB’s defense mechanisms against evolving cyber threats.
Regular training programs ensure that our staff is aware of cybersecurity best practices, social engineering tactics, and the importance of safeguarding sensitive information. In the event of a cybersecurity incident, we have a well-defined incident response plan. This plan includes a structured approach to containing, eradicating, and recovering from the incident, as well as communication protocols with stakeholders.
Regular training programs ensure that our staff is aware of cybersecurity best practices, social engineering tactics, and the importance of safeguarding sensitive information. In the event of a cybersecurity incident, a well-defined incident response plan is in place. This plan includes a structured approach to containing, eradicating, and recovering from the incident, as well as communication protocols with stakeholders.
This proactive approach allows us to anticipate and respond to potential risks promptly. Our cybersecurity controls are designed to protect against unauthorized access, data breaches, and other cyber threats. These controls encompass a multi-layered defense strategy, including firewalls, intrusion detection systems, encryption, and continuous monitoring. We recognize that employees are a critical line of defense.
This proactive approach allows LCNB to anticipate and respond to potential risks promptly. LCNB’s cybersecurity controls are designed to protect against unauthorized access, data breaches, and other cyber threats. These controls encompass a multi-layered defense strategy, including firewalls, intrusion detection systems, encryption, and continuous monitoring. LCNB recognizes that employees are a critical line of defense.
Regular evaluations, feedback mechanisms, and participation in industry collaborations help us adapt and enhance our strategy in response to emerging threats. Our cybersecurity risk management and strategy reflect our dedication to maintaining the confidentiality, integrity, and availability of our information assets. We believe that our proactive approach positions us well to navigate the evolving cybersecurity landscape.
Regular evaluations, feedback mechanisms, and participation in industry collaborations help us adapt and enhance the strategy in response to emerging threats. LCNB’s cybersecurity risk management and strategy reflect the dedication to maintaining the confidentiality, integrity, and availability of our information assets. LCNB believes that this proactive approach positions the Company well to navigate the evolving cybersecurity landscape.
To further mitigate the potential financial impacts of cybersecurity incidents, we maintain cybersecurity insurance coverage. This coverage is regularly reviewed and adjusted to align with the evolving threat landscape and our risk profile. We are committed to a culture of continuous improvement in our cybersecurity practices.
To further mitigate the potential financial impacts of cybersecurity incidents, LCNB maintains cybersecurity insurance coverage. This coverage is regularly reviewed and adjusted to align with the evolving threat landscape and risk profile. LCNB is committed to a culture of continuous improvement in its cybersecurity practices.
Item 1C. Cybersecurity Cybersecurity Risk Management and Strategy We recognize the critical importance of cybersecurity in safeguarding our business operations, intellectual property, and sensitive information. Our cybersecurity risk management and strategy are integral to our overall risk management framework. The following outlines our approach to identifying, assessing, and mitigating cybersecurity risks.
Item 1C. Cybersecurity Cybersecurity Risk Management and Strategy LCNB recognizes the critical importance of cybersecurity in safeguarding its business operations, intellectual property, and sensitive information. Cybersecurity risk management and strategy are integral to LCNB’s overall risk management framework. The following outlines LCNB’s approach to identifying, assessing, and mitigating cybersecurity risks.
Governance Our cybersecurity strategy is underpinned by a robust governance framework overseen by the Board of Directors. The Board plays an active role in shaping cybersecurity policies, conducting regular reviews of the effectiveness of our cybersecurity program, and ensuring its alignment with overarching business objectives. This governance ensures a comprehensive and proactive approach to managing cybersecurity risks.
The Board plays an active role in shaping cybersecurity policies, conducting regular reviews of the effectiveness of the cybersecurity program, and ensuring its alignment with overarching business objectives. This governance ensures a comprehensive and proactive approach to managing cybersecurity risks.
In summary, our governance structure ensures that cybersecurity is a top-level priority, with the Board, committees, employees, and external partners collaborating seamlessly to safeguard our systems and data. Through continuous evaluation, robust defense mechanisms, and a skilled workforce, we remain committed to maintaining the highest standards of cybersecurity in alignment with our business objectives.
LCNB’s governance structure ensures that cybersecurity is a top-level priority, with the Board, committees, employees, and external partners collaborating seamlessly to safeguard systems and data. Through continuous evaluation, robust defense mechanisms, and a skilled workforce, LCNB remains committed to maintaining the highest standards of cybersecurity.
These dedicated individuals bring years of knowledge to the table, staying abreast of the latest developments in the field. Their expertise enhances our ability to address emerging threats proactively and reinforces the resilience of our cybersecurity framework.
The Bank is equipped with a cadre of IT professionals boasting extensive industry experience in cybersecurity. These dedicated individuals bring years of knowledge to the table, staying abreast of the latest developments in the field. Their expertise enhances LCNB’s ability to address emerging threats proactively and reinforces the resilience of our cybersecurity framework.
We conduct regular risk assessments to identify and evaluate potential cybersecurity threats and vulnerabilities. Our assessments consider the evolving threat landscape, the sensitivity of our data, and the potential impact on business operations. These risk assessments help us develop our Information Security Program. We leverage threat intelligence sources to stay informed about emerging cyber threats.
LCNB conducts regular risk assessments to identify, prevent, and mitigate potential cybersecurity threats and vulnerabilities. These assessments consider the evolving threat landscape, the sensitivity of our data, and the potential impact on business operations. These risk assessments are utilized to develop our Information Security Program. LCNB leverages threat intelligence sources to continually evaluate current and emerging cyber threats.
The Privacy Committee, in conjunction with the Information Security Officer, plays a pivotal role in the assessment and management of cybersecurity risks. Regular committee meetings are conducted to discuss and analyze the evolving threat landscape.
The Privacy Committee, in conjunction with the Information Security Officer, plays a pivotal role in the assessment and management of cybersecurity risks. Regular committee meetings are conducted to discuss and analyze the evolving threat landscape. These meeting minutes are systematically reported up to the Executive and Board levels, ensuring that key decision-makers are well-informed and can provide strategic guidance.
These audits are conducted periodically to identify vulnerabilities, assess compliance with established policies, and ensure the effectiveness of implemented security controls. The insights gained from audits contribute to the continuous improvement and refinement of our cybersecurity measures. Our bank is equipped with a cadre of IT professionals boasting extensive industry experience in cybersecurity.
Internal and external audits serve as essential tools to evaluate the efficacy of LCNB’s cybersecurity processes. These audits are conducted periodically to identify vulnerabilities, assess compliance with established policies, and ensure the effectiveness of implemented security controls. The insights gained from audits contribute to the continuous improvement and refinement of cybersecurity measures.
Removed
These meeting minutes are systematically reported up to the Executive and Board levels, ensuring that key decision-makers are well-informed and can provide strategic guidance. -25- Table of Contents LCNB CORP. AND SUBSIDIARIES Our first line of defense against cybersecurity threats involves leveraging our workforce and engaging various Third Parties.
Added
As of the report date, risks from cybersecurity threats have not materially affected our company. -24- Table of Contents LCNB CORP. AND SUBSIDIARIES Governance LCNB’s cybersecurity strategy is underpinned by a robust governance framework overseen by the Board of Directors.

Item 2. Properties

Properties — owned and leased real estate

3 edited+0 added−0 removed0 unchanged
Biggest changeLCNB is currently constructing a new office in Chillicothe, Ohio, which will replace the current downtown Chillicothe Office. Management believes that LCNB's banking and other offices are in good condition and suitable to its needs. The Hunter Office, located in Franklin, Ohio, closed at the end of the business day on January 12, 2023.
Biggest changeManagement believes that LCNB's banking and other offices are in good condition and suitable to its needs. The Florence, Kentucky office closed at the end of the business day on February 27, 2025.
The Main Office and Oxford, Ohio locations have excess space that is currently being leased to third parties. An operations center in Lebanon, Ohio is currently being leased from the Warren County Port Authority. Upon expiration of the lease in 2027, LCNB has the option to purchase the property for $1.00.
The Main Office, Oxford, Ohio, Eaton, Ohio, and Bridgetown, Ohio locations have excess space that is currently being leased to third parties. An operations center in Lebanon, Ohio is currently being leased from the Warren County Port Authority. Upon expiration of the lease in 2027, LCNB has the option to purchase the property for $1.00.
Item 2. Properties LCNB owns its main office in Lebanon, Ohio, which is approximately 28,000 square feet and houses its executive, wealth management, and certain administrative personnel. LCNB owns an additional 26 branch locations and leases an additional seven branch locations, pursuant to operating leases.
Item 2. Properties LCNB owns its main office in Lebanon, Ohio, which is approximately 28,000 square feet and houses its executive, wealth management, and certain administrative personnel. As of December 31, 2024, LCNB owns an additional 28 branch locations and leases an additional seven branch locations, pursuant to operating leases.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe 10b5-1 trading plan is administered by an independent broker and is subject to price, market volume, and timing restrictions. No purchases were made under the Program during the three months ended December 31, 2023. The maximum number of shares that may yet be purchased under the Program is 315,047. -27- Table of Contents LCNB CORP.
Biggest changeThe 10b5-1 trading plan is administered by an independent broker and is subject to price, market volume, and timing restrictions. No purchases were made under the Program during the three months ended December 31, 2024. The maximum number of shares that may yet be purchased under the Program is 315,047. -26- Table of Contents LCNB CORP. AND SUBSIDIARIES
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities LCNB had approximately 1,056 registered holders of its common stock as of March 14, 2024. The number of shareholders includes banks and brokers who act as nominees, each of whom may represent more than one shareholder.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities LCNB had approximately 1,138 registered holders of its common stock as of March 12, 2025. The number of shareholders includes banks and brokers who act as nominees, each of whom may represent more than one shareholder.
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AND SUBSIDIARIES The graph below provides an indicator of cumulative total shareholder returns for LCNB as compared with the NASDAQ Composite Index and the S&P U.S. BMI Banks - Midwest Region Index. This graph covers the period from December 31, 2018 through December 31, 2023.
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The cumulative total shareholder returns included in the graph reflect the returns for the shares of common stock of LCNB. The information provided in the graph assumes that $100 was invested on December 31, 2018 in LCNB common stock, the NASDAQ Composite Index, and the S&P U.S. BMI Banks - Midwest Region Index and that all dividends were reinvested.
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Period Ending Index 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 LCNB Corp. $ 100.00 132.62 105.83 146.87 141.92 131.31 NASDAQ Composite Index $ 100.00 136.69 198.10 242.03 163.28 236.17 S&P U.S. BMI Banks - Midwest Region Index $ 100.00 130.10 111.85 147.78 127.53 130.20 Source: S&P Global Market Intelligence © 2024 -28- Table of Contents LCNB CORP. AND SUBSIDIARIES

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeGains were lower in 2022 primarily due to the volume of loans sold. • Other non-interest expense for 2023 was partially offset by a $425,000 gain recognized on the sale of an office building as a result of LCNB's branch consolidation strategy. • Other non-interest expense for 2022 included $471,000 in losses from the sales of two office buildings as a result of LCNB's branch consolidation strategy. • Other non-interest expense for 2022 was partially offset by an $889,000 gain recognized from the sale of other real estate owned.
Biggest changeThe offices were closed as a result of LCNB's branch consolidation strategy. • Other non-interest expense for 2022 included $471,000 in losses from the sales of two office buildings as a result of LCNB's branch consolidation strategy. • Other non-interest expense for 2022 was partially offset by an $889,000 gain recognized from the sale of other real estate owned.
The following table presents, for the years indicated, average balances for interest-earning assets and interest-bearing liabilities, the income or expense related to each item, and the resulting average yields earned or rates paid. -30- Table of Contents LCNB CORP. AND SUBSIDIARIES
The following table presents, for the years indicated, average balances for interest-earning assets and interest-bearing liabilities, the income or expense related to each item, and the resulting average yields earned or rates paid. -27- Table of Contents LCNB CORP. AND SUBSIDIARIES
The following items affected financial position and results of operations for the years indicated: • Cincinnati Bancorp, Inc. merged with and into LCNB Corp. on November 1, 2023. • Eagle Financial Bancorp, Inc. is expected to merge with and into LCNB Corp. during the second quarter 2024. • Merger related expenses connected with the above two acquisitions totaled $4,656,000 during 2023. • Net interest income in 2023 was $56,349,000, compared to $61,042,000 in 2022 and $57,124,000 in 2021. • The provision for credit losses in 2023 totaled $2,077,000, compared to a provision of $250,000 for 2022 and a recovery of $269,000 for 2021.
The following items affected financial position and results of operations for the years indicated: • Cincinnati Bancorp, Inc. merged with and into LCNB Corp. on November 1, 2023 and Eagle Financial Bancorp, Inc. merged with and into LCNB Corp. on April 12, 2024. • Merger related expenses connected with the above two acquisitions totaled $3,442,000 and $4,656,000 during 2024 and 2023, respectively. • Net interest income in 2024 was $60,795,000, compared to $56,349,000 in 2023 and $61,042,000 in 2022. • The provision for credit losses in 2024 totaled $1,962,000, compared to a provision of $2,077,000 for 2023 and $250,000 for 2022.
Overview Net income for 2023 was $12,628,000 (basic and diluted earnings per share of $1.10), compared to $22,128,000 (basic and diluted earnings per share of $1.93) in 2022 and $20,974,000 (basic and diluted earnings per share of $1.66) in 2021.
Overview Net income for 2024 was $13,492,000 (basic and diluted earnings per share of $0.97), compared to $12,628,000 (basic and diluted earnings per share of $1.10) in 2023 and $22,128,000 (basic and diluted earnings per share of $1.93) in 2022.
Included in the provision for credit losses for 2023 was a $1,722,000 provision expense related to loans acquired through the Cincinnati Federal acquisition that were not considered purchased with credit deterioration ("non-PCD loans"). • Net gains from sales of loans totaled $697,000 in 2023, $196,000 in 2022, and $852,000 in 2021.
Included in the provision for credit losses for 2024 was a $763,000 provision expense related to loans acquired through the Eagle Financial Bancorp acquisition that were not considered purchased with credit deterioration (non-PCD loans").
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Item 6. [Reserved] -29- Table of Contents LCNB CORP. AND SUBSIDIARIES Item 7.
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A comparable provision of $1,722,000 was recognized on non-PCD loans acquired through the Cincinnati Bancorp acquisition in 2023. • Net gains from sales of loans totaled $3,433,000 in 2024, $697,000 in 2023, and $196,000 in 2022.
Added
Gains were higher in 2024 primarily due to the volume of loans sold. • Other non-interest expense for 2024 and 2023 were partially offset by gains recognized on the sale of closed office buildings of $455,000 and $425,000, respectively.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe increase in 2022 was primarily due to overall wage and benefit increases, increased compensation expense recognized on restricted stock grants, increased pension expense, and to a higher amount of personnel expenses deferred in 2021 attributable to the high volume of PPP loans originated in that period. • Occupancy expense, net increased during 2023 and 2022 due to a higher amount of maintenance and repair costs on LCNB's properties in general as well as incremental expenses related to the CNNB acquisition in 2023. • State financial institutions tax, which is based on year-end capital levels, decreased during 2023 as compared to 2022 due to reductions in capital caused by treasury share purchases during 2022 and a decrease in the fair value of debt securities during 2022, which was recorded net of taxes as an increase in accumulated other comprehensive loss, a component of capital. • Amortization of intangibles decreased during 2022 as compared to 2021 because the core deposit intangibles from the First Capital Bancshares, Inc. and Eaton National Bank & Trust Co. acquisitions amortized in full during the first quarter of 2022. • FDIC insurance premiums increased in 2023 because of a two basis point increase in the FDIC's initial base deposit insurance assessment rate that took effect at the beginning of 2023. • Other real estate owned, net for 2022 is primarily due to a gain recognized on the sale of foreclosed property, slightly offset by other expenses recognized on such property. • Merger-related expenses reflect costs incurred in connection with the acquisitions of Cincinnati Bancorp, Inc., which closed on November 1, 2023, and Eagle Financial Bancorp, Inc., which is anticipated to close during the second quarter of 2024. • Other non-interest expense decreased during 2023 primarily due to a $425,000 gain recognized on the sale of an office building that was closed as a result of LCNB's office consolidation strategy, which was netted against other non-interest expense for accounting purposes.
Biggest changeFDIC insurance premiums increased in 2023 because of a two basis point increase in the FDIC's initial base deposit insurance assessment rate that took effect at the beginning of that year. • Other real estate owned, net for 2022, is primarily due to a gain recognized on the sale of foreclosed property, slightly offset by other expenses recognized on such property. • Merger- related expenses reflect costs incurred in connection with the acquisitions of EFBI and CNNB. • Other non-interest expense increased in 2024 partially due to increased outside accounting and auditing fees and partially due to smaller increases in various other accounts.
Information summarizing the regulatory capital of the Bank at December 31, 2023 and 2022 and corresponding regulatory minimum requirements is included in Note 15 - Regulatory Matters and Impact on Payment of Dividends. The FDIC, the insurer of deposits in financial institutions, has adopted a risk-based insurance premium system based in part on an institution's capital adequacy.
Information summarizing the regulatory capital of the Bank at December 31, 2024 and 2023 and corresponding regulatory minimum requirements is included in Note 15 - Regulatory Matters and Impact on Payment of Dividends. The FDIC, the insurer of deposits in financial institutions, has adopted a risk-based insurance premium system based in part on an institution's capital adequacy.
Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a material effect on LCNB's and the Bank's financial statements. These minimum levels are expressed in the form of certain ratios.
Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a material effect on LCNB's and the Bank's financial statements. These minimum levels are expressed in the form of certain ratios.
LCNB experienced no liquidity or operational problems as a result of current liquidity levels. Management believes LCNB has the ability to generate and obtain adequate amounts of liquidity to meet its requirements in the short and long-term. -37- Table of Contents LCNB CORP. AND SUBSIDIARIES Item 7.
LCNB experienced no liquidity or operational problems as a result of current liquidity levels. Management believes LCNB has the ability to generate and obtain adequate amounts of liquidity to meet its requirements in the short and long-term. -35- Table of Contents LCNB CORP. AND SUBSIDIARIES Item 7.
(2) Change in interest income from non-taxable investment securities is computed based on interest income determined on a taxable-equivalent yield basis. Interest income has been divided by a factor comprised of the complement of the incremental tax rate of 21%. 2023 vs. 2022.
(2) Change in interest income from non-taxable investment securities is computed based on interest income determined on a taxable-equivalent yield basis. Interest income has been divided by a factor comprised of the complement of the incremental tax rate of 21%. 2024 vs. 2023.
Interest paid on long-term debt increased due to a $38.9 million increase in average balances and to a 119 basis point increase in the average rate paid. -32- Table of Contents LCNB CORP. AND SUBSIDIARIES Item 7.
Interest paid on long-term debt increased due to a $38.9 million increase in average balances and to a 119 basis point increase in the average rate paid. -29- Table of Contents LCNB CORP. AND SUBSIDIARIES Item 7.
In addition, entities need to disclose the amortized cost balance for each class of financial asset by credit quality indicator, disaggregated by the year of origination. -39- Table of Contents LCNB CORP. AND SUBSIDIARIES Item 7.
In addition, entities need to disclose the amortized cost balance for each class of financial asset by credit quality indicator, disaggregated by the year of origination. -37- Table of Contents LCNB CORP. AND SUBSIDIARIES Item 7.
Other non-interest expense for 2022 included $471,000 in losses from the sales of two closed office buildings. -35- Table of Contents LCNB CORP. AND SUBSIDIARIES Item 7.
Other non-interest expense for 2022 included $471,000 in losses from the sales of two closed office buildings. -32- Table of Contents LCNB CORP. AND SUBSIDIARIES Item 7.
(4) The net interest margin is the taxable-equivalent net interest income divided by average interest-earning assets. -31- Table of Contents LCNB CORP. AND SUBSIDIARIES Item 7.
(4) The net interest margin is the taxable-equivalent net interest income divided by average interest-earning assets. -28- Table of Contents LCNB CORP. AND SUBSIDIARIES Item 7.
The new share repurchase program authorizes the repurchase of up to 500,000 shares of common stock. -38- Table of Contents LCNB CORP. AND SUBSIDIARIES Item 7.
The new share repurchase program authorizes the repurchase of up to 500,000 shares of common stock. -36- Table of Contents LCNB CORP. AND SUBSIDIARIES Item 7.
Additional borrowings of approximately $63.6 million were available through the line of credit arrangements at year-end. Management closely monitors the level of liquid assets available to meet ongoing funding needs. It is management's intent to maintain adequate liquidity so that sufficient funds are readily available at a reasonable cost.
Additional borrowings of approximately $115.0 million were available through the line of credit arrangements at year-end. Management closely monitors the level of liquid assets available to meet ongoing funding needs. It is management's intent to maintain adequate liquidity so that sufficient funds are readily available at a reasonable cost.
Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Commitments to extend credit at December 31, 2023 totaled $267.4 million and are more fully described in Note 14 - Commitments and Contingent Liabilities to LCNB's consolidated financial statements.
Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Commitments to extend credit at December 31, 2024 totaled $290.5 million and are more fully described in Note 14 - Commitments and Contingent Liabilities to LCNB's consolidated financial statements.
If the present value of cash flows expected to be collected is less than the amortized cost basis, a provision is recorded to the allowance for credit losses. Any decline in fair value not recorded through an allowance for credit losses is recognized in accumulated other comprehensive income (loss), net of applicable taxes. -40- Table of Contents LCNB CORP.
If the present value of cash flows expected to be collected is less than the amortized cost basis, a provision is recorded to the allowance for credit losses. Any decline in fair value not recorded through an allowance for credit losses is recognized in accumulated other comprehensive income (loss), net of applicable taxes. Loans Held-For-Sale.
Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Income Taxes LCNB's effective tax rates for the years ended December 31, 2023, 2022, and 2021 were 17.2%, 17.9%, and 18.0%, respectively.
Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Income Taxes LCNB's effective tax rates for the years ended December 31, 2024, 2023, and 2022 were 15.5%, 17.2%, and 17.9%, respectively.
Primary funding sources include customer deposits with the Bank, short-term and long-term borrowings from the Federal Home Loan Bank, short-term line of credit arrangements totaling $85.0 million with three correspondent banks, and interest and repayments received from LCNB's loan and investment portfolios. Total remaining borrowing capacity with the Federal Home Loan Bank at December 31, 2023 was approximately $89.2 million.
Primary funding sources include customer deposits with the Bank, short-term and long-term borrowings from the FHLB, line of credit arrangements totaling $115.0 million with three correspondent banks, and interest and repayments received from LCNB's loan and investment portfolios. Total remaining borrowing capacity with the FHLB at December 31, 2024 was approximately $115.4 million.
The difference between the statutory rate of 21% and the effective tax rate is primarily due to tax-exempt interest income from municipal securities, tax-exempt earnings from bank owned life insurance, tax-exempt earnings from LCNB Risk Management, Inc., and tax credits and losses related to investments in affordable housing tax credit limited partnerships.
The difference between the statutory rate of 21% and the effective tax rate is primarily due to tax-exempt interest income from municipal securities, tax-exempt earnings from bank owned life insurance, tax-exempt earnings from LCNB Risk Management, Inc. and tax credits and losses related to investments in affordable housing tax credit limited partnerships netted with the net impact of non-deductible merger costs for 2023 and 2024.
Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Non-Interest Income A comparison of non-interest income for 2023, 2022, and 2021 is as follows: Increase (Decrease) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 (In thousands) Fiduciary income $ 7,091 6,468 6,674 623 (206) Service charges and fees on deposit accounts 5,856 6,190 6,036 (334) 154 Net gains on sales of debt securities — — 303 — (303) Bank owned life insurance income 1,136 1,074 1,074 62 — Net gains from sales of loans 697 196 852 501 (656) Other operating income 631 360 1,293 271 (933) Total non-interest income $ 15,411 14,288 16,232 1,123 (1,944) Reasons for changes include: • Fiduciary income increased during 2023 primarily due to increases in the fair values of trust and brokerage assets managed, on which fees are based.
Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Non-Interest Income A comparison of non-interest income for 2024, 2023, and 2022 is as follows: Increase (Decrease) 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 (In thousands) Fiduciary income $ 8,445 7,091 6,468 1,354 623 Service charges and fees on deposit accounts 6,759 5,856 6,190 903 (334 ) Net losses on sales of debt securities (214 ) — — (214 ) — Bank owned life insurance income 1,665 1,136 1,074 529 62 Net gains from sales of loans 3,433 697 196 2,736 501 Other operating income 316 631 360 (315 ) 271 Total non-interest income $ 20,404 15,411 14,288 4,993 1,123 Reasons for changes include: • Fiduciary income increased in 2024 and 2023 primarily due to increases in the fair values of trust and brokerage assets managed, on which fees are based.
Prior approval from the OCC, the Bank's primary regulator, is necessary for the Bank to pay dividends in excess of this amount. If dividends exceed net profit for a year, a bank is generally not required to carry forward the negative amount resulting from such excess if the bank can attribute the excess to the preceding two years.
If dividends exceed net profit for a year, a bank is generally not required to carry forward the negative amount resulting from such excess if the bank can attribute the excess to the preceding two years.
The following table provides information concerning LCNB's commitments at December 31, 2023: Amount of Commitment Expiration Per Period Total Amounts Committed 1 year or less Over 1 through 3 years Over 3 through 5 years More than 5 years (In thousands) Commitments to extend credit $ 45,406 45,406 — — — Unused lines of credit 222,006 73,699 57,943 17,776 72,588 Standby letters of credit 5 5 — — — Total $ 267,417 119,110 57,943 17,776 72,588 Capital Resources The Bank is required by banking regulators to meet certain minimum levels of capital adequacy.
The following table provides information concerning LCNB's commitments at December 31, 2024: Amount of Commitment Expiration Per Period Total Over 1 Over 3 Amounts 1 year through 3 through 5 More than Committed or less years years 5 years (In thousands) Commitments to extend credit $ 31,492 31,492 — — — Unused lines of credit 259,015 76,110 73,506 17,159 92,240 Standby letters of credit 5 5 — — — Total $ 290,512 107,607 73,506 17,159 92,240 Capital Resources The Bank is required by banking regulators to meet certain minimum levels of capital adequacy.
Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Years ended December 31, 2023 2022 2021 Average Outstanding Balance Interest Earned/ Paid Average Yield/ Rate Average Outstanding Balance Interest Earned/ Paid Average Yield/ Rate Average Outstanding Balance Interest Earned/ Paid Average Yield/ Rate (Dollars in thousands) Loans (1) $ 1,467,981 $ 71,894 4.90 % $ 1,380,272 $ 59,247 4.29 % $ 1,329,072 $ 56,142 4.22 % Interest-bearing demand deposits 13,039 734 5.63 % 9,027 166 1.84 % 14,876 48 0.32 % Federal Reserve Bank stock 4,722 283 5.99 % 4,652 279 6.00 % 4,652 279 6.00 % Federal Home Loan Bank stock 8,293 590 7.11 % 4,716 196 4.16 % 5,203 104 2.00 % Investment securities: Equity securities 3,879 175 4.51 % 4,451 85 1.91 % 4,576 72 1.57 % Debt securities, taxable 277,157 5,235 1.89 % 293,700 5,027 1.71 % 272,251 3,668 1.35 % Debt securities, non-taxable (2) 24,031 871 3.62 % 27,532 953 3.46 % 32,937 1,094 3.32 % Total earning assets 1,799,102 79,782 4.43 % 1,724,350 65,953 3.82 % 1,663,567 61,407 3.69 % Non-earning assets 210,509 196,995 193,597 Allowance for credit losses (8,046) (5,629) (5,701) Total assets $ 2,001,565 $ 1,915,716 $ 1,851,463 Interest-bearing demand and money market deposits $ 535,865 7,850 1.46 % $ 516,949 1,372 0.27 % $ 463,636 556 0.12 % Savings deposits 398,299 725 0.18 % 449,841 618 0.14 % 407,298 599 0.15 % IRA and time certificates 233,604 7,996 3.42 % 172,119 1,692 0.98 % 214,344 2,423 1.13 % Short-term borrowings 75,383 4,060 5.39 % 14,482 416 2.87 % 821 6 0.73 % Long-term debt 56,798 2,619 4.61 % 17,910 613 3.42 % 16,148 469 2.90 % Total interest-bearing liabilities 1,299,949 23,250 1.79 % 1,171,301 4,711 0.40 % 1,102,247 4,053 0.37 % Noninterest-bearing demand deposits 472,232 513,400 482,402 Other liabilities 21,557 22,744 25,991 Capital 207,827 208,271 240,823 Total liabilities and capital $ 2,001,565 $ 1,915,716 $ 1,851,463 Net interest rate spread (3) 2.64 % 3.42 % 3.32 % Net interest income and net interest margin on a tax equivalent basis (4) $ 56,532 3.14 % $ 61,242 3.55 % $ 57,354 3.45 % Ratio of interest-earning assets to interest-bearing liabilities 138.40 % 147.22 % 150.93 % (1) Includes non-accrual loans if any.
Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Years ended December 31, 2024 2023 2022 Average Interest Average Average Interest Average Average Interest Average Outstanding Earned/ Yield/ Outstanding Earned/ Yield/ Outstanding Earned/ Yield/ Balance Paid Rate Balance Paid Rate Balance Paid Rate (Dollars in thousands) Loans (1) $ 1,765,672 $ 96,477 5.46 % 1,467,981 71,894 4.90 % 1,380,272 59,247 4.29 % Interest-bearing demand deposits 15,486 890 5.75 % 13,039 734 5.63 % 9,027 166 1.84 % Interest-bearing time deposits 61 — 0.00 % — — 0.00 % — — 0.00 % Federal Reserve Bank stock 6,143 369 6.01 % 4,722 283 5.99 % 4,652 279 6.00 % Federal Home Loan Bank stock 19,460 1,641 8.43 % 8,293 590 7.11 % 4,716 196 4.16 % Investment securities: Equity securities 5,012 184 3.67 % 3,879 175 4.51 % 4,451 85 1.91 % Debt securities, taxable 261,856 4,847 1.85 % 277,157 5,235 1.89 % 293,700 5,027 1.71 % Debt securities, non-taxable (2) 19,005 768 4.04 % 24,031 871 3.62 % 27,532 953 3.46 % Total earning assets 2,092,695 105,176 5.03 % 1,799,102 79,782 4.43 % 1,724,350 65,953 3.82 % Non-earning assets 267,894 210,509 196,995 Allowance for credit losses (11,263 ) (8,046 ) (5,629 ) Total assets $ 2,349,326 2,001,565 1,915,716 Interest-bearing demand and money market deposits $ 607,144 12,877 2.12 % 535,865 7,850 1.46 % 516,949 1,372 0.27 % Savings deposits 368,401 1,028 0.28 % 398,299 725 0.18 % 449,841 618 0.14 % IRA and time certificates 481,516 21,933 4.55 % 233,604 7,996 3.42 % 172,119 1,692 0.98 % Short-term borrowings 18,987 1,117 5.88 % 75,383 4,060 5.39 % 14,482 416 2.87 % Long-term debt 156,683 7,265 4.64 % 56,798 2,619 4.61 % 17,910 613 3.42 % Total interest-bearing liabilities 1,632,731 44,220 2.71 % 1,299,949 23,250 1.79 % 1,171,301 4,711 0.40 % Noninterest-bearing demand deposits 450,147 472,232 513,400 Other liabilities 20,880 21,557 22,744 Capital 245,568 207,827 208,271 Total liabilities and capital $ 2,349,326 2,001,565 1,915,716 Net interest rate spread (3) 2.32 % 2.64 % 3.42 % Net interest income and net interest margin on a tax equivalent basis (4) $ 60,956 2.91 % 56,532 3.14 % 61,242 3.55 % Ratio of interest-earning assets to interest-bearing liabilities 128.17 % 138.40 % 147.22 % (1) Includes non-accrual loans if any.
Allowance for Credit Losses LCNB continuously reviews the loan portfolio for credit risk through the use of its lending and loan review functions. Independent loan reviews analyze specific loans, providing validation that credit risks are appropriately identified, graded, and reported to the Loan Committee, Board of Directors, and the Audit Committee of the Board of Directors.
Independent loan reviews analyze specific loans, providing validation that credit risks are appropriately identified, graded, and reported to the Loan Committee, Board of Directors, and the Audit Committee of the Board of Directors.
Net interest income on a fully tax-equivalent basis for 2023 totaled $56,532,000, a decrease of $4,710,000 from 2022. The decrease resulted from an increase in total taxable-equivalent interest income of $13,829,000, which was more than offset by an increase in total interest expense of $18,539,000.
The decrease resulted from an increase in total taxable-equivalent interest income of $13,829,000, which was more than offset by an increase in total interest expense of $18,539,000.
Calculating an appropriate level for the allowance and provision for credit losses involves a high degree of management judgment and is, by its nature, imprecise. Revisions may be necessary as more information becomes available. -33- Table of Contents LCNB CORP. AND SUBSIDIARIES Item 7.
Calculating an appropriate level for the allowance and provision for credit losses involves a high degree of management judgment and is, by its nature, imprecise. Revisions may be necessary as more information becomes available. Net charge-offs for 2024, 2023, and 2022 totaled $741,000, $185,000, and $110,000, respectively.
Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Non-Interest Expense A comparison of non-interest expense for 2023, 2022, and 2021 is as follows: Increase (Decrease) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 (In thousands) Salaries and employee benefits $ 29,108 28,483 27,616 625 867 Equipment expenses 1,616 1,629 1,678 (13) (49) Occupancy expense, net 3,301 3,067 2,949 234 118 State financial institutions tax 1,628 1,740 1,758 (112) (18) Marketing 1,101 1,184 1,239 (83) (55) Amortization of intangibles 532 478 1,043 54 (565) FDIC premiums 932 530 492 402 38 ATM expense 1,112 1,370 1,416 (258) (46) Computer maintenance and supplies 1,358 1,114 1,213 244 (99) Contracted services 2,776 2,503 2,430 273 73 Other real estate owned, net 4 (866) 2 870 (868) Merger-related expenses 4,656 — — 4,656 — Other non-interest expense 6,299 6,902 6,204 (603) 698 Total non-interest expense $ 54,423 48,134 48,040 6,289 94 Reasons for changes include: • Salaries and employee benefits were 2.2% greater in 2023 than in 2022 and 3.1% greater in 2022 than in 2021.
Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Non-Interest Expense A comparison of non-interest expense for 2024, 2023, and 2022 is as follows: Increase (Decrease) 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 (In thousands) Salaries and employee benefits $ 35,170 29,108 28,483 6,062 625 Equipment expenses 1,584 1,616 1,629 (32 ) (13 ) Occupancy expense, net 3,725 3,301 3,067 424 234 State financial institutions tax 1,881 1,628 1,740 253 (112 ) Marketing 1,047 1,101 1,184 (54 ) (83 ) Amortization of intangibles 1,142 532 478 610 54 FDIC premiums 1,895 932 530 963 402 Computer maintenance and supplies 1,425 1,358 1,114 67 244 Contracted services 3,212 2,776 2,503 436 273 Other real estate owned, net 5 4 (866 ) 1 870 Merger-related expenses 3,442 4,656 — (1,214 ) 4,656 Other non-interest expense 8,748 7,411 8,272 1,337 (861 ) Total non-interest expense $ 63,276 54,423 48,134 8,853 6,289 Reasons for changes include: • Salaries and employee benefits were 20.8% greater in 2024 than in 2023 and 2.2% greater in 2023 than in 2022.
LCNB recorded provisions for credit losses totaling $2,077,000 for 2023, compared to a $250,000 provision for 2022 and a $269,000 net recovery for 2021. Included in the provision for credit losses for 2023 was a $1,722,000 provision expense related to non-PCD loans acquired through the Cincinnati Federal acquisition.
LCNB recorded provisions for credit losses and unfunded commitments totaling $1,962,000 for 2024, compared to a $2,077,000 provision for 2023 and a $250,000 provision for 2022. Included in the provision for credit losses for 2024 and 2023 were $763,000 and a $1,722,000, respectively, related to non-PCD loans acquired through the EFBI and CNNB acquisitions.
These increases were partially offset by decreased pension and health insurance expenses and to a higher amount of personnel expenses deferred during 2023 as a cost of loan originations.
These increases were partially offset by decreased pension and health insurance expenses and to a higher amount of personnel expenses deferred during 2023 as a cost of loan originations. • Occupancy expense, net increased during 2024 primarily due to increased utility and depreciation expenses caused by the additional offices acquired from EFBI and CNNB.
For the years ended December 31, 2023 vs. 2022 2022 vs. 2021 Increase (decrease) due to Increase (decrease) due to Volume Rate Total Volume Rate Total (In thousands) Interest income attributable to: Loans (1) $ 3,930 8,717 12,647 2,187 918 3,105 Interest-bearing demand deposits 101 467 568 (26) 144 118 Federal Reserve Bank stock 4 — 4 — — — Federal Home Loan Bank stock 203 191 394 (11) 103 92 Investment securities: Equity securities (12) 102 90 (2) 15 13 Debt securities, taxable (293) 501 208 307 1,052 1,359 Debt securities, non-taxable (2) (125) 43 (82) (186) 45 (141) Total interest income 3,808 10,021 13,829 2,269 2,277 4,546 Interest expense attributable to: Interest-bearing demand and money market deposits 52 6,426 6,478 71 745 816 Savings deposits (77) 184 107 60 (41) 19 IRA and time certificates 793 5,511 6,304 (440) (291) (731) Short-term borrowings 3,016 628 3,644 349 61 410 Long-term debt 1,729 277 2,006 55 89 144 Total interest expense 5,513 13,026 18,539 95 563 658 Net interest income $ (1,705) (3,005) (4,710) 2,174 1,714 3,888 (1) Non-accrual loans, if any, are included in average loan balances.
For the years ended December 31, 2024 vs. 2023 2023 vs. 2022 Increase (decrease) due to Increase (decrease) due to Volume Rate Total Volume Rate Total (In thousands) Interest income attributable to: Loans (1) $ 15,653 8,930 24,583 3,930 8,717 12,647 Interest-bearing demand deposits 140 16 156 101 467 568 Interest-bearing time deposits — — — — — — Federal Reserve Bank stock 85 1 86 4 — 4 Federal Home Loan Bank stock 924 127 1,051 203 191 394 Investment securities: Equity securities 45 (36 ) 9 (12 ) 102 90 Debt securities, taxable (285 ) (103 ) (388 ) (293 ) 501 208 Debt securities, non-taxable (2) (196 ) 93 (103 ) (125 ) 43 (82 ) Total interest income 16,366 9,028 25,394 3,808 10,021 13,829 Interest expense attributable to: Interest-bearing demand and money market deposits 1,151 3,876 5,027 52 6,426 6,478 Savings deposits (58 ) 361 303 (77 ) 184 107 IRA and time certificates 10,625 3,312 13,937 793 5,511 6,304 Short-term borrowings (3,287 ) 344 (2,943 ) 3,016 628 3,644 Long-term debt 4,631 15 4,646 1,729 277 2,006 Total interest expense 13,062 7,908 20,970 5,513 13,026 18,539 Net interest income $ 3,304 1,120 4,424 (1,705 ) (3,005 ) (4,710 ) (1) Non-accrual loans, if any, are included in average loan balances.
Interest paid on short-term borrowings increased due to a $13.7 million increase in average balances and to a 214 basis point increase in the average rate paid. Interest paid on long-term debt increased due to a $1.8 million increase in average balances and to a 52 basis point increase in the average rate paid.
Interest paid on interest-bearing demand and money market deposit accounts increased due to a $71.3 million increase in average deposit balances and to a 66 basis point increase in the average rate paid. Interest paid on long-term debt increased due to a $99.9 million increase in average balances and to a 3 basis point increase in the average rate paid.
The decreases in fair value were partially offset by an increase in the number of wealth management accounts. • Service charges and fees on deposit accounts decreased during 2023 primarily due to decreases in most fee categories, including fees received from check cards, ATM usage fees, and deposit account fees in general.
The increases in fair value were due to the opening of new Wealth Management customer accounts and to an increase in the market values of managed assets. • Service charges and fees on deposit accounts increased during 2024 primarily due to increases in check card income and fee income received on the ICS product, partially offset by a decrease in overdraft fees and deposit account fees in general.
Financial Condition A comparison of balance sheet line items at December 31 is as follows (in thousands): 2023 2022 Difference $ Difference % ASSETS: Total cash and cash equivalents $ 39,723 22,701 17,022 74.98 % Investment securities: Equity securities with a readily determinable fair value, at fair value 1,336 2,273 (937) (41.22) % Equity securities without a readily determinable fair value, at cost 3,666 2,099 1,567 74.65 % Debt securities, available-for-sale, at fair value 276,601 289,850 (13,249) (4.57) % Debt securities, held-to-maturity, at cost 16,858 19,878 (3,020) (15.19) % Federal Reserve Bank stock, at cost 5,086 4,652 434 9.33 % Federal Home Loan Bank stock, at cost 15,176 4,415 10,761 243.74 % Loans, net 1,712,946 1,395,632 317,314 22.74 % Premises and equipment, net 36,302 33,042 3,260 9.87 % Operating lease right-of-use assets 6,000 6,525 (525) (8.05) % Goodwill 79,509 59,221 20,288 34.26 % Core deposit and other intangibles, net 9,494 1,827 7,667 419.65 % Bank owned life insurance 49,847 44,298 5,549 12.53 % Interest receivable 8,405 7,482 923 12.34 % Other assets, net 30,643 25,503 5,140 20.15 % Total assets $ 2,291,592 1,919,398 372,194 19.39 % LIABILITIES: Deposits: Non-interest-bearing $ 462,267 505,824 (43,557) (8.61) % Interest-bearing 1,362,122 1,099,146 262,976 23.93 % Total deposits 1,824,389 1,604,970 219,419 13.67 % Short-term borrowings 97,395 71,455 25,940 36.30 % Long-term debt 113,123 19,072 94,051 493.14 % Operating leases liability 6,261 6,647 (386) (5.81) % Accrued interest and other liabilities 15,121 16,579 (1,458) (8.79) % Total liabilities 2,056,289 1,718,723 337,566 19.64 % SHAREHOLDERS' EQUITY: Common shares 173,637 144,069 29,568 20.52 % Retained earnings 140,017 139,249 768 0.55 % Treasury shares, at cost (56,015) (52,689) (3,326) 6.31 % Accumulated other comprehensive loss, net of taxes (22,336) (29,954) 7,618 (25.43) % Total shareholders' equity 235,303 200,675 34,628 17.26 % Total liabilities and shareholders' equity $ 2,291,592 1,919,398 372,194 19.39 % -36- Table of Contents LCNB CORP.
Financial Condition A comparison of balance sheet line items at December 31 is as follows (in thousands): 2024 2023 Difference $ Difference % ASSETS: Total cash and cash equivalents 35,744 39,723 (3,979 ) (10.02 )% Interest-bearing time deposits 250 — 250 NM Investment securities: Equity securities with a readily determinable fair value, at fair value 1,363 1,336 27 2.02 % Equity securities without a readily determinable fair value, at cost 3,666 3,666 — 0.00 % Debt securities, available-for-sale, at fair value 258,327 276,601 (18,274 ) (6.61 )% Debt securities, held-to-maturity, at cost 16,324 16,858 (534 ) (3.17 )% Federal Reserve Bank stock, at cost 6,405 5,086 1,319 25.93 % Federal Home Loan Bank stock, at cost 20,710 15,176 5,534 36.47 % Loans, net 1,709,811 1,712,946 (3,135 ) (0.18 )% Loans held for sale 5,556 — 5,556 NM Premises and equipment, net 41,049 36,302 4,747 13.08 % Operating lease right-of-use assets 5,785 6,000 (215 ) (3.58 )% Goodwill 90,310 79,509 10,801 13.58 % Core deposit and other intangibles, net 11,104 9,494 1,610 16.96 % Bank owned life insurance 54,002 49,847 4,155 8.34 % Interest receivable 8,701 8,405 296 3.52 % Other assets, net 38,287 30,643 7,644 24.95 % Total assets $ 2,307,394 2,291,592 15,802 0.69 % LIABILITIES: Deposits: Non-interest-bearing 459,619 462,267 (2,648 ) (0.57 )% Interest-bearing 1,418,673 1,362,122 56,551 4.15 % Total deposits 1,878,292 1,824,389 53,903 2.95 % Short-term borrowings — 97,395 (97,395 ) (100.00 )% Long-term debt 155,153 113,123 42,030 37.15 % Operating leases liability 6,115 6,261 (146 ) (2.33 )% Accrued interest and other liabilities 14,798 15,121 (323 ) (2.14 )% Total liabilities 2,054,358 2,056,289 (1,931 ) (0.09 )% SHAREHOLDERS' EQUITY: Common shares 186,937 173,637 13,300 7.66 % Retained earnings 141,290 140,017 1,273 0.91 % Treasury shares, at cost (56,002 ) (56,015 ) 13 (0.02 )% Accumulated other comprehensive loss, net of taxes (19,189 ) (22,336 ) 3,147 (14.09 )% Total shareholders' equity 253,036 235,303 17,733 7.54 % Total liabilities and shareholders' equity $ 2,307,394 2,291,592 15,802 0.69 % NM - Not Meaningful -33- Table of Contents LCNB CORP.
Liquidity LCNB Corp. depends on dividends from the Bank for the majority of its liquid assets, including the cash needed to pay dividends to its shareholders. Federal banking law limits the amount of dividends the Bank may pay to the sum of retained net income for the current year plus retained net income for the previous two years.
Federal banking law limits the amount of dividends the Bank may pay to the sum of retained net income for the current year plus retained net income for the previous two years. Prior approval from the OCC, the Bank's primary regulator, is necessary for the Bank to pay dividends in excess of this amount.
No new policies were purchased during 2023. • Other assets increased primarily due to current and deferred tax assets recorded as a result of the CNNB merger. • Total deposits increased primarily due to additional deposits obtained as a result of the CNNB merger.
No new policies were purchased during 2024. • Other assets increased primarily due to deferred tax assets recorded as a result of the EFBI merger. • Total deposits increased due to a combination of deposits acquired through the merger with EFBI and through organic deposit growth, partially offset by a decrease in funds invested in the ICS demand reciprocal product.
Interest income from taxable debt securities increased due to a $21.4 million increase in average securities and to a 36 basis point increase in the average rate earned on these securities.
The increase in total interest income was due primarily to a $24,583,000 increase in interest income from loans due to a $297.7 million increase in average loans and to a 56 basis point increase in the average rate earned.
Interest paid on NOW and money market deposits increased due to a $53.3 million increase in average balances and to a 15 basis point increase in the average rate paid. Interest paid on IRA and time certificates decreased due to a $42.2 million decrease in average deposit balances and to a 15 basis point decrease in the average rate paid.
The increase in total interest expense was primarily due to a $13,937,000 increase in interest paid on IRA and time certificates due to a $247.9 million increase in average balances and to a 113 basis point increase in the average rate paid.
LCNB assumed approximately $56.0 million in short-term borrowings, largely paid off by year-end, and $6.0 million in long-term debt as a result of the merger with CNNB. • Common shares increased primarily because 2,042,598 shares of LCNB common stock valued at $28,576,000 were issued to CNNB shareholders to effectuate the merger. • Treasury shares increased because of the repurchase of 199,913 shares of common stock during 2023, which represents almost 1.8% of shares outstanding at December 31, 2022. • Accumulated other comprehensive loss, net of taxes increased because of market-driven partial recoveries in the fair value of LCNB's available-for-sale debt securities investments.
The new debt was used to pay down short-term borrowings and to support growth in liquidity and the loan portfolio. • Common shares increased primarily because 868,001 shares of LCNB common stock valued at $12,187,000 were issued to EFBI shareholders to effectuate the merger. • Accumulated other comprehensive loss, net of taxes decreased because of market-driven partial recoveries in the fair value of LCNB's available-for-sale debt securities investments.
Other operating income decreased in 2022 as compared to 2021 primarily because LCNB recognized $292,000 in losses on equity securities during 2022 as compared to $142,000 in gains during 2021. In addition, other operating income for 2021 included a one-time Ohio Financial Institutions Tax refund of $508,000. -34- Table of Contents LCNB CORP. AND SUBSIDIARIES Item 7.
Other operating income increased in 2023 as compared to 2022 primarily because of realized and unrealized net gains on equity securities, reflecting a partial recovery in market values. -31- Table of Contents LCNB CORP. AND SUBSIDIARIES Item 7.
AND SUBSIDIARIES Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Reasons for changes include: • Debt securities, available-for-sale, decreased due to maturities, paydowns, calls, and decreases in market valuation.
Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Reasons for changes include: • Debt securities, available-for-sale, decreased due to maturities, paydowns, sales, and calls, partially offset by purchases of new securities and increases in market valuation. • FHLB stock increased due to the addition of stock previously held by EFBI and to the purchase of additional stock to support additional borrowings and loans sold to the FHLB, partially offset by the FHLB's repurchase of excess stock. • Net loans decreased primarily due to loans transferred to the held-for-sale category and later sold, partially offset by the addition of loans acquired through the merger with EFBI.
Offsetting the increases were a $2,196,000 increase to the allowance for credit losses on loans due to the adoption of ASC 326, a $493,000 increase to the allowance for purchased credit deteriorated loans obtained in the merger with CNNB, and a $1,722,000 provision for credit losses on non-PCD loans obtained in the merger with CNNB. • Goodwill increased due to additional goodwill recorded as a result of the merger with CNNB. • Core deposit and other intangibles increased due to the additions of a core deposit intangible and mortgage servicing rights obtained in the merger with CNNB. • Bank owned life insurance increased primarily due to additional policies obtained in the merger with CNNB and secondarily due to increases in the cash values of the policies.
Approximately $233 million of single-family residential loans were sold in the secondary market during 2024. • Premises and equipment, net increased primarily due to additional office buildings acquired in the merger with EFBI and the construction of the new downtown Chillicothe Office. • Goodwill increased due to additional goodwill recorded as a result of the merger with EFBI. • Core deposit and other intangibles increased due to the addition of a core deposit intangible obtained in the merger with EFBI. • Bank owned life insurance increased primarily due to additional policies obtained in the merger with EFBI and secondarily due to increases in the cash values of the policies.
The increase resulted from an increase in total taxable-equivalent interest income of $4,546,000, partially offset by an increase in total interest expense of $658,000. The increase in total interest income was due primarily to a $3,105,000 increase in interest income from loans and a $1,359,000 increase in interest income from taxable debt securities.
Net interest income on a fully tax-equivalent basis for 2024 totaled $60,956,000, an increase of $4,424,000 from 2023. The increase resulted from an increase in total taxable-equivalent interest income of $25,394,000, which was partially offset by an increase in total interest expense of $20,970,000.
The Targeted Federal Funds rate increased by 425 basis points during 2022 and by an additional 100 basis points during 2023. 2022 vs. 2021. Net interest income on a fully tax-equivalent basis for 2022 totaled $61,242,000, an increase of $3,888,000 from 2021.
The increased rates paid on interest-bearing liabilities and the increased yield earned on interest-earning assets is largely the result of fluctuations in market rates. 2023 vs. 2022. Net interest income on a fully tax-equivalent basis for 2023 totaled $56,532,000, a decrease of $4,710,000 from 2022.
Removed
Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) The increased rates paid on interest-bearing liabilities and the increased yield earned on interest-earning assets is largely the result of higher market interest rates that were caused by FOMC increases in the Targeted Federal Funds rate.
Added
Average loans increased due to organic growth in the portfolio in addition to loans acquired through mergers with CNNB in quarter four of 2023 and EFBI in quarter two of 2024.
Removed
Loan interest increased due to a $51.2 million increase in average loans and to a 7 basis point increase in the average rate earned. The average rate earned includes loan prepayment fees, which increased from $601,000 for 2021 to $1,025,000 for 2022.
Added
Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Allowance for Credit Losses LCNB continuously reviews the loan portfolio for credit risk through the use of its lending and loan review functions.
Removed
The increase in total interest expense was primarily due to an $816,000 increase in interest paid on NOW and money market deposits, a $410,000 increase in interest paid on short-term borrowings, and a $144,000 increase in interest paid on long-term debt, partially offset by a $731,000 decrease in interest paid on IRA and time certificates.
Added
Charge-offs during 2024 were greater because of a $589,000 charge-off on a commercial & industrial loan. -30- Table of Contents LCNB CORP. AND SUBSIDIARIES Item 7.
Removed
The increases in fair value are due to the opening of new Wealth Management customer accounts and to an increase in the market values of managed assets.
Added
LCNB reduced overdraft fees from $35 per occurrence to $25 effective November 1, 2023. A higher volume of check cards were outstanding during 2024 due to the mergers with EFBI and CNNB.
Removed
Fiduciary income decreased during 2022 primarily due to decreases in the fair values of trust and brokerage assets managed due to an overall decrease in the market values of equity and debt securities caused by general economic conditions.
Added
Service charges and fees on deposit accounts decreased during 2023 primarily due to decreases in most fee categories, including fees received from check cards, ATM usage fees, and deposit account fees in general. • Net losses from sales of debt securities during 2024 reflect losses recognized on sales of municipal securities with amortized cost bases of approximately $9.8 million. • Bank-owned life insurance ("BOLI") income increased during 2024 primarily due to mortality proceeds recognized.
Removed
Service charges and fees on deposit accounts increased during 2022 primarily due to an increase in the volume of overdraft fees collected and fees recognized in relation to the ICS deposit program, partially offset by an overall decrease in service charges collected on deposit accounts. • Net gains from sales of loans were greater during 2023 and 2021 as compared to 2022 primarily due to the volume of loans sold. • Other operating income increased in 2023 as compared to 2022 primarily because of realized and unrealized net gains on equity securities, reflecting a partial recovery in market values.
Added
The 2023 and 2022 periods did not include mortality proceeds. BOLI income also increased to a lesser extent due to insurance policies acquired in the mergers with EFBI and CNNB. • Net gains from sales of loans were greater during 2024 and 2023 primarily due to a higher volume of residential real estate loans sold.
Removed
There were no security purchases during 2023. • Federal Home Loan Bank stock increased due to the addition of stock previously held by Cincinnati Federal and to the purchase of additional stock to support additional borrowings and loans sold to the FHLB, partially offset by the FHLB's repurchase of excess stock. • Net loans increased due to loans obtained through the merger with CNNB and to organic growth in the loan portfolio.
Added
Included in these gains for the 2024 period were an $843,000 loss on the sale of approximately $48.9 million of below market rate loans acquired from CNNB and a $359,000 gain on the sale of approximately $29.8 million of below market rate loans predominately acquired from EFBI.
Removed
Generally, non-interest and interest-bearing demand deposits and savings account balances decreased during the year, while money market accounts and IRA and time certificates increased as depositors sought higher interest rates. • Short-term borrowings and long-term debt increased primarily to support an increase in liquidity and to support growth in the loan portfolio, as the increase in net loans was greater than the increase in deposits.
Added
The funds from these acquired loan sales were used to fund new loans and pay down debt. • Other operating income decreased in 2024 as compared to 2023 primarily due to amortization of capitalized mortgage servicing rights obtained in the merger with CNNB, which amortization is netted for accounting purposes against fee income recognized from the servicing of sold residential mortgage loans.
Added
The increase in 2024 was due to overall wage and benefit increases, an increased number of employees due to the acquisitions of EFBI and CNNB, higher sales commissions, and higher health insurance costs.
Added
Maintenance and repair costs related to LCNB's office facilities also contributed to the increase.
Added
Occupancy expense, net increased during 2023 due to a higher amount of maintenance and repair costs on LCNB's properties in general as well as incremental expenses related to the CNNB acquisition. • State financial institutions tax, which is based on previous year-end capital levels, increased during 2024 as compared to 2023 due to increases in capital resulting primarily from stock issued for the acquisition of CNNB.
Added
The tax decreased in 2023 as compared to 2022 due to reductions in capital caused by treasury share purchases during 2022 and a decrease in the fair value of debt securities during 2022, which was recorded net of taxes as an increase in accumulated other comprehensive loss, a component of capital. • Amortization of intangibles increased during 2024 as compared to 2023 due to the amortization of core deposit intangibles recognized from the acquisitions of EFBI and CNNB. • FDIC insurance premiums increased during 2024 due to a higher assessment base, partially reflecting increased assets resulting from the acquisitions of EFBI and CNNB, and to an increase in the assessment rate charged.
Added
Partially offsetting the net increase in 2024 was a $455,000 gain recognized on the sale of an office building that was closed as a result of LCNB's office consolidation strategy, which was netted against other non-interest expense for accounting purposes.
Added
Other non-interest expense decreased during 2023 primarily due to a $425,000 gain recognized on the sale of an office building that was closed as a result of LCNB's office consolidation strategy, which was netted against other non-interest expense for accounting purposes.
Added
The effective tax rate for 2024 was lower due to tax-exempt items not decreasing in proportion to the overall decrease in earnings.
Added
Most of the deposit growth occurred in the money market deposit and IRA and time certificates products. • Long-term debt increased due to additional advances from the FHLB of Cincinnati.
Added
LCNB's loan portfolio represents its largest asset category and is its most significant source of interest income. Loan classifications have been identified as Commercial & Industrial, Commercial Real Estate, Residential Real Estate, Consumer, Agricultural, and Other. Commercial real estate is the largest classification in LCNB's loan portfolio, comprising about 64.6% of total loans at December 31, 2024.
Added
Loans secured by commercial real estate consist of owner-occupied, non-owner-occupied, farmland, multi-family, and construction loans.
Added
A commercial real estate, owner-occupied loan finances the purchase, construction, or refinance of a building or other property for which the repayment of principal is dependent upon cash flows from ongoing operations conducted by the party, or an affiliate of the party, who owns the property.
Added
A commercial real estate, non-owner occupied loan finances the purchase, construction or refinance of a building or other property for which the repayment of principal is dependent upon rental income associated with the property or the subsequent sale of the property.
Added
The values of these loans are primarily impacted by the level of interest rates associated with the debt and to local economic conditions, which dictate occupancy rates and the amount of rent charged. The increase in debt service due to higher interest rates may not be able to be passed on to tenants.
Added
As part of the origination process, loan interest rates and occupancy rates are stressed to determine the impact on the borrower’s ability to maintain adequate debt service under different economic conditions.
Added
Further, LCNB monitors the concentration in any one industry and has established limits relative to the total of the Bank's tier 1 and tier 2 capital for each category of loan. Credit quality trends are monitored by industry to determine if a change in the risk exposure to a certain industry may warrant a change in underwriting standards.
Added
The following table provides a breakdown of amortized cost of commercial real estate loans by property-type classification as of December 31, 2024 , excluding loans which are junior in lien or covered by collateral secured with varying classes of assets (dollars in thousands): Amount % of Total Multi-family $ 277,910 28 % Retail 161,204 16 % Office 123,462 12 % Mixed Use 95,117 10 % Hotel/Motel 81,772 8 % Self storage 46,115 5 % Warehouse (one tenant) 44,835 4 % Light Industrial 33,151 3 % Warehouse (more than one tenant) 21,182 2 % Healthcare Facilities 19,995 2 % Manufacturing 19,827 2 % Dental 12,987 1 % Other 70,881 7 % Total $ 1,008,438 100 % -34- Table of Contents LCNB CORP.
Added
AND SUBSIDIARIES Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Most of LCNB's commercial real estate loans are made within its general market area of Southwest and South-Central Ohio and Northern Kentucky.
Added
The following table provides a breakdown of amortized cost of commercial real estate loans by real estate collateral location as of December 31, 2024 , excluding loans which are junior in lien or covered by collateral secured with varying classes of assets (dollars in thousands): Amount % of Total Franklin County, Ohio $ 305,272 30 % Hamilton County, Ohio 202,538 20 % Montgomery County, Ohio 92,847 9 % Butler County, Ohio 88,221 9 % Warren County, Ohio 81,338 8 % Delaware County, Ohio 39,900 4 % Greene County, Ohio 31,941 3 % Boone County, Kentucky 29,166 3 % Kenton County, Kentucky 20,714 2 % Clermont County, Ohio 18,912 2 % Licking County, Ohio 14,806 2 % Fairfield County, Ohio 9,679 1 % Ross County, Ohio 8,662 1 % Other, Ohio 53,149 5 % Other, Kentucky 7,065 1 % Other, Indiana 3,390 0 % Other, West Virginia 838 0 % Total $ 1,008,438 100 % Liquidity LCNB Corp. depends on dividends from the Bank for the majority of its liquid assets, including the cash needed to pay dividends to its shareholders.
Added
Loans held-for-sale (“LHFS”) represent mortgage loans intended to be sold in the secondary market and other loans that management has an active plan to sell. LHFS are carried at the lower-of-cost-or-fair value as determined on an aggregate basis by type of loan. Any writedowns to fair value upon the transfer of loans to LHFS are reflected in loan charge-offs.
Added
Any further decreases are recognized in non-interest income and increases in fair value above the loan cost basis are not recognized until the loans are sold. -38- Table of Contents LCNB CORP. AND SUBSIDIARIES

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

5 edited+0 added−1 removed6 unchanged
Biggest changeRate Shock Scenario in Basis Points Amount (In thousands) $ Change in Net Interest Income % Change in Net Interest Income Limits Up 300 62,684 (5,018) (7.41) % 20 % Up 200 64,289 (3,413) (5.04) % 15 % Up 100 65,797 (1,905) (2.81) % 10 % Base 67,702 — — % — % Down 100 68,623 921 1.36 % 10 % Down 200 70,044 2,342 3.46 % 15 % Down 300 71,496 3,794 5.60 % 20 % IRSA shows the effect on net interest income during a one-year period only.
Biggest changeThe changes in net interest income for all rate assumptions are within LCNB’s acceptable ranges. $ Change in % Change in Rate Shock Scenario in Amount Net Interest Net Interest Basis Points (In thousands) Income Income Limits Up 300 $ 77,139 (1,640 ) (2.08 )% 15 % Up 200 77,617 (1,162 ) (1.48 )% 10 % Up 100 77,984 (795 ) (1.01 )% 5 % Base 78,779 — — % — % Down 100 78,687 (92 ) (0.12 )% 5 % Down 200 79,046 267 0.34 % 10 % Down 300 79,428 649 0.82 % 15 % IRSA shows the effect on net interest income during a one-year period only.
Furthermore, the models do not reflect actions that borrowers, depositors, and management may take in response to changing economic conditions and interest rate levels. -41- Table of Contents LCNB CORP. AND SUBSIDIARIES
Furthermore, the models do not reflect actions that borrowers, depositors, and management may take in response to changing economic conditions and interest rate levels. -39- Table of Contents LCNB CORP. AND SUBSIDIARIES
As shown below, the December 31, 2023 IRSA indicates that an increase in interest rates will have a negative effect on net interest income and a decrease in interest rates will have a positive effect on net interest income. The changes in net interest income for all rate assumptions are within LCNB’s acceptable ranges.
As shown below, the December 31, 2024 EVE analysis indicates that an increase in interest rates will have a negative effect on the EVE and that a decrease in interest rates will have a positive effect. The changes in the EVE for all rate assumptions are within LCNB's acceptable ranges.
As shown below, the December 31, 2023 EVE analysis indicates that an increase in interest rates of 200 or 300 basis points will have a negative effect on the EVE and that a 100 basis point increase or a decrease in interest rates will have a positive effect.
As shown below, the December 31, 2024 IRSA indicates that an increase in interest rates or a decrease of 100 basis points will have a negative effect on net interest income and a decrease in interest rates of 200 or 300 basis points will have a positive effect on net interest income.
Rate Shock Scenario in Basis Points Amount (In thousands) $ Change in EVE % Change in EVE Limits Up 300 127,089 (32,877) (20.55) % 25 % Up 200 144,143 (15,823) (9.89) % 20 % Up 100 160,341 375 0.23 % 15 % Base 159,966 — — % — % Down 100 190,962 30,996 19.38 % 15 % Down 200 205,572 45,606 28.51 % 20 % Down 300 222,367 62,401 39.01 % 25 % The IRSA and EVE simulations discussed above are not projections of future income or equity and should not be relied on as being indicative of future operating results.
Rate Shock Scenario in Amount $ Change in % Change in Basis Points (In thousands) EVE EVE Limits Up 300 $ 192,306 (26,009 ) (11.91 )% 25 % Up 200 205,104 (13,211 ) (6.05 )% 20 % Up 100 217,539 (776 ) (0.36 )% 15 % Base 218,315 — — % — % Down 100 238,327 20,012 9.17 % 15 % Down 200 253,234 34,919 15.99 % 20 % Down 300 269,669 51,354 23.52 % 25 % The IRSA and EVE simulations discussed above are not projections of future income or equity and should not be relied on as being indicative of future operating results.
Removed
The changes in the EVE for all upward rate shocks are within LCNB's acceptable ranges. The changes in the EVE for all downward rate shocks are outside LCNB's acceptable ranges as shown below. Management has determined the downward shifts to be acceptable due to the positive nature of the results.

Other LCNB 10-K year-over-year comparisons