LCNB LCNB Corporation

LCNB Corp. (LCNB) today announced net income of $2,896,000 (total basic and diluted earnings per share of $0.29) and $8,828,000 (total basic and diluted earnings per share of $0.89 and $0.88, respectively) for the three and nine months ended September 30, 2016, respectively. This compares to net income of $2,633,000 (total basic and diluted earnings per share of $0.26) and $8,590,000 (total basic and diluted earnings per share of $0.89 and $0.88, respectively) for the same three and nine-month periods in 2015. Results for 2016 were significantly affected by the acquisition of BNB Bancorp, Inc. ("BNB") on April 30, 2015. In addition, LCNB sold impaired loans with a carrying value of approximately $4.5 million during the second quarter 2015.

Commenting on the financial results, LCNB Chief Executive Officer Steve Foster said, "We are pleased to present our financial results for the three and nine months ended September 30, 2016. Net income for the three and nine-month periods of 2016 was $263,000 and $238,000 greater than the comparable periods in 2015, respectively, despite several one-time charges that were recognized during 2016. The first of which was a $251,000 penalty incurred during the first quarter for the early payoff of a now high-rate Federal Home Loan Bank ("FHLB") borrowing, which will decrease future interest expense. The second was write-downs totaling $576,000 recognized during the second and third quarters for a commercial other real estate owned property. Organic loan growth during the nine-month period in 2016 was $40.7 million, which significantly contributed to increases in net interest income of $513,000 and $482,000 for the three and nine months ended September 30, 2016, respectively, as compared to the same periods in 2015."

The provision for loan losses for the three months ended September 30, 2016 was $132,000 greater than the comparable period in 2015. The provision for the nine-month period of 2016 was $128,000 less than the comparable period in 2015. Net loan charge-offs for the nine months ended September 30, 2016 and 2015 totaled $189,000 and $1,148,000, respectively. The 2015 balance includes charge-offs recognized as a result of the impaired loan sale mentioned above. Non-accrual loans and loans past due 90 days or more and still accruing interest increased $2,357,000, from $2,282,000 or 0.30% of total loans at December 31, 2015, to $4,639,000 or 0.57% of total loans at September 30, 2016, primarily due to two loans to the same borrower totaling $1,307,000 that were newly classified as non-accrual during the first quarter 2016 and two loans to same borrower totaling $1,217,000 that were newly classified as non-accrual during the third quarter 2016. Other real estate owned (which includes property acquired through foreclosure or deed-in-lieu of foreclosure) decreased from $846,000 at December 31, 2015 to $270,000 at September 30, 2016 due to write-downs totaling $576,000 recognized on commercial property.

Non-interest income for the three and nine months ended September 30, 2016 was $460,000 and $715,000 greater than the comparable periods in 2015, respectively, primarily due to increases in gains from sales of investment securities, reflecting a higher volume of securities sales.

Non-interest expense for the three and nine months ended September 30, 2016 was $505,000 and $1,190,000 greater than the comparable periods in 2015, respectively. The increase for the quarter was largely due to increases in salaries and employee benefits. The increase for the nine-month period was primarily due to increases in salaries and employee benefits, increases in other real estate owned expenses, and a $251,000 penalty for the early payoff of a $5 million FHLB advance recognized during the first quarter 2016. The FHLB advance had an interest rate of 5.25% and was paid off to reduce interest expense on long-term debt. Salaries and employee benefits increased primarily due to salary and wage increases, employees retained from the BNB acquisition, and an increase in the number of employees in addition to the acquisition. These increases were partially offset by the absence of merger-related expenses during the 2016 period.

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, 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.

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 may incur increased charge-offs in the future;
3. LCNB may face competitive loss of customers;
4. 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;
5. changes in general economic conditions and increased competition could adversely affect LCNB’s operating results;
6. 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;
7. LCNB may experience difficulties growing loan and deposit balances;
8. the current economic environment poses significant challenges for us and could adversely affect our financial condition and results of operations;
9. 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; and
10. the effects of the Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) and the regulations promulgated and to be promulgated thereunder, which may subject LCNB and its subsidiaries to a variety of new and more stringent legal and regulatory requirements which adversely affect their respective businesses.

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 Nine Months Ended 9/30/2016   6/30/2016   3/31/2016   12/31/2015   9/30/2015 9/30/2016   9/30/2015

Condensed Income Statement

Interest income $ 10,895 11,008 10,621 10,812 10,409 32,524 31,847 Interest expense 885   883   849   906   912   2,617   2,422   Net interest income 10,010 10,125 9,772 9,906 9,497 29,907 29,425 Provision for loan losses 372   396   90   380   240   858   986   Net interest income after provision 9,638 9,729 9,682 9,526 9,257 29,049 28,439 Non-interest income 2,846 2,750 2,642 2,600 2,386 8,238 7,523 Non-interest expense 8,593   8,468   8,292   8,229   8,088   25,353   24,163   Income before income taxes 3,891 4,011 4,032 3,897 3,555 11,934 11,799 Provision for income taxes 995   1,043   1,068   1,013   922   3,106   3,209   Net income $ 2,896   2,968   2,964   2,884   2,633   8,828   8,590   Accreted income on acquired loans $ 223 304 343 292 255 870 1,934 Amortization of acquired deposit premiums $ 0 0 27 34 46 27 443 Tax-equivalent net interest income $ 10,432 10,538 10,166 10,298 9,874 31,136 30,500  

Per Share Data

Dividends per share $ 0.16 0.16 0.16 0.16 0.16 0.48 0.48 Basic earnings per share $ 0.29 0.30 0.30 0.29 0.26 0.89 0.89 Diluted earnings per share $ 0.29 0.29 0.30 0.29 0.26 0.88 0.88 Book value per share $ 14.70 14.66 14.39 14.12 14.22 14.70 14.22 Tangible book value per share $ 11.24 11.17 10.88 10.58 10.66 11.24 10.66 Average basic shares outstanding 9,962,571 9,922,024 9,916,114 9,905,612 9,898,233 9,930,182 9,637,344 Average diluted shares outstanding 9,977,592 9,943,797 9,998,516 10,014,908 10,005,788 9,974,319 9,742,839 Shares outstanding at period end 9,993,695 9,937,262 9,931,788 9,925,547 9,903,294 9,993,695 9,903,294  

Selected Financial Ratios

Return on average assets 0.87 % 0.92 % 0.93 % 0.89 % 0.82 % 0.91 % 0.95 % Return on average equity 7.82 % 8.28 % 8.37 % 8.07 % 7.51 % 8.15 % 8.55 % Dividend payout ratio 55.17 % 53.33 % 53.33 % 55.17 % 61.54 % 53.93 % 53.93 % Net interest margin (tax equivalent) 3.42 % 3.55 % 3.49 % 3.46 % 3.37 % 3.49 % 3.71 % Efficiency ratio (tax equivalent) 64.71 % 63.73 % 64.74 % 63.80 % 65.97 % 64.39 % 63.55 %  

Selected Balance Sheet Items

Investment securities and stock $ 394,798 399,345 393,976 406,981 391,430   Loans: Commercial and industrial $ 40,097 45,153 45,324 45,275 45,325 Commercial, secured by real estate 467,512 455,654 430,179 419,633 407,264 Residential real estate 268,574 266,625 271,812 273,139 274,054 Consumer 18,752 18,545 17,925 18,510 19,283 Agricultural 15,872 13,605 12,589 13,479 16,016 Other, including deposit overdrafts 619 635 643 665 676 Deferred net origination costs 236   248   242   237   215   Loans, gross 811,662 800,465 778,714 770,938 762,833 Less allowance for loan losses 3,798   3,373   3,150   3,129   2,958   Loans, net $ 807,864   797,092   775,564   767,809   759,875     Total earning assets $ 1,222,614 1,201,563 1,180,719 1,178,750 1,168,629 Total assets 1,333,536 1,312,635 1,285,922 1,280,531 1,275,171 Total deposits 1,158,921 1,124,698 1,120,208 1,087,160 1,103,513 Short-term borrowings 16,989 30,541 11,668 37,387 14,931 Long-term debt 662 726 789 5,947 6,016    

 

Three Months Ended Six Months Ended 9/30/2016 6/30/2016 3/31/2016 12/31/2015 9/30/2015 9/30/2016 9/30/2015

Selected Balance Sheet Items, continued

Total shareholders’ equity 146,906 145,710 142,933 140,108 140,851 Equity to assets ratio 11.02 % 11.10 % 11.12 % 10.94 % 11.05 % Loans to deposits ratio 70.04 % 71.17 % 69.52 % 70.91 % 69.13 %   Tangible common equity (TCE) $ 111,946 110,541 107,567 104,529 105,063 Tangible common assets (TCA) 1,298,576 1,277,466 1,250,556 1,244,952 1,239,383 TCE/TCA 8.62 % 8.65 % 8.60 % 8.40 % 8.48 %  

Selected Average Balance Sheet Items

Investment securities and stock $ 396,620 396,130 389,648 406,423 385,353 394,141 353,391   Loans $ 800,729 784,324 772,204 764,440 760,159 785,807 732,600 Less allowance for loan losses 3,382   3,103   3,130   2,929   2,885   3,206   2,873   Net loans $ 797,347 781,221 769,074 761,511 757,274 782,601 729,727   Total earning assets $ 1,212,232 1,193,585 1,171,709 1,181,594 1,160,768 1,192,580 1,099,351 Total assets 1,323,532 1,303,073 1,278,014 1,285,114 1,267,171 1,301,620 1,204,909 Total deposits 1,147,981 1,133,403 1,104,330 1,107,214 1,099,730 1,128,642 1,042,879 Short-term borrowings 16,328 14,355 20,710 20,290 13,450 17,128 13,358 Long-term debt 684 747 1,256 5,970 6,040 895 6,247 Total shareholders’ equity 147,371 144,185 142,447 141,751 139,032 144,678 134,256 Equity to assets ratio 11.13 % 11.06 % 11.15 % 11.03 % 10.97 % 11.12 % 11.14 % Loans to deposits ratio 69.75 % 69.20 % 69.93 % 69.04 % 69.12 % 69.62 % 70.25 %  

Asset Quality

Net charge-offs $ (53 ) 173 69 209 161 Other real estate owned 270 682 846 846 1,208   Non-accrual loans 4,619 2,697 3,328 1,723 2,254 Loans past due 90 days or more and still accruing 20   369   99   559   130   Total nonperforming loans $ 4,639 3,066 3,427 2,282 2,384   Net charge-offs to average loans (0.03 )% 0.09 % 0.04 % 0.11 % 0.08 % Allowance for loan losses to total loans 0.47 % 0.42 % 0.40 % 0.41 % 0.39 % Nonperforming loans to total loans 0.57 % 0.38 % 0.44 % 0.30 % 0.31 % Nonperforming assets to total assets 0.37 % 0.29 % 0.33 % 0.24 % 0.28 %  

Assets Under Management

LCNB Corp. total assets $ 1,333,536 1,312,635 1,285,922 1,280,531 1,275,171 Trust and investments (fair value) 293,808 284,118 274,297 283,193 258,675 Mortgage loans serviced 105,018 107,189 107,992 111,837 113,610 Business cash management 7,647 8,551 6,773 7,271 6,809 Brokerage accounts (fair value) 179,244   163,596   157,713   148,956   142,151   Total assets managed $ 1,919,253   1,876,089   1,832,697   1,831,788   1,796,416    

Non-GAAP Financial Measures

Net income $ 2,896 2,968 2,964 2,884 2,633 8,828 8,590 Less (add) net gain (loss) on sales of securities, net of tax 202 183 245 108 0 630 219 Add merger-related expenses, net of tax 0   0   0   2   32   0   461   Core net income $ 2,694 2,785 2,719 2,778 2,665 8,198 8,832 Basic core earnings per share $ 0.27 0.28 0.27 0.28 0.27 0.83 0.92 Diluted core earnings per share $ 0.27 0.28 0.27 0.28 0.27 0.82 0.91 Adjusted return on average assets 0.81 % 0.86 % 0.85 % 0.86 % 0.83 % 0.84 % 0.98 % Adjusted return on average equity 7.27 % 7.77 % 7.66 % 7.77 % 7.60 % 7.57 % 8.80 % Core efficiency ratio (tax equivalent) 66.24 % 65.09 % 66.67 % 64.60 % 65.57 % 65.99 % 62.41 %

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