Press Release

LCNB Corp. Reports Financial Results for the Three Months Ended March 31, 2016

Company Release - 4/19/2016

LEBANON, Ohio--(BUSINESS WIRE)-- LCNB Corp. (NASDAQ:LCNB) today announced net income of $2,964,000 (total basic and diluted earnings per share of $0.30) for the three months ended March 31, 2016. This compares to net income of $2,834,000 (total basic and diluted earnings per share of $0.30) for the same three-month period in 2015. Results for 2016 were significantly affected by the acquisition of BNB Bancorp, Inc. ("BNB") on April 30, 2015.

Net interest income for the three months ended March 31, 2016 increased $444,000 from the comparable period in 2015, due primarily to a $72.2 million increase in average loans and a $76.4 million increase in average investment securities and stock. The BNB merger added $34.7 million to LCNB's loan portfolio as of the merger date. The remainder of the increase in average loans was due to new loan origination. These increases were partially offset by a decrease in the tax equivalent net interest margin.

Commenting on the financial results, LCNB CEO Steve Foster said, "We are pleased to announce solid financial results for the first quarter of 2016. As the economy continues to improve, LCNB has experienced increased loan demand. In addition to the $34.7 million in loans that BNB added to our portfolio in April 2015, organic growth since March 2015 totaled $37.5 million. We believe that our strong balance sheet and recent actions, including the construction of our new operations center in Lebanon, Ohio, as well as technology and delivery channel investments, favorably position us for future growth. All of our acquisitions are fully integrated and we look forward to making our full line of financial products and services available to our current and future customers."

The provision for loan losses for the three months ended March 31, 2016 was $21,000 greater than the comparable period in 2015. Net loan charge-offs for the first quarter 2016 and 2015 totaled $69,000 and $353,000, respectively. Non-accrual loans and loans past due 90 days or more and still accruing interest increased $1,145,000, from $2,282,000 or 0.30% of total loans at December 31, 2015 to $3,427,000 or 0.44% of total loans at March 31, 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. Other real estate owned (which includes property acquired through foreclosure) was $846,000 at both March 31, 2016 and December 31, 2015 and consisted of one commercial property.

Non-interest income for the three months ended March 31, 2016 was $336,000 greater than the comparable period in 2015, primarily due to a $260,000 increase in gains from sales of investment securities.

Non-interest expense for the three months ended March 31, 2016 was $643,000 greater than the comparable period in 2015, primarily due to a $273,000 increase in salaries and employee benefits and a $251,000 penalty for early payoff of a $5 millionFederal Home Loan Bank ("FHLB") advance (included in other non-interest expense). 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 outside of the acquisitions. The FHLB advance had an interest rate of 5.25% and was paid off to reduce interest expense on long-term debt.

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
3/31/2016   12/31/2015   9/30/2015   6/30/2015   3/31/2015

Condensed Income Statement

Interest income $ 10,621 10,812 10,409 11,348 10,090
Interest expense 849   906   912   748   762  
Net interest income 9,772 9,906 9,497 10,600 9,328
Provision for loan losses 90   380   240   677   69  
Net interest income after provision 9,682 9,526 9,257 9,923 9,259
Non-interest income 2,642 2,600 2,386 2,831 2,306
Non-interest expense 8,292   8,229   8,088   8,426   7,649  
Income before income taxes 4,032 3,897 3,555 4,328 3,916
Provision for income taxes 1,068   1,013   922   1,205   1,082  
Net income $ 2,964   2,884   2,633   3,123   2,834  
 

Per Share Data

Dividends per share $ 0.16 0.16 0.16 0.16 0.16
Basic earnings per share $ 0.30 0.29 0.26 0.33 0.30
Diluted earnings per share $ 0.30 0.29 0.26 0.32 0.30
Book value per share $ 14.39 14.12 14.22 13.91 13.80
Tangible book value per share $ 10.88 10.58 10.66 10.33 10.40
Average basic shares outstanding 9,916,114 9,905,612 9,898,233 9,694,732 9,312,636
Average diluted shares outstanding 9,998,516 10,014,908 10,005,788 9,804,728 9,410,774
Shares outstanding at period end 9,931,788 9,925,547 9,903,294 9,896,904 9,317,583
 

Selected Financial Ratios

Return on average assets 0.93 % 0.89 % 0.82 % 1.03 % 1.02 %
Return on average equity 8.37 % 8.07 % 7.51 % 9.21 % 9.01 %
Dividend payout ratio 53.33 % 55.17 % 61.54 % 48.48 % 53.33 %
 
Net interest margin (tax equivalent) 3.49 % 3.46 % 3.37 % 3.95 % 3.83 %
Efficiency ratio (tax equivalent) 64.74 % 63.80 % 65.97 % 61.08 % 63.90 %
 

Selected Balance Sheet Items

Investment securities and stock $ 393,976 406,981 391,430 378,651 329,429
 
Loans:
Commercial and industrial $ 45,324 45,275 45,325 47,958 36,447
Commercial, secured by real estate 430,179 419,633 407,264 399,551 381,371
Residential real estate 271,812 273,139 274,054 273,249 255,926
Consumer 17,925 18,510 19,283 19,718 17,296
Agricultural 12,589 13,479 16,016 13,434 9,816
Other, including deposit overdrafts 643 665 676 638 678
Deferred net origination costs 242   237   215   188   151  
Loans, gross 778,714 770,938 762,833 754,736 701,685
Less allowance for loan losses 3,150   3,129   2,958   2,879   2,837  
Loans, net $ 775,564   767,809   759,875   751,857   698,848  
 
Total assets $ 1,285,922 1,280,531 1,275,171 1,249,363 1,129,497
Total deposits 1,120,208 1,087,160 1,103,513 1,084,033 973,725
Short-term borrowings 11,668 37,387 14,931 12,731 13,454
Long-term debt 789 5,947 6,016 6,085 6,153
Total shareholders’ equity 142,933 140,108 140,851 137,698 128,576
Equity to assets ratio 11.12 % 10.94 % 11.05 % 11.02 % 11.38 %
Loans to deposit ratio 69.52 % 70.91 % 69.13 % 69.62 % 72.06 %
 
 
 
Three Months Ended
3/31/201612/31/20159/30/20156/30/20153/31/2015
Selected Balance Sheet Items, continued
Tangible common equity (TCE) $ 107,567 104,529 105,063 101,694 96,340
Tangible common assets (TCA) 1,250,556 1,244,952 1,239,383 1,213,359 1,097,261
TCE/TCA 8.60 % 8.40 % 8.48 % 8.38 % 8.78 %
 
Selected Average Balance Sheet Items
Investment securities and stock $ 389,648 406,423 385,353 360,750 313,279
 
Loans $ 772,204 764,440 760,159 737,021 699,959
Less allowance for loan losses 3,130   2,929   2,885   2,865   2,870  
Net loans $ 769,074 761,511 757,274 734,156 697,089
 
Total assets $ 1,278,014 1,285,114 1,267,171 1,220,938 1,125,326
Total deposits 1,104,330 1,107,214 1,099,730 1,057,818 969,658
Short-term borrowings 20,710 20,290 13,450 12,803 13,824
Long-term debt 1,256 5,970 6,040 6,108 6,598
Total shareholders’ equity 142,447 141,751 139,032 136,003 127,608
 

Asset Quality

Net charge-offs $ 69 209 161 635 353
Other real estate owned 846 846 1,208 1,364 1,364
Non-accrual loans 3,328 1,723 2,254 1,961 3,972
Loans past due 90 days or more and still accruing 99   559   130   128   355  
Total nonperforming loans $ 3,427 2,282 2,384 2,089 4,327
Net charge-offs to average loans 0.04 % 0.11 % 0.08 % 0.35 % 0.20 %
Allowance for loan losses to total loans 0.40 % 0.41 % 0.39 % 0.38 % 0.40 %
Nonperforming loans to total loans 0.44 % 0.30 % 0.31 % 0.28 % 0.62 %
Nonperforming assets to total assets 0.33 % 0.24 % 0.28 % 0.28 % 0.50 %
 

Assets Under Management

LCNB Corp. total assets $ 1,285,922 1,280,531 1,275,171 1,249,363 1,129,497
Trust and investments (fair value) 274,297 283,193 258,675 272,209 264,122
Mortgage loans serviced 107,992 111,837 113,610 117,204 116,534
Business cash management 6,773 7,271 6,809 6,628 5,839
Brokerage accounts (fair value) 157,713   148,956   142,151   144,186   141,439  
Total assets managed $ 1,832,697   1,831,788   1,796,416   1,789,590   1,657,431  
 

Non-GAAP Financial Measures

Accreted income on acquired loans $ 333 219 243 1,348 326
Amortization of acquired deposit premiums $ 27 34 46 211 186
 
Net income $ 2,964 2,884 2,633 3,123 2,834
Less (add) net gain (loss) on sales of securities, net of tax 245 108 0 146 73
Add merger-related expenses, net of tax 0   2   32   363   66  
Core net income $ 2,719 2,778 2,665 3,340 2,827
Basic core earnings per share $ 0.27 0.28 0.27 0.34 0.30
Diluted core earnings per share $ 0.27 0.28 0.27 0.34 0.30
Adjusted return on average assets 0.85 % 0.86 % 0.83 % 1.10 % 1.01 %
Adjusted return on average equity 7.66 % 7.77 % 7.60 % 9.85 % 8.86 %
Core efficiency ratio (tax equivalent) 66.67 % 64.60 % 65.57 % 58.23 % 63.91 %
 

LCNB Corp.
Steve P. Foster, 800-344-2265
CEO and President

Source: LCNB Corp.
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