# LCNB Corp: Form 10-Q for the period ended Mar 31, 2024

- Company: [LCNB Corp](/companies/lcnb.md) (CIK 1074902)
- Form: 10-Q
- Filed: 2024-05-10
- Accepted by EDGAR: May 10, 2024, 16:15 ET
- Period: 2024-03-31
- Accession: 0001074902-24-000079
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1074902/000107490224000079/lcnb-20240331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1074902/000107490224000079/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Interest expense | 3 months, 2024-01-01 to 2024-03-31 | $10.9m | us-gaap:InterestExpense |
| Income tax | 3 months, 2024-01-01 to 2024-03-31 | $312.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-01-01 to 2024-03-31 | $1.9m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-01-01 to 2024-03-31 | $0.15 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-01-01 to 2024-03-31 | $0.15 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-01-01 to 2024-03-31 | 13,112,302 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2024-01-01 to 2024-03-31 | −$12.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2024-01-01 to 2024-03-31 | $858.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2024-01-01 to 2024-03-31 | $2.9m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 3 months, 2024-01-01 to 2024-03-31 | $0 | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2024-03-31 | $33.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Total assets | at 2024-03-31 | $2.28bn | us-gaap:Assets |
| Total liabilities | at 2024-03-31 | $2.05bn | us-gaap:Liabilities |
| Long-term debt | at 2024-03-31 | $162.6m | us-gaap:LongTermDebt |
| Short-term borrowings | at 2024-03-31 | $10.0m | us-gaap:ShortTermBorrowings |
| Shareholders' equity | at 2024-03-31 | $233.7m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 5,085 characters.

LCNB adopted CECL effective January 1, 2023 using the modified retrospective method for all financial assets measured at amortized cost and off-balance sheet credit exposures. Results for reporting periods beginning after January 1, 2023 are presented under CECL while prior period amounts continue to be reported in accordance with the incurred loss accounting standards. The transition adjustment of the CECL adoption included an increase in the allowance of $2.4 million, and a $1.9 million decrease to the retained earnings account to reflect the cumulative effect of adopting CECL on the Consolidated Balance Sheet, with the $0.5 million tax impact portion being recorded as part of the deferred tax asset in other assets in the condensed consolidated balance sheet.

Accounting for Intangibles. LCNB’s intangible assets are composed primarily of goodwill and core deposit intangibles related to acquisitions of other financial institutions.

Accounting rules require LCNB to determine the fair value of all the assets and liabilities of an acquired entity and to record their fair values on the date of acquisition. LCNB employs a variety of means in determining fair values, including the use of discounted cash flow analysis, market comparisons and projected future revenue streams. For those items for which management concludes that LCNB has the appropriate expertise to determine fair value, management may choose to use its own calculation of fair value. In other cases, where the fair value is not readily determined, consultation with outside parties is used to determine fair value. Once valuations have been determined, the net difference between the price paid for the acquired entity and the fair value of the balance sheet is recorded as goodwill. Goodwill is assessed at least annually for impairment, with any such impairment recognized in the period identified. A more frequent assessment is performed if there are material

changes in the market place or within the organizational structure.

Core deposit intangibles acquired from business combinations are initially measured at their estimated fair values and are then amortized on a straight-line basis over their estimated useful lives. Management evaluates whether triggering events or circumstances have occurred that indicate the remaining useful life or carrying value of the amortizing intangible should be revised.

Fair Value Accounting for Debt Securities. Debt securities classified as available-for-sale are recorded at fair value with unrealized gains and losses recorded in other comprehensive income (loss), net of tax. Available-for-sale debt securities in unrealized loss positions are evaluated to determine if the decline in fair value should be recorded in income or in other comprehensive income (loss). LCNB first determines if it intends to sell or if it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either criteria is met, the security's amortized cost basis is written down to fair value through income. If neither of these criteria is met, LCNB evaluates whether the decline in fair value resulted from credit factors. In making this determination, management considers, among other factors, the extent to which fair value is less than the amortized cost basis, any changes to the rating of the security by rating agencies, and any adverse conditions specifically related to the security or issuer. If the present value of cash flows expected to be collected is less than the amortized cost basis, a provision is recorded to the allowance for credit losses. Any decline in fair value not recorded through an allowance for credit losses is recognized in accumulated other comprehensive income (loss), net of applicable taxes.

### Results of Operations

Net income for the three months ended March 31, 2024 was $1,915,000 (total basic and diluted earnings per share of $0.15). This compares to net income of $4,157,000 (total basic and diluted earnings per share of $0.37) for the same three-month period in 2023. Results for the 2024 period were affected by the acquisition of Cincinnati Federal Bancorp on November 1, 2023.

Net interest income for the three months ended March 31, 2024 and 2023 was $13,895,000 and $13,942,000, respectively. The decrease in net interest income was primarily due to interest paid on higher amounts of average interest-bearing demand and money market deposits, IRA and time certificates, and long-term borrowings and to higher interest expense associated with the rapid year-over-year increase in the Effective Federal Funds Rate. These increases in interest expense were partially offset by increased interest income from higher average loan balances and an increase in the average rate earned on the loan portfolio. The higher average loan and deposit balances during 2024 period were partially due to the acquisition of Cincinnati Federal. LCNB's tax equivalent net interest margin for the first three months of 2024 was 2.73%, compared to 3.28% for the same period last year.

## Market risk

As filed, 3,701 characters.

Market risk for LCNB is primarily interest rate risk. LCNB attempts to mitigate this risk through asset/liability management strategies designed to decrease the vulnerability of its earnings to material and prolonged changes in interest rates. LCNB does not use derivatives such as interest rate swaps, caps, or floors to hedge this risk. LCNB has not entered into any market risk instruments for trading purposes.

The Bank's Asset and Liability Management Committee primarily uses a combination of Interest Rate Sensitivity Analysis ("IRSA") and Economic Value of Equity ("EVE") analysis for measuring and managing interest rate risk. IRSA is used to estimate the effect on net interest income ("NII") during a one-year period of instantaneous and sustained movements in interest rates, also called interest rate shocks, of 100, 200, and 300 basis points. The base projection uses a current interest rate scenario. As shown below, the March 31, 2024 IRSA indicates that an increase in interest rates will have a negative effect on NII and a decrease in interest rates will have a positive effect on NII. The changes in NII for all rate assumptions are within LCNB's acceptable ranges.

*(Dollars in thousands)*

| Rate Shock Scenario in Basis Points | Amount | $ Change in NII | % Change in NII | Limits |
| --- | ---: | ---: | ---: | ---: |
| Up 300 | $60,241 | (4,937) | (7.57)% | 20% |
| Up 200 | 61,834 | (3,344) | (5.13)% | 15% |
| Up 100 | 63,329 | (1,849) | (2.84)% | 10% |
| Base | 65,178 | — | —% | —% |
| Down 100 | 66,137 | 959 | 1.47% | 10% |
| Down 200 | 67,547 | 2,369 | 3.63% | 15% |
| Down 300 | 68,969 | 3,791 | 5.82% | 20% |

IRSA shows the effect on NII during a one-year period only. A more long-range model is the EVE analysis, which shows the estimated present value of future cash inflows from interest-earning assets less the present value of future cash outflows for interest-bearing liabilities for the same rate shocks. As shown below, the March 31, 2024 EVE analysis indicates that an increase in interest rates of 200 or 300 basis points will have a negative effect on the EVE and an increase in interest rates of 100 basis points or a decrease in interest rates will have a positive effect on the EVE. The changes in the EVE for all upward rate shocks are within LCNB's acceptable ranges. The changes in the EVE for all downward rate shocks are outside LCNB's acceptable ranges as shown below. Management has determined the downward shifts to be acceptable due to the positive nature of the results.

*(Dollars in thousands)*

| Rate Shock Scenario in Basis Points | Amount | $ Change in EVE | % Change in EVE | Limits |
| --- | ---: | ---: | ---: | ---: |
| Up 300 | $131,574 | (29,639) | (18.38)% | 25% |
| Up 200 | 147,070 | (14,143) | (8.77)% | 20% |
| Up 100 | 161,752 | 539 | 0.33% | 15% |
| Base | 161,213 | — | —% | —% |
| Down 100 | 188,844 | 27,631 | 17.14% | 15% |
| Down 200 | 201,876 | 40,663 | 25.22% | 20% |
| Down 300 | 220,862 | 59,649 | 37.00% | 25% |

The IRSA and EVE simulations discussed above are not projections of future income or equity and should not be relied on as being indicative of future operating results. Assumptions used, including the nature and timing of interest rate levels, yield curve shape, prepayments on loans and securities, deposit decay rates, pricing decisions on loans and deposits, and reinvestment or replacement of asset and liability cash flows, are inherently uncertain and, as a result, the models cannot precisely measure future NII or equity. Furthermore, the models do not reflect actions that borrowers, depositors, and management may take in response to changing economic conditions and interest rate levels.

## Controls and procedures

As filed, 1,218 characters.

a) **Disclosure controls and procedures.** The Chief Executive Officer and the Chief Financial Officer have carried out an evaluation of the effectiveness of LCNB's disclosure controls and procedures that ensure that information relating to LCNB required to be disclosed by LCNB in the reports that it files or submits under the Securities and Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to LCNB's management, including its principal executive officer and principal financial officer, as appropriate, in order to allow timely decisions to be made regarding required disclosures. Based upon this evaluation, these officers have concluded that, as of March 31, 2024, LCNB's disclosure controls and procedures were effective.

b) **Changes in internal control over financial reporting.** During the period covered by this report, there were no changes in LCNB's internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, LCNB's internal control over financial reporting.

## Risk factors

As filed, 162 characters.

Readers should carefully consider the risk factors previously disclosed in Part I, Item 1A. Risk Factors in LCNB's Form 10-K for the year ended December 31, 2023.

Filed May 10, 2024.
Source: SEC EDGAR, the filing index for accession 0001074902-24-000079. Last ingested by Listed: Nov 4, 2026, 17:51 ET. No prices; not investment advice.