LCNB Corp. (LCNB) (NASDAQ: LCNB) today announced net income of $3,003,000 (total basic and diluted earnings per share of $0.30) and $6,249,000 (total basic and diluted earnings per share of $0.62) for the three and six months ended June 30, 2017. This compares to net income of $2,968,000 (total basic and diluted earnings per share of $0.30 and $0.29, respectively) and $5,932,000 (total basic and diluted earnings per share of $0.60 and $0.59, respectively) for the same three and six-month periods in 2016.

Commenting on the financial results, LCNB Chief Executive Officer Steve Foster said, "We are pleased to present our financial results for the first half of 2017. Our financial results were solid and we experienced continued growth in our loan and deposit relationships. Return on average assets for the six months ended June 30, 2017 was 0.96% compared to 0.92% for the first half of 2016. Return on average equity for the first half of 2017 was 8.62% compared to 8.32% for the same period in 2016. Comparing June 30, 2017 to June 30, 2016, net loans increased $26.5 million or 3.3% and total deposits increased $19.2 million or 1.7%.

Net interest income for the three months ended June 30, 2017 was $52,000 less from the comparable period in 2016 primarily due to a decrease in the interest rate margin from 3.55% for the second quarter 2016 to 3.50% for the second quarter 2017. Net interest income for the six months ended June 30, 2017 increased $163,000 over the comparable period in 2016 due primarily to growth in LCNB's loan portfolio, partially offset by a decrease in the average rate earned on the portfolio.

The provision for loan losses for the three and six months ended June 30, 2017 was $174,000 and $249,000, respectively, less than the comparable periods in 2016. Net loan charge-offs for the three and six months ended June 30, 2017 totaled $168,000 and $430,000, respectively. This compares to net charge-offs of $173,000 and $242,000 for the three and six months ended June 30, 2016, respectively. Non-accrual loans and loans past due 90 days or more and still accruing interest decreased $1,860,000, from $5,748,000 or 0.70% of total loans at December 31, 2016, to $3,888,000 or 0.47% of total loans at June 30, 2017. The decrease is primarily due to two non-accrual commercial real estate loans to the same borrower with a carrying value of $1,236,000 at December 31, 2016 that were transferred into other real estate owned and subsequently sold during the first quarter 2017.

Non-interest income for the three months ended June 30, 2017 was $40,000 greater than the comparable period in 2016 primarily due to increases in trust income, service charges and fees on deposit accounts and income from bank owned life insurance. These increases were largely offset by decreases in gains from the sale of investment securities. Non-interest income for the six months ended June 30, 2017 was $172,000 less than the comparable period in 2016, primarily due to a $510,000 decrease in gains from the sales of investment securities, partially offset by increases in the same line items mentioned previously.

Non-interest expense for the three months ended June 30, 2017 was $143,000 greater than the comparable period in 2016 primarily due to organizational costs for a captive insurance agency incorporated by LCNB Corp. during the second quarter 2017 and to increases in salaries and employee benefits, partially offset by a decrease in other real estate owned expenses. Non-interest expense for the six months ended June 30, 2017 was $181,000 less than the comparable period in 2016, primarily due to a $380,000 decrease in other real estate owned expenses and to the absence of a $251,000 penalty incurred during the first quarter 2016 to pre-pay a Federal Home Loan Bank borrowing bearing an interest rate of 5.25%. The borrowing was paid off to reduce future interest expense on long-term debt. These decreases were partially offset by the increases previously mentioned.

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. A commercial loan office is located in Franklin County, 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 Six Months Ended
6/30/2017   3/31/2017   12/31/2016   9/30/2016   6/30/2016 6/30/2017   6/30/2016

Condensed Income Statement

Interest income $ 10,934 10,864 11,226 10,895 11,008 21,798 21,629
Interest expense 861   877   887   885   883   1,738   1,732  
Net interest income 10,073 9,987 10,339 10,010 10,125 20,060 19,897
Provision for loan losses 222   15   55   372   396   237   486  
Net interest income after provision 9,851 9,972 10,284 9,638 9,729 19,823 19,411
Non-interest income 2,790 2,430 2,615 2,846 2,750 5,220 5,392
Non-interest expense 8,611   7,968   7,908   8,593   8,468   16,579   16,760  
Income before income taxes 4,030 4,434 4,991 3,891 4,011 8,464 8,043
Provision for income taxes 1,027   1,188   1,337   995   1,043   2,215   2,111  
Net income $ 3,003   3,246   3,654   2,896   2,968   6,249   5,932  
Accreted income on acquired loans $ 180 220 495 223 304 400 647
Tax-equivalent net interest income $ 10,494 10,410 10,772 10,432 10,538 20,904 20,704
 

Per Share Data

Dividends per share $ 0.16 0.16 0.16 0.16 0.16 0.32 0.32
Basic earnings per common share $ 0.30 0.32 0.37 0.29 0.30 0.62 0.60
Diluted earnings per common share $ 0.30 0.32 0.37 0.29 0.29 0.62 0.59
Book value per share $ 14.77 14.52 14.30 14.70 14.66 14.77 14.66
Tangible book value per share $ 11.38 11.11 10.86 11.24 11.17 11.38 11.17
Average basic common shares outstanding 10,004,422 9,995,054 9,984,344 9,962,571 9,922,024 9,999,765 9,919,070
Average diluted common shares outstanding 10,011,312 10,002,878 9,997,565 9,977,592 9,943,797 10,007,192 9,971,900
Shares outstanding at period end 10,014,004 10,009,642 9,998,025 9,993,695 9,937,262 10,014,004 9,937,262
 

Selected Financial Ratios

Return on average assets 0.91 % 1.01 % 1.10 % 0.87 % 0.92 % 0.96 % 0.92 %
Return on average equity 8.15 % 9.10 % 9.91 % 7.82 % 8.28 % 8.62 % 8.32 %
Dividend payout ratio 53.33 % 50.00 % 43.24 % 55.17 % 53.33 % 51.61 % 53.33 %
Net interest margin (tax equivalent) 3.50 % 3.55 % 3.56 % 3.42 % 3.55 % 3.53 % 3.52 %
Efficiency ratio (tax equivalent) 64.82 % 62.06 % 59.07 % 64.71 % 63.73 % 63.47 % 64.22 %
 

Selected Balance Sheet Items

Cash and cash equivalents $ 29,967 33,274 18,865 33,213 19,007
Investment securities and stock 373,595 371,501 368,032 394,798 399,345
 
Loans:
Commercial and industrial $ 38,651 40,039 41,878 40,097 45,153
Commercial, secured by real estate 495,255 475,594 477,275 467,512 455,654
Residential real estate 258,710 260,853 265,788 268,574 266,625
Consumer 17,475 17,646 19,173 18,752 18,545
Agricultural 16,014 15,459 14,802 15,872 13,605
Other, including deposit overdrafts 547 609 633 619 635
Deferred net origination costs 281   281   254   236   248  
Loans, gross 826,933 810,481 819,803 811,662 800,465
Less allowance for loan losses 3,382   3,328   3,575   3,798   3,373  
Loans, net $ 823,551   807,153   816,228   807,864   797,092  
 
Three Months Ended Six Months Ended
6/30/2017 3/31/2017 12/31/2016 9/30/2016 6/30/2016 6/30/2017 6/30/2016

Selected Balance Sheet Items, continued

Total earning assets $ 1,211,096 1,200,544 1,188,322 1,222,614 1,201,563
Total assets 1,335,571 1,319,074 1,306,799 1,333,536 1,312,635
Total deposits 1,143,920 1,148,198 1,110,905 1,158,921 1,124,698
Short-term borrowings 31,712 15,957 42,040 16,989 30,541
Long-term debt 402 480 598 662 726
Total shareholders’ equity 147,927 145,318 142,944 146,906 145,710
Equity to assets ratio 11.08 % 11.02 % 10.94 % 11.02 % 11.10 %
Loans to deposits ratio 72.29 % 70.59 % 73.80 % 70.04 % 71.17 %
 
Tangible common equity (TCE) $ 113,542 110,745 108,178 111,946 110,541
Tangible common assets (TCA) 1,301,186 1,284,501 1,272,033 1,298,576 1,277,466
TCE/TCA 8.73 % 8.62 % 8.50 % 8.62 % 8.65 %
 

Selected Average Balance Sheet Items

Cash and cash equivalents $ 33,639 26,672 28,422 32,011 29,399 30,173 28,466
Investment securities and stock 373,295 366,499 380,138 396,620 396,130 369,916 392,889
 
Loans $ 811,186 813,597 812,537 800,729 784,324 812,385 778,264
Less allowance for loan losses 3,334   3,557   3,654   3,382   3,103   3,445   3,116  
Net loans $ 807,852 810,040 808,883 797,347 781,221 808,940 775,148
 
Total earning assets $ 1,202,129 1,188,383 1,204,360 1,212,232 1,193,585 1,195,294 1,182,647
Total assets 1,321,442 1,308,591 1,316,037 1,323,532 1,303,073 1,315,052 1,290,543
Total deposits 1,148,206 1,125,457 1,138,740 1,147,981 1,133,403 1,136,895 1,118,867
Short-term borrowings 15,030 28,500 20,406 16,328 14,355 21,728 17,532
Long-term debt 441 537 620 684 747 489 1,002
Total shareholders’ equity 147,826 144,672 146,602 147,371 144,185 146,258 143,316
Equity to assets ratio 11.19 % 11.06 % 11.14 % 11.13 % 11.06 % 11.12 % 11.11 %
Loans to deposits ratio 70.65 % 72.29 % 71.35 % 69.75 % 69.20 % 71.46 % 69.56 %
 

Asset Quality

Net charge-offs $ 168 262 278 (53 ) 173 430 242
Other real estate owned 0 0 0 270 682 0 682
 
Non-accrual loans 3,747 3,869 5,725 4,619 2,697 3,747 2,697
Loans past due 90 days or more and still accruing 141   12   23   20   369   141   369  
Total nonperforming loans $ 3,888 3,881 5,748 4,639 3,066 3,888 3,066
 
Net charge-offs to average loans 0.08 % 0.13 % 0.14 % (0.03 )% 0.09 % 0.11 % 0.06 %
Allowance for loan losses to total loans 0.41 % 0.41 % 0.44 % 0.47 % 0.42 % 0.41 % 0.42 %
Nonperforming loans to total loans 0.47 % 0.48 % 0.70 % 0.57 % 0.38 % 0.47 % 0.38 %
Nonperforming assets to total assets 0.29 % 0.29 % 0.44 % 0.37 % 0.29 % 0.29 % 0.29 %
 

Assets Under Management

LCNB Corp. total assets $ 1,335,571 1,319,074 1,306,799 1,333,536 1,312,635
Trust and investments (fair value) 315,450 316,856 303,534 293,808 284,118
Mortgage loans serviced 98,234 99,324 100,982 105,018 107,189
Cash management 45,519 29,102 30,319 27,453 28,362
Brokerage accounts (fair value) 209,019   199,019   188,663   179,244   163,596  
Total assets managed $ 2,003,793   1,963,375   1,930,297   1,939,059   1,895,900  
   
LCNB CORP. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS

(Dollars in thousands)

 
June 30, 2017 December 31,
(Unaudited) 2016
ASSETS:
Cash and due from banks $ 19,399 18,378
Interest-bearing demand deposits 10,568   487  
Total cash and cash equivalents 29,967 18,865
Investment securities:
Available-for-sale, at fair value 328,788 320,659
Held-to-maturity, at cost 38,437 41,003
Federal Reserve Bank stock, at cost 2,732 2,732
Federal Home Loan Bank stock, at cost 3,638 3,638
Loans, net 823,551 816,228
Premises and equipment, net 34,980 30,244
Goodwill 30,183 30,183
Core deposit and other intangibles 4,202 4,582
Bank owned life insurance 27,604 27,307
Other assets 11,489   11,358  
TOTAL ASSETS $ 1,335,571   1,306,799  
 
LIABILITIES:
Deposits:
Noninterest-bearing $ 275,346 271,332
Interest-bearing 868,574   839,573  
Total deposits 1,143,920 1,110,905
Short-term borrowings 31,712 42,040
Long-term debt 402 598
Accrued interest and other liabilities 11,610   10,312  
TOTAL LIABILITIES 1,187,644   1,163,855  
 
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 June 30, 2017 and December 31, 2016; issued 10,767,631 and 10,751,652 shares at June 30, 2017 and December 31, 2016, respectively 76,785 76,490
Retained earnings 83,782 80,736
Treasury shares at cost, 753,627 shares at March 31, 2017 and December 31, 2016 (11,665 ) (11,665 )
Accumulated other comprehensive income, net of taxes (975 ) (2,617 )
TOTAL SHAREHOLDERS' EQUITY 147,927   142,944  
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,335,571   1,306,799  
   
LCNB CORP. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(Dollars in thousands, except per share data)

(Unaudited)

 
Three Months Ended Six Months Ended
June 30, June 30,
2017   2016 2017   2016
INTEREST INCOME:
Interest and fees on loans $ 8,823 8,892 17,738 17,519
Interest on investment securities –
Taxable 1,149 1,187 2,242 2,376
Non-taxable 795 794 1,594 1,552
Other short-term investments 167   135   224   182
TOTAL INTEREST INCOME 10,934   11,008   21,798   21,629
INTEREST EXPENSE:
Interest on deposits 846 870 1,689 1,693
Interest on short-term borrowings 12 8 42 22
Interest on long-term debt 3   5   7   17
TOTAL INTEREST EXPENSE 861   883   1,738   1,732
NET INTEREST INCOME 10,073 10,125 20,060 19,897
PROVISION FOR LOAN LOSSES 222   396   237   486
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 9,851   9,729   19,823   19,411
NON-INTEREST INCOME:
Trust income 881 837 1,733 1,600
Service charges and fees on deposit accounts 1,312 1,243 2,534 2,436
Net gain (loss) on sales of securities 140 279 140 650
Bank owned life insurance income 297 191 486 360
Gains from sales of loans 63 61 102 102
Other operating income 97   139   225   244
TOTAL NON-INTEREST INCOME 2,790   2,750   5,220   5,392
NON-INTEREST EXPENSE:
Salaries and employee benefits 4,703 4,532 9,229 9,095
Equipment expenses 264 239 475 488
Occupancy expense, net 636 588 1,204 1,157
State franchise tax 286 276 570 557
Marketing 216 201 359 368
Amortization of intangibles 188 188 373 375
FDIC insurance premiums 108 162 212 327
Contracted services 375 223 623 450
Other real estate owned — 356 5 385
Other non-interest expense 1,835   1,703   3,529   3,558
TOTAL NON-INTEREST EXPENSE 8,611   8,468   16,579   16,760
INCOME BEFORE INCOME TAXES 4,030 4,011 8,464 8,043
PROVISION FOR INCOME TAXES 1,027   1,043   2,215   2,111
NET INCOME $ 3,003   2,968   6,249   5,932
 
Dividends declared per common share $ 0.16 0.16 0.32 0.32
Earnings per common share:
Basic 0.30 0.30 0.62 0.60
Diluted 0.30 0.29 0.62 0.59
Weighted average common shares outstanding:
Basic 10,004,422 9,922,024 9,999,765 9,919,070
Diluted 10,011,312 9,943,797 10,007,192 9,971,900