LCNB Corp. Reports Record Financial Results For The Three and Six Months Ended June 30, 2021

LCNB Wealth Assets Up 31.8% Year-over-Year to a Record $1.02 Billion
Total Assets Managed¹ 13.1% Higher Year-over-Year to a Record $3.08 Billion
Second Quarter Diluted Earnings Per Share Increased 5.1% Year-over-Year to a Second Quarter Record of $0.41

LEBANON, Ohio--(BUSINESS WIRE)--LCNB Corp. ("LCNB") (NASDAQ: LCNB) today announced financial results for the three and six months ended June 30, 2021.

Commenting on the financial results, LCNB President and Chief Executive Officer Eric Meilstrup said, “LCNB achieved record second quarter earnings, driven by continued growth in total assets managed and strong asset quality. Growing assets, controlling risk, and diversifying revenue has helped LCNB successfully navigate the current low interest rate environment. Fee income generated from the Paycheck Protection Program (“PPP”) also contributed $402,000 to our record second quarter earnings as we processed $10.4 million of loan forgiveness under the program during the quarter. PPP loans continue to wind down and our loan portfolio included $23.8 million of PPP loans at June 30, 2021. In addition, we continue to benefit from robust fiduciary income associated with our rapidly growing wealth management business and, for the second quarter 2021, fiduciary income increased 44.5% over the prior year period to a quarterly record of $1.7 million."

Mr. Meilstrup continued, “Average net loans are up both sequentially and year-over-year, despite the $46 million of PPP loans forgiven over the past 12 months, which is a testament to our local presence and the value we provide customers within our compelling Ohio markets. In addition, while the competition for loans is high, we remain disciplined with our approach to risk and pricing of loans. As a result, our asset quality is robust as total non-performing loans are in line with pre-pandemic levels and net charge-offs continue to be limited. At June 30, 2021, we only had one $10.4 million relationship still in a COVID-19 deferral status, which is a 97.3% decline from the balance of COVID-19 deferrals at June 30, 2020.

¹ Total Assets Managed includes LCNB Corp. Consolidated Assets, LCNB Wealth Management Assets (Trust and Investments and Brokerage accounts), Loans Serviced for Others, and Cash Management Services.

“We continue to focus on strategies that support our growth opportunities, increase operating efficiencies, improve our customer engagement, and enhance our digital resources. We continue to develop and retain proven bankers and financial professionals throughout our organization. Additionally, we continue to attract new talent and we recently enhanced our commercial lending presence to pursue additional loan opportunities within Northern Kentucky. We also recently rebranded our investment and trust services to LCNB Wealth, which is an important component of our enhanced go to market and cross-selling strategies. Overall, I am extremely pleased with the progress we are making and excited by the direction we are headed,” concluded Mr. Meilstrup.

Net income for the 2021 second quarter was $5,290,000, compared to $5,057,000 for the same period last year. Earnings per basic and diluted share for the 2021 second quarter were $0.41, compared to $0.39 for the same period last year. Net income for the six-month period ended June 30, 2021, was $10,530,000, compared to $10,083,000 for the same period last year. Earnings per basic and diluted share for the six-month period ended June 30, 2021, were $0.82, compared to $0.78 for the same period last year.

Net interest income for the three months ended June 30, 2021, was $14,369,000, compared to $13,998,000 for the comparable period in 2020. Net interest income for the six-month period ended June 30, 2021, increased $565,000 to $28,741,000, as compared to $28,176,000 in the same period last year. Favorably contributing to the variances for both the three- and six- month periods were fees recognized from PPP loans and market driven 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, 2021, increased $995,000 or by 30.0% to $4,314,000, compared to $3,319,000 for the same period last year. For the six months ended June 30, 2021, non-interest income increased $621,000 or by 8.7% to $7,779,000, compared to $7,158,000 for the same period last year. The primary drivers of the second quarter and first half year-over-year increases in non-interest income were increased fiduciary income, deposit service charges, and a one-time refund for the Company’s Ohio Financial Institution taxes, which was included in other operating income.

Non-interest expense for the three months ended June 30, 2021, was $1,092,000 greater than the comparable period in 2020 primarily due to increases in salaries and employee benefits, equipment, marketing, FDIC insurance, contracted services, and other non-interest expenses. For the first half ended June 30, 2021, non-interest expense increased $1,512,000 from the comparable period in 2020.

Asset Quality

For the 2021 second quarter, LCNB recorded a $15,000 credit for loan losses, compared to a provision of $16,000 for the 2020 second quarter. For the six months ended June 30, 2021, LCNB recognized a credit for loan losses of $67,000, compared to a provision of $1,189,000 for the six months ended June 30, 2020. The $1,256,000 year-over-year improvement in the provision for loan losses was partially due to strong asset quality and last year’s proactive build in the Company’s allowance for loan losses associated with the potential economic impacts caused by the COVID-19 pandemic.

Net charge-offs for the 2021 second quarter were $12,000, compared to $8,000 for the same period last year. For the 2021 six-month period, net charge-offs were $9,000, compared to $218,000 or 0.03% of average loans for the 2020 six-month period.

Non-accrual loans and loans past due 90 days or more and still accruing interest decreased $576,000, from $3,914,000 or 0.29% of total loans at June 30, 2020, to $3,338,000 or 0.25% of total loans at June 30, 2021. Nonperforming assets to total assets was 0.18% at June 30, 2021, compared to 0.23% at June 30, 2020.

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, digital 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, 2020, 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, 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 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 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
	6/30/2021			3/31/2021			12/31/2020		9/30/2020		6/30/2020		6/30/2021		6/30/2020
Condensed Income Statement
Interest income	$	15,429		$	15,535		15,945		15,322		15,957		30,964		32,513
Interest expense	1,060			1,163			1,432		1,793		1,959		2,223		4,337
Net interest income	14,369			14,372			14,513		13,529		13,998		28,741		28,176
Provision (credit) for loan losses	(15		)	(52		)	(151	)	976		16		(67	)	1,189
Net interest income after provision (credit)	14,384			14,424			14,664		12,553		13,982		28,808		26,987
Non-interest income	4,314			3,465			4,305		4,278		3,319		7,779		7,158
Non-interest expense	12,208			11,492			11,944		11,653		11,116		23,700		22,188
Income before income taxes	6,490			6,397			7,025		5,178		6,185		12,887		11,957
Provision for income taxes	1,200			1,157			1,283		928		1,128		2,357		1,874
Net income	$	5,290		$	5,240		5,742		4,250		5,057		10,530		10,083
Amort/Accret income on acquired loans	$	216		$	249		186		181		294		465		961
Amort/Accret expenses on acquired interest-bearing liabilities	$	—		$	—		1		—		2		—		4
Tax-equivalent net interest income	$	14,427		$	14,432		14,577		13,594		14,066		28,858		28,319
Per Share Data
Dividends per share	$	0.19		$	0.19		0.19		0.18		0.18		0.38		0.36
Basic earnings per common share	$	0.41		$	0.41		0.44		0.33		0.39		0.82		0.78
Diluted earnings per common share	$	0.41		$	0.41		0.44		0.33		0.39		0.82		0.78
Book value per share	$	18.99		$	18.66		18.73		18.46		18.27		18.99		18.27
Tangible book value per share	$	14.15		$	13.87		13.93		13.66		13.47		14.15		13.47
Weighted average common shares outstanding:
Basic	12,743,726			12,794,824			12,852,614		12,937,865		12,940,975		12,769,131		12,933,528
Diluted	12,743,726			12,794,852			12,852,657		12,937,901		12,941,001		12,769,146		12,934,158
Shares outstanding at period end	12,634,845			12,820,108			12,858,325		12,926,686		12,975,879		12,634,845		12,975,879
Selected Financial Ratios
Return on average assets	1.15		%	1.20		%	1.31	%	0.97	%	1.19	%	1.17	%	1.21	%
Return on average equity	8.78		%	8.80		%	9.52	%	7.08	%	8.63	%	8.79	%	8.69	%
Return on average tangible equity	11.76		%	11.81		%	12.83	%	9.56	%	11.74	%	11.79	%	11.92	%
Dividend payout ratio	46.34		%	46.34		%	43.18	%	54.55	%	46.15	%	46.34	%	46.15	%
Net interest margin (tax equivalent)	3.51		%	3.68		%	3.71	%	3.47	%	3.70	%	3.57	%	3.81	%
Efficiency ratio (tax equivalent)	65.14		%	64.21		%	63.26	%	65.20	%	63.94	%	64.69	%	62.54	%
Selected Balance Sheet Items
Cash and cash equivalents	$	22,909		$	41,144		31,730		24,485		42,736
Debt and equity securities	349,199			276,774			248,624		199,044		194,883
Loans:
Commercial and industrial	$	97,240		$	107,630		100,254		124,628		125,492
Commercial, secured by real estate	836,085			855,894			843,230		843,943		833,286
Residential real estate	341,447			328,265			309,692		327,689		334,349
Consumer	35,257			35,799			36,917		36,504		32,859
Agricultural	8,765			8,698			10,100		8,920		11,071
Other, including deposit overdrafts	369			346			363		403		283
Deferred net origination fees	(1,398		)	(1,531		)	(1,135	)	(1,927	)	(1,902	)
Loans, gross	1,317,765			1,335,101			1,299,421		1,340,160		1,335,438
Less allowance for loan losses	5,652			5,679			5,728		5,974		5,016
Loans, net	$	1,312,113		$	1,329,422		1,293,693		1,334,186		1,330,422
Total earning assets	$	1,671,462		$	1,634,818		1,562,392		1,547,538		1,554,537
Total assets	1,856,670			1,818,321			1,745,884		1,725,615		1,735,332

	Three Months Ended												Six Months Ended
	6/30/2021			3/31/2021			12/31/2020		9/30/2020		6/30/2020		6/30/2021		6/30/2020
Selected Balance Sheet Items, continued
Total deposits	1,577,345			1,537,116			1,455,423		1,430,394		1,438,921
Short-term borrowings	—			—			—		—		—
Long-term debt	15,000			17,000			22,000		31,999		33,998
Total shareholders’ equity	239,952			239,246			240,825		238,585		237,047
Equity to assets ratio	12.92		%	13.16		%	13.79	%	13.83	%	13.66	%
Loans to deposits ratio	83.54		%	86.86		%	89.28	%	93.69	%	92.81	%
Tangible common equity (TCE)	$	178,771		$	177,805		179,127		176,624		174,823
Tangible common assets (TCA)	1,795,489			1,756,880			1,684,186		1,663,654		1,673,108
TCE/TCA	9.96		%	10.12		%	10.64	%	10.62	%	10.45	%
Selected Average Balance Sheet Items
Cash and cash equivalents	$	45,414		$	37,269		49,273		42,661		46,292		41,385		35,712
Debt and equity securities	312,596			260,147			218,816		197,788		182,371		286,517		193,642
Loans	$	1,328,760		$	1,313,803		1,313,892		1,339,608		1,318,753		1,321,323		1,285,654
Less allowance for loan losses	5,678			5,715			5,920		5,250		4,998		5,696		4,468
Net loans	$	1,323,082		$	1,308,088		1,307,972		1,334,358		1,313,755		1,315,627		1,281,186
Total earning assets	$	1,666,126		$	1,589,582		1,561,392		1,558,886		1,528,610		1,628,066		1,495,779
Total assets	1,852,035			1,775,154			1,742,947		1,741,998		1,704,303		1,813,888		1,671,394
Total deposits	1,570,070			1,488,156			1,447,217		1,445,573		1,412,082		1,529,339		1,379,426
Short-term borrowings	716			342			—		—		82		530		749
Long-term debt	15,571			19,689			30,803		33,020		34,964		17,619		36,644
Total shareholders’ equity	241,651			241,517			239,881		238,990		235,587		241,585		233,322
Equity to assets ratio	13.05		%	13.61		%	13.76	%	13.72	%	13.82	%	13.32	%	13.96	%
Loans to deposits ratio	84.63		%	88.28		%	90.79	%	92.67	%	93.39	%	86.40	%	93.20	%
Asset Quality
Net charge-offs (recoveries)	$	12		$	(3	)	95		18		8		9		218
Other real estate owned	—			—			—		—		—		—		—
Non-accrual loans	3,338			3,365			3,718		4,110		3,876		3,338		3,876
Loans past due 90 days or more and still accruing	—			—			—		94		38		—		38
Total nonperforming loans	$	3,338		$	3,365		3,718		4,204		3,914		3,338		3,914
Net charge-offs to average loans	0.00		%	0.00		%	0.03	%	0.01	%	0.00	%	0.00	%	0.03	%
Allowance for loan losses to total loans	0.43		%	0.43		%	0.44	%	0.45	%	0.38	%	0.43	%	0.38	%
Nonperforming loans to total loans	0.25		%	0.25		%	0.29	%	0.31	%	0.29	%	0.25	%	0.29	%
Nonperforming assets to total assets	0.18		%	0.19		%	0.21	%	0.24	%	0.23	%	0.18	%	0.23	%
Assets Under Management
LCNB Corp. total assets	$	1,856,670		$	1,818,321		1,745,884		1,725,615		1,735,332
Trust and investments (fair value)	701,838			673,742			628,414		524,502		516,076
Mortgage loans serviced	126,924			127,290			137,188		120,546		100,189
Cash management	80,177			118,494			116,792		119,520		116,615
Brokerage accounts (fair value)	314,491			299,355			292,953		267,307		255,276
Total assets managed	$	3,080,100		$	3,037,202		2,921,231		2,757,490		2,723,488

LCNB CORP. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (Dollars in thousands)
	June 30, 2021 (Unaudited)			December 31, 2020
ASSETS:
Cash and due from banks	$	18,411		17,383
Interest-bearing demand deposits	4,498			14,347
Total cash and cash equivalents	22,909			31,730
Investment securities:
Equity securities with a readily determinable fair value, at fair value	2,488			2,389
Equity securities without a readily determinable fair value, at cost	2,099			2,099
Debt securities, available-for-sale, at fair value	310,515			209,471
Debt securities, held-to-maturity, at cost	24,242			24,810
Federal Reserve Bank stock, at cost	4,652			4,652
Federal Home Loan Bank stock, at cost	5,203			5,203
Loans, net	1,312,113			1,293,693
Premises and equipment, net	35,356			35,376
Operating leases right of use asset	6,730			6,274
Goodwill	59,221			59,221
Core deposit and other intangibles	2,853			3,453
Bank owned life insurance	42,685			42,149
Interest receivable	8,395			8,337
Other assets	17,209			17,027
TOTAL ASSETS	$	1,856,670		1,745,884
LIABILITIES:
Deposits:
Noninterest-bearing	$	472,830		455,073
Interest-bearing	1,104,515			1,000,350
Total deposits	1,577,345			1,455,423
Long-term debt	15,000			22,000
Operating lease liabilities	6,846			6,371
Accrued interest and other liabilities	17,527			21,265
TOTAL LIABILITIES	1,616,718			1,505,059
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 14,201,728 and 14,163,904 shares at June 30, 2021 and December 31, 2020, respectively; outstanding 12,634,845 and 12,858,325 shares at June 30, 2021 and December 31, 2020, respectively	142,791			142,443
Retained earnings	120,720			115,058
Treasury shares at cost, 1,566,883 and 1,305,579 shares at June 30, 2021 and December 31, 2020, respectively	(25,122		)	(20,719	)
Accumulated other comprehensive income, net of taxes	1,563			4,043
TOTAL SHAREHOLDERS' EQUITY	239,952			240,825
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	1,856,670		1,745,884

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,
	2021			2020	2021		2020
INTEREST INCOME:
Interest and fees on loans	$	14,108		14,822	28,643		30,049
Dividends on equity securities with a readily determinable fair value	13			13	26		27
Dividends on equity securities without a readily determinable fair value	5			12	11		28
Interest on debt securities, taxable	905			667	1,623		1,617
Interest on debt securities, non-taxable	218			254	442		539
Other investments	180			189	219		253
TOTAL INTEREST INCOME	15,429			15,957	30,964		32,513
INTEREST EXPENSE:
Interest on deposits	945			1,732	1,973		3,849
Interest on short-term borrowings	1			—	2		7
Interest on long-term debt	114			227	248		481
TOTAL INTEREST EXPENSE	1,060			1,959	2,223		4,337
NET INTEREST INCOME	14,369			13,998	28,741		28,176
PROVISION (CREDIT) FOR LOAN LOSSES	(15		)	16	(6	)	1,189
NET INTEREST INCOME AFTER PROVISION (CREDIT) FOR LOAN LOSSES	14,384			13,982	28,808		26,987
NON-INTEREST INCOME:
Fiduciary income	1,735			1,201	3,264		2,304
Service charges and fees on deposit accounts	1,519			1,237	2,885		2,532
Net gains on sales of debt securities, available-for-sale	—			—	—		221
Bank owned life insurance income	269			287	536		888
Gains from sales of loans	151			317	194		437
Other operating income	640			277	900		776
TOTAL NON-INTEREST INCOME	4,314			3,319	7,779		7,158
NON-INTEREST EXPENSE:
Salaries and employee benefits	7,111			6,648	13,544		13,416
Equipment expenses	443			289	811		576
Occupancy expense, net	729			723	1,523		1,405
State financial institutions tax	437			420	881		856
Marketing	357			258	625		435
Amortization of intangibles	260			260	517		520
FDIC insurance premiums, net	123			31	236		30
Contracted services	623			475	1,163		877
Other non-interest expense	2,125			2,012	4,400		4,073
TOTAL NON-INTEREST EXPENSE	12,208			11,116	23,700		22,188
INCOME BEFORE INCOME TAXES	6,490			6,185	12,887		11,957
PROVISION FOR INCOME TAXES	1,200			1,128	2,357		1,874
NET INCOME	$	5,290		5,057	10,530		10,083
Dividends declared per common share	$	0.19		0.18	0.38		0.36
Earnings per common share:
Basic	0.41			0.39	0.82		0.78
Diluted	0.41			0.39	0.82		0.78
Weighted average common shares outstanding:
Basic	12,743,726			12,940,975	12,769,131		12,933,528
Diluted	12,743,726			12,941,001	12,769,146		12,934,158