Equibles

10-Q

LCNB CORP (LCNB)

10-Q 2025-05-07 For: 2025-03-31
View Original
Added on April 06, 2026

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2025

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from  to

Commission File Number 001-35292

LCNB Corp.

(Exact name of registrant as specified in its charter)

Ohio 31-1626393
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)

2 North Broadway, Lebanon, Ohio 45036

(Address of principal executive offices, including Zip Code)

(513) 932-1414

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, No Par Value LCNB NASDAQ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

☒ Yes         ☐ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

☒ Yes         ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐                                                               Accelerated filer ☒

Non-accelerated filer ☐                                                                Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

☐ Yes         ☒ No

The number of shares outstanding of the issuer's common stock, without par value, as of May 7, 2025 was 14,167,428 shares.

Table of Contents

LCNB CORP. AND SUBSIDIARIES

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION 3
Item 1. Financial Statements 3
CONSOLIDATED CONDENSED BALANCE SHEETS 3
CONSOLIDATED CONDENSED STATEMENTS OF INCOME 4
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME 5
CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY 6
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS 7
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 39
Item 3. Quantitative and Qualitative Disclosures about Market Risks 52
Item 4. Controls and Procedures 53
PART II. OTHER INFORMATION 54
Item 1.  Legal Proceedings 54
Item 1A. Risk Factors 54
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds 54
Item 3.  Defaults Upon Senior Securities 54
Item 4.  Mine Safety Disclosures 54
Item 5.  Other Information 54
Item 6.  Exhibits 55
SIGNATURES 56

1

Table of Contents

Glossary of Abbreviations and Acronyms

ACL Allowance for Credit Losses
ASC Accounting Standards Codification
ASU Accounting Standards Update
Bank LCNB National Bank
CECL Current expected credit losses
CNNB Cincinnati Bancorp, Inc.
Company LCNB Corp. and its consolidated subsidiaries as a whole
DCF Discounted Cash Flow
EFBI Eagle Financial Bancorp, Inc.
FASB Financial Accounting Standards Board
FDIC Federal Deposit Insurance Corporation
FFIEC Financial Institutions Examination Council
FHLB Federal Home Loan Bank
FICO Fair Isaac Corporation
FOMC Federal Open Market Committee of the Federal Reserve System
FRB Federal Reserve Bank
GAAP Generally Accepted Accounting Principles
IRA Individual Retirement Account
LCNB LCNB Corp. and its consolidated subsidiaries as a whole
LDA Loss Driver Analysis
LGD Loss Given Default
OAEM Other Assets Especially Mentioned
PCD Purchased Credit Deteriorated
PD Probability of Default
SEC Securities and Exchange Commission

2

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1.         Financial Statements

LCNB CORP. AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

(Dollars in thousands)

December 31, 2024
Audited
ASSETS: **** ****
Cash and due from banks 28,626 20,393
Interest-bearing demand deposits 9,044 15,351
Total cash and cash equivalents 37,670 35,744
Interest-bearing time deposits 250 250
Investment securities:
Equity securities with a readily determinable fair value, at fair value 1,387 1,363
Equity securities without a readily determinable fair value, at cost 3,666 3,666
Debt securities, available-for-sale, at fair value 255,891 258,327
Debt securities, held-to-maturity, at cost, net of allowance for credit losses of 5 at March 31, 2025 and December 31, 2024 17,585 16,324
Federal Reserve Bank stock, at cost 6,405 6,405
Federal Home Loan Bank stock, at cost 20,710 20,710
Loans held-for-sale 6,098 5,556
Loans, net of allowance for credit losses of 12,124 and 12,001 at March 31, 2025 and December 31, 2024, respectively 1,705,506 1,709,811
Premises and equipment, net 39,972 41,049
Operating lease right-of-use assets 5,935 5,785
Goodwill 90,310 90,310
Core deposit and other intangibles, net 10,616 11,104
Bank-owned life insurance 54,348 54,002
Interest receivable 9,013 8,701
Other assets, net 37,383 38,287
TOTAL ASSETS 2,302,745 2,307,394
LIABILITIES: **** ****
Deposits:
Noninterest-bearing 464,059 459,619
Interest-bearing 1,457,590 1,418,673
Total deposits 1,921,649 1,878,292
Long-term debt 104,637 155,153
Operating lease liabilities 6,299 6,115
Accrued interest and other liabilities 11,509 14,798
TOTAL LIABILITIES 2,044,094 2,054,358
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 17,378,298 and 17,329,423 shares at March 31, 2025 and December 31, 2024, respectively; outstanding 14,166,915 and 14,118,040 shares at March 31, 2025 and December 31, 2024, respectively 187,369 186,937
Retained earnings 142,811 141,290
Treasury shares at cost, 3,211,383 shares at March 31, 2025 and December 31, 2024 (56,002 ) (56,002 )
Accumulated other comprehensive loss, net of taxes (15,527 ) (19,189 )
TOTAL SHAREHOLDERS' EQUITY 258,651 253,036
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 2,302,745 2,307,394

All values are in US Dollars.

The accompanying notes to consolidated condensed financial statements are an integral part of these statements.

3

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LCNB CORP. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(Dollars in thousands, except per share data)

(Unaudited)

Three Months Ended
March 31,
2025 2024
INTEREST INCOME: ****
Interest and fees on loans $ 23,181 22,682
Dividends on equity securities:
With a readily determinable fair value 10 9
Without a readily determinable fair value 29 31
Interest on debt securities:
Taxable 1,256 1,232
Non-taxable 146 143
Other investments 694 661
TOTAL INTEREST INCOME 25,316 24,758
INTEREST EXPENSE: ****
Interest on deposits 7,559 8,190
Interest on short-term borrowings 1 935
Interest on long-term debt 1,457 1,738
TOTAL INTEREST EXPENSE 9,017 10,863
NET INTEREST INCOME 16,299 13,895
PROVISION FOR CREDIT LOSSES 197 125
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 16,102 13,770
NON-INTEREST INCOME: ****
Fiduciary income 2,164 1,973
Service charges and fees on deposit accounts 1,766 1,384
Net losses from sales of debt securities, available-for-sale — (214 )
Bank-owned life insurance income 346 318
Net gains from sales of loans 841 522
Other operating income (loss) 105 (54 )
TOTAL NON-INTEREST INCOME 5,222 3,929
NON-INTEREST EXPENSE: ****
Salaries and employee benefits 9,172 8,554
Equipment expenses 382 390
Occupancy expense, net 1,010 1,005
State financial institutions tax 453 428
Marketing 315 174
Amortization of intangibles 297 236
FDIC insurance premiums, net 410 504
Contracted services 870 784
Merger-related expenses — 775
Other non-interest expense 2,900 2,622
TOTAL NON-INTEREST EXPENSE 15,809 15,472
INCOME BEFORE INCOME TAXES 5,515 2,227
PROVISION FOR INCOME TAXES 906 312
NET INCOME $ 4,609 1,915
Earnings per common share:
Basic $ 0.33 0.15
Diluted 0.33 0.15
Weighted average common shares outstanding:
Basic 14,051,310 13,112,302
Diluted 14,051,310 13,112,302

The accompanying notes to consolidated condensed financial statements are an integral part of these statements.

4

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LCNB CORP. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)
2024
Net income 4,609 1,915
Other comprehensive income (loss):
Net unrealized gain (loss) on available-for-sale debt securities (net of tax expense (benefit) of 973 and (342) for the three months ended March 31, 2025 and 2024, respectively) 3,662 (1,287 )
Reclassification adjustment for net realized losses on sales of available-for-sale debt securities included in net income (net of tax benefit of 45 for the three months ended March 31, 2024) — 169
Other comprehensive income (loss), net of tax 3,662 (1,118 )
TOTAL COMPREHENSIVE INCOME 8,271 797

All values are in US Dollars.

The accompanying notes to consolidated condensed financial statements are an integral part of these statements.

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LCNB CORP. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY

(Dollars in thousands, except per share data)

(Unaudited)

Accumulated
Other Total
Common Retained Treasury Comprehensive Shareholders'
Stock Earnings Shares Loss Equity
Three Months Ended March 31, 2025 **** **** **** ****
Balance at January 1, 2025 14,118,040 $ 186,937 141,290 (56,002 ) (19,189 ) 253,036
Net income 4,609 4,609
Other comprehensive income, net of taxes 3,662 3,662
Dividend Reinvestment and Stock Purchase Plan 9,925 148 148
Shares issued for restricted stock awards 38,950 —
Compensation expense relating to restricted stock 284 284
Common stock dividends, 0.22 per share (3,088 ) (3,088 )
Balance at March 31, 2025 14,166,915 $ 187,369 142,811 (56,002 ) (15,527 ) 258,651
Three Months Ended March 31, 2024 **** **** **** ****
Balance at January 1, 2024 13,173,569 $ 173,637 140,017 (56,015 ) (22,336 ) 235,303
Net income 1,915 1,915
Other comprehensive loss, net of taxes (1,118 ) (1,118 )
Dividend Reinvestment and Stock Purchase Plan 9,004 130 130
Shares issued for restricted stock awards 41,703 —
Compensation expense relating to restricted stock 315 315
Common stock dividends, 0.22 per share (2,882 ) (2,882 )
Balance at March 31, 2024 13,224,276 $ 174,082 139,050 (56,015 ) (23,454 ) 233,663

All values are in US Dollars.

The accompanying notes to consolidated condensed financial statements are an integral part of these statements.

6

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LCNB CORP. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Three Months Ended
March 31,
2025 2024
CASH FLOWS FROM OPERATING ACTIVITIES: **** ****
Net income $ 4,609 1,915
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation, amortization, and accretion 503 481
Provision for credit losses 197 125
Deferred income tax provision 506 44
Increase in cash surrender value of bank-owned life insurance (346 ) (318 )
Realized and unrealized (gains) losses from equity securities, net (14 ) 10
Realized losses from sales of debt securities, available-for-sale — 214
Impairment charge recognized on premises and equipment 73 —
Origination of mortgage loans for sale (27,577 ) (32,620 )
Realized gains from sales of loans (841 ) (522 )
Proceeds from sales of originated loans 27,876 22,429
Compensation expense related to restricted stock 284 315
Changes in:
Accrued interest receivable (312 ) (710 )
Other assets (48 ) (936 )
Other liabilities (2,698 ) (2,368 )
TOTAL ADJUSTMENTS (2,397 ) (13,856 )
NET CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES 2,212 (11,941 )
CASH FLOWS FROM INVESTING ACTIVITIES: **** ****
Equity securities:
Purchases of securities (10 ) (8 )
Available for-sale debt securities:
Proceeds from sales — 9,615
Proceeds from maturities, prepayments and calls 7,012 4,624
Purchases of securities — (2,207 )
Held-to-maturity debt securities:
Proceeds from maturities, prepayments and calls 116 112
Purchases of securities (1,377 ) —
Purchase of Federal Reserve Bank stock — (688 )
Purchases of Federal Home Loan Bank stock — (1,293 )
Net decrease in loans 4,750 2,961
Purchases of premises and equipment (70 ) (858 )
Funding of tax credit investments (608 ) (553 )
NET CASH FLOWS PROVIDED BY INVESTING ACTIVITIES 9,813 11,705
CASH FLOWS FROM FINANCING ACTIVITIES: **** ****
Net increase in customer deposits 43,357 34,104
Net decrease in short-term borrowings — (87,395 )
Proceeds from issuance of long-term debt — 50,000
Principal payments on long-term debt (50,516 ) (493 )
Proceeds from issuance of common stock 148 130
Cash dividends paid on common stock (3,088 ) (2,882 )
NET CASH FLOWS USED IN FINANCING ACTIVITIES (10,099 ) (6,536 )
NET CHANGE IN CASH AND CASH EQUIVALENTS 1,926 (6,772 )
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 35,744 39,723
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 37,670 32,951
SUPPLEMENTAL CASH FLOW INFORMATION: **** ****
CASH PAID DURING THE YEAR FOR:
Interest $ 9,675 10,312
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES: **** ****
Transfer from loans held-for-investment to loans held-for-sale $ — 64,869
Transfer from premises and equipment to premises held-for-sale 525 —
Right-of-use assets obtained in exchange for lease obligations 318 —

The accompanying notes to consolidated condensed financial statements are an integral part of these statements.

7

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LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 - BASIS OF PRESENTATION

BASIS OF PRESENTATION

The accompanying unaudited interim consolidated condensed financial statements include LCNB Corp. and its wholly-owned subsidiaries: LCNB National Bank and LCNB Risk Management, Inc., its captive insurance company. All material intercompany transactions and balances are eliminated in consolidation.

The unaudited interim consolidated condensed financial statements have been prepared in accordance with U.S. GAAP for interim financial information and the rules and regulations of the SEC.  Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules and regulations.  In the opinion of management, the unaudited interim consolidated financial statements include all adjustments (consisting of normal, recurring accruals) considered necessary for a fair presentation of the Company's financial position, results of consolidated operations, and cash flows for the interim periods, as required by Regulation S-X, Rule 10-01.

The consolidated condensed balance sheet as of December 31, 2024 has been derived from the audited consolidated balance sheet as of that date.

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Results of operations for the three months ended March 31, 2025 are not necessarily indicative of the results to be expected for the full year ending December 31, 2025.  These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements, accounting policies, and financial notes thereto included in LCNB's 2024 Annual Report on Form 10-K filed with the SEC.

Certain prior period amounts have been reclassified to conform to the current year presentation. Specifically, prior period cash flows previously presented as a change in other liabilities have been reclassified to funding of tax credit investments to align with the current year's reporting. These reclassifications do not impact the reported results of operations.

ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS

ASU 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.”

ASU No. 2023-09 was issued in December 2023 and became effective for LCNB on January 1, 2025.The amendments require that public business entities on an annual basis (1) disclose specific categories in the rate reconciliation, and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income (or loss) by the applicable statutory income tax rate). The amendments require that all entities disclose on an annual basis the following information about income taxes paid: (1) the amount of income taxes paid (net of refunds received) disaggregated by federal (national), state, and foreign taxes; and (2) the amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than 5 percent of total income taxes paid (net of refunds received). The amendments also require that all entities disclose the following information: (1) income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign; and (2) income tax expense (or benefit) from continuing operations disaggregated by federal (national), state, and foreign.  Adoption of ASU No. 2023-09 did not have a material impact to the financial statements of the Company.

ASU 2024-01 “Compensation - Stock Compensation (Topic 718) - Scope Application of Profits Interest and Similar Awards,”

ASU No. 2024-01 was issued in March 2024 and became effective for LCNB on January 1, 2025. It clarifies how an entity determines whether a profits interest or similar award is within the scope of Topic 718 or is not a share-based payment arrangement and, therefore, is within the scope of other guidance. ASU 2024-01 provides an illustrative example with multiple fact patterns and also amends certain language in the “Scope” and “Scope Exceptions” sections of Topic 718 to improve its clarity and operability without changing the guidance. Entities can apply the amendments either retrospectively to all prior periods presented in the financial statements or prospectively to profits interest and similar awards granted or modified on or after the date of adoption. If prospective application is elected, an entity must disclose the nature of and reason for the change in accounting principle. Adoption of ASU No. 2024-01 did not have a material impact to the financial statements of the Company.

RECENT ACCOUNTING PRONOUNCEMENTS NOT YET EFFECTIVE

From time to time the FASB issues an ASU to communicate changes to U.S. GAAP. As of March 31, 2025, there are no newly issued but not yet effective ASUs that could have an effect on LCNB’s financial position or results of consolidated operations.

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LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

(Continued)

NOTE 2 - BUSINESS COMBINATIONS

Eagle Financial Bancorp, Inc.

On April 12, 2024, LCNB acquired Eagle Financial Bancorp, Inc. (“EFBI”), the holding company for EAGLE.bank, an Ohio state-chartered bank. Under the terms of the definitive merger agreement, EFBI merged with and into LCNB Corp., immediately followed by the merger of EAGLE.bank with and into LCNB National Bank. EAGLE.bank operated three full-service banking offices in Cincinnati, Ohio, which became offices of LCNB after the merger. This transaction increased LCNB’s presence in the Cincinnati market.

Subject to the terms of the merger agreement, EFBI shareholders had the opportunity to elect to receive either 1.1401 shares of LCNB Corp. stock, $19.10 per share in cash for each share of EFBI common stock owned, or a combination thereof subject to at least 60%, but not more than 70%, of the shares of EFBI being exchanged for LCNB common stock. The fair value of the common stock issued as part of the consideration was determined on the basis of the closing price of LCNB's common stock on the acquisition date.

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LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

(Continued)

NOTE 2 - BUSINESS COMBINATIONS (continued)

The following table summarizes the fair value of the total consideration transferred as a part of the EFBI acquisition and the fair value of identifiable assets acquired and liabilities assumed as originally reported at June 30, 2024and as adjusted at  March 31, 2025 (in thousands). No adjustments to goodwill were recorded in the first quarter of 2025.

Adjustments March 31, 2025
Consideration:
Cash consideration 10,256 (83 ) 10,173
Common stock (868,001 shares issued at 14.04 per share) 12,891 (704 ) 12,187
Fair value of total consideration transferred 23,147 (787 ) 22,360
Identifiable Assets Acquired:
Cash and cash equivalents 8,029 — 8,029
Debt securities, available-for-sale 698 — 698
Federal Home Loan Bank stock 4,334 — 4,334
Loans, net 127,700 — 127,700
Premises and equipment 3,427 — 3,427
Operating lease right-of-use assets 48 — 48
Core deposit and other intangibles 3,760 — 3,760
Bank owned life insurance 3,004 — 3,004
Deferred income taxes 1,813 2,453 4,266
Other assets 2,590 482 3,072
Total identifiable assets acquired 155,403 2,935 158,338
Liabilities Assumed:
Deposits 132,435 — 132,435
Short-term borrowings 13,000 — 13,000
Operating lease liabilities 48 — 48
Other liabilities 773 (1 ) 772
Total liabilities assumed 146,256 (1 ) 146,255
Total Identifiable Net Assets Acquired 9,147 2,936 12,083
Goodwill Resulting From Merger 14,000 (3,723 ) 10,277

All values are in US Dollars.

The fair value and gross contractual amounts of non-PCD loans as of the acquisition date was $101.7 million and $112.5 million, respectively. LCNB recorded a provision for credit losses on these loans of $763 thousand during the second quarter of 2024.

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LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

(Continued)

NOTE 2 - BUSINESS COMBINATIONS (continued)

As permitted by ASC No. 805-10-25, Business Combinations, the above estimated amounts may be adjusted up to one year after the closing date of the transaction to reflect any new information obtained about facts and circumstances existing at the acquisition date. While the Company believes that the information available on the merger date provided a reasonable basis for estimating fair value, additional information and evidence may be provided which will be utilized to finalize all valuations and record final adjustments during the one year subsequent measurement period. These adjustments may include: (i) changes in deferred tax assets or liabilities related to fair value estimates and changes in the expected realization of items considered to be net operating loss carryforwards due to tax calculations still in process, and (ii) changes in goodwill as a result of the net effect of any adjustments. As such, any changes in the estimated fair value of assets will be recognized in the period the adjustment is identified.

The consideration adjustments are associated with the unearned portion of EAGLE.bank's employee stock ownership plan. The other assets, other liabilities and resulting deferred tax adjustments in the table above were related to the updated fair value adjustments.

The amount of goodwill recorded reflects LCNB's expansion in the Cincinnati market and related synergies that are expected to result from the acquisition and represents the excess purchase price over the estimated fair value of the net assets acquired. The goodwill will not be amortizable on LCNB's financial records and will not be deductible for tax purposes. Total goodwill will be subject to an annual test for impairment and the amount impaired, if any, will be charged to expense at the time of impairment.

Direct expenses related to the EFBI acquisition totaled $298 thousand during the three months ended March 31, 2024. They were expensed as incurred and are recorded as merger-related expenses in the consolidated statements of income. There were no direct expenses related to the EFBI acquisition in 2025.

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LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

(Continued)

NOTE 3 - INVESTMENT SECURITIES

The amortized cost and estimated fair value of debt securities at March 31, 2025 and December 31, 2024 are summarized as follows (in thousands):

Amortized Cost Unrealized Gains Unrealized Losses Fair Value
March 31, 2025
Debt Securities, Available-for-Sale:
U.S. Treasury notes $ 67,674 — 3,750 63,924
U.S. Agency notes 83,384 — 5,000 78,384
Corporate bonds 8,200 15 422 7,793
U.S. Agency mortgage-backed securities 75,467 3 7,620 67,850
Municipal securities:
Non-taxable 4,239 — 243 3,996
Taxable 36,585 — 2,641 33,944
$ 275,549 18 19,676 255,891
Debt Securities, Held-to-Maturity:
Municipal securities:
Non-taxable $ 14,456 — 1,059 13,397
Taxable 3,129 — 324 2,805
$ 17,585 — 1,383 16,202
December 31, 2024
Debt Securities, Available-for-Sale:
U.S. Treasury notes $ 70,934 — 4,754 66,180
U.S. Agency notes 83,770 — 6,253 77,517
Corporate Bonds 8,200 5 449 7,756
U.S. Agency mortgage-backed securities 78,869 3 9,326 69,546
Municipal securities:
Non-taxable 4,248 — 266 3,982
Taxable 36,599 — 3,253 33,346
$ 282,620 8 24,301 258,327
Debt Securities, Held-to-Maturity:
Municipal securities:
Non-taxable $ 13,195 — 922 12,273
Taxable 3,129 — 474 2,655
$ 16,324 — 1,396 14,928

The amortized cost of debt securities in the above table excludes accrued interest of $1.1 million and $993 thousand at March 31, 2025 and December 31, 2024, respectively, that is recorded in other assets on the consolidated condensed balance sheets.

Expected credit losses on debt securities were $5 thousand at March 31, 2025 and December 31, 2024.

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LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

(Continued)

NOTE 3 - INVESTMENT SECURITIES (continued)

Information concerning debt securities with gross unrealized losses at March 31, 2025 and December 31, 2024, aggregated by length of time that individual securities have been in a continuous loss position, is as follows (in thousands):

Less than Twelve Months Twelve Months or Greater
Fair Value Unrealized Losses Fair Value Unrealized Losses
March 31, 2025
Available-for-Sale:
U.S. Treasury notes $ — — 63,924 3,750
U.S. Agency notes 4,110 34 74,274 4,966
Corporate bonds — — 6,278 422
U.S. Agency mortgage-backed securities 5,805 18 61,799 7,602
Municipal securities:
Non-taxable — — 3,995 243
Taxable — — 33,884 2,641
$ 9,915 52 244,154 19,624
Held-to-Maturity:
Municipal securities:
Non-taxable $ 3,619 58 9,370 1,001
Taxable — — 2,805 324
$ 3,619 58 12,175 1,325
December 31, 2024
Available-for-Sale:
U.S. Treasury notes $ 3,232 — 62,948 4,754
U.S. Agency notes 3,991 137 73,526 6,116
Corporate Bonds 743 7 6,258 442
U.S. Agency mortgage-backed securities 5,806 180 63,539 9,146
Municipal securities:
Non-taxable — — 3,982 266
Taxable — — 33,286 3,253
$ 13,772 324 243,539 23,977
Held-to-Maturity:
Municipal securities:
Non-taxable $ 2,283 17 9,578 905
Taxable — — 2,655 474
$ 2,283 17 12,233 1,379

At March 31, 2025, LCNB’s securities portfolio consisted of 159 securities, 153 of which were in an unrealized loss position. At December 31, 2024, LCNB's securities portfolio consisted of 161 securities, 157 of which were in an unrealized loss position.

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NOTE 3 - INVESTMENT SECURITIES (continued)

Each quarter, LCNB performs an analysis to determine if any of the unrealized losses on available-for-sale debt securities are comprised of credit losses as compared to unrealized losses due to market interest rate adjustments. The assessment includes a review of the unrealized loss for each security issuance held; the financial condition and near-term prospects of the issuer, including external credit ratings and recent downgrades; and LCNB's ability and intent to hold the security for a period of time sufficient for a recovery in value. LCNB also considers the extent to which the securities are issued by the federal government or its agencies and any guarantee of issued amounts by those agencies. The portfolio continues to consist of a mix of fixed and floating-rate, high quality securities, largely rated AA (or better), displaying an overall effective duration of approximately 3.2 years. No credit losses were determined to be present as of March 31, 2025, as there was no credit quality deterioration noted. Therefore, no provision for credit losses on available-for-sale debt securities was recognized for the first quarter of 2025.

Debt securities with a market value of $135.7 million and $116.2 million at March 31, 2025 and December 31, 2024, respectively, were pledged to secure public deposits and for other purposes required or as permitted by law.

Excluding holdings in U.S. Treasury securities and U.S. Government Agencies, there were no investments in securities of any issuer that exceeded 10% of LCNB's consolidated shareholders' equity at March 31, 2025.

Contractual maturities of debt securities at March 31, 2025 were as follows (in thousands).  Actual maturities may differ from contractual maturities when issuers have the right to call or prepay obligations.

Available-for-Sale Held-to-Maturity
Amortized Cost Fair Value Amortized Cost Fair Value
Due within one year $ 26,722 26,278 64 63
Due from one to five years 144,868 135,199 991 966
Due from five to ten years 28,493 26,564 9,523 8,828
Due after ten years — — 7,007 6,345
200,083 188,041 17,585 16,202
U.S. Agency mortgage-backed securities 75,466 67,850 — —
$ 275,549 255,891 17,585 16,202

Certain information concerning the sale of debt securities available-for-sale for the three months ended March 31, 2025 and 2024 was as follows (in thousands):

Three Months Ended
March 31,
2025 2024
Proceeds from sales $ — 9,615
Gross realized gains — —
Gross realized losses — 214

Realized gains or losses from the sale of securities are computed using the specific identification method.

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NOTE 3 - INVESTMENT SECURITIES (continued)

Equity securities with a readily determinable fair value are carried at fair value, with changes in fair value recognized in other operating income in the consolidated condensed statements of income. Equity securities without a readily determinable fair value are measured at cost minus impairment, if any, plus or minus any changes resulting from observable price changes in orderly transactions, as defined, for identical or similar investments of the same issuer. LCNB was not aware of any impairment or observable price change adjustments that needed to be made at March 31, 2025 on its investments in equity securities without a readily determinable fair value.

The amortized cost and estimated fair value of equity securities with a readily determinable fair value at March 31, 2025 and December 31, 2024 are summarized as follows (in thousands):

March 31, 2025 December 31, 2024
Amortized Fair Amortized Fair
Cost Value Cost Value
Mutual Funds $ 1,461 1,293 1,451 1,265
Equity Securities 10 94 10 98
Total equity securities with a readily determinable fair value $ 1,471 1,387 1,461 1,363

Certain information concerning changes in the fair value of equity securities with a readily determinable fair value for the three months ended March 31, 2025 and 2024 were as follows (in thousands):

Three Months Ended
March 31,
2025 2024
Net gains (losses) recognized during the period on equity securities $ 14 (10 )
Less net gains (losses) recognized during the period on equity securities sold during the period — —
Net unrealized gains (losses) recognized during the reporting period on equity securities still held at period end $ 14 (10 )

LCNB is a member of the FHLB system and its regional FRB. Members are required to own a certain amount of stock based on predetermined formulas. FHLB and FRB stock are carried at cost, which is equal to par value, and periodically evaluated for impairment based on ultimate recovery of par value.

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NOTE 4 - LOANS

Major classifications of loans at March 31, 2025 and December 31, 2024 were as follows (in thousands):

March 31, 2025 December 31, 2024
Commercial & industrial $ 112,689 118,611
Commercial, secured by real estate:
Owner occupied 217,052 210,327
Non-owner occupied 505,518 508,531
Farmland 37,057 37,860
Multi-family 265,334 264,260
Construction 83,399 91,154
Residential real estate:
Secured by senior liens on 1-4 family dwellings 397,209 392,513
Secured by junior liens on 1-4 family dwellings 21,481 21,522
Home equity line-of-credit loans 45,494 43,064
Consumer 19,054 20,498
Agricultural 13,210 13,293
Other loans, including deposit overdrafts 133 179
Loans, gross 1,717,630 1,721,812
Less allowance for credit losses 12,124 12,001
Loans, net $ 1,705,506 1,709,811

Loans in the above table are shown net of deferred origination fees and costs. Deferred origination fees, net of related costs, were $929 thousand and $796 thousand at March 31, 2025 and December 31, 2024, respectively. Accrued interest receivable of $7.9 million and $7.7 million are excluded from the balances above as of March 31, 2025 and December 31, 2024, respectively, and are recorded in other assets in the consolidated condensed balance sheets.

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NOTE 4 – LOANS (continued)

Non-accrual loans by class of receivable as of March 31, 2025 and December 31, 2024 were as follows (in thousands):

March 31, 2025 December 31, 2024
Non-accrual Non-accrual
Loans with no Total Loans with no Total
Allowance for Non-accrual Allowance for Non-accrual
Credit Losses Loans Credit Losses Loans
Commercial & industrial $ — 1,379 — 1,375
Commercial, secured by real estate:
Owner occupied — — — —
Non-owner occupied — 2,687 — 2,642
Farmland 16 16 16 16
Multi-family — — — —
Construction — — — —
Residential real estate:
Secured by senior liens on 1-4 family dwellings 71 601 73 467
Secured by junior liens on 1-4 family dwellings — — — —
Home equity line-of-credit loans — — — —
Consumer 27 27 28 28
Agricultural — — — —
Total $ 114 4,710 117 4,528

Interest income recognized on nonaccrual loans totaled approximately $1 thousand and $116 thousand during the three months ended  March 31, 2025 and 2024, respectively. Accrued interest reversed and charged against interest income for these loans totaled approximately $9 thousand and $27 thousand during the three months ended  March 31, 2025 and 2024, respectively.

The ratio of non-accrual loans to total loans outstanding at March 31, 2025 and December 31, 2024 was 0.27% and 0.26%, respectively.

ALLOWANCE FOR CREDIT LOSSES

The ACL is an estimate of the expected credit losses on financial assets measured at amortized cost, which is measured using relevant information about past events, including historical credit loss experience on financial assets with similar risk characteristics, current conditions, and reasonable and supportable forecasts that affect the collectability of the remaining cash flows over the contractual term of the financial assets. A provision for credit losses is charged to operations based on management’s periodic evaluation of these and other pertinent factors.

QUANTITATIVE CONSIDERATIONS

The ACL is primarily calculated utilizing a DCF model. Key inputs and assumptions used in this model are discussed below:

• Forecast model - For each portfolio segment, an LDA was performed in order to identify appropriate loss drivers and create a regression model for use in forecasting cash flows. The LDA utilized peer FFIEC Call Report data for all pools and was last updated for the September 30, 2024 ACL calculation based on relevant information available at March 31, 2024.

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NOTE 4 – LOANS (continued)

• Probability of default – PD is the probability that an asset will be in default within a given time frame. The Company has defined default as when a charge-off has occurred, a loan goes to non-accrual status, or a loan is greater than 90 days past due. The forecast model is utilized to estimate PDs.
• Loss given default – LGD is the percentage of the asset not expected to be collected due to default. The LGD is derived from company specific and peer loss data.
--- ---
• Prepayments and curtailments – Prepayments and curtailments are calculated based on the Company’s own data. This analysis is updated when materially relevant.
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• Forecast and reversion – The Company, as of December 31, 2024, utilized a four-quarter reasonable and supportable forecast period with a six-quarter straight line reversion to the long-term historical average. As of March 31, 2025, the Company continues to utilize a four-quarter reasonable and supportable forecast period with a six-quarter straight line reversion to the long-term historical average.
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• Economic forecast – The Company utilizes a third party to provide economic forecasts under various scenarios, which are assessed against economic indicators and management’s observations in the market. As of March 31, 2025, the Company selected a forecast which forecasts unemployment between 4.66% and 5.57%, the change in Coincident Economic Activity between 0.43% and 1.18%, the change in Commercial Real Estate Price Indexes between -8.90% and -2.30%, and the change in the Home Price Index between -1.54% and 3.08% during the forecast periods. Management believes that the resulting quantitative reserve appropriately balances economic indicators with identified risks.  As of December 31, 2024, the Company selected a forecast which forecasts unemployment between 4.75% and 5.48%, the change in Coincident Economic Activity between -0.21% and 0.80%, the change in Commercial Real Estate Price Indexes between -6.95% and -2.07%, and the change in the Home Price Index between -2.51% and 2.91% during the forecast periods. The historical averages for LCNB’s economic indicators are unemployment – 5.73%, change in Coincident Economic Activity – 1.94%, change in Commercial Real Estate Price Indexes – 4.65%, and change in Home Price Index – 2.78%.
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QUALITATIVE CONSIDERATIONS

In addition to the quantitative model, management considers the need for qualitative adjustment for risks not considered in the DCF. Factors that are considered by management in determining loan collectability and the appropriate level of the ACL are listed below:

• Actual and expected changes in international, national, regional, and local economic and business conditions and developments in which the Company operates that affect the collectability of financial assets;
• The effect of other external factors such as the regulatory, legal and technological environments, competition, and events such as natural disasters or pandemics;
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• Model risk including statistical risk, reversion risk, timing risk, and model limitation risk;
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• Changes in the nature and volume of the portfolio and terms of loans; and
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• Lending policies and procedures, including changes in underwriting standards and practices for collections, write-offs, and recoveries.
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NOTE 4 – LOANS (continued)

The following table presents activity in the allowance for credit losses by portfolio segment for the three months ended March 31, 2025 and 2024 (in thousands):

Commercial,
Commercial Secured by Residential
& Industrial Real Estate Real Estate Consumer Agricultural Other Total
Three Months Ended March 31, 2025 **** **** **** **** **** **** ****
Balance, beginning of period $ 1,573 6,537 3,634 220 24 13 12,001
Provision for (recovery of) credit losses (266 ) 293 91 1 (4 ) 47 162
Losses charged off — — — — — (53 ) (53 )
Recoveries — — 4 — — 10 14
Balance, end of period $ 1,307 6,830 3,729 221 20 17 12,124
Ratio of net charge-offs to average loans — % — % (0.00 )% — % — % 111.79 % 0.01 %
Commercial,
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Commercial Secured by Residential
& Industrial Real Estate Real Estate Consumer Agricultural Other Total
Three Months Ended March 31, 2024 **** **** **** **** **** **** ****
Balance, beginning of period $ 1,039 5,414 3,816 238 18 — 10,525
Provision for (recovery of) credit losses (72 ) 1,072 (964 ) (11 ) — 52 77
Losses charged off — — — (3 ) — (75 ) (78 )
Recoveries — — — 8 — 25 33
Balance, end of period $ 967 6,486 2,852 232 18 2 10,557
Ratio of net charge-offs to average loans — % — % — % (0.08 )% — % 259.48 % 0.01 %

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NOTE 4 – LOANS (continued)

The ratio of the allowance for credit losses for loans to total loans at  March 31, 2025 and December 31, 2024 was 0.71% and 0.70%, respectively.

For collateral dependent loans where management has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and repayment of the loan is to be provided substantially through the operation or sale of the collateral, the allowance for credit losses is measured based on the difference between the fair value of the collateral, less costs to sell, and the amortized cost basis of the loan as of the measurement date.

The following table presents the carrying value and related allowance of collateral dependent individually evaluated loans by class segment at the dates indicated (in thousands):

March 31, 2025 December 31, 2024
Amortized Related Amortized Related
Cost Basis Allowance Cost Basis Allowance
Commercial & industrial $ — — — —
Commercial, secured by real estate:
Owner occupied 44 — 48 —
Non-owner occupied 2,687 1,269 2,642 1,201
Farmland 16 — 16 —
Multi-family — — — —
Construction — — — —
Residential real estate:
Secured by senior liens on 1-4 family dwellings 709 63 527 50
Secured by junior liens on 1-4 family dwellings — — — —
Home equity line-of-credit loans 76 — 75 —
Consumer — — — —
Agricultural — — — —
Other loans, including deposit overdrafts — — — —
Total $ 3,532 1,332 3,308 1,251

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NOTE 4 – LOANS (continued)

The risk characteristics of LCNB's material loan portfolio segments were as follows:

Commercial & Industrial Loans. LCNB’s commercial & industrial loan portfolio consists of loans for a variety of purposes, including, for example, loans to fund working capital requirements (such as inventory and receivables financing) and purchases of machinery and equipment.  LCNB offers a variety of commercial & industrial loan arrangements, including term loans, balloon loans, and lines of credit.  Commercial & industrial loans can have a fixed or variable rate, with maturities ranging from one to ten years.  Commercial & industrial loans are offered to businesses and professionals for short and medium terms on both a collateralized and uncollateralized basis. Commercial & industrial loans typically are underwritten on the basis of the borrower’s ability to make repayment from the cash flow of the business.  Collateral, when obtained, may include liens on furniture, fixtures, equipment, inventory, receivables, or other assets.  As a result, such loans involve complexities, variables, and risks that require thorough underwriting and more robust servicing than other types of loans.

Commercial, Secured by Real Estate Loans.  Commercial real estate loans include loans secured by a variety of commercial, retail and office buildings, religious facilities, hotels, multifamily (more than four-family) residential properties, construction and land development loans, and other land loans. Mortgage loans secured by owner-occupied agricultural property are included in this category.  Commercial real estate loan products generally amortize over five to twenty-five years and are payable in monthly principal and interest installments.  Some have balloon payments due within one to ten years after the origination date.  The majority have adjustable interest rates with adjustment periods ranging from one to ten years, some of which are subject to established “floor” interest rates.

Commercial real estate loans are underwritten based on the ability of the property, in the case of income-producing property, or the borrower’s business to generate sufficient cash flow to amortize the debt. Secondary emphasis is placed upon global debt service, collateral value, financial strength and liquidity of any and all guarantors, and other factors. Commercial real estate loans are generally originated with a 75% to 85% maximum loan to appraised value ratio, depending upon borrower occupancy rates.

Residential Real Estate Loans.  Residential real estate loans include loans secured by first or second mortgage liens on one to four-family residential properties.  Home equity lines of credit are also included in this category.  First and second mortgage loans are generally amortized over five to thirty years with monthly principal and interest payments.  Home equity lines of credit generally have a five year or less draw period with interest only payments followed by a repayment period with monthly payments based on the amount outstanding.  LCNB offers both fixed and adjustable-rate mortgage loans.  Adjustable-rate loans are available with adjustment periods ranging between one to fifteen years and adjust according to an established index plus a margin, subject to certain floor and ceiling rates.  A substantial majority of home equity lines of credit have a variable rate of interest based on the Wall Street Journal prime rate plus a margin.

Residential real estate loans are underwritten primarily based on the borrower’s ability to repay, prior credit history, and the value of the collateral.  LCNB generally requires private mortgage insurance for first mortgage loans that have a loan to appraised value ratio of greater than 80% or may require other credit enhancements for second lien mortgage loans.

Consumer Loans.  LCNB’s portfolio of consumer loans generally includes secured and unsecured loans to individuals for household, family and other personal expenditures.  Secured loans include loans to fund the purchase of automobiles, recreational vehicles, boats, and similar acquisitions. Consumer loans made by LCNB generally have fixed rates and terms ranging up to 72 months, depending upon the nature of the collateral, size of the loan, and other relevant factors. Consumer loans generally have higher interest rates but pose additional risks of collectability and loss when compared to certain other types of loans. Collateral, if present, is generally subject to damage, wear, and depreciation.  The borrower’s ability to repay is of primary importance in the underwriting of consumer loans.

Agricultural Loans.  LCNB’s portfolio of agricultural loans includes loans for financing agricultural production and for financing the purchase of equipment used in the production of agricultural products.  LCNB’s agricultural loans are generally secured by farm machinery, livestock, crops, vehicles, or other agricultural-related collateral.

Other Loans, Including Deposit Overdrafts. Other loans may include loans that do not fit in any of the other categories, but it is primarily composed of overdrafts from transaction deposit accounts. Overdraft payments are recorded as a recovery and overdrafts are generally written off after 34 days with a negative balance.

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NOTE 4 – LOANS (continued)

LCNB’s management monitors the credit quality of its loans on an ongoing basis. This monitoring includes annual reviews for loans with a principal balance greater than $1 million and bi-annual reviews for loans with a principal balance of more than $500 thousand through $1 million. LCNB also has a loan grade monitoring system in place to track and report loan grades and classifications, enabling the identification and management of non-performing loans. ​ Major factors used in determining loan grades vary based on the nature of the loan, but commonly include factors such as debt service coverage, internal cash flow, liquidity, leverage, operating performance, debt burden, FICO scores, occupancy, interest rate sensitivity, and expense burden. ​Commercial real estate loans rated OAEM or worse are reviewed at least quarterly for credit deterioration.

A loan is assigned to a risk category based on relevant information about the ability of the borrower to service the debt including, but not limited to, current financial information, historical payment experience, credit documentation, public information, and current economic trends.  The categories used are:

• Pass – loans categorized in this category are higher quality loans that do not fit any of the other categories described below.
• Other Assets Especially Mentioned ("OAEM") – loans in this category are currently protected but are potentially weak. These loans constitute a risk but not to the point of justifying a classification of substandard.  The credit risk may be relatively minor yet constitute an undue risk in light of the circumstances surrounding a specific asset.
• Substandard – loans in this category are inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any.  Assets so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt.  They are characterized by the possibility that LCNB will sustain some loss if the deficiencies are not corrected.
• Doubtful – loans classified in this category have all the weaknesses inherent in loans classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

LCNB generally performs a classification of assets review, including the regulatory classification of assets, on an ongoing basis. The results of the classification of assets review are validated annually by an independent third-party loan review firm. In the event of a difference in rating or classification between those assigned by the internal and external resources, the Company will utilize the more critical or conservative rating or classification. Loans with regulatory classifications are presented monthly to the Board of Directors.

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NOTE 4 – LOANS (continued)

The following table presents the amortized cost basis of loans by vintage and credit quality indicators at March 31, 2025 and December 31, 2024 (in thousands):

Term Loans by Origination Year
Revolving Revolving
Loans Loans
Amortized Converted
2025 2024 2023 2022 2021 Prior Cost Basis to Term Total
March 31, 2025
Commercial & industrial
Pass $ 1,200 15,993 10,807 27,525 22,144 11,597 16,467 — 105,733
OAEM 102 — 79 1,216 — 1,304 499 — 3,200
Substandard 83 — — 1,789 — — 428 77 2,377
Doubtful — 1,379 — — — — — — 1,379
Total 1,385 17,372 10,886 30,530 22,144 12,901 17,394 77 112,689
Gross charge-offs (1) — — — — — — — — —
Commercial, secured by real estate
Pass 3,703 50,179 114,807 199,409 155,357 420,652 138,600 — 1,082,707
OAEM — — — 3,716 4,359 7,009 — — 15,084
Substandard — — — 7,329 — 3,065 — 175 10,569
Doubtful — — — — — — — — —
Total 3,703 50,179 114,807 210,454 159,716 430,726 138,600 175 1,108,360
Gross charge-offs (1) — — — — — — — — —
Residential real estate
Pass 6,877 33,644 58,878 80,225 85,001 150,593 43,740 — 458,958
OAEM — — — — 198 1,211 — — 1,409
Substandard — — 530 — 287 3,000 — — 3,817
Doubtful — — — — — — — — —
Total 6,877 33,644 59,408 80,225 85,486 154,804 43,740 — 464,184
Gross charge-offs (1) — — — — — — — — —
Consumer
Pass 1,588 5,624 4,461 3,153 2,341 1,780 59 — 19,006
OAEM — — — — — — — — —
Substandard — — — 38 — 10 — — 48
Doubtful — — — — — — — — —
Total 1,588 5,624 4,461 3,191 2,341 1,790 59 — 19,054
Gross charge-offs (1) — — — — — — — — —
Agricultural
Pass 51 283 1,354 342 146 297 10,737 — 13,210
OAEM — — — — — — — — —
Substandard — — — — — — — — —
Doubtful — — — — — — — — —
Total 51 283 1,354 342 146 297 10,737 — 13,210
Gross charge-offs (1) — — — — — — — — —
Other
Pass — — — — — — 133 — 133
OAEM — — — — — — — — —
Substandard — — — — — — — — —
Doubtful — — — — — — — — —
Total — — — — — — 133 — 133
Gross charge-offs (1) — — — — — — 53 — 53
Total loans $ 13,604 107,102 190,916 324,742 269,833 600,518 210,663 252 1,717,630
(1) - for the three months ended March 31, 2025.
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NOTE 4 – LOANS (continued)

Term Loans by Origination Year
Revolving Revolving
Loans Loans
Amortized Converted
2024 2023 2022 2021 2020 Prior Cost Basis to Term Total
December 31, 2024
Commercial & industrial
Pass $ 17,844 11,914 31,287 24,201 6,930 6,507 14,836 — 113,519
OAEM — — — — 1,416 — — — 1,416
Substandard — — 1,789 — 81 — 431 — 2,301
Doubtful 1,375 — — — — — — — 1,375
Total 19,219 11,914 33,076 24,201 8,427 6,507 15,267 — 118,611
Gross charge-offs (2) — — 588 22 — — — — 610
Commercial, secured by real estate
Pass 43,461 111,706 185,003 160,126 99,709 337,270 155,686 — 1,092,961
OAEM — — 3,755 1,496 175 3,640 — — 9,066
Substandard — — 7,399 — — 2,706 — — 10,105
Doubtful — — — — — — — — —
Total 43,461 111,706 196,157 161,622 99,884 343,616 155,686 — 1,112,132
Gross charge-offs (2) — — — — — — — — —
Residential real estate
Pass 33,898 60,232 73,984 86,712 52,241 104,254 41,482 — 452,803
OAEM — — — — — 207 — — 207
Substandard — 394 — 289 480 2,912 14 — 4,089
Doubtful — — — — — — — — —
Total 33,898 60,626 73,984 87,001 52,721 107,373 41,496 — 457,099
Gross charge-offs (2) — — — — — — — — —
Consumer
Pass 6,553 5,053 3,598 2,792 1,900 491 66 — 20,453
OAEM — — — — — — — — —
Substandard — — 41 — — 4 — — 45
Doubtful — — — — — — — — —
Total 6,553 5,053 3,639 2,792 1,900 495 66 — 20,498
Gross charge-offs (2) — 1 39 3 — — — — 43
Agricultural
Pass 289 1,458 378 149 309 29 10,681 — 13,293
OAEM — — — — — — — — —
Substandard — — — — — — — — —
Doubtful — — — — — — — — —
Total 289 1,458 378 149 309 29 10,681 — 13,293
Gross charge-offs (2) — — — — 57 — — — 57
Other
Pass — — — — — — 179 — 179
OAEM — — — — — — — — —
Substandard — — — — — — — — —
Doubtful — — — — — — — — —
Total — — — — — — 179 — 179
Gross charge-offs (2) — — — — — — 193 — 193
Total loans $ 103,420 190,757 307,234 275,765 163,241 458,020 223,375 — 1,721,812
(2) - for the year ended December 31, 2024.
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(Continued)

NOTE 4 – LOANS (continued)

A loan portfolio aging analysis by class segment at March 31, 2025 and December 31, 2024 is as follows (in thousands):

90 Days
90 Days or More
30-59 Days 60-89 Days or More Total Total Loans Past Due
Past Due Past Due Past Due Past Due Current Receivable and Accruing
March 31, 2025
Commercial & industrial $ 114 — — 114 112,575 112,689 —
Commercial, secured by real estate: — — — — —
Owner occupied — — — — 217,052 217,052 —
Non-owner occupied 187 — 2,687 2,874 502,644 505,518 —
Farmland — — — — 37,057 37,057 —
Multi-family — — — — 265,334 265,334 —
Construction — — — — 83,399 83,399 —
Residential real estate: — — — — —
Secured by senior liens on 1-4 family dwellings 912 269 110 1,291 395,918 397,209 102
Secured by junior liens on 1-4 family dwellings — — — — 21,481 21,481 —
Home equity line-of-credit loans 49 10 76 135 45,359 45,494 76
Consumer 41 3 30 74 18,980 19,054 3
Agricultural — — — — 13,210 13,210 —
Other 133 — — 133 — 133 —
Total $ 1,436 282 2,903 4,621 1,713,009 1,717,630 181
December 31, 2024
Commercial & industrial $ 666 — — 666 117,945 118,611 —
Commercial, secured by real estate:
Owner occupied — — — — 210,327 210,327 —
Non-owner occupied — — 2,642 2,642 505,889 508,531 —
Farms 460 — — 460 37,400 37,860 —
Multi-family — — — — 264,260 264,260 —
Construction — — — — 91,154 91,154 —
Residential real estate
Secured by senior liens on 1-4 family dwellings 1,948 249 237 2,434 390,079 392,513 57
Secured by junior liens on 1-4 family dwellings — 8 — 8 21,514 21,522 —
Home equity line-of-credit loans 72 — 33 105 42,959 43,064 33
Consumer 10 — 28 38 20,460 20,498 —
Agricultural — — — — 13,293 13,293 —
Other 179 — — 179 — 179 —
Total $ 3,335 257 2,940 6,532 1,715,280 1,721,812 90

Residential consumer mortgage loans secured by residential real estate in the process of foreclosure totaled $60 thousand and $33 thousand at March 31, 2025 and  December 31, 2024, respectively.

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NOTE 4 – LOANS (continued)

From time to time, the terms of certain loans are modified when concessions are granted to borrowers experiencing financial difficulties. Each modification is separately negotiated with the borrower and includes terms and conditions that reflect the borrower's ability to pay the debt as modified. The modification of the terms of such loans may have included one, or a combination of, the following: an interest rate reduction, term extension, forgiveness of principal, or an other-than-insignificant payment delay.

Excluding individually evaluated collateral dependent loans that are measured at fair value, the following tables present the amortized cost basis of loans modified during the reporting period for borrowers who were experiencing financial difficulty at the time of modification, disaggregated by class of financing receivable and type of concession granted (in thousands), as of March 31, 2024 and 2025:

Interest Rate Reduction Extended Maturity Principal Forgiveness Payment Delay Combination - Interest Rate Reduction and Extended Maturity Combination - Interest Rate Reduction and Payment Delay Total Modifications Percent of Total Class
Three Months Ended March 31, 2025 ****
Commercial & industrial $ — 77 — — 999 — 1,076 0.95 %
Commercial, secured by real estate, owner occupied — 494 — — — — 494 0.23 %
Total $ — 571 — — 999 — 1,570
Three Months Ended March 31, 2024 ****
Commercial & industrial $ — 1,793 — — — — 1,793 1.47 %
Residential real estate, secured by senior liens on 1-4 family dwellings — — — — — 25 25 0.01 %
Total $ — 1,793 — — — 25 1,818

During the third quarter of 2024, one borrower defaulted on two consumer loans that underwent maturity-extension and payment-delay modifications during quarter two of 2024 while the borrower was known to be experiencing financial difficulty. The borrower remained in default through February 2025. At March 31, 2025, the amortized cost basis of these two consumer loans totaled $27 thousand. No other loans defaulted during the quarter ended March 31, 2025 that, within twelve months prior to their default, were modified for borrowers experiencing financial difficulty. During the quarter ended March 31, 2024, no loans defaulted which, in the twelve months preceding their default, were modified for borrowers experiencing financial difficulty.

At  March 31, 2025 and December 31, 2024, LCNB was not committed to lend additional funds to borrowers who, during the respective three and twelve-month reporting period, were granted loan modifications while experiencing financial difficulty.

Mortgage loans sold to and serviced for the Federal Home Loan Mortgage Corporation and other investors are not included in the accompanying consolidated condensed balance sheets.  The unpaid principal balances of those loans at March 31, 2025 and December 31, 2024 were approximately $354.6 million and $397.6 million, respectively.

NOTE 5 - PURCHASED CREDIT DETERIORATED LOANS

Activity during the three months ended March 31, 2024 and 2025 for the accretable discount related to PCD loans acquired from EFBI and CNNB is as follows (in thousands):

Three Months Ended March 31,
2025 2024
Accretable discount, beginning of period $ 1,113 1,467
Less accretion 13 58
Accretable discount, end of period $ 1,100 1,409

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NOTE 6 - AFFORDABLE HOUSING TAX CREDIT LIMITED PARTNERSHIP INVESTMENTS

LCNB is a limited partner in multiple limited partnerships that sponsor affordable housing projects utilizing the Low Income Housing Tax Credit pursuant to Section 42 of the Internal Revenue Code. The purpose of the investments is to achieve a satisfactory return on capital, to facilitate the sale of additional affordable housing product offerings, and to assist in achieving goals associated with the Community Reinvestment Act. The primary activities of the limited partnerships include the identification, development, and operation of multi-family housing that is leased to qualifying residential tenants.

The following table presents the balances of LCNB's affordable housing tax credit investments and related unfunded commitments at March 31, 2025 and December 31, 2024 (in thousands):

March 31, December 31,
2025 2024
Affordable housing tax credit investment $ 18,950 18,950
Less amortization 6,444 6,044
Net affordable housing tax credit investment $ 12,506 12,906
Unfunded commitment $ 3,819 4,426

The net affordable housing tax credit investment is included in other assets and the unfunded commitment is included in accrued interest and other liabilities in the consolidated condensed balance sheets.

LCNB anticipates to fund the unfunded commitment over twelve years.

The following table presents other information relating to LCNB's affordable housing tax credit investments for the three months ended March 31, 2025 and 2024 (in thousands):

Three Months Ended March 31,
2025 2024
Tax credits and other tax benefits recognized $ 485 443
Tax credit amortization expense included in provision for income taxes 400 372

NOTE 7 - DEPOSITS

The following table presents the composition of LCNB's deposits at March 31, 2025 and December 31, 2024 (in thousands):

March 31, December 31,
2025 2024
Demand deposits $ 464,059 459,619
Interest-bearing demand and money fund deposits 609,256 540,884
Savings deposits 365,961 367,205
IRA and time certificates 482,373 510,584
Total $ 1,921,649 1,878,292

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NOTE 7 - DEPOSITS (continued)

Contractual maturities of time deposits at March 31, 2025 were as follows (in thousands):

Three months or less $ 132,693
Over three through six months 133,576
Over six through twelve months 179,402
April 1, 2025 - March 31, 2026 445,671
April 1, 2026 - March 31, 2027 30,222
April 1, 2027 - March 31, 2028 3,056
April 1, 2028 - March 31, 2029 1,420
April 1, 2029 - March 31, 2030 1,639
Thereafter 365
Total contractual maturities $ 482,373

The aggregate amount of time deposits in denominations of $250 thousand or more at March 31, 2025 and December 31, 2024 was $102.2 million and $107.8 million, respectively.

NOTE 8 – BORROWINGS

Long-term debt at March 31, 2025 and December 31, 2024 was as follows (dollars in thousands):

March 31, 2025 December 31, 2024
Amount Weighted Average Interest Rate Amount Weighted Average Interest Rate
Term loan $ 9,637 4.25 % $ 10,153 4.25 %
FHLB long-term advances 95,000 4.83 % 145,000 4.62 %
$ 104,637 4.78 % $ 155,153 4.60 %

The term loan with a correspondent financial institution bears a fixed interest rate of 4.25%, amortizes quarterly, and has a final balloon payment due on June 15, 2025.

Contractual maturities of long-term debt at March 31, 2025 and December 31, 2024 were as follows (in thousands):

March 31, December 31,
2025 2024
Maturing within one year $ 9,637 10,153
Maturing after one year through two years 25,000 25,000
Maturing after two years through three years 25,000 35,000
Maturing after three years through four years 25,000 45,000
Maturing after four years through five years 10,000 30,000
Thereafter 10,000 10,000
Total $ 104,637 155,153

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NOTE 8 – BORROWINGS (continued)

There were no short-term borrowings at March 31, 2025 or  December 31, 2024.

At March 31, 2025, LCNB had a short-term revolving line of credit arrangement with a financial institution for a maximum amount of $10 million at an interest rate equal to the Wall Street Journal Prime Rate minus 25 basis points. This agreement expires on June 15, 2025.

At March 31, 2025, LCNB had short-term line of credit borrowing arrangements with three correspondent financial institutions. Under the terms of the first arrangement, LCNB can borrow up to $30 million at an interest rate equal to the lending institution’s federal funds rate plus a spread of 50 basis points. Under the terms of the second arrangement, LCNB can borrow up to $50 million at an interest rate equal to the FOMC targeted federal funds rate plus a spread of 25 basis points. Under the terms of the third arrangement, LCNB can borrow up to $25 million at the interest rate in effect at the time of borrowing. At March 31, 2025, LCNB had not drawn down on any of these borrowing arrangements.

All long-term and short-term advances from the FHLB of Cincinnati are secured by a blanket pledge of LCNB's 1-4 family first lien mortgage loans in the amount of approximately $414 million and $410 million at March 31, 2025 and December 31, 2024, respectively. Remaining borrowing capacity with the FHLB, including both long-term and short-term borrowings, at March 31, 2025 was approximately $144.3 million.

NOTE 9 - LEASES

Lease expenses for offices are included in the consolidated condensed statements of income in net occupancy expense and lease expenses for equipment and ATMs are included in equipment expense. Components of lease expense for the three months ended March 31, 2025 and 2024 were as follows (in thousands):

Three Months Ended
March 31,
2025 2024
Operating lease expense $ 252 226
Short-term lease expense 5 19
Variable lease expense 20 4
Other 11 7
Total lease expense $ 288 256

Other information related to leases at March 31, 2025 were as follows (dollars in thousands):

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $ 256
Right-of-use assets obtained in exchange for new operating lease liabilities $ 318
Weighted average remaining lease term in years for operating leases 33.0
Weighted average discount rate for operating leases 3.69 %

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NOTE 10 – INCOME TAXES

A reconciliation between the statutory income tax and LCNB's effective tax rate on income from continuing operations follows:

Three Months Ended March 31,
2025 2024
Statutory tax rate 21.0 % 21.0 %
Increase (decrease) resulting from:
Tax exempt interest (0.5 )% (1.2 )%
Tax exempt income on bank-owned life insurance (1.3 )% (3.0 )%
Captive insurance premium income (1.3 )% (3.3 )%
Affordable housing tax credit limited partnerships (1.6 )% (3.2 )%
Nondeductible merger-related expenses 0.0 % 3.3 %
Other, net 0.1 % 0.4 %
Effective tax rate 16.4 % 14.0 %

NOTE 11 - COMMITMENTS AND CONTINGENT LIABILITIES

LCNB is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers.  These financial instruments include commitments to extend credit and involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated condensed balance sheets.  Exposure to credit loss in the event of nonperformance by the other parties to financial instruments for commitments to extend credit is represented by the contract amount of those instruments.

In addition to such commitments to extend credit, LCNB may have services for customers in place that, though they obligate LCNB to provide credit on certain terms, do not constitute commitments to extend credit. For example, the Account Protection product, LCNB's deposit overdraft program, is offered as a service by the Bank and does not constitute a contract between the customer and LCNB.

LCNB uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.

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NOTE 11 – COMMITMENTS AND CONTINGENT LIABILITIES (continued)

Financial instruments whose contract amounts represent off-balance-sheet credit risk at March 31, 2025 and December 31, 2024 were as follows (in thousands):

March 31, 2025 December 31, 2024
Commitments to extend credit:
Commercial loans $ 11,382 7,881
Other loans
Fixed rate 18,202 21,613
Adjustable rate 3,613 1,998
Unused lines of credit:
Fixed rate 10,283 10,403
Adjustable rate 230,611 231,046
Unused overdraft protection amounts on demand accounts 17,424 17,566
Standby letters of credit 5 5
Total commitments $ 291,520 290,512

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.  Unused lines of credit include amounts not drawn on line of credit loans.  Commitments to extend credit and unused lines of credit generally have fixed expiration dates or other termination clauses.

Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party.  These guarantees generally are fully secured and have varying maturities.

LCNB evaluates each customer's credit worthiness on a case-by-case basis.  The amount of collateral obtained is based on management's credit evaluation of the borrower and may include accounts receivable; inventory, property, plant, and equipment; residential realty; and income-producing commercial properties.

Activity in the allowance for credit losses on off-balance sheet credit exposures, recorded in other liabilities on the consolidated balance sheets, for the three months ended March 31, 2025 and 2024 is as follows (in thousands):

Three Months Ended March 31,
2025 2024
Balance, beginning of period $ 263 281
Provision for credit losses 34 48
Balance, end of period $ 297 329

Capital expenditures include the construction or acquisition of new office buildings, improvements to LCNB's offices, purchases of furniture and equipment, and additions or improvements to LCNB's information technology system. Commitments outstanding for capital expenditures as of March 31, 2025 totaled approximately $26 thousand.

Management believes that LCNB has sufficient liquidity to fund its lending and capital expenditure commitments.

LCNB and its subsidiaries are parties to various claims and proceedings arising in the normal course of business.  Management, after consultation with legal counsel, believes that the liabilities, if any, arising from such proceedings and claims will not be material to LCNB's consolidated financial position or results of operations.

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NOTE 12 – ACCUMULATED OTHER COMPREHENSIVE LOSS

Changes in accumulated other comprehensive loss for the three months ended March 31, 2025 and 2024 were as follows (in thousands):

Three Months Ended March 31,
Changes in
Unrealized Pension Plan
Losses on Assets and
Available-for- Benefit
Sale Debt Securities Obligations Total
2025 **** **** ****
Balance at beginning of period $ (19,190 ) 1 (19,189 )
Other comprehensive income, net of taxes 3,662 — 3,662
Reclassifications — — —
Balance at end of period $ (15,528 ) 1 (15,527 )
2024 **** **** ****
Balance at beginning of period $ (22,281 ) (55 ) (22,336 )
Other comprehensive loss, net of taxes (1,287 ) — (1,287 )
Reclassifications 169 — 169
Balance at end of period $ (23,399 ) (55 ) (23,454 )

Reclassifications out of accumulated other comprehensive loss during the three months ended March 31, 2025 and 2024 and the affected line items in the condensed consolidated statements of income were as follows (in thousands):

Three Months Ended Affected Line Item in the
March 31, Consolidated Condensed
2025 2024 Statements of Income
Realized losses from sales of debt securities, available-for-sale $ — (214 ) Net losses from sales of debt securities, available-for-sale
Income tax benefit — (45 ) Provision for income taxes
Reclassification adjustment, net of taxes $ — (169 )

NOTE 13 – RETIREMENT PLANS

LCNB participates in a noncontributory defined benefit multi-employer retirement plan that covers substantially all regular full-time employees hired before January 1, 2009, on which date the plan was soft-frozen. Employees hired before this date who received a benefit reduction under certain amendments to the defined benefit retirement plan receive an automatic contribution of 5% or 7% of their annual compensation, depending on the sum of an employee's age and vesting service, into their defined contribution plans (401(k) plans), regardless of the contributions made by the employees.  These contributions are made annually and these employees did not receive any employer matches to their 401(k) contributions until March 1, 2025 as described below.

The noncontributory defined benefit multi-employer retirement plan was hard-frozen on March 1, 2025, meaning that benefit increases will no longer accrue to covered employees as of that date.

Employees hired on or after January 1, 2009 receive a 50% employer match on their contributions into the 401(k) plan, up to a maximum LCNB contribution of 3% of each individual employee's annual compensation.  Employees who did not receive an employer match on their 401(k) contributions because of their participation in the noncontributory defined benefit multi-employer retirement plan started receiving matches on March 1, 2025.

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NOTE 13 – RETIREMENT PLANS (continued)

Funding and administrative costs of the qualified noncontributory defined benefit retirement plan and 401(k) plan charged to pension and other employee benefits in the consolidated condensed statements of income for the three-month period ended  March 31, 2025 and 2024 were as follows (in thousands):

Three Months Ended
March 31,
2025 2024
Qualified noncontributory defined benefit retirement plan $ 316 327
401(k) plan 260 220

Certain highly compensated former employees participate in a nonqualified defined benefit retirement plan.  The nonqualified plan ensures that participants receive the full amount of benefits to which they would have been entitled under the noncontributory defined benefit retirement plan in the absence of limits on benefit levels imposed by certain sections of the Internal Revenue Code. This plan is limited to the original participants and no new participants have been added.

The net periodic pension cost of the nonqualified defined benefit retirement plan consists solely of interest cost of $19 thousand for the three months ended March 31, 2025 and $18 thousand for the three months ended March 31, 2024.

NOTE 14 – STOCK BASED COMPENSATION

The 2015 Ownership Incentive Plan (the "2015 Plan") was ratified by LCNB Corp.'s shareholders at the annual meeting on April 28, 2015 and allows for stock-based awards to eligible employees, as determined by the Compensation Committee of the Board of Directors. Awards may be made in the form of stock options, appreciation rights, restricted shares, and/or restricted share units. The 2015 Plan provides for the issuance of up to 450 thousand shares of common stock. The 2015 Plan terminated on April 28, 2025.

Stock-based awards may be in the form of treasury shares or newly issued shares.

Restricted stock awards granted under the 2015 Plan during the three months ended March 31, 2025 and 2024 were as follows:

2025 2024
Weighted Weighted
Average Average
Grant Date Grant Date
Shares Fair Value Shares Fair Value
Nonvested at January 1, 84,593 $ 16.59 79,017 $ 17.94
Granted 38,950 14.60 41,703 13.87
Vested (37,998 ) 16.12 (36,127 ) 16.39
Forfeited — — — —
Nonvested at March 31, 85,545 $ 15.89 84,593 $ 16.59

At March 31, 2025, there were 85,545 restricted stock awards outstanding with an approximate stock value of $1.3 million based on that day's closing stock price. At March 31, 2024, there were 84,593 restricted stock awards outstanding with an approximate stock value of $1.3 million based on that day's closing stock price. The fair value of restricted stock awards was $569 thousand on the grant date of February 24, 2025 and $578 thousand on the grant date of March 4, 2024. Grants to officers of LCNB vest over a period of five years while grants to members of the board of directors vest immediately. The grant date fair value is recognized ratably into expense over the vesting period.

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NOTE 14 – STOCK BASED COMPENSATION (continued)

The following table presents expense recorded in salaries and employee benefits for restricted stock awards and the related tax information for the three months ended March 31, 2025 and 2024 (in thousands):

Three Months Ended
March 31,
2025 2024
Restricted stock expense $ 284 315
Tax effect 60 66

Unrecognized compensation expense for restricted stock awards was $1.2 million at March 31, 2025 and is expected to be recognized over a period of 5.0 years.

NOTE 15 – EARNINGS PER COMMON SHARE

LCNB has granted restricted stock awards with non-forfeitable dividend rights, which are considered participating securities. Accordingly, earnings per share is computed using the two-class method as required by ASC No. 260-10-45. Basic earnings per common share is calculated by dividing net income allocated to common shareholders by the weighted average number of common shares outstanding during the period, which excludes the participating securities.  Diluted earnings per common share is adjusted for the dilutive effects of stock options, warrants, and restricted stock.  The diluted average number of common shares outstanding has been increased for the assumed exercise of stock options and warrants with proceeds used to purchase treasury shares at the average market price for the period.

Earnings per share for the three months ended March 31, 2025 and 2024 were calculated as follows (dollars in thousands, except share and per share data):

Three Months Ended
March 31,
2025 2024
Net income $ 4,609 1,915
Less allocation of earnings and dividends to participating securities 28 12
Net income allocated to common shareholders $ 4,581 1,903
Weighted average common shares outstanding, gross 14,136,855 13,196,895
Less average participating securities 85,545 84,593
Adjusted weighted average number of shares outstanding used in the calculation of basic and diluted earnings per common share 14,051,310 13,112,302
Earnings per common share:
Basic $ 0.33 0.15
Diluted 0.33 0.15

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NOTE 16 - FAIR VALUE MEASUREMENTS

LCNB measures certain assets at fair value using various valuation techniques and assumptions, depending on the nature of the asset.  Fair value is defined as the price that would be received from the sale of an asset in an orderly transaction between market participants at the measurement date.

The inputs to the valuation techniques used to measure fair value are assigned to one of three broad levels:

• Level 1 – quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the reporting date.
• Level 2 – inputs other than quoted prices included within level 1 that are observable for the asset or liability either directly or indirectly.  Level 2 inputs may include quoted prices for similar assets in active markets, quoted prices for identical assets or liabilities in markets that are not active, inputs other than quoted prices (such as interest rates or yield curves) that are observable for the asset or liability, and inputs that are derived from or corroborated by observable market data.
--- ---
• Level 3 – inputs that are unobservable for the asset or liability.
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EQUITY SECURITIES WITH A READILY DETERMINABLE FAIR VALUE

Equity securities with a readily determinable fair value are reported at fair value with changes in fair value reported in other operating income in the consolidated condensed statements of income. Fair values for equity securities are determined based on market quotations (level 1). LCNB has an investment in a mutual fund that is measured at fair value using net asset values, which are considered level 1 because the net asset values are determined and published and are the basis for current transactions.

DEBT SECURITIES, AVAILABLE-FOR-SALE

The majority of LCNB's financial debt securities are classified as available-for-sale.  The securities are reported at fair value with unrealized holding gains and losses reported net of income taxes in accumulated other comprehensive loss. LCNB utilizes a pricing service for determining the fair values of its debt securities.  Methods and significant assumptions used to estimate fair value were as follows:

• Fair values for U.S. Treasury notes are determined based on market quotations (level 1).
• Fair values for the other debt securities are calculated using the discounted cash flow method for each security.  The discount rates for these cash flows are estimated by the pricing service using rates observed in the market (level 2). Cash flow streams are dependent on estimated prepayment speeds and the overall structure of the securities given existing market conditions.
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ASSETS RECORDED AT FAIR VALUE ON A NONRECURRING BASIS

Assets that may be recorded at fair value on a nonrecurring basis include individually evaluated collateral dependent loans (or impaired loans prior to the adoption of ASC 326), other real estate owned, and other repossessed assets.

LCNB does not record loans at fair value on a recurring basis, except for loans held-for-sale. However, from time to time, nonrecurring fair value adjustments to collateral dependent loans are recorded to reflect partial write-downs or specific reserves that are based on the observable market price or current estimated value of the collateral. These loans are reported in the nonrecurring table below at initial recognition of significant borrower distress and on an ongoing basis until recovery or charge-off. The fair values of distressed loans are determined using either the sales comparison approach or income approach. Respective unobservable inputs for the approaches consist of adjustments for differences between comparable sales and the utilization of appropriate capitalization rates.

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NOTE 16 - FAIR VALUE MEASUREMENTS (continued)

The following table summarizes the valuation of LCNB's assets recorded at fair value by input levels as of March 31, 2025 and December 31, 2024 (in thousands):

Fair Value Measurements at the End of
the Reporting Period Using
Quoted Prices Significant
in Active Other Significant
Markets for Observable Unobservable
Fair Value Identical Assets Inputs Inputs
Measurements (Level 1) (Level 2) (Level 3)
March 31, 2025
Recurring fair value measurements:
Equity securities with a readily determinable fair value:
Equity securities $ 94 94 — —
Mutual funds measured at net asset value 1,293 1,293 — —
Debt securities, available-for-sale:
U.S. Treasury notes 63,924 63,924 — —
U.S. Agency notes 78,384 — 78,384 —
Corporate bonds 7,793 — 7,793 —
U.S. Agency mortgage-backed securities 67,850 — 67,850 —
Municipal securities:
Non-taxable 3,996 — 3,996 —
Taxable 33,944 — 33,944 —
Total recurring fair value measurements $ 257,278 65,311 191,967 —
Nonrecurring fair value measurements:
Individually evaluated collateral dependent loans $ 1,915 — — 1,915
Total nonrecurring fair value measurements $ 1,915 — — 1,915
December 31, 2024
Recurring fair value measurements:
Equity securities with a readily determinable fair value:
Equity securities $ 98 98 — —
Mutual funds measured at net asset value 1,265 1,265 — —
Debt securities, available-for-sale:
U.S. Treasury notes 66,180 66,180 — —
U.S. Agency notes 77,517 — 77,517 —
Corporate bonds 7,756 — 7,756 —
U.S. Agency mortgage-backed securities 69,546 — 69,546 —
Municipal securities:
Non-taxable 3,982 — 3,982 —
Taxable 33,346 — 33,346 —
Total recurring fair value measurements $ 259,690 67,543 192,147 —
Nonrecurring fair value measurements:
Individually evaluated collateral dependent loans $ 1,816 — — 1,816
Total nonrecurring fair value measurements $ 1,816 — — 1,816

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NOTE 16 - FAIR VALUE MEASUREMENTS (continued)

The following table presents quantitative information about unobservable inputs used in nonrecurring level 3 fair value measurements at March 31, 2025 and December 31, 2024 (dollars in thousands):

Range
Valuation Unobservable Weighted
Fair Value Technique Inputs High Low Average
March 31, 2025
Individually evaluated collateral dependent loans $ 1,915 Estimated sales price Adjustments for comparable properties, discounts to reflect current market conditions Not applicable
December 31, 2024
Individually evaluated collateral dependent loans $ 1,816 Estimated sales price Adjustments for comparable properties, discounts to reflect current market conditions Not applicable

Carrying amounts and estimated fair values of financial instruments as of March 31, 2025 and December 31, 2024 were as follows (in thousands):

Fair Value Measurements at the End of
the Reporting Period Using
Quoted
Prices Significant
in Active Other Significant
Markets for Observable Unobservable
Carrying Fair Identical Assets Inputs Inputs
Amount Value (Level 1) (Level 2) (Level 3)
March 31, 2025
FINANCIAL ASSETS:
Cash and cash equivalents $ 37,670 37,670 37,670 — —
Debt securities, held-to-maturity, net 17,585 16,202 — 16,202 —
Loans held-for-sale 6,098 6,098 — 6,098 —
Loans, net 1,705,506 1,625,293 — — 1,625,293
Accrued interest receivable 9,013 9,013 — 9,013 —
Lender risk account 6,214 6,214 — — 6,214
FINANCIAL LIABILITIES:
Deposits 1,921,649 1,927,673 1,439,276 488,397 —
Long-term debt 104,637 106,866 — 106,866 —
Accrued interest payable 1,825 1,825 — 1,825 —
December 31, 2024
FINANCIAL ASSETS:
Cash and cash equivalents $ 35,744 35,744 35,744 — —
Debt securities, held-to-maturity, net 16,324 14,929 — 14,929 —
Loans held-for-sale 5,556 5,556 — 5,556
Loans, net 1,709,811 1,659,244 — — 1,659,244
Accrued interest receivable 8,701 8,701 — 8,701 —
Lender risk account 6,033 6,033 — — 6,033
FINANCIAL LIABILITIES:
Deposits 1,878,292 1,887,331 1,367,709 519,622 —
Long-term debt 155,153 156,523 — 156,523 —
Accrued interest payable 2,482 2,482 — 2,482 —

The methodology to derive the fair value of loans at March 31, 2025 is consistent with the methodology utilized to determine the fair value of loans acquired in the Company’s recent acquisitions of CNNB and EFBI.

The fair values of off-balance-sheet financial instruments such as loan commitments and letters of credit are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements. The fair values of such instruments were not material at  March 31, 2025 or December 31, 2024.

Fair values of financial instruments are based on various assumptions, including the discount rate and estimates of future cash flows. Therefore, the fair values presented may not represent amounts that could be realized in actual transactions. In addition, because the required disclosures exclude certain financial instruments and all nonfinancial instruments, any aggregation of the fair value amounts presented would not represent the underlying value of LCNB.

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NOTE 17 - SEGMENT INFORMATION

LCNB has one reportable segment, which is determined by the members of the executive team who, as a group, act as the designated chief operating decision makers. Based upon information provided about LCNB's products and services offered, the reportable segment is primarily banking operations. The segment is also distinguished by the level of information provided to the chief operating decision makers, who use such information to review performance of various components of the business, such as branches, which are then aggregated if operating performance, products and services, and customers are similar. The chief operating decision makers will evaluate the financial performance of LCNB's business components by evaluating revenue streams, significant expenses, and budget to actual results in assessing LCNB's segment and in determining the allocation of resources. The chief operating decision makers use revenue streams to evaluate product pricing and significant expenses to assess performance and evaluate return on assets. The chief operating decision makers use consolidated net income to benchmark LCNB against its competitors. The benchmarking analysis coupled with monitoring of budget to actual results are used in assessing performance and in establishing compensation. Loans, investments, and deposits provide the revenues in the banking operation. Interest expense, provisions for credit losses, and payroll provide the significant expenses in the banking operation. All operations are domestic.

Accounting policies for the reportable segment are the same as those described in Note 1. Segment performance is evaluated using consolidated net income.

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Item 2.          Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward Looking Statements

Certain statements made in this document 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, 2024, 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. LCNB’s ability to integrate recent and future acquisitions, including CNNB and EFBI, may be unsuccessful or may be more difficult, time-consuming, or costly than expected;
--- ---
3. LCNB may incur increased loan charge-offs in the future and the allowance for credit losses may be inadequate;
--- ---
4. LCNB may face competitive loss of customers;
--- ---
5. changes in the interest rate environment, either by interest rate increases or decreases, may have results on LCNB’s operations materially different from those anticipated by LCNB’s market risk management functions;
--- ---
6. changes in general economic conditions and increased competition could adversely affect LCNB’s operating results;
--- ---
7. 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;
--- ---
8. LCNB may experience difficulties growing loan and deposit balances;
--- ---
9. 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;
--- ---
10. global and/or domestic geopolitical relations and/or conflicts could create financial market uncertainty and have negative impacts on commodities, currency, and stability, which could adversely affect LCNB's operating results and financial condition;
--- ---
11. difficulties with technology or data security breaches, including cyberattacks or widespread outages, could negatively affect LCNB's ability to conduct business and its relationships with customers, vendors, and others;
--- ---
12. adverse weather events and natural disasters and global and/or national epidemics could negatively affect LCNB's customers given its concentrated geographic scope, which could impact LCNB's operating results; and
--- ---
13. government intervention in the U.S. financial system, including the effects of legislative, tax, accounting, and regulatory actions and reforms, including the Jumpstart Our Business Startups Act, the Consumer Financial Protection Bureau, the capital ratios of Basel III as adopted by the federal banking authorities, changes in deposit insurance premium levels, and any such future regulatory actions or reforms.
--- ---

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.

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Item 2.          Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

Critical Accounting Estimates

The accounting policies of LCNB conform to U.S. generally accepted accounting principles and require management to make estimates and develop assumptions that affect the amounts reported in the financial statements and related footnotes. These estimates and assumptions are based on information available to management as of the date of the financial statements. Actual results could differ significantly from management’s estimates. As this information changes, management’s estimates and assumptions used to prepare LCNB’s financial statements and related disclosures may also change. The most significant accounting policies followed by LCNB are presented in Note 1 of the Notes to Consolidated Financial Statements included in LCNB's 2024 Annual Report on Form 10-K filed with the SEC. Based on the valuation techniques used and the sensitivity of financial statement amounts to the methods, assumptions, and estimates underlying those amounts, management has identified the items described below to be the accounting areas that require the most subjective or complex judgments and, as such, could be most subject to revision as new information becomes available.

Business Combinations.   Assets acquired, including identified intangible assets such as core deposit intangibles, and liabilities assumed as a result of a merger or acquisition transaction are recorded at their estimated fair values.  The difference between the consideration paid and the net fair value of assets acquired and liabilities assumed is recorded as goodwill. Management engages third-party specialists to assist in the development of fair value estimates. Significant estimates and assumptions used to value acquired assets and liabilities assumed include, but are not limited to, projected cash flows, future growth rates, repayment rates, default rates and losses assuming default, discount rates, and realizable collateral values. The allowance for credit losses for PCD loans is recognized within acquisition accounting. The allowance for credit losses for non-PCD assets is recognized as provision for credit losses in the same reporting period as the merger or acquisition. Fair value adjustments are amortized or accreted into the income statement over the estimated lives of the acquired assets and assumed liabilities. The purchase date valuations and any subsequent adjustments determine the amount of goodwill recognized in connection with the merger or acquisition.

Preliminary estimates of fair values may be adjusted for a period of time no greater than one year subsequent to the merger or acquisition date if new information is obtained about facts and circumstances that existed as of the merger or acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. Adjustments recorded during this period are recognized in the current reporting period.

Allowance for Credit Losses.  The allowance is maintained at a level LCNB management believes is adequate to absorb estimated credit losses identified and inherent in the loan portfolio. The allowance is established through a provision for credit losses charged as an expense.  Loans are charged against the allowance for credit losses when management believes that the collectability of the principal is unlikely.  Subsequent recoveries, if any, are credited to the allowance.  The allowance is an amount that management believes will be adequate to absorb estimated losses over the contractual terms in the loan portfolio based on evaluations of the collectability of loans and prior loan loss experience.  The evaluations take into consideration such factors as changes in the nature and volume of the loan portfolio, overall portfolio quality, review of specific problem loans, and current and forecasted economic conditions that may affect the borrowers' ability to pay.  This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments. This ASU (as subsequently amended by ASU 2018-19) significantly changed how entities measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. This standard replaced the “incurred loss” approach with an “expected loss” model. Referred to as the CECL model, this standard applies to financial assets subject to credit losses and measured at amortized cost and certain off-balance sheet credit exposures. The standard also expanded disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the allowance. In addition, entities need to disclose the amortized cost balance for each class of financial asset by credit quality indicator, disaggregated by the year of origination.

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Item 2.          Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

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.

See Note 1- Basis of Presentation - Adoption of New Accounting Pronouncements in the 2024 Annual Report on Form 10-K for further detailed descriptions of LCNB's estimation process and methodology related to the allowance. See also Note 4 – Loans in this Quarterly Report on Form 10-Q for further information regarding LCNB's loan portfolio and allowance.

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 marketplace 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.

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Item 2.          Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

Results of Operations

Net income for the three months ended March 31, 2025 was $4.6 million (total basic and diluted earnings per share of $0.33). This compares to net income of $1.9 million (total basic and diluted earnings per share of $0.15) for the same three-month periods in 2024. Results for the 2024 periods were affected by the expenses incurred in connection with the acquisition of Eagle Financial Bancorp, Inc. on April 12, 2024 and Cincinnati Bancorp, Inc. on November 1, 2023.

Net interest income for the three months ended March 31, 2025 was $16.3 million. This compares to net interest income of $13.9 million for the same three-month period in 2024. The growth in net interest income was primarily due to the reduction in average interest rates paid on interest-bearing liabilities and higher average rates earned on loans. LCNB’s tax equivalent net interest margin was 3.25% for the first quarter 2025, compared to 2.72% for the same period last year.

LCNB recorded a provision for credit losses of $197 thousand for the three months ended March 31, 2025. This compares to a provision of $125 thousand for the same three-month period in 2024.

Non-interest income for the three months ended March 31, 2025 was $5.2 million. This compares to non-interest income of $3.9 million for the same period in 2024. The increase was primarily due to higher amounts of net gains from sales of loans, fiduciary income, service charges and fees on deposit accounts, and other income.

Non-interest expense for the three months ended March 31, 2025 was $15.8 million, compared to $15.5 million for the same three-month period in 2024. The $300 thousand increase was primarily due to higher operating expenses associated with the Eagle acquisition during April 2024 and increased marketing expenses, partially offset by the lack of merger-related expenses compared to the same period last year. LCNB had $775 thousand of one-time merger-related expenses that occurred in the first quarter of 2024.

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Item 2.          Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

Net Interest Income

Three Months Ended March 31, 2025 vs. March 31, 2024

LCNB's primary source of earnings is net interest income, which is the difference between earnings from loans and other investments and interest paid on deposits and other liabilities.  The following table presents, for the three months ended March 31, 2025 and March 31, 2024, average balances for interest-earning assets and interest-bearing liabilities, the income or expense related to each item, and the resulting average yields earned or rates paid.

Three Months Ended March 31,
2025 2024
Average Interest Average Average Interest Average
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance Paid Rate Balance Paid Rate
(Dollars in thousands)
Loans (1) $ 1,721,894 23,181 5.46 % $ 1,722,568 22,682 5.30 %
Interest-bearing demand deposits 10,337 130 5.10 % 23,317 324 5.59 %
Interest-bearing time deposits 250 — 0.00 % — — 0.00 %
Federal Reserve Bank stock 6,405 95 6.02 % 5,509 (4 ) (0.29 )%
Federal Home Loan Bank stock 20,710 469 9.18 % 16,239 341 8.45 %
Investment securities:
Equity securities 5,043 39 3.14 % 4,995 40 3.22 %
Debt securities, taxable 254,715 1,256 2.00 % 265,164 1,232 1.87 %
Debt securities, non-taxable (2) 17,160 185 4.37 % 18,864 181 3.86 %
Total earnings assets 2,036,514 25,355 5.05 % 2,056,656 24,796 4.85 %
Non-earning assets 273,545 248,633
Allowance for credit losses (12,001 ) (10,523 )
Total assets $ 2,298,058 $ 2,294,766
Interest-bearing demand and money market deposits $ 570,473 2,337 1.66 % $ 643,199 3,917 2.45 %
Savings deposits 365,876 195 0.22 % 368,049 206 0.23 %
IRA and time certificates 497,178 5,027 4.10 % 370,130 4,067 4.42 %
Short-term borrowings 72 1 5.63 % 65,052 935 5.78 %
Long-term debt 127,289 1,457 4.64 % 150,177 1,738 4.65 %
Total interest-bearing liabilities 1,560,888 9,017 2.34 % 1,596,607 10,863 2.74 %
Demand deposits 462,916 443,168
Other liabilities 19,134 19,872
Equity 255,120 235,119
Total liabilities and equity $ 2,298,058 $ 2,294,766
Net interest rate spread (3) 2.71 % 2.11 %
Net interest income and net interest margin on a taxable-equivalent basis (4) 16,338 3.25 % 13,933 2.72 %
Ratio of interest-earning assets to interest-bearing liabilities 130.47 % 128.81 %
(1) Includes non-accrual loans and loans held-for-sale.
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(2) Income from tax-exempt securities is included in interest income on a taxable-equivalent basis.  Interest income has been divided by a factor comprised of the complement of the incremental tax rate of 21%.
(3) The net interest spread is the difference between the average rate on total interest-earning assets and interest-bearing liabilities.
(4) The net interest margin is the taxable-equivalent net interest income divided by average interest-earning assets.

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Item 2.          Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

The following table presents the changes in taxable-equivalent basis interest income and expense for each major category of interest-earning assets and interest-bearing liabilities and the amount of change attributable to volume and rate changes for the three months ended March 31, 2025 as compared to the same period in 2024.  Changes not solely attributable to rate or volume have been allocated to volume and rate changes in proportion to the relationship of absolute dollar amounts of the changes in each.

Three Months Ended
March 31, 2025 vs. 2024
Increase (decrease) attributable to:
Volume Rate Total
(In thousands)
Interest-earning Assets: **** **** ****
Loans $ (9 ) 508 499
Interest-bearing demand deposits (166 ) (28 ) (194 )
Federal Reserve Bank stock (1 ) 100 99
Federal Home Loan Bank stock 100 28 128
Investment securities:
Equity securities — (1 ) (1 )
Debt securities, taxable (50 ) 74 24
Debt securities, non-taxable (17 ) 21 4
Total interest income (143 ) 702 559
Interest-bearing Liabilities: **** **** ****
Interest-bearing demand and money market deposits (406 ) (1,174 ) (1,580 )
Savings deposits (1 ) (10 ) (11 )
IRA and time certificates 1,306 (346 ) 960
Short-term borrowings (904 ) (30 ) (934 )
Long-term debt (262 ) (19 ) (281 )
Total interest expense (267 ) (1,579 ) (1,846 )
Net interest income $ 124 2,281 2,405

Net interest income on a fully taxable-equivalent basis for the three months ended March 31, 2025 totaled $16.3 million, an increase of $2.4 million from the comparable period in 2024.  Total interest income increased $559 thousand and total interest expense decreased $1.8 million.

The $559 thousand increase in total interest income was primarily due to a $499 thousand increase in loan interest income. The increase in loan interest income was primarily due to a 16 basis point (a basis point equals 0.01%) increase in the average rate earned on the loan portfolio, slightly offset by a $674 thousand decrease in average loan balances.

The $1.8 million decrease in total interest expense was primarily due to a $1.6 million decrease in interest expense for interest-bearing demand deposits, money market deposits, and short-term borrowings The decrease was partially offset by an increase in interest expense for IRA and time certificates. Interest expense on interest-bearing demand and money market deposits decreased primarily due to a 79 basis point decrease in the average rate paid for these deposits and secondarily to a $72.7 million decrease in average deposit balances. Interest expense associated with short-term borrowings decreased due to payoffs of short-term borrowings during 2024. Interest expense increased on IRA and time certificates due to increased balances, primarily from acquisition activity, and was partially offset by a 32 basis point decrease in the average rate paid for these deposits.

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Provision and Allowance For Credit Losses

LCNB continuously reviews the loan portfolio for credit risk through the use of its lending and loan review functions. Independent loan reviews analyze specific loans, providing validation that credit risks are appropriately identified, graded, and reported to the Loan Committee, Board of Directors, and the Audit Committee of the Board of Directors. New credits meeting specific criteria are analyzed prior to origination and are reviewed by the Loan Committee, the Loan Committee of the Board of Directors, and the Board of Directors.

The total provision for credit losses is determined based upon management's evaluation as to the amount needed to maintain the allowance for credit losses at a level considered appropriate in relation to the risk of losses inherent in the portfolio. For analysis purposes, the loan portfolio is separated into pools of similar loans. These pools include commercial and industrial loans, owner occupied commercial real estate loans, non-owner occupied commercial real estate loans, real estate loans secured by farms, real estate loans secured by multi-family dwellings, residential real estate loans secured by senior liens on 1-4 family dwellings, residential real estate loans secured by junior liens on 1-4 family dwellings, home equity line of credit loans, consumer loans, loans for agricultural purposes not secured by real estate, construction loans secured by 1-4 family dwellings, construction loans secured by other real estate, and several smaller classifications. Within each pool of loans, LCNB examines a variety of factors to determine the adequacy of the allowance for credit losses, including historic charge-off percentages, overall pool quality, a review of specific problem loans, current economic trends and conditions that may affect borrowers' ability to pay, and the nature, volume, and consistency of the loan pool.

LCNB recorded a provision for credit losses of $197 thousand for the first quarter of 2025, compared to $125 thousand for the comparable period in 2024. The provision for the 2025 period included a provision for credit losses on loans of $162 thousand and a provision for off-balance-sheet credit exposures of $34 thousand. The provision for the 2024 period included a provision for credit losses on loans of $77 thousand and a provision for off-balance-sheet credit exposures of $48 thousand.

Calculating an appropriate level for the allowance and provision for credit losses involves a high degree of management judgment and is, by its nature, imprecise. Revisions may be necessary as more information becomes available or if market conditions change.

Net charge-offs for the three months ended March 31, 2025 totaled $39 thousand, compared to net charge-offs of $45 thousand for the same period in 2024.

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Item 2.          Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

Non-Interest Income

A comparison of non-interest income for the three months ended March 31, 2025 and March 31, 2024 is as follows (in thousands):

Three Months Ended
March 31,
2025 2024 Difference
Fiduciary income $ 2,164 1,973 191
Service charges and fees on deposit accounts 1,766 1,384 382
Net losses from sales of debt securities, available-for-sale — (214 ) 214
Bank-owned life insurance income 346 318 28
Net gains from sales of loans 841 522 319
Other operating income (loss) 105 (54 ) 159
Total non-interest income $ 5,222 3,929 1,293

Reasons for changes include:

• Fiduciary income increased primarily due to increases in the fair values of trust and brokerage assets managed, on which fees are based. The increases in fair value are due to the opening of new Wealth Management customer accounts.
• Service charges and fees on deposit accounts increased primarily due to increased fee income received on the ICS product and secondarily to an increase in overdraft fees.
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• There were no sales of debt securities during the three months ended March 31, 2025.
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• Net gains from sales of loans increased due to a higher volume of residential real estate loan sales.
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• Other operating income increased primarily due to a decrease in amortization of capitalized mortgage servicing rights, which amortization is netted for accounting purposes against fee income recognized from the servicing of sold residential mortgage loans.
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Item 2.          Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

Non-Interest Expense

A comparison of non-interest expense for the three months ended March 31, 2025 and March 31, 2024 is as follows (in thousands):

Three Months Ended
March 31,
2025 2024 Difference
Salaries and employee benefits $ 9,172 8,554 618
Equipment expenses 382 390 (8 )
Occupancy expense, net 1,010 1,005 5
State financial institutions tax 453 428 25
Marketing 315 174 141
Amortization of intangibles 297 236 61
FDIC insurance premiums, net 410 504 (94 )
Contracted services 870 784 86
Merger-related expenses — 775 (775 )
Other non-interest expense 2,900 2,622 278
Total non-interest expense $ 15,809 15,472 337

Reasons for changes include:

• Salaries and employee benefits increased due to overall wage and benefit increases, an increased number of employees due to the acquisition of EFBI, and higher health insurance costs.
• Marketing expenses increased due to development costs for a new marketing brand awareness campaign and timing involving other marketing efforts.  Management anticipates that marketing expenses will normalize through the remainder of the year.
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• Amortization of core deposit intangibles increased due to the acquisition of EFBI.
• Merger-related expenses during the first quarter of 2024 reflect costs incurred in connection with the acquisitions of EFBI and CNNB.
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• Other non-interest expense for the first quarter 2025 includes a $73 thousand impairment charge on the fair value of a closed office.  The remaining net increase can be attributed to smaller increases in various other accounts.
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Income Taxes

LCNB's effective tax rate for the three months ended March 31, 2025 was 16.4%, compared to 14.0% for the same period in 2024.  The difference between the statutory rate of 21% and the effective tax rates is primarily due to tax-exempt interest income from municipal securities, tax-exempt earnings from bank-owned life insurance, tax-exempt earnings from LCNB Risk Management, Inc., and tax credits and losses related to investments in affordable housing tax credit limited partnerships. The effective tax rate for 2024 was lower due to tax-exempt items not decreasing in proportion to the overall decrease in earnings.

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Item 2.          Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

Financial Condition

A comparison of balance sheet line items at March 31, 2025 and December 31, 2024 is as follows (dollars in thousands):

March 31, 2025 December 31, 2024 Difference Difference %
ASSETS: **** **** **** ****
Total cash and cash equivalents $ 37,670 35,744 5.39 %
Interest-bearing time deposits 250 250 0.00 %
Investment securities:
Equity securities with a readily determinable fair value, at fair value 1,387 1,363 1.76 %
Equity securities without a readily determinable fair value, at cost 3,666 3,666 0.00 %
Debt securities, available-for-sale, at fair value 255,891 258,327 ) (0.94 )%
Debt securities, held-to-maturity, net, at cost 17,585 16,324 7.72 %
Federal Reserve Bank stock, at cost 6,405 6,405 0.00 %
Federal Home Loan Bank stock, at cost 20,710 20,710 0.00 %
Loans held-for-sale 6,098 5,556 9.76 %
Loans, net 1,705,506 1,709,811 ) (0.25 )%
Premises and equipment, net 39,972 41,049 ) (2.62 )%
Operating lease right-of-use assets 5,935 5,785 2.59 %
Goodwill 90,310 90,310 0.00 %
Core deposit and other intangibles, net 10,616 11,104 ) (4.39 )%
Bank-owned life insurance 54,348 54,002 0.64 %
Interest receivable 9,013 8,701 3.59 %
Other assets, net 37,383 38,287 ) (2.36 )%
TOTAL ASSETS $ 2,302,745 2,307,394 ) (0.20 )%
LIABILITIES: **** **** **** ****
Deposits:
Noninterest-bearing $ 464,059 459,619 0.97 %
Interest-bearing 1,457,590 1,418,673 2.74 %
Total deposits 1,921,649 1,878,292 2.31 %
Long-term debt 104,637 155,153 ) (32.56 )%
Operating lease liabilities 6,299 6,115 3.01 %
Accrued interest and other liabilities 11,509 14,798 ) (22.23 )%
TOTAL LIABILITIES 2,044,094 2,054,358 ) (0.50 )%
SHAREHOLDERS' EQUITY: **** **** **** ****
Common shares 187,369 186,937 0.23 %
Retained earnings 142,811 141,290 1.08 %
Treasury shares, at cost (56,002 ) (56,002 ) 0.00 %
Accumulated other comprehensive loss, net of taxes (15,527 ) (19,189 ) (19.08 )%
TOTAL SHAREHOLDERS' EQUITY 258,651 253,036 2.22 %
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,302,745 2,307,394 ) (0.20 )%

All values are in US Dollars.

NM - Not Meaningful

Reasons for changes include:

• Debt securities, held-to-maturity, increased due to purchases of new securities.
• Loans held-for-sale increased due to an increase in single-family residential loans originated for sale in the secondary market.
--- ---
• Premises and equipment decreased due to the transfer of the Florence building to premises held-for-sale, which is included in the other assets classification.

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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

(Continued)

Item 2.          Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

• Total interest-bearing deposits increased primarily due to an increase in deposits obtained through the ICS service, partially offset by decreases in IRA and time certificate deposits.
• Long-term debt decreased due to the early payoff of $50 million in advances bearing a weighted average interest rate of 4.23% from the FHLB of Cincinnati.  Funds for the payoff were provided by the increase in ICS deposits mentioned above, resulting in an overall decrease in the average interest rate.
--- ---
• Accumulated other comprehensive loss, net of taxes decreased because of market-driven partial recoveries in the fair value of LCNB's available-for-sale debt securities investments.
--- ---

LCNB's loan portfolio represents its largest asset category and is its most significant source of interest income. Loan classifications have been identified as Commercial & Industrial, Commercial Real Estate, Residential Real Estate, Consumer, Agricultural, and Other. Commercial real estate is the largest classification in LCNB's loan portfolio, comprising about 65% of total loans at March 31, 2025.

Loans secured by commercial real estate consist of owner-occupied, non-owner-occupied, farmland, multi-family, and construction loans. A commercial real estate, owner-occupied loan finances the purchase, construction, or refinance of a building or other property for which the repayment of principal is dependent upon cash flows from ongoing operations conducted by the party, or an affiliate of the party, who owns the property. A commercial real estate, non-owner occupied loan finances the purchase, construction or refinance of a building or other property for which the repayment of principal is dependent upon rental income associated with the property or the subsequent sale of the property. The values of these loans are primarily impacted by the level of interest rates associated with the debt and to local economic conditions, which dictate occupancy rates and the amount of rent charged. The increase in debt service due to higher interest rates may not be able to be passed on to tenants. As part of the origination process, loan interest rates and occupancy rates are stressed to determine the impact on the borrower’s ability to maintain adequate debt service under different economic conditions. Further, LCNB monitors the concentration in any one industry and has established limits relative to the total of the Bank's tier 1 and tier 2 capital for each category of loan. Credit quality trends are monitored by industry to determine if a change in the risk exposure to a certain industry may warrant a change in underwriting standards.

The following table provides a breakdown of amortized cost of commercial real estate loans by property-type classification as of March 31, 2025, excluding loans which are junior in lien or covered by collateral secured with varying classes of assets (dollars in thousands):

Amount % of Total
Multi-family & Multi-family Construction $ 276,475 27 %
Retail 158,149 15 %
Office 125,032 12 %
Mixed Use 95,301 9 %
Hotel/Motel 89,782 9 %
Other 67,721 6 %
Self storage 45,707 4 %
Warehouse (one tenant) 44,016 4 %
Farmland 37,057 4 %
Light Industrial 32,745 3 %
Warehouse (more than one tenant) 23,342 2 %
Healthcare Facilities 19,707 2 %
Manufacturing 19,348 2 %
Dental 12,760 1 %
Total $ 1,047,142 100 %

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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

(Continued)

Item 2.          Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

Most of LCNB's commercial real estate loans are made within its general market area of Southwest and South-Central Ohio and Northern Kentucky. The following table provides a breakdown of amortized cost of commercial real estate loans by real estate collateral location as of March 31, 2025, excluding loans which are junior in lien or covered by collateral secured with varying classes of assets (dollars in thousands):

Amount % of Total
Franklin County, Ohio $ 301,649 29 %
Hamilton County, Ohio 199,476 19 %
Montgomery County, Ohio 95,769 9 %
Butler County, Ohio 89,931 9 %
Warren County, Ohio 83,102 8 %
Other, Ohio 64,803 6 %
Delaware County, Ohio 45,463 4 %
Greene County, Ohio 35,544 3 %
Boone County, Kentucky 28,762 3 %
Kenton County, Kentucky 21,605 2 %
Clermont County, Ohio 20,344 2 %
Preble County, Ohio 18,052 2 %
Licking County, Ohio 14,691 1 %
Ross County, Ohio 12,807 1 %
Other, Kentucky 6,779 1 %
Other, Indiana 7,561 1 %
Other, West Virginia 804 0 %
Total $ 1,047,142 100 %

Regulatory Capital

The Bank must meet certain minimum capital requirements set by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a material effect on the Company's and the Bank's financial statements. LCNB’s and the Bank’s capital amounts and classification are also subject to qualitative judgments by regulators about components, risk weightings, and other factors.

In addition to the minimum capital requirements, a financial institution needs to maintain a Capital Conservation Buffer composed of Common Equity Tier 1 Capital of at least 2.5% above its minimum risk-weighted capital requirements to avoid limitations on its ability to make capital distributions, including dividend payments to shareholders and certain discretionary bonus payments to executive officers. A financial institution with a buffer below 2.5% is subject to increasingly stringent limitations on capital distributions as the buffer approaches zero.

For various regulatory purposes, financial institutions are classified into categories based upon capital adequacy:

Minimum
Requirement To Be
with Capital Considered
Minimum Conservation Well-
Requirement Buffer Capitalized
Ratio of Common Equity Tier 1 Capital to risk-weighted assets 4.5 % 7.0 % 6.5 %
Ratio of Tier 1 Capital to risk-weighted assets 6.0 % 8.5 % 8.0 %
Ratio of Total Capital (Tier 1 Capital plus Tier 2 Capital) to risk-weighted assets 8.0 % 10.5 % 10.0 %
Leverage Ratio (Tier 1 Capital to adjusted quarterly average total assets) 4.0 % NA 5.0 %

As of the most recent notification from their regulators, the Bank and LCNB were categorized as "well-capitalized" under the regulatory framework for prompt corrective action.  Management believes that no conditions or events have occurred since the last notification that would change the Bank's or LCNB's category.

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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

(Continued)

Item 2.          Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

A summary of the Bank's regulatory capital and capital ratios follows (dollars in thousands):

March 31, 2025 December 31, 2024
Regulatory Capital:
Shareholders' equity $ 264,078 259,811
Goodwill and other intangibles (100,754 ) (100,279 )
Accumulated other comprehensive loss, net 15,528 19,189
Tier 1 risk-based capital 178,852 178,721
Eligible allowance for credit losses 12,070 11,805
Total risk-based capital $ 190,922 190,526
Capital ratios:
Common Equity Tier 1 Capital to risk-weighted assets 9.98 % 9.94 %
Tier 1 Capital to risk-weighted assets 9.98 % 9.94 %
Total Capital to risk-weighted assets 10.66 % 10.60 %
Leverage 8.07 % 7.94 %

Qualifications for community banking organizations to use a simplified measure of capital adequacy approach include having a tier 1 leverage ratio of greater than 9%, less than $10 billion in total consolidated assets, and limited amounts of off-balance-sheet exposures and trading assets and liabilities. A qualifying community banking organization that opts into the Community Bank Leverage Ratio framework and meets all requirements under the framework will be considered to have met the well-capitalized ratio requirements under the Prompt Corrective Action regulations and will not be required to report or calculate risk-based capital. LCNB did not qualify to use the simplified measure for the March 31, 2025 or December 31, 2024 regulatory capital calculations.

Liquidity

Effective liquidity management ensures that cash is available to meet the cash flow needs of borrowers and depositors, pay dividends to shareholders, and meet LCNB's operating cash needs. Primary funding sources include customer deposits with the Bank, short-term and long-term borrowings from the Federal Home Loan Bank, line of credit arrangements totaling $115.0 million with three correspondent banks, and interest and repayments received from LCNB's loan and investment portfolios. In addition, LCNB has approximately $108 million in off-balance sheet insured cash sweeps immediately available for liquidity.

Total remaining borrowing capacity with the Federal Home Loan Bank at March 31, 2025 was approximately $144.3 million. Additional borrowings of approximately $115.0 million were available through line of credit arrangements with correspondent banks.

Management closely monitors the level of liquid assets available to meet ongoing funding needs.  It is management's intent to maintain adequate liquidity so that sufficient funds are readily available at a reasonable cost.  LCNB experienced no liquidity or operational problems as a result of current liquidity levels. Management believes LCNB has the ability to generate and obtain adequate amounts of liquidity to meet its requirements in the short and long-term.

Commitments to extend credit at March 31, 2025 totaled $291.5 million and are more fully described in Note 11 - Commitments and Contingent Liabilities to LCNB's condensed consolidated financial statements. Since many commitments to extend credit may expire without being drawn upon, the total commitment amount does not necessarily represent future cash required to satisfy the commitment reported prior to its expiration.

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(Unaudited)

(Continued)

Item 3.         Quantitative and Qualitative Disclosures about Market Risk

Market risk for LCNB is primarily due to 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, 2025 IRSA indicates that an increase in interest rates would have a negative effect on NII, while a decrease in interest rates would have a positive effect on NII. The changes in NII for all rate shock scenarios are within LCNB's acceptable ranges.

Change in % Change in
Rate Shock Scenario in Basis Points Amount NII NII Limits
(Dollars in thousands)
Up 300 $ 79,672 ) (2.65 )% 15 %
Up 200 80,336 ) (1.84 )% 10 %
Up 100 80,880 ) (1.17 )% 5 %
Base 81,838 — % — %
Down 100 81,941 0.13 % 5 %
Down 200 82,492 0.80 % 10 %
Down 300 82,953 1.36 % 15 %

All values are in US Dollars.

The IRSA shows the effect on NII during a one-year period only.  A longer-range model is the EVE analysis, which shows, accounting for the same rate shocks, 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, 2025 EVE analysis indicates that an increase in interest rates will have a negative effect on the EVE and a decrease in interest rates will have a positive effect on the EVE. The changes in EVE for all rate shock scenarios are within LCNB's acceptable ranges.

Change in % Change in
Rate Shock Scenario in Basis Points Amount EVE EVE Limits
(Dollars in thousands)
Up 300 $ 201,096 ) (14.23 )% 25 %
Up 200 215,964 ) (7.89 )% 20 %
Up 100 230,683 ) (1.61 )% 15 %
Base 234,463 — % — %
Down 100 255,648 9.04 % 15 %
Down 200 268,052 14.33 % 20 %
Down 300 284,615 21.39 % 25 %

All values are in US Dollars.

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 conditions, 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.

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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

(Continued)

Item 4.         Controls and Procedures

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, 2025, 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.

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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

(Continued)

PART II. OTHER INFORMATION

Item 1.         Legal Proceedings

Except for routine litigation incidental to its business, LCNB is not a party to any material pending legal proceedings and none of its property is the subject of any material proceedings.

Item 1A.      Risk Factors

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, 2024.

Item 2          Unregistered Sales of Equity Securities and Use of Proceeds

During the period covered by this report, LCNB did not sell any of its securities that were not registered under the Securities Act.

Under the Issuer Stock Repurchase Plan Agreement (the "Plan"), LCNB may purchase common shares through various means such as open market transactions, including block purchases and privately negotiated transactions. The number of shares repurchased and the timing, manner, price and amount of any repurchases are determined at LCNB's discretion. Factors include, but are not limited to, share price, trading volume, and general market conditions, along with LCNB’s general business conditions. The Plan may be suspended or discontinued at any time and does not obligate LCNB to acquire any specific number of its common shares.

As part of the Plan, LCNB entered into a trading plan adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended. The 10b5-1 trading plan permits common shares to be repurchased at times that LCNB might otherwise be precluded from doing so under insider trading laws or self-imposed trading restrictions. The 10b5-1 trading plan is administered by an independent broker and is subject to price, market volume, and timing restrictions.

On February 27, 2023, LCNB's Board of Directors authorized the Plan. Under the terms of the Plan, LCNB is authorized to repurchase up to 500,000 of its outstanding common shares. The Plan replaced and superseded LCNB’s prior Issuer Stock Repurchase Plan Agreement, which was adopted on May 27, 2022.

No purchases were made under the Plan during the three months ended March 31, 2025. The maximum number of shares that may yet be purchased under the Plan is 315,047.

Item 3.         Defaults Upon Senior Securities

None.

Item 4.         Mine Safety Disclosures

Not applicable.

Item 5.         Other Information

During the three months ended March 31, 2025, none of our directors or officers informed us of the adoption, modification, or termination of a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as those terms are defined in Regulation S-K, Item 408.

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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

(Continued)

Item 6.         Exhibits

Exhibit No. Exhibit Description
2.1 Agreement and Plan of Merger dated as of May 17, 2023 by and between LCNB Corp. and Cincinnati Bancorp, Inc. - incorporated by reference to the Registrant's Current Report on Form 8-K filed on May 18, 2023, Exhibit 2.1.
2.2 Agreement and Plan of Merger dated as of November 28, 2023 by and between LCNB Corp. and Eagle Financial Bancorp, Inc. - incorporated by reference to the Registrant's Current Report on Form 8-K filed on November 29, 2023,Exhibit 2.1.
3.1 Amended and Restated Articles of Incorporation of LCNB Corp., as amended. (This document represents the Amended and Restated Articles of Incorporation of LCNB Corp. in compiled form incorporating all amendments. The compiled document has not been filed with the Ohio Secretary of State.) - incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2018, Exhibit 3.1.
3.2 Code of Regulations of LCNB Corp. – incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2005, Exhibit 3(ii)
31.1 Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
32 Certification of Chief Executive Officer and Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002.
101 The following financial information from LCNB Corp.'s Quarterly Report on Form 10-Q for the quarter ended March 31, 2025 is formatted in Extensible Business Reporting Language:  (i) the Consolidated Condensed Balance Sheets, (ii) the Consolidated Condensed Statements of Income, (iii) the Consolidated Condensed Statements of Comprehensive Income, (iv) the Consolidated Condensed Statements of Shareholders' Equity, (v) the Consolidated Condensed Statements of Cash Flows, and (vi) the Notes to Consolidated Condensed Financial Statements.
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

(Continued)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

LCNB Corp.
May 7, 2025 /s/ Eric J. Meilstrup
Eric J. Meilstrup
Chief Executive Officer and President
May 7, 2025 /s/ Robert C. Haines, II
Robert C. Haines, II
Executive Vice President and Chief Financial Officer

56

ex_762549.htm

Exhibit 31.1

CERTIFICATIONS

In connection with the Quarterly Report of LCNB Corp. on Form 10-Q for the period ending March 31, 2025, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Eric J. Meilstrup, Chief Executive Officer of LCNB Corp., certify that:

1) I have reviewed this quarterly report on Form 10-Q of LCNB Corp.;
2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
--- ---
3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;
--- ---
4) The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
--- ---
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
--- ---
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
--- ---
c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
--- ---
d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
--- ---
5) The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
--- ---
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and
--- ---
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
--- ---
/s/ Eric J. Meilstrup
---
Eric J. Meilstrup
Chief Executive Officer and President
May 7, 2025

ex_762550.htm

Exhibit 31.2

CERTIFICATIONS

In connection with the Quarterly Report of LCNB Corp. on Form 10-Q for the period ending March 31, 2025, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Robert C. Haines, II, Executive Vice President and Chief Financial Officer of LCNB Corp., certify that:

1) I have reviewed this quarterly report on Form 10-Q of LCNB Corp.;
2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
--- ---
3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;
--- ---
4) The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
--- ---
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
--- ---
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
--- ---
c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
--- ---
d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
--- ---
5) The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
--- ---
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and
--- ---
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
--- ---
/s/ Robert C. Haines, II
---
Robert C. Haines, II
Executive Vice President and<br> Chief Financial Officer
May 7, 2025

ex_762551.htm

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of LCNB Corp. (the "Company") on Form 10-Q for the period ending March 31, 2025, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), we, Eric J. Meilstrup, Chief Executive Officer, and Robert C. Haines, II, Executive Vice President and Chief Financial Officer, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to the best of our knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
--- ---
/s/ Eric J. Meilstrup /s/ Robert C. Haines, II
--- ---
Eric J. Meilstrup<br> Chief Executive Officer and President Robert C. Haines, II<br> Executive Vice President and Chief Financial Officer

Date:  May 7, 2025

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