LCNB LCNB Corporation

LCNB Corp. ("LCNB") (NASDAQ: LCNB) today announced net income of $5,193,000 (total basic and diluted earnings per share of $0.40) and $14,845,000 (total basic and diluted earnings per share of $1.24) for the three and twelve months ended December 31, 2018, respectively. This compares to net income of $3,617,000 (total basic and diluted earnings per share of $0.37 and $0.36, respectively) and $12,972,000 (total basic and diluted earnings per share of $1.30 and $1.29, respectively) for the same three and twelve month periods in 2017. Items significantly affecting net income during the 2018 period were:

• a merger with Columbus First Bancorp, Inc. ("Columbus First") on May 31, 2018,
• expenses relating to the merger with Columbus First, which totaled $164,000 and $2,123,000 for the three and twelve month periods, respectively,
• a net loss of $461,000 on the sale of fixed assets primarily due to the sale of two buildings, and
• a reduction in LCNB's federal tax rate from 34% to 21% as a result of the Tax Cuts and Jobs Act that was signed into law on December 22, 2017.

Commenting on the financial results, LCNB Chief Executive Officer Steve Foster said, "We are pleased to report our financial results for the three and twelve months ended December 31, 2018. Net income for the three and twelve months ended December 31, 2018 was greater than the comparable periods in 2017, despite merger-related expenses recognized for the acquisition of Columbus First. The merger with Columbus First, combined with organic growth, had a positive effect on net interest income, which was $7.3 million greater in 2018 than in 2017. Return on average assets equaled 1.27% and 1.00% for the three and twelve month periods in 2018. Eliminating merger-related expenses from the income statement produces pro-forma net income of $5,341,000 and $16,598,000 for the three and twelve month periods in 2018, respectively. Pro-forma return on average asset ratios for the three and twelve month periods were 1.30% and 1.11%, respectively."

Net interest income for the three and twelve months ended December 31, 2018 was, respectively, $2,853,000 and $7,305,000 greater than the comparable periods in 2017, primarily due to growth in LCNB's average loan portfolio, partially offset by a decrease in average investment securities and increases in average deposits and long-term borrowings. Also offsetting the growth in the loan portfolio was a market-driven increase in average rates paid on deposits. Loans, deposits, and long-term borrowings obtained through the merger with Columbus First were a significant component of LCNB's loan portfolio growth and the increases in deposits and long-term borrowings.

The provision for loan losses for the twelve months ended December 31, 2018 was $708,000 greater than the comparable period in 2017. Non-accrual loans and loans past due 90 days or more and still accruing interest increased $140,000, from $2,965,000 or 0.35% of total loans at December 31, 2017 to $3,105,000 or 0.26% of total loans at December 31, 2018.

Non-interest income for the three and twelve months ended December 31, 2018 was, respectively, $123,000 and $592,000 greater than the comparable periods in 2017 primarily due to increases in fiduciary income and service charges and fees on deposit accounts, partially offset by a decrease in net gains (losses) from sales of securities.

Non-interest expense for the three and twelve months ended December 31, 2018 was, respectively, $1,313,000 and $6,639,000 greater than the comparable periods in 2017 primarily due to increases in salaries and employee benefits and merger-related expenses. Also contributing to the increase during the twelve month period were losses incurred from the sale of two of LCNB's office buildings. Merger-related expenses increased due to costs connected to the acquisition of Columbus First.

The merger with Columbus First was accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed, and consideration paid were recorded at their estimated fair values as of the merger date. Any changes in the estimated fair values based on new information about facts that existed at the merger date will be recognized in the period the adjustment is identified.

LCNB Corp. is a financial holding company headquartered in Lebanon, Ohio. Through its subsidiary, LCNB National Bank (the “Bank”), it serves customers and communities in Southwest and South Central Ohio. A financial institution with a long tradition for building strong relationships with customers and communities, the Bank offers convenient banking locations in Butler, Clermont, Clinton, Fayette, Franklin, Hamilton, Montgomery, Preble, Ross, and Warren Counties, Ohio. The Bank continually strives to exceed customer expectations and provides an array of services for all personal and business banking needs including checking, savings, online banking, personal lending, business lending, agricultural lending, business support, deposit and treasury, investment services, trust and IRAs and stock purchases. LCNB Corp. common shares are traded on the NASDAQ Capital Market Exchange® under the symbol “LCNB.” Learn more about LCNB Corp. at www.lcnb.com.

Certain statements made in this news release regarding LCNB’s financial condition, results of operations, plans, objectives, future performance and business, are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. These forward-looking statements are identified by the fact they are not historical facts and include words such as “anticipate”, “could”, “may”, “feel”, “expect”, “believe”, “plan”, and similar expressions. Please refer to LCNB’s Annual Report on Form 10-K for the year ended December 31, 2017, as well as its other filings with the SEC, for a more detailed discussion of risks, uncertainties and factors that could cause actual results to differ from those discussed in the forward-looking statements.

These forward-looking statements reflect management's current expectations based on all information available to management and its knowledge of LCNB’s business and operations. Additionally, LCNB’s financial condition, results of operations, plans, objectives, future performance and business are subject to risks and uncertainties that may cause actual results to differ materially. These factors include, but are not limited to:

1. the success, impact, and timing of the implementation of LCNB’s business strategies;
2. LCNB’s ability to integrate recent and future acquisitions, including the recent merger with Columbus First, may be unsuccessful, or may be more difficult, time-consuming or costly than expected;
3. LCNB may incur increased charge-offs in the future;
4. LCNB may face competitive loss of customers;
5. changes in the interest rate environment may have results on LCNB’s operations materially different from those anticipated by LCNB’s market risk management functions;
6. changes in general economic conditions and increased competition could adversely affect LCNB’s operating results;
7. changes in other regulations and government policies affecting bank holding companies and their subsidiaries, including changes in monetary policies, could negatively impact LCNB’s operating results;
8. LCNB may experience difficulties growing loan and deposit balances;
9. the current economic environment poses significant challenges for us and could adversely affect our financial condition and results of operations;
10. deterioration in the financial condition of the U.S. banking system may impact the valuations of investments LCNB has made in the securities of other financial institutions resulting in either actual losses or other than temporary impairments on such investments;
11. difficulties with technology or data security breaches, including cyberattacks, that could negatively affect LCNB's ability to conduct business and its relationships with customers, vendors, and others; and
12. government intervention in the U.S. financial system, including the effects of recent legislative, tax, accounting and regulatory actions and reforms, including the Dodd-Frank Wall Street Reform and Consumer Protection Act (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, and the Tax Cuts and Jobs Act.

Forward-looking statements made herein reflect management's expectations as of the date such statements are made. Such information is provided to assist shareholders and potential investors in understanding current and anticipated financial operations of LCNB and is included pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. LCNB undertakes no obligation to update any forward-looking statement to reflect events or circumstances that arise after the date such statements are made.

    LCNB Corp. and Subsidiaries Financial Highlights

(Dollars in thousands, except per share amounts)

(Unaudited)

  Three Months Ended Year Ended 12/31/2018   9/30/2018   6/30/2018   3/31/2018   12/31/2017 12/31/2018   12/31/2017

Condensed Income Statement

Interest income $ 15,844 15,070 12,538 11,142 11,610 54,594 44,463 Interest expense 2,334   1,967   1,170   954   953   6,425   3,599   Net interest income 13,510 13,103 11,368 10,188 10,657 48,169 40,864 Provision for loan losses (39 ) 659   224   79   (10 ) 923   215   Net interest income after provision 13,549 12,444 11,144 10,109 10,667 47,246 40,649 Non-interest income 2,702 2,921 2,791 2,636 2,579 11,050 10,458 Non-interest expense 9,925   10,317   10,711   9,549   8,612   40,502   33,863   Income before income taxes 6,326 5,048 3,224 3,196 4,634 17,794 17,244 Provision for income taxes 1,133   847   486   483   1,017   2,949   4,272   Net income $ 5,193   4,201   2,738   2,713   3,617   14,845   12,972   Amort/Accret income on acquired loans $ 229 198 44 96 606 567 1,096 Amort/Accret expenses on acquired interest-bearing liabilities $ 149 214 — — — 363 — Tax-equivalent net interest income $ 13,680 13,279 11,549 10,375 11,062 48,883 42,549  

Per Share Data

Dividends per share $ 0.17 0.16 0.16 0.16 0.16 0.65 0.64 Basic earnings per common share $ 0.40 0.32 0.25 0.27 0.37 1.24 1.30 Diluted earnings per common share $ 0.40 0.32 0.25 0.27 0.36 1.24 1.29 Book value per share $ 16.47 16.05 15.97 14.80 14.99 16.47 14.99 Tangible book value per share $ 11.67 11.23 11.14 11.47 11.64 11.67 11.64 Weighted average common shares outstanding: Basic 13,285,386 13,285,203 11,099,485 10,020,611 10,013,777 11,935,350 10,005,575 Diluted 13,290,499 13,290,665 11,105,014 10,028,588 10,020,566 11,942,253 10,012,511 Shares outstanding at period end 13,295,276 13,304,976 13,299,235 10,041,152 10,023,059 13,295,276 10,023,059  

Selected Financial Ratios

Return on average assets 1.27 % 1.03 % 0.78 % 0.85 % 1.11 % 1.00 % 0.99 % Return on average equity 9.55 % 7.76 % 6.46 % 7.33 % 9.49 % 7.90 % 8.74 % Dividend payout ratio 42.50 % 50.00 % 64.00 % 59.26 % 43.24 % 52.42 % 49.23 % Net interest margin (tax equivalent) 3.69 % 3.59 % 3.63 % 3.59 % 3.73 % 3.63 % 3.58 % Efficiency ratio (tax equivalent) 60.58 % 63.69 % 74.69 % 73.39 % 63.13 % 67.58 % 63.88 %  

Selected Balance Sheet Items

Cash and cash equivalents $ 20,040 19,812 24,901 17,494 25,386 Debt and equity securities 282,813 299,786 311,047 310,009 317,413   Loans: Commercial and industrial $ 77,740 78,002 81,778 37,118 36,057 Commercial, secured by real estate 740,647 704,987 705,978 542,890 527,947 Residential real estate 349,127 347,920 339,435 246,487 251,582 Consumer 17,283 17,505 17,705 17,176 17,450 Agricultural 13,297 13,280 13,390 12,217 15,194 Other, including deposit overdrafts 450 498 583 506 539 Deferred net origination costs 79   133   229   263   291   Loans, gross 1,198,623 1,162,325 1,159,098 856,657 849,060 Less allowance for loan losses 4,046   4,016   3,603   3,529   3,403   Loans, net $ 1,194,577   1,158,309   1,155,495   853,128   845,657     Total earning assets $ 1,483,166 1,465,787 1,471,923 1,168,204 1,170,700 Total assets 1,636,927 1,620,299 1,631,442 1,288,791 1,295,638 Total deposits 1,300,919 1,371,023 1,380,884 1,123,463 1,085,821       Three Months Ended Year Ended 12/31/2018 9/30/2018 6/30/2018 3/31/2018 12/31/2017 12/31/2018 12/31/2017

Selected Balance Sheet Items, continued

Short-term borrowings 56,230 0 0 0 47,000 Long-term debt 47,032 23,079 27,085 6,219 303 Total shareholders’ equity 218,985 213,515 212,366 148,584 150,271 Equity to assets ratio 13.38 % 13.18 % 13.02 % 11.53 % 11.60 % Loans to deposits ratio 92.14 % 84.78 % 83.94 % 76.25 % 78.20 %   Tangible common equity (TCE) $ 155,197 149,398 147,705 114,801 116,289 Tangible common assets (TCA) 1,573,139 1,556,182 1,566,781 1,255,008 1,261,656 TCE/TCA 9.87 % 9.60 % 9.43 % 9.15 % 9.22 %  

Selected Average Balance Sheet Items

Cash and cash equivalents $ 20,685 25,920 27,319 21,820 18,787 23,910 25,132 Debt and equity securities 291,433 304,112 306,366 313,689 332,225 303,839 358,682   Loans $ 1,177,061 1,155,846 961,726 853,152 840,526 1,038,159 822,452 Less allowance for loan losses 4,016   3,622   4,245   3,401   3,407   3,822   3,405   Net loans $ 1,173,045 1,152,224 957,481 849,751 837,119 1,034,337 819,047   Total earning assets $ 1,471,650 1,465,510 1,276,176 1,170,708 1,175,180 1,347,162 1,189,106 Total assets 1,626,029 1,623,016 1,409,698 1,292,375 1,295,293 1,488,941 1,309,501 Total deposits 1,333,673 1,367,950 1,212,104 1,114,979 1,096,966 1,258,075 1,125,866 Short-term borrowings 36,348 1,833 3,491 14,086 34,440 13,967 23,976 Long-term debt 25,536 25,757 13,252 2,255 323 16,789 421 Total shareholders’ equity 215,739 214,769 170,077 150,058 151,154 187,915 148,443 Equity to assets ratio 13.27 % 13.23 % 12.06 % 11.61 % 11.67 % 12.62 % 11.34 % Loans to deposits ratio 88.26 % 84.49 % 79.34 % 76.52 % 76.62 % 82.52 % 73.05 %  

Asset Quality

Net charge-offs (recoveries) $ (68 ) 245 150 (47 ) (7 ) 280 387 Other real estate owned 244 35 35 — — 244 —   Non-accrual loans 2,956 2,603 4,065 2,744 2,965 2,956 2,965 Loans past due 90 days or more and still accruing 149   1   5   146   0   149   0   Total nonperforming loans $ 3,105 2,604 4,070 2,890 2,965 3,105 2,965   Net charge-offs (recoveries) to average loans (0.02 )% 0.08 % 0.06 % (0.02 )% 0.00 % 0.03 % 0.05 % Allowance for loan losses to total loans 0.34 % 0.35 % 0.31 % 0.41 % 0.40 % 0.34 % 0.40 % Nonperforming loans to total loans 0.26 % 0.22 % 0.35 % 0.34 % 0.35 % 0.26 % 0.35 % Nonperforming assets to total assets 0.20 % 0.16 % 0.25 % 0.22 % 0.23 % 0.20 % 0.23 %  

Assets Under Management

LCNB Corp. total assets $ 1,636,927 1,620,299 1,631,442 1,288,791 1,295,638 Trust and investments (fair value) 337,549 386,582 370,587 359,766 362,486 Mortgage loans serviced 97,685 115,647 114,536 90,630 92,818 Cash management 48,906 36,502 48,369 72,372 84,344 Brokerage accounts (fair value) 233,751   247,175   238,651   230,168   229,006   Total assets managed $ 2,354,818   2,406,205   2,403,585   2,041,727   2,064,292    

Non-GAAP Financial Measures

Net income $ 5,193 4,201 2,738 2,713 3,617 14,845 12,972 Add: merger-related expenses, net of tax 148   274   710   621   87   1,753   87   Adjusted net income $ 5,341   4,475   3,448   3,334   3,704   16,598   13,059   Basic adjusted earnings per share 0.41 0.34 0.31 0.33 0.37 1.39 1.31 Diluted adjusted earnings per share 0.41 0.34 0.31 0.33 0.37 1.39 1.30 Adjusted return on average assets 1.30 % 1.09 % 0.98 % 1.05 % 1.16 % 1.11 % 1.00 % Adjusted return on average equity 9.82 % 8.27 % 8.13 % 9.01 % 9.94 % 8.83 % 8.80 %       LCNB CORP. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS  

(Dollars in thousands)

 

December 31,2018(Unaudited)

December 31,2017

ASSETS: Cash and due from banks $ 18,310 21,159 Interest-bearing demand deposits 1,730   4,227   Total cash and cash equivalents 20,040 25,386 Interest-bearing time deposits 996 — Investment securities: Equity securities with a readily determinable fair value, at fair value 2,078 2,160 Equity securities without a readily determinable fair value, at cost 2,099 1,099 Debt securities, available-for-sale, at fair value 238,421 275,213 Debt securities, held-to-maturity, at cost 29,721 32,571 Federal Reserve Bank stock, at cost 4,653 2,732 Federal Home Loan Bank stock, at cost 4,845 3,638 Loans, net 1,194,577 845,657 Premises and equipment, net 32,627 34,927 Goodwill 59,221 30,183 Core deposit and other intangibles 5,042 3,799 Bank owned life insurance 28,723 27,985 Other assets 13,884   10,288   TOTAL ASSETS $ 1,636,927   1,295,638     LIABILITIES: Deposits: Noninterest-bearing $ 322,571 283,212 Interest-bearing 978,348   802,609   Total deposits 1,300,919 1,085,821 Short-term borrowings 56,230 47,000 Long-term debt 47,032 303 Accrued interest and other liabilities 13,761   12,243   TOTAL LIABILITIES 1,417,942   1,145,367     COMMITMENTS AND CONTINGENT LIABILITIES — —   SHAREHOLDERS' EQUITY: Preferred shares – no par value, authorized 1,000,000 shares, none outstanding — — Common shares – no par value, authorized 19,000,000 shares at December 31, 2018 and 2017; issued 14,070,303 and 10,776,686 shares at December 31, 2018 and 2017, respectively 141,170 76,977 Retained earnings 94,547 87,301 Treasury shares at cost, 775,027 and 753,627 shares at December 31, 2018 and 2017, respectively (12,013 ) (11,665 ) Accumulated other comprehensive loss, net of taxes (4,719 ) (2,342 ) TOTAL SHAREHOLDERS' EQUITY 218,985   150,271   TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,636,927   1,295,638       LCNB CORP. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(Dollars in thousands, except per share data)

(Unaudited)

  Three Months Ended Year Ended December 31, December 31, 2018   2017 2018   2017 INTEREST INCOME: Interest and fees on loans $ 14,010 9,738 47,489 36,571 Dividends on equity securities with a readily determinable fair value 17 19 65 63 Dividends on equity securities without a readily determinable fair value 17 9 39 26 Interest on debt securities, taxable 900 950 3,666 4,239 Interest on debt securities, non-taxable 641 753 2,686 3,130 Other short-term investments 259   141   649   434 TOTAL INTEREST INCOME 15,844   11,610   54,594   44,463 INTEREST EXPENSE: Interest on deposits 1,976 839 5,753 3,378 Interest on short-term borrowings 223 112 311 209 Interest on long-term debt 135   2   361   12 TOTAL INTEREST EXPENSE 2,334   953   6,425   3,599 NET INTEREST INCOME 13,510 10,657 48,169 40,864 PROVISION FOR LOAN LOSSES (39 ) (10 ) 923   215 NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 13,549   10,667   47,246   40,649 NON-INTEREST INCOME: Fiduciary income 971 869 3,958 3,473 Service charges and fees on deposit accounts 1,420 1,350 5,590 5,236 Net gains (losses) on sales of securities — 15 (8 ) 233 Bank owned life insurance income 185 191 738 867 Gains from sales of loans 41 30 223 166 Other operating income 85   124   549   483 TOTAL NON-INTEREST INCOME 2,702   2,579   11,050   10,458 NON-INTEREST EXPENSE: Salaries and employee benefits 5,488 4,678 21,279 18,585 Equipment expenses 341 336 1,138 1,172 Occupancy expense, net 742 724 2,861 2,613 State financial institutions tax 299 286 1,197 1,137 Marketing 321 232 1,119 873 Amortization of intangibles 263 189 922 751 FDIC insurance premiums 130 103 419 423 Contracted services 454 325 1,547 1,255 Other real estate owned 16 2 20 10 Merger-related expenses 164 108 2,123 118 Other non-interest expense 1,707   1,629   7,877   6,926 TOTAL NON-INTEREST EXPENSE 9,925   8,612   40,502   33,863 INCOME BEFORE INCOME TAXES 6,326 4,634 17,794 17,244 PROVISION FOR INCOME TAXES 1,133   1,017   2,949   4,272 NET INCOME $ 5,193   3,617   14,845   12,972   Dividends declared per common share $ 0.17 0.16 0.65 0.64 Earnings per common share: Basic 0.40 0.37 1.24 1.30 Diluted 0.40 0.36 1.24 1.29 Weighted average common shares outstanding: Basic 13,285,386 10,013,777 11,935,350 10,005,575 Diluted 13,290,499 10,020,566 11,942,253 10,012,511

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LCNB Corp.Steve P. Foster, CEO, 800-344-BANKRobert C. Haines II, Executive Vice President and CFO, 800-344-BANK