LCNB Corp. Reports Record Financial Results for the Three and Six Months Ended June 30, 2022

Loans, Net Increased 4.2% Year-over-Year to $1.37 Billion Total Deposits Increased 5.2% Year-over-Year to $1.66 Billion Credit Quality Remains Strong with Total Nonperforming Loans Declining to $0.6 Million, or 0.04% of Total Loans Second Quarter Earnings Per Share Increased 19.5% to a Quarterly Record of $0.49 Per Diluted Share

LCNB Corp. ("LCNB") (NASDAQ: LCNB) today announced financial results for the three and six months ended June 30, 2022.

Commenting on the financial results, LCNB President and Chief Executive Officer Eric Meilstrup said, “LCNB produced strong financial results during the second quarter. Second quarter basic and diluted earnings per share of $0.49 were a quarterly record and benefited from a 5.6% increase in net interest income, an $889,000 gain from the sale of other real estate owned, and our share repurchase program. Solid core profitability combined with our repurchase program also drove an improvement in second quarter return on tangible equity, which grew to 15.52% for the three months ended June 30, 2022.”

Mr. Meilstrup continued, “We believe we are well positioned to navigate the fluid business environment because of our historically strong asset quality, diversified sources of revenue, and the value of our community-oriented financial services. Supporting our commercial, retail, and wealth customers and expanding our diverse financial services to more customers and markets throughout the greater Cincinnati, Dayton, Chillicothe, and Columbus markets are important components of our growth initiatives. Our personal and business banking services, combined with our Wealth Management offerings, provide a powerful platform suite of financial products to our local communities. I am encouraged by the progress we are making attracting more customers to LCNB and growing our balance sheet.”

"We also remain committed to returning excess capital to our shareholders through our dividend policy and share buyback program. Year-to-date, we have retired approximately 8.7% of our common stock through our share repurchase program. In addition, LCNB’s year-to-date dividend payout ratio of nearly 46% and annualized dividend yield of approximately 5% reflects management and the Board’s desire to return a meaningful amount of our earnings back to our shareholders,” concluded Mr. Meilstrup.

Income Statement

Net income for the 2022 second quarter was $5,618,000, compared to $5,290,000 for the same period last year. Earnings per basic and diluted share for the 2022 second quarter were $0.49, compared to $0.41 for the same period last year. Net income for the six-month period ended June 30, 2022, was $10,141,000, compared to $10,530,000 for the same period last year. Earnings per basic and diluted share for the six-month period ended June 30, 2022, were $0.87, compared to $0.82 for the same period last year.

Net interest income for the three months ended June 30, 2022, was $15,167,000, compared to $14,369,000 for the comparable period in 2021. Net interest income for the six-month period ended June 30, 2022, increased $649,000 to $29,390,000, as compared to $28,741,000 in the same period last year. Favorably contributing to the variances for both the three- and six- month periods were overall growth in the taxable debt securities and loan portfolios and decreases in the average rates paid on deposits, aided by a shift from higher cost certificates of deposit to lower cost demand and savings products.

Non-interest income for the three months ended June 30, 2022, decreased $786,000, or by 18.2% to $3,528,000, compared to $4,314,000 for the same period last year. For the six months ended June 30, 2022, non-interest income decreased $701,000, or by 9.0% to $7,078,000, compared to $7,779,000 for the same period last year. Non-interest income for the three and six months ended June 30, 2021, included a one-time refund on the Company’s Ohio Financial Institutions Taxes, which was included in other operating income. The primary drivers for the remainder of the second quarter decrease included decreased fiduciary income, decreased gains from sales of loans, and net unrealized losses recognized on LCNB’s equity securities investment portfolio. Drivers for the remainder of the first half year-over-year decrease in non-interest income included net unrealized losses recognized on LCNB’s equity securities investment portfolio.

Non-interest expense for the three months ended June 30, 2022, was $739,000 less than the comparable period in 2021 primarily due to an $889,000 gain from the sale of other real estate owned during the 2022 second quarter, which was partially offset by a $140,000 impairment charge included in other operating expense that was associated with the sale of the Company’s Colerain Office building. For the first half ended June 30, 2022, non-interest expense increased $19,000 from the comparable period in 2021.

Capital Allocation

During the 2022 second quarter, LCNB invested $0.5 million to repurchase 33,035 shares of its outstanding stock at an average price of $15.48 per share. Year-to-date, LCNB invested $21.5 million to repurchase 1,084,723 shares of its outstanding stock at an average price of $19.87 per share. This equates to approximately 8.7% of the Company’s outstanding common stock prior to the repurchase. At June 30, 2022, LCNB had 466,965 shares remaining under its May 27, 2022, share repurchase program.

For the second quarter ended June 30, 2022, LCNB paid $0.20 per share in dividends, a 5.3% increase from $0.19 per share for the second quarter last year. Year-to-date, LCNB paid $0.40 per share in dividends, compared to $0.38 per share for the first half last year.

Balance Sheet

Total assets at June 30, 2022 increased 3.0% to a record $1.91 billion from $1.86 billion at June 30, 2021. Net loans at June 30, 2022, increased 4.2% to $1.37 billion, compared to $1.31 billion at June 30, 2021.

Total deposits at June 30, 2022 increased 5.2% to a record $1.66 billion, compared to $1.58 billion at June 30, 2021, as LCNB continues to experience year-over-year growth in both interest-bearing and non-interest-bearing accounts.

Long-term debt at June 30, 2022 was $15 million greater than at December 31, 2021 due to the restructuring of a $20 million short-term line of credit into a $15 million three year term loan and a $5 million short-term line of credit.

Asset Quality

For the 2022 second quarter, LCNB recorded a $377,000 provision for loan losses, compared to a credit of $15,000 for the 2021 second quarter. For the six months ended June 30, 2022, LCNB recorded a provision for loan losses of $426,000, compared to a credit for loan losses of $67,000 for the six months ended June 30, 2021. The $493,000 year-over-year increase in the provision for loan losses was partially due to higher year-over-year net charge-offs and additional provisioning for the increase in volume of the commercial real estate loan portfolio.

Net charge-offs for the 2022 second quarter were $74,000, compared to $12,000 for the same period last year. For the 2022 six-month period, net charge-offs were $99,000 or 0.01% of average loans, compared to $9,000 for the 2021 six-month period.

Total nonperforming loans, which includes non-accrual loans and loans past due 90 days or more and still accruing interest, decreased $2,739,000 from $3,338,000 or 0.25% of total loans at June 30, 2021, to $599,000 or 0.04% of total loans at June 30, 2022. The decrease in nonperforming loans was primarily a result of the completion of the foreclosure process on a commercial real estate loan and the reclassification of that loan to other real estate owned. Nonperforming assets to total assets was 0.03% at June 30, 2022, compared to 0.18% at June 30, 2021.

About LCNB Corp.

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.

Forward-Looking Statements

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, 2021, as well as its other filings with the SEC, for a more detailed discussion of risks, uncertainties and factors that could cause actual results to differ from those discussed in the forward-looking statements.

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

1. the success, impact, and timing of the implementation of LCNB’s business strategies;
2. the significant risks and uncertainties for LCNB's business, results of operations and financial condition, as well as its regulatory capital and liquidity ratios and other regulatory requirements, caused by the COVID-19 pandemic, which will depend on several factors, including the scope and duration of the pandemic, its influence on financial markets, the effectiveness of LCNB's work from home arrangements and staffing levels in operational facilities, the impact of market participants on which LCNB relies, and actions taken by governmental authorities and other third parties in response to the pandemic;
3. the disruption of global, national, state, and local economies associated with the COVID-19 pandemic and the Russia/Ukraine conflict, which could affect LCNB's liquidity and capital positions, impair the ability of our borrowers to repay outstanding loans, impair collateral values, and further increase the allowance for credit losses;
4. LCNB’s ability to integrate future acquisitions may be unsuccessful, or may be more difficult, time-consuming, or costly than expected;
5. LCNB may incur increased loan charge-offs in the future;
6. LCNB may face competitive loss of customers;
7. changes in the interest rate environment, which may include continued interest rate increases, may have results on LCNB’s operations materially different from those anticipated by LCNB’s market risk management functions;
8. changes in general economic conditions and increased competition could adversely affect LCNB’s operating results;
9. 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;
10. LCNB may experience difficulties growing loan and deposit balances;
11. 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;
12. 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;
13. 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;
14. adverse weather events and natural disasters and global and/or national epidemics; and
15. government intervention in the U.S. financial system, including the effects of recent legislative, tax, accounting and regulatory actions and reforms, including the Coronavirus Aid, Relief, and Economic Security ("CARES") Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Jumpstart Our Business Startups Act, the Consumer Financial Protection Bureau, the capital ratios of Basel III as adopted by the federal banking authorities, and the Tax Cuts and Jobs Act.

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

LCNB Corp. and Subsidiaries
Financial Highlights
(Dollars in thousands, except per share amounts)
(Unaudited)
	Three Months Ended																	Six Months Ended
	6/30/2022				3/31/2022			12/31/2021			9/30/2021				6/30/2021			6/30/2022			6/30/2021
Condensed Income Statement
Interest income	$	16,208			15,122			15,189				15,024			15,429			31,330			30,964
Interest expense		1,041			899			879				951			1,060			1,940			2,223
Net interest income		15,167			14,223			14,310				14,073			14,369			29,390			28,741
Provision (credit) for loan losses		377			49			(508	)			306			(15	)		426			(67	)
Net interest income after provision (credit) for loan losses		14,790			14,174			14,818				13,767			14,384			28,964			28,808
Non-interest income		3,528			3,550			4,347				4,106			4,314			7,078			7,779
Non-interest expense		11,469			12,250			12,311				12,029			12,208			23,719			23,700
Income before income taxes		6,849			5,474			6,854				5,844			6,490			12,323			12,887
Provision for income taxes		1,231			951			1,227				1,027			1,200			2,182			2,357
Net income	$	5,618			4,523			5,627				4,817			5,290			10,141			10,530
Supplemental Income Statement Information
Amort/Accret income on acquired loans	$	61			66			116				132			216			127			465
Tax-equivalent net interest income	$	15,217			14,273			14,365				14,129			14,427			29,490			28,858
Per Share Data
Dividends per share	$	0.20			0.20			0.20				0.19			0.19			0.40			0.38
Basic earnings per common share	$	0.49			0.38			0.45				0.39			0.41			0.87			0.82
Diluted earnings per common share	$	0.49			0.38			0.45				0.39			0.41			0.87			0.82
Book value per share	$	17.84			18.14			19.22				19.17			18.99			17.84			18.99
Tangible book value per share	$	12.53			12.84			14.33				14.28			14.15			12.53			14.15
Weighted average common shares outstanding:
Basic		11,337,805			11,818,614			12,370,702				12,455,276			12,743,726			11,576,873			12,769,131
Diluted		11,337,805			11,818,614			12,370,702				12,455,276			12,743,726			11,576,873			12,769,146
Shares outstanding at period end		11,374,515			11,401,503			12,414,956				12,434,084			12,634,845			11,374,515			12,634,845
Selected Financial Ratios
Return on average assets		1.18	%		0.96	%		1.18	%			1.02	%		1.15	%		1.07	%		1.17	%
Return on average equity		10.96	%		8.13	%		9.33	%			7.93	%		8.78	%		9.48	%		8.79	%
Return on average tangible common equity		15.52	%		11.11	%		12.51	%			10.62	%		11.76	%		13.18	%		11.79	%
Dividend payout ratio		40.82	%		52.63	%		44.44	%			48.72	%		46.34	%		45.98	%		46.34	%
Net interest margin (tax equivalent)		3.54	%		3.35	%		3.34	%			3.32	%		3.51	%		3.45	%		3.57	%
Efficiency ratio (tax equivalent)		61.18	%		68.73	%		65.79	%			65.96	%		65.14	%		64.86	%		64.69	%
Selected Balance Sheet Items
Cash and cash equivalents	$	31,815			19,941			18,136				23,852			22,909
Debt and equity securities		337,952			330,715			345,649				352,066			349,199
Loans:
Commercial and industrial	$	114,971			105,805			101,792				91,246			97,240
Commercial, secured by real estate		905,703			906,140			889,108				862,202			836,085
Residential real estate		315,930			328,034			334,547				343,318			341,447
Consumer		30,308			32,445			34,190				35,349			35,257
Agricultural		7,412			7,980			10,647				8,852			8,765
Other, including deposit overdrafts		81			45			122				247			369
Deferred net origination fees		(928	)		(928	)		(961	)			(1,055	)		(1,398	)
Loans, gross		1,373,477			1,379,521			1,369,445				1,340,159			1,317,765
Less allowance for loan losses		5,833			5,530			5,506				5,828			5,652
Loans, net	$	1,367,644			1,373,991			1,363,939				1,334,331			1,312,113
	Three Months Ended																	Six Months Ended
	6/30/2022				3/31/2022			12/31/2021			9/30/2021				6/30/2021			6/30/2022			6/30/2021
Selected Balance Sheet Items, continued
Total earning assets	$	1,722,853			1,712,115			1,716,420				1,695,281			1,671,462
Total assets		1,912,627			1,899,630			1,903,629				1,884,252			1,856,670
Total deposits		1,658,825			1,636,606			1,628,819				1,603,203			1,577,345
Short-term borrowings		5,000			24,746			—				—			—
Long-term debt		25,000			10,000			10,000				15,000			15,000
Total shareholders’ equity		202,960			206,875			238,604				238,419			239,952
Equity to assets ratio		10.61	%		10.89	%		12.53	%			12.65	%		12.92	%
Loans to deposits ratio		82.80	%		84.29	%		84.08	%			83.59	%		83.54	%
Tangible common equity (TCE)	$	142,557			146,360			177,949				177,501			178,771
Tangible common assets (TCA)		1,852,224			1,839,115			1,842,974				1,823,334			1,795,489
TCE/TCA		7.70	%		7.96	%		9.66	%			9.73	%		9.96	%
Selected Average Balance Sheet Items
Cash and cash equivalents	$	28,787			32,826			29,614				34,557			45,414			30,788			41,385
Debt and equity securities		338,149			340,666			348,150				356,214			312,596			339,432			286,517
Loans	$	1,375,710			1,376,926			1,351,762				1,321,629			1,328,760			1,376,315			1,321,323
Less allowance for loan losses		5,532			5,503			5,843				5,567			5,678			5,517			5,696
Net loans	$	1,370,178			1,371,423			1,345,919				1,316,062			1,323,082			1,370,798			1,315,627
Total earning assets	$	1,722,503			1,727,335			1,708,392				1,688,589			1,666,126			1,724,938			1,628,066
Total assets		1,912,574			1,917,226			1,896,530				1,879,314			1,852,035			1,914,767			1,813,888
Total deposits		1,655,389			1,646,627			1,615,020				1,595,773			1,570,070			1,651,032			1,529,339
Short-term borrowings		18,263			12,503			893				1,320			716			15,399			530
Long-term debt		12,637			10,000			14,402				15,000			15,571			11,326			17,619
Total shareholders’ equity		205,645			225,725			239,174				240,976			241,651			215,629			241,585
Equity to assets ratio		10.75	%		11.77	%		12.61	%			12.82	%		13.05	%		11.26	%		13.32	%
Loans to deposits ratio		83.10	%		83.62	%		83.70	%			82.82	%		84.63	%		83.36	%		86.40	%
Asset Quality
Net charge-offs (recoveries)	$	74			25			(186	)		$	130			12			99			9
Other real estate owned		—			—			—				—			—			—			—
Non-accrual loans	$	599			1,455			1,481				2,629			3,338			599			3,338
Loans past due 90 days or more and still accruing		—			—			56				13			—			—			—
Total nonperforming loans	$	599			1,455			1,537			$	2,642			3,338			599			3,338
Net charge-offs (recoveries) to average loans		0.02	%		0.01	%		(0.05	) %			0.04	%		0.00	%		0.01	%		0.00	%
Allowance for loan losses to total loans		0.42	%		0.40	%		0.40	%			0.43	%		0.43	%		0.42	%		0.43	%
Nonperforming loans to total loans		0.04	%		0.11	%		0.11	%			0.20	%		0.25	%		0.04	%		0.25	%
Nonperforming assets to total assets		0.03	%		0.08	%		0.08	%			0.14	%		0.18	%		0.03	%		0.18	%
Assets Under Management
LCNB Corp. total assets	$	1,912,627			1,899,630			1,903,629				1,884,252			1,856,670
Trust and investments (fair value)		625,984			700,353			722,093				713,936			701,838
Mortgage loans serviced		153,557			152,271			149,382				140,147			126,924
Cash management		38,914			75,302			34,009				72,622			80,177
Brokerage accounts (fair value)		303,663			326,290			334,670				319,495			314,491
Total assets managed	$	3,034,745			3,153,846			3,143,783				3,130,452			3,080,100

LCNB CORP. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in thousands)
	June 30, 2022 (Unaudited)				December 31, 2021
ASSETS:
Cash and due from banks	$	20,391			16,810
Interest-bearing demand deposits		11,424			1,326
Total cash and cash equivalents		31,815			18,136
Investment securities:
Equity securities with a readily determinable fair value, at fair value		2,250			2,546
Equity securities without a readily determinable fair value, at cost		2,099			2,099
Debt securities, available-for-sale, at fair value		301,232			308,177
Debt securities, held-to-maturity, at cost		22,516			22,972
Federal Reserve Bank stock, at cost		4,652			4,652
Federal Home Loan Bank stock, at cost		5,203			5,203
Loans, net		1,367,644			1,363,939
Premises and equipment, net		34,519			35,385
Operating leases right of use asset		6,101			6,357
Goodwill		59,221			59,221
Core deposit and other intangibles		2,178			2,473
Bank owned life insurance		43,758			43,224
Interest receivable		7,448			7,999
Other assets		21,991			21,246
TOTAL ASSETS	$	1,912,627			1,903,629
LIABILITIES:
Deposits:
Noninterest-bearing	$	499,124			501,531
Interest-bearing		1,159,701			1,127,288
Total deposits		1,658,825			1,628,819
Short-term borrowings		5,000			—
Long-term debt		25,000			10,000
Operating lease liabilities		6,227			6,473
Accrued interest and other liabilities		14,615			19,733
TOTAL LIABILITIES		1,709,667			1,665,025
COMMITMENTS AND CONTINGENT LIABILITIES		—			—
SHAREHOLDERS' EQUITY:
Preferred shares – no par value, authorized 1,000,000 shares, none outstanding		—			—
Common shares –no par value, authorized 19,000,000 shares; issued 14,258,074 and 14,213,792 shares at June 30, 2022 and December 31, 2021, respectively; outstanding 11,374,515 and 12,414,956 shares at June 30, 2022 and December 31, 2021, respectively		143,635			143,130
Retained earnings		131,894			126,312
Treasury shares at cost, 2,883,559 and 1,798,836 shares at June 30, 2022 and December 31, 2021, respectively		(50,629	)		(29,029	)
Accumulated other comprehensive loss, net of taxes		(21,940	)		(1,809	)
TOTAL SHAREHOLDERS' EQUITY		202,960			238,604
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	1,912,627			1,903,629

LCNB CORP. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
(Unaudited)
	Three Months Ended June 30,							Six Months Ended June 30,
	2022				2021			2022			2021
INTEREST INCOME:
Interest and fees on loans	$	14,548			14,108			28,334			28,643
Dividends on equity securities with a readily determinable fair value		14			13			26			26
Dividends on equity securities without a readily determinable fair value		5			5			10			11
Interest on debt securities, taxable		1,254			905			2,349			1,623
Interest on debt securities, non-taxable		188			218			377			442
Other investments		199			180			234			219
TOTAL INTEREST INCOME		16,208			15,429			31,330			30,964
INTEREST EXPENSE:
Interest on deposits		775			945			1,514			1,973
Interest on short-term borrowings		163			1			249			2
Interest on long-term debt		103			114			177			248
TOTAL INTEREST EXPENSE		1,041			1,060			1,940			2,223
NET INTEREST INCOME		15,167			14,369			29,390			28,741
PROVISION (CREDIT) FOR LOAN LOSSES		377			(15	)		426			(67	)
NET INTEREST INCOME AFTER PROVISION (CREDIT) FOR LOAN LOSSES		14,790			14,384			28,964			28,808
NON-INTEREST INCOME:
Fiduciary income		1,643			1,735			3,338			3,264
Service charges and fees on deposit accounts		1,546			1,519			2,952			2,885
Bank owned life insurance income		269			269			534			536
Gains from sales of loans		64			151			188			194
Other operating income		6			640			66			900
TOTAL NON-INTEREST INCOME		3,528			4,314			7,078			7,779
NON-INTEREST EXPENSE:
Salaries and employee benefits		7,014			7,111			14,229			13,544
Equipment expenses		428			443			836			811
Occupancy expense, net		735			729			1,510			1,523
State financial institutions tax		437			437			873			881
Marketing		368			357			630			625
Amortization of intangibles		112			260			252			517
FDIC insurance premiums, net		134			123			260			236
Contracted services		679			623			1,289			1,163
Other real estate owned, net		(879	)		1			(879	)		2
Other non-interest expense		2,441			2,124			4,719			4,398
TOTAL NON-INTEREST EXPENSE		11,469			12,208			23,719			23,700
INCOME BEFORE INCOME TAXES		6,849			6,490			12,323			12,887
PROVISION FOR INCOME TAXES		1,231			1,200			2,182			2,357
NET INCOME	$	5,618			5,290			10,141			10,530
Dividends declared per common share	$	0.20			0.19			0.40			0.38
Earnings per common share:
Basic		0.49			0.41			0.87			0.82
Diluted		0.49			0.41			0.87			0.82
Weighted average common shares outstanding:
Basic		11,337,805			12,743,726			11,576,873			12,769,131
Diluted		11,337,805			12,743,726			11,576,873			12,769,146

 

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