Equibles

10-Q

LCNB CORP (LCNB)

10-Q 2025-08-06 For: 2025-06-30
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 June 30, 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 August 6, 2025 was 14,175,891 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 54
Item 4. Controls and Procedures 55
PART II. OTHER INFORMATION 56
Item 1.  Legal Proceedings 56
Item 1A. Risk Factors 56
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds 56
Item 3.  Defaults Upon Senior Securities 56
Item 4.  Mine Safety Disclosures 56
Item 5.  Other Information 56
Item 6.  Exhibits 57
SIGNATURES 58

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 37,465 20,393
Interest-bearing demand deposits 12,313 15,351
Total cash and cash equivalents 49,778 35,744
Interest-bearing time deposits 256 250
Investment securities:
Equity securities with a readily determinable fair value, at fair value 1,405 1,363
Equity securities without a readily determinable fair value, at cost 3,666 3,666
Debt securities, available-for-sale, at fair value 253,320 258,327
Debt securities, held-to-maturity, at cost, net of allowance for credit losses of 5 at June 30, 2025 and December 31, 2024 17,429 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 6,026 5,556
Loans, net of allowance for credit losses of 12,108 and 12,001 at June 30, 2025 and December 31, 2024, respectively 1,700,902 1,709,811
Premises and equipment, net 39,662 41,049
Operating lease right-of-use assets 6,020 5,785
Goodwill 90,310 90,310
Core deposit and other intangibles, net 10,106 11,104
Bank-owned life insurance 54,701 54,002
Interest receivable 8,795 8,701
Other assets, net 38,309 38,287
TOTAL ASSETS 2,307,800 2,307,394
LIABILITIES: **** ****
Deposits:
Noninterest-bearing 463,123 459,619
Interest-bearing 1,456,249 1,418,673
Total deposits 1,919,372 1,878,292
Long-term debt 105,000 155,153
Operating lease liabilities 6,401 6,115
Accrued interest and other liabilities 13,553 14,798
TOTAL LIABILITIES 2,044,326 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 17,390,749 and 17,329,423 shares at June 30, 2025 and December 31, 2024, respectively; outstanding 14,175,241 and 14,118,040 shares at June 30, 2025 and December 31, 2024, respectively 187,653 186,937
Retained earnings 145,621 141,290
Treasury shares at cost, 3,215,508 and 3,211,383 shares at June 30, 2025 and December 31, 2024, respectively (56,071 ) (56,002 )
Accumulated other comprehensive loss, net of taxes (13,729 ) (19,189 )
TOTAL SHAREHOLDERS' EQUITY 263,474 253,036
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 2,307,800 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 Six Months Ended
June 30, June 30,
2025 2024 2025 2024
INTEREST INCOME: ****
Interest and fees on loans $ 23,838 24,836 47,019 47,518
Dividends on equity securities:
With a readily determinable fair value 11 9 21 18
Without a readily determinable fair value 25 30 54 61
Interest on debt securities:
Taxable 1,213 1,183 2,469 2,415
Non-taxable 161 145 307 288
Other investments 691 762 1,385 1,423
TOTAL INTEREST INCOME 25,939 26,965 51,255 51,723
INTEREST EXPENSE: ****
Interest on deposits 7,119 9,690 14,678 17,880
Interest on short-term borrowings 1 181 2 1,116
Interest on long-term debt 1,278 1,877 2,735 3,615
TOTAL INTEREST EXPENSE 8,398 11,748 17,415 22,611
NET INTEREST INCOME 17,541 15,217 33,840 29,112
PROVISION FOR CREDIT LOSSES 18 528 215 653
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 17,523 14,689 33,625 28,459
NON-INTEREST INCOME: ****
Fiduciary income 2,262 2,067 4,426 4,040
Service charges and fees on deposit accounts 1,884 1,537 3,650 2,921
Net losses from sales of debt securities, available-for-sale — — — (214 )
Bank-owned life insurance income 353 341 699 659
Net gains from sales of loans 615 50 1,456 572
Other operating income 134 85 239 31
TOTAL NON-INTEREST INCOME 5,248 4,080 10,470 8,009
NON-INTEREST EXPENSE: ****
Salaries and employee benefits 8,872 9,006 18,044 17,560
Equipment expenses 371 395 753 785
Occupancy expense, net 1,022 944 2,032 1,949
State financial institutions tax 449 476 902 904
Marketing 281 210 596 384
Amortization of intangibles 301 298 598 534
FDIC insurance premiums, net 380 394 790 898
Contracted services 859 844 1,729 1,628
Merger-related expenses 140 2,320 140 3,095
Other non-interest expense 2,892 2,938 5,792 5,560
TOTAL NON-INTEREST EXPENSE 15,567 17,825 31,376 33,297
INCOME BEFORE INCOME TAXES 7,204 944 12,719 3,171
PROVISION FOR INCOME TAXES 1,285 19 2,191 331
NET INCOME $ 5,919 925 10,528 2,840
Earnings per common share:
Basic $ 0.41 0.07 0.74 0.21
Diluted 0.41 0.07 0.74 0.21
Weighted average common shares outstanding:
Basic 14,085,764 13,948,671 14,070,417 13,526,261
Diluted 14,085,764 13,948,671 14,070,417 13,526,261

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 COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

Six Months Ended
June 30,
2024 2025 2024
Net income 5,919 925 10,528 2,840
Other comprehensive income (loss):
Net unrealized gain (loss) on available-for-sale debt securities (net of tax expense (benefit) of 478 and 161 for the three months ended June 30, 2025 and 2024, respectively, and 1,451 and (181) for the six months ended June 30, 2025 and 2024, respectively) 1,798 605 5,460 (682 )
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 six months ended June 30, 2024) — — — 169
Other comprehensive income (loss), net of tax 1,798 605 5,460 (513 )
TOTAL COMPREHENSIVE INCOME 7,717 1,530 15,988 2,327

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 June 30, 2025 **** **** **** **** ****
Balance at April, 1 2025 14,166,915 187,369 142,811 (56,002 ) (15,527 ) 258,651
Net income 5,919 5,919
Other comprehensive income, net of taxes 1,798 1,798
Dividend Reinvestment and Stock Purchase Plan 12,451 183 183
Repurchase of common stock (4,125 ) (69 ) (69 )
Compensation expense relating to restricted stock 101 101
Common stock dividends, 0.22 per share (3,109 ) (3,109 )
Balance at June 30, 2025 14,175,241 $ 187,653 145,621 (56,071 ) (13,729 ) 263,474
Six Months Ended June 30, 2025
Balance at January 1, 2025 14,118,040 $ 186,937 141,290 (56,002 ) (19,189 ) 253,036
Net income 10,528 10,528
Other comprehensive income, net of taxes 5,460 5,460
Dividend Reinvestment and Stock Purchase Plan 22,376 331 331
Shares issued for restricted stock awards 38,950 —
Repurchase of common stock (4,125 ) (69 ) (69 )
Compensation expense relating to restricted stock 385 385
Common stock dividends, 0.44 per share (6,197 ) (6,197 )
Balance at June 30, 2025 14,175,241 $ 187,653 145,621 (56,071 ) (13,729 ) 263,474
Three Months Ended June 30, 2024 **** **** **** **** ****
Balance at April, 1 2024 13,224,276 174,082 139,050 (56,015 ) (23,454 ) 233,663
Net income 925 925
Other comprehensive loss, net of taxes 605 605
Dividend Reinvestment and Stock Purchase Plan 9,351 130 130
Stock issued for acquisition of Eagle Financial Bancorp, Inc. 918,128 12,891 12,891
Compensation expense relating to restricted stock 92 92
Common stock dividends, 0.22 per share (3,092 ) (3,092 )
Balance at June 30, 2024 14,151,755 $ 187,195 136,883 (56,015 ) (22,849 ) 245,214
Six Months Ended June 30, 2024
Balance at January 1, 2024 13,173,569 $ 173,637 140,017 (56,015 ) (22,336 ) 235,303
Net income 2,840 2,840
Other comprehensive loss, net of taxes (513 ) (513 )
Dividend Reinvestment and Stock Purchase Plan 18,355 260 260
Stock issued for acquisition of Eagle Financial Bancorp, Inc. 918,128 12,891 12,891
Shares issued for restricted stock awards 41,703
Compensation expense relating to restricted stock 407 407
Common stock dividends, 0.44 per share (5,974 ) (5,974 )
Balance at June 30, 2024 14,151,755 $ 187,195 136,883 (56,015 ) (22,849 ) 245,214

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 CASH FLOWS

(In thousands)

(Unaudited)

Six Months Ended
June 30,
2025 2024
CASH FLOWS FROM OPERATING ACTIVITIES: **** ****
Net income $ 10,528 2,840
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation, amortization, and accretion (1,253 ) 386
Provision for credit losses 215 653
Deferred income tax provision 1,221 44
Increase in cash surrender value of bank-owned life insurance (699 ) (659 )
Realized and unrealized (gains) losses from equity securities, net (22 ) 24
Realized losses from sales of debt securities, available-for-sale — 214
Origination of mortgage loans for sale (57,973 ) (64,832 )
Realized gains from sales of loans (1,456 ) (1,414 )
Proceeds from sales of originated loans 58,959 62,346
Proceeds from sales of acquired loans — 47,718
Realized losses from sales of acquired loans — 842
Compensation expense related to restricted stock 385 407
Changes in:
Accrued interest receivable (94 ) (777 )
Other assets (2,095 ) (4,602 )
Other liabilities (37 ) (229 )
TOTAL ADJUSTMENTS (2,849 ) 40,121
NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES 7,679 42,961
CASH FLOWS FROM INVESTING ACTIVITIES: **** ****
Equity securities:
Purchases of securities (20 ) (18 )
Available for-sale debt securities:
Proceeds from sales — 9,615
Proceeds from maturities, prepayments and calls 12,541 9,336
Purchases of securities (750 ) (4,861 )
Held-to-maturity debt securities:
Proceeds from maturities, prepayments and calls 273 570
Purchases of securities (1,378 ) (2,558 )
Purchase of interest-bearing time deposits (6 ) —
Purchase of Federal Reserve Bank stock — (1,248 )
Purchases of Federal Home Loan Bank stock — (1,293 )
Proceeds from redemption of Federal Home Loan Bank stock — 93
Net decrease in loans 12,170 27,503
Purchases of premises and equipment (305 ) (2,001 )
Proceeds from sales of premises and equipment 1 —
Cash and cash equivalents acquired, net of cash paid for acquisition — (1,025 )
Funding of tax credit investments (1,163 ) (1,062 )
NET CASH FLOWS PROVIDED BY INVESTING ACTIVITIES 21,363 33,051
CASH FLOWS FROM FINANCING ACTIVITIES: **** ****
Net increase (decrease) in customer deposits 41,080 (13,764 )
Net decrease in short-term borrowings — (110,395 )
Proceeds from issuance of long-term debt — 50,000
Principal payments on long-term debt (50,153 ) (990 )
Proceeds from issuance of common stock 331 260
Repurchase of common stock (69 ) —
Cash dividends paid on common stock (6,197 ) (5,974 )
NET CASH FLOWS USED IN FINANCING ACTIVITIES (15,008 ) (80,863 )
NET CHANGE IN CASH AND CASH EQUIVALENTS 14,034 (4,851 )
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 35,744 39,723
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 49,778 34,872
SUPPLEMENTAL CASH FLOW INFORMATION: **** ****
CASH PAID DURING THE YEAR FOR:
Interest $ 18,257 21,481
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES: **** ****
Transfer from loans held-for-investment to loans held-for-sale $ — 65,288
Transfer from premises and equipment to premises held-for-sale 525 —
Right-of-use assets obtained in exchange for lease obligations 554 62

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 condensed 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 and six months ended June 30, 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 June 30, 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  June 30, 2025 (in thousands).

Adjustments June 30, 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)

Effective April 11, 2025, management finalized the fair values of the acquired assets and assumed liabilities within the 12 month post-acquisition date, as allowed by GAAP.  The consideration adjustments in the table above 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 $124 thousand during the three and six months ended *June 20, 2025,*and totaled $2.3 million and $2.8 million during the three and six months ended June 30, 2024. They were expensed as incurred and are recorded as merger-related expenses in the consolidated statements of income.

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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 June 30, 2025 and December 31, 2024 are summarized as follows (in thousands):

Amortized Cost Unrealized Gains Unrealized Losses Fair Value
June 30, 2025
Debt Securities, Available-for-Sale:
U.S. Treasury notes $ 67,646 — 3,124 64,522
U.S. Agency notes 83,379 — 4,231 79,148
Corporate bonds 8,950 21 386 8,585
U.S. Agency mortgage-backed securities 72,553 2 7,172 65,383
Municipal securities:
Non-taxable 4,229 — 227 4,002
Taxable 33,945 — 2,265 31,680
$ 270,702 23 17,405 253,320
Debt Securities, Held-to-Maturity:
Municipal securities:
Non-taxable $ 14,300 — 1,041 13,259
Taxable 3,129 — 350 2,779
$ 17,429 — 1,391 16,038
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 $1.0 million and $993 thousand at June 30, 2025 and December 31, 2024, respectively, that is recorded in other assets on the consolidated condensed balance sheets.

Expected credit losses on debt securities, held-to-maturity, were $5 thousand at June 30, 2025 and December 31, 2024.

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NOTE 3 - INVESTMENT SECURITIES (continued)

Information concerning debt securities with gross unrealized losses at June 30, 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
June 30, 2025
Available-for-Sale:
U.S. Treasury notes $ — — 64,522 3,124
U.S. Agency notes 4,159 4 74,989 4,227
Corporate bonds — — 6,314 386
U.S. Agency mortgage-backed securities 5,643 82 59,517 7,090
Municipal securities:
Non-taxable — — 4,001 227
Taxable — — 31,620 2,265
$ 9,802 86 240,963 17,319
Held-to-Maturity:
Municipal securities:
Non-taxable $ 3,616 61 9,243 980
Taxable — — 2,779 350
$ 3,616 61 12,022 1,330
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 June 30, 2025, LCNB’s securities portfolio consisted of 158 securities, 151 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 3.1 years. No credit losses were determined to be present as of June 30, 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 second quarter of 2025.

Debt securities with a market value of $134.9 million and $116.2 million at June 30, 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 June 30, 2025.

Contractual maturities of debt securities at June 30, 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 $ 39,320 38,700 64 63
Due from one to five years 132,809 124,710 973 953
Due from five to ten years 26,020 24,527 9,411 8,806
Due after ten years — — 6,981 6,216
198,149 187,937 17,429 16,038
U.S. Agency mortgage-backed securities 72,553 65,383 — —
$ 270,702 253,320 17,429 16,038

Certain information concerning the sale of debt securities available-for-sale for the three and six months ended June 30, 2025 and 2024 was as follows (in thousands):

Three Months Ended Six Months Ended
June 30, June 30,
2025 2024 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 June 30, 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 June 30, 2025 and December 31, 2024 are summarized as follows (in thousands):

June 30, 2025 December 31, 2024
Amortized Fair Amortized Fair
Cost Value Cost Value
Mutual Funds $ 1,471 1,308 1,451 1,265
Equity Securities 10 97 10 98
Total equity securities with a readily determinable fair value $ 1,481 1,405 1,461 1,363

Certain information concerning changes in the fair value of equity securities with a readily determinable fair value for the three and six months ended June 30, 2025 and 2024 were as follows (in thousands):

Three Months Ended Six Months Ended
June 30, June 30,
2025 2024 2025 2024
Net gains (losses) recognized during the period on equity securities $ 8 (14 ) 22 (24 )
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 $ 8 (14 ) 22 (24 )

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 June 30, 2025 and December 31, 2024 were as follows (in thousands):

June 30, 2025 December 31, 2024
Commercial & industrial $ 110,643 118,611
Commercial, secured by real estate:
Owner occupied 219,829 210,327
Non-owner occupied 502,326 508,531
Farmland 36,173 37,860
Multi-family 254,900 264,260
Construction 95,738 91,154
Residential real estate:
Secured by senior liens on 1-4 family dwellings 390,742 392,513
Secured by junior liens on 1-4 family dwellings 21,400 21,522
Home equity line-of-credit loans 48,146 43,064
Consumer 18,476 20,498
Agricultural 14,466 13,293
Other loans, including deposit overdrafts 171 179
Loans, gross 1,713,010 1,721,812
Less allowance for credit losses 12,108 12,001
Loans, net $ 1,700,902 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 $902 thousand and $796 thousand at June 30, 2025 and December 31, 2024, respectively. Accrued interest receivable of $7.8 million and $7.7 million are excluded from the balances above as of June 30, 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 June 30, 2025 and December 31, 2024 were as follows (in thousands):

June 30, 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 $ — 1,384 — 1,375
Commercial, secured by real estate:
Owner occupied — — — —
Non-owner occupied — 2,520 — 2,642
Farmland 16 16 16 16
Multi-family — — — —
Construction — — — —
Residential real estate:
Secured by senior liens on 1-4 family dwellings 276 559 73 467
Secured by junior liens on 1-4 family dwellings — — — —
Home equity line-of-credit loans — — — —
Consumer 21 21 28 28
Agricultural — — — —
Total $ 313 4,500 117 4,528

Interest income recognized on nonaccrual loans totaled approximately $1 thousand and $172 thousand during the six months ended  June 30, 2025 and 2024, respectively. Accrued interest reversed and charged against interest income for these loans totaled approximately $9 thousand and $27 thousand during the six months ended  June 30, 2025 and 2024, respectively.

The ratio of non-accrual loans to total loans outstanding at June 30, 2025 and December 31, 2024 was 0.26%.

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 – There were no changes to the Company's forecast or reversion periods during the second quarter of 2025; as of June 30, 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 June 30, 2025, the Company selected a forecasted data model which projects unemployment between 5.28% and 6.10%, the change in Coincident Economic Activity between -0.15% and 0.53%, the change in Commercial Real Estate Price Indexes between -5.79% and -1.48%, and the change in the Home Price Index between -2.57% and 2.06% during the forecast periods. Management believes that the resulting quantitative reserve appropriately balances economic indicators with identified risks. As of March 31, 2025, the Company selected a forecast model which projects 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. The historical averages for LCNB’s economic indicators are unemployment – 5.74%, change in Coincident Economic Activity – 2.01, change in Commercial Real Estate Price Indexes – 4.62%, and change in Home Price Index – 2.81%
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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 and six months ended June 30, 2025 and 2024 (in thousands):

Other Loans,
Commercial, Including
Commercial Secured by Residential Deposit
& Industrial Real Estate Real Estate Consumer Agricultural Overdrafts Total
Three Months Ended June 30, 2025 **** **** **** **** **** **** ****
Balance, beginning of period $ 1,307 6,830 3,729 221 20 17 12,124
Provision for (recovery of) credit losses 79 (495 ) 424 12 8 35 63
Losses charged off — — (37 ) (5 ) — (53 ) (95 )
Recoveries — — — 1 — 15 16
Balance, end of period $ 1,386 6,335 4,116 229 28 14 12,108
Ratio of net charge-offs to average loans — % — % 0.03 % 0.09 % — % 100.27 % 0.02 %
Six Months Ended June 30, 2025 **** **** **** **** **** **** ****
Balance, beginning of year $ 1,573 6,537 3,634 220 24 13 12,001
Provision for (recovery of) credit losses (187 ) (202 ) 515 13 4 82 225
Losses charged off — — (37 ) (5 ) — (106 ) (148 )
Recoveries — — 4 1 — 25 30
Balance, end of period $ 1,386 6,335 4,116 229 28 14 12,108
Ratio of net charge-offs (recoveries) to average loans — % — % 0.01 % 0.04 % — % 101.45 % 0.01 %
Other Loans,
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Commercial, Including
Commercial Secured by Residential Deposit
& Industrial Real Estate Real Estate Consumer Agricultural Overdrafts Total
Three Months Ended June 30, 2024 **** **** **** **** **** **** ****
Balance, beginning of period $ 967 6,486 2,852 232 18 2 10,557
Acquisition of Eagle Financial Bancorp, Inc. - PCD Loans 101 8 79 — — — 188
Provision for (recovery of) credit losses 449 (512 ) (184 ) (21 ) 20 28 (220 )
Acquisition of Eagle Financial Bancorp, Inc. - provision for credit losses on non-PCD loans charged to expense 51 246 466 — — — 763
Losses charged off — — — (40 ) — (46 ) (86 )
Recoveries — — 9 41 — 18 68
Balance, end of period $ 1,568 6,228 3,222 212 38 2 11,270
Ratio of net charge-offs to average loans — % — % (0.01 )% (0.02 )% — % 73.60 % — %
Six Months Ended June 30, 2024 **** **** **** **** **** **** ****
Balance, beginning of year, prior to adoption of ASC 326 $ 1,039 5,414 3,816 238 18 — 10,525
Acquisition of Eagle Financial Bancorp, Inc. - PCD Loans 101 8 79 — — — 188
Provision for (recovery of) credit losses 377 560 (1,148 ) (32 ) 20 80 (143 )
Acquisition of Eagle Financial Bancorp, Inc. - provision for credit losses on non-PCD loans charged to expense 51 246 466 — — — 763
Losses charged off — — — (43 ) — (121 ) (164 )
Recoveries — — 9 49 — 43 101
Balance, end of period $ 1,568 6,228 3,222 212 38 2 11,270
Ratio of net charge-offs to average loans — % — % — % (0.05 )% — % 121.28 % — %

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NOTE 4 – LOANS (continued)

The ratio of the allowance for credit losses for loans to total loans at  June 30, 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):

June 30, 2025 December 31, 2024
Amortized Related Amortized Related
Cost Basis Allowance Cost Basis Allowance
Commercial & industrial $ — — — —
Commercial, secured by real estate:
Owner occupied 41 — 48 —
Non-owner occupied 2,519 78 2,642 1,201
Farmland 16 — 16 —
Multi-family — — — —
Construction — — — —
Residential real estate:
Secured by senior liens on 1-4 family dwellings 720 32 527 50
Secured by junior liens on 1-4 family dwellings — — — —
Home equity line-of-credit loans 43 — 75 —
Consumer — — — —
Agricultural — — — —
Other loans, including deposit overdrafts — — — —
Total $ 3,339 110 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 60 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 June 30, 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
June 30, 2025
Commercial & industrial
Pass $ 6,811 13,456 10,433 24,683 20,917 10,357 16,028 — 102,685
OAEM 99 — 74 650 668 1,265 432 — 3,188
Substandard — — — 2,921 — — 389 76 3,386
Doubtful — 1,384 — — — — — — 1,384
Total 6,910 14,840 10,507 28,254 21,585 11,622 16,849 76 110,643
Gross charge-offs (1) — — — — — — — — —
Commercial, secured by real estate
Pass 16,200 49,969 116,395 202,333 154,007 405,032 137,594 — 1,081,530
OAEM — — — 3,682 1,859 10,099 — — 15,640
Substandard — — — 7,258 1,474 2,892 — 172 11,796
Doubtful — — — — — — — — —
Total 16,200 49,969 116,395 213,273 157,340 418,023 137,594 172 1,108,966
Gross charge-offs (1) — — — — — — — — —
Residential real estate
Pass 11,255 34,582 57,142 77,729 83,727 145,600 46,375 — 456,410
OAEM — — — — 196 1,173 — — 1,369
Substandard — — 495 — 284 1,730 — — 2,509
Doubtful — — — — — — — — —
Total 11,255 34,582 57,637 77,729 84,207 148,503 46,375 — 460,288
Gross charge-offs (1) — — 27 — — 10 — — 37
Consumer
Pass 3,371 5,094 3,930 2,791 1,903 1,284 58 — 18,431
OAEM — — — — — — — — —
Substandard — 3 — 31 6 5 — — 45
Doubtful — — — — — — — — —
Total 3,371 5,097 3,930 2,822 1,909 1,289 58 — 18,476
Gross charge-offs (1) — — — 4 1 — — — 5
Agricultural
Pass 1,788 207 1,267 250 59 268 10,627 — 14,466
OAEM — — — — — — — — —
Substandard — — — — — — — — —
Doubtful — — — — — — — — —
Total 1,788 207 1,267 250 59 268 10,627 — 14,466
Gross charge-offs (1) — — — — — — — — —
Other
Pass — — — — — — 171 — 171
OAEM — — — — — — — — —
Substandard — — — — — — — — —
Doubtful — — — — — — — — —
Total — — — — — — 171 — 171
Gross charge-offs (1) — — — — — — 106 — 106
Total loans $ 39,524 104,695 189,736 322,328 265,100 579,705 211,674 248 1,713,010
(1) - for the six months ended June 30, 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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NOTE 4 – LOANS (continued)

A loan portfolio aging analysis by class segment at June 30, 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
June 30, 2025
Commercial & industrial — — — — 110,643 110,643 —
Commercial, secured by real estate:
Owner occupied — — — — 219,829 219,829 —
Non-owner occupied — — 2,520 2,520 499,806 502,326 —
Farmland — — — — 36,173 36,173 —
Multi-family — — — — 254,900 254,900 —
Construction — — — — 95,738 95,738 —
Residential real estate:
Secured by senior liens on 1-4 family dwellings 75 221 355 651 390,091 390,742 225
Secured by junior liens on 1-4 family dwellings 8 — — 8 21,392 21,400 —
Home equity line-of-credit loans 355 17 43 415 47,731 48,146 43
Consumer 11 6 24 41 18,435 18,476 3
Agricultural — — — — 14,466 14,466 —
Other 171 — — 171 — 171 —
Total $ 620 244 2,942 3,806 1,709,204 1,713,010 271
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 —
Farmland 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 $154 thousand and $33 thousand at June 30, 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  June 30, 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 Combination - Extended Maturity and Payment Delay Total Modifications Percent of Total Class
Three Months Ended June 30, 2025 **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** ****
Commercial & industrial $ — — — — — — 1,722 1,722 1.56 %
Consumer — 21 — — — — — 21 0.11 %
Total $ — 21 — — — — 1,722 1,743
Six Months Ended June 30, 2025 **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** ****
Commercial & industrial $ — 76 — — 1,006 — 1,722 2,804 2.53 %
Commercial, secured by real estate, owner occupied — 488 — — — — — 488 0.22 %
Consumer — 21 — — — — — 21 0.11 %
Total $ — 585 — — 1,006 — 1,722 3,313
Three Months Ended June 30, 2024 **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** ****
Consumer $ — — — — — — 30 30 0.13 %
Total $ — — — — — — 30 30
Six Months Ended June 30, 2024 **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** ****
Residential real estate, secured by senior liens on 1-4 family dwellings $ — — — — — 23 — 23 0.01 %
Consumer — — — — — — 30 30 0.13 %
Total $ — — — — — 23 30 53

During the third quarter of 2024, one borrower defaulted on two consumer loans that underwent maturity-extension and payment-delay modifications during the second quarter of 2024 while the borrower was known to be experiencing financial difficulty. The borrower remained in default through February 2025. At June 30, 2025, the amortized cost basis of these two consumer loans totaled $21 thousand. No other loans defaulted during the year-to-date period ended June 30, 2025 that, within twelve months prior to their default, were modified for borrowers experiencing financial difficulty. During the three and six months ended June 30, 2024, no loans defaulted which, in the twelve months preceding their default, were modified for borrowers experiencing financial difficulty.

At  June 30, 2025 and December 31, 2024, LCNB was not committed to lend additional funds to borrowers who, during the respective six-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 June 30, 2025 and December 31, 2024 were approximately $348.0 million and $397.6 million, respectively.

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NOTE 5 - PURCHASED CREDIT DETERIORATED LOANS

Activity during the three months ended June 30, 2024 and 2025 for the accretable discount related to PCD loans acquired from EFBI and CNNB is as follows (in thousands):

Three Months Ended June 30, Six Months Ended June 30,
2025 2024 2025 2024
Accretable discount, beginning of period $ 1,100 1,410 1,113 1,467
Accretable discount acquired through merger with EFBI — 253 — 253
Less loans transferred to held-for-sale — 396 — 396
Less accretion 29 108 42 165
Accretable discount, end of period $ 1,071 1,159 1,071 1,159

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 June 30, 2025 and December 31, 2024 (in thousands):

June 30, December 31,
2025 2024
Affordable housing tax credit investment $ 20,950 18,950
Less amortization 6,845 6,044
Net affordable housing tax credit investment $ 14,105 12,906
Unfunded commitment $ 5,263 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 and six months ended June 30, 2025 and 2024 (in thousands):

Three Months Ended June 30, Six Months Ended June 30,
2025 2024 2025 2024
Tax credits and other tax benefits recognized $ 487 445 972 888
Tax credit amortization expense included in provision for income taxes 401 368 801 740

NOTE 7 - DEPOSITS

The following table presents the composition of LCNB's deposits at June 30, 2025 and December 31, 2024 (in thousands):

June 30, December 31,
2025 2024
Demand deposits $ 463,123 459,619
Interest-bearing demand and money fund deposits 647,493 540,884
Savings deposits 364,083 367,205
IRA and time certificates 444,673 510,584
Total $ 1,919,372 1,878,292

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NOTE 7 - DEPOSITS (continued)

Contractual maturities of time deposits at June 30, 2025 were as follows (in thousands):

Three months or less $ 142,354
Over three through six months 151,901
Over six through twelve months 118,803
July 1, 2025 - June 30, 2026 413,058
July 1, 2026 - June 30, 2027 25,374
July 1, 2027 - June 30, 2028 2,797
July 1, 2028 - June 30, 2029 1,120
July 1, 2029 - June 30, 2030 2,003
Thereafter 321
Total contractual maturities $ 444,673

The aggregate amount of time deposits in denominations of $250 thousand or more at June 30, 2025 and December 31, 2024 was $93.4 million and $107.8 million, respectively.

NOTE 8 – BORROWINGS

Long-term debt at June 30, 2025 and December 31, 2024 was as follows (dollars in thousands):

June 30, 2025 December 31, 2024
Amount Weighted Average Interest Rate Amount Weighted Average Interest Rate
Term loan $ 10,000 6.50 % $ 10,153 4.25 %
FHLB long-term advances 95,000 4.83 % 145,000 4.62 %
$ 105,000 4.99 % $ 155,153 4.60 %

The term loan with a correspondent financial institution bears a fixed interest rate of 6.5%, amortizes quarterly, and has a final balloon payment due on June 15, 2028.

Contractual maturities of long-term debt at June 30, 2025 and December 31, 2024 were as follows (in thousands):

June 30, December 31,
2025 2024
Maturing within one year $ — 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 35,000 45,000
Maturing after four years through five years 10,000 30,000
Thereafter 10,000 10,000
Total $ 105,000 155,153

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NOTE 8 – BORROWINGS (continued)

There were no short-term borrowings at June 30, 2025 or  December 31, 2024.

At June 30, 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, 2027.

At June 30, 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 June 30, 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 $408 million and $410 million at June 30, 2025 and December 31, 2024, respectively. Remaining borrowing capacity with the FHLB, including both long-term and short-term borrowings, at June 30, 2025 was approximately $148.1 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 and six months ended June 30, 2025 and 2024 were as follows (in thousands):

Three Months Ended Six Months Ended
June 30, June 30,
2025 2024 2025 2024
Operating lease expense $ 214 239 466 465
Short-term lease expense — 16 5 35
Variable lease expense 16 16 36 20
Other 9 11 20 18
Total lease expense $ 239 282 527 538

Other information related to leases at June 30, 2025 were as follows (dollars in thousands):

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $ 457
Right-of-use assets obtained in exchange for new operating lease liabilities $ 554
Weighted average remaining lease term in years for operating leases 32.7
Weighted average discount rate for operating leases 3.71 %

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(Continued)

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 June 30, Six Months Ended June 30,
2025 2024 2025 2024
Statutory tax rate 21.0 % 21.0 % 21.0 % 21.0 %
Increase (decrease) resulting from:
Tax exempt interest (0.4 )% (2.8 )% (0.5 )% (1.7 )%
Tax exempt income on bank-owned life insurance (1.0 )% (7.6 )% (1.2 )% (4.4 )%
Captive insurance premium income (0.9 )% (6.6 )% (1.0 )% (4.3 )%
Affordable housing tax credit limited partnerships (1.2 )% (8.2 )% (1.3 )% (4.7 )%
Nondeductible merger-related expenses 0.3 % 5.4 % 0.2 % 3.9 %
Other, net 0.0 % 0.8 % 0.0 % 0.6 %
Effective tax rate 17.8 % 2.0 % 17.2 % 10.4 %

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 LCNB 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 June 30, 2025 and December 31, 2024 were as follows (in thousands):

June 30, 2025 December 31, 2024
Commitments to extend credit:
Commercial loans $ 14,528 7,881
Other loans
Fixed rate 15,376 21,613
Adjustable rate 5,514 1,998
Unused lines of credit:
Fixed rate 9,069 10,403
Adjustable rate 219,138 231,046
Unused overdraft protection amounts on demand accounts 17,257 17,566
Standby letters of credit 5 5
Total commitments $ 280,887 290,512

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 condensed balance sheets, for the three and six months ended June 30, 2025 and 2024 is as follows (in thousands):

Three Months Ended June 30, Six Months Ended June 30,
2025 2024 2025 2024
Balance, beginning of period $ 297 329 263 281
Acquisition of Eagle Financial Bancorp, Inc. — 48 — 48
Provision for (recovery of) credit losses (45 ) (15 ) (11 ) 33
Balance, end of period $ 252 362 252 362

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 June 30, 2025 totaled approximately $60 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 and six months ended June 30, 2025 and 2024 were as follows (in thousands):

Three Months Ended June 30, Six Months Ended June 30,
Changes in Changes in
Unrealized Pension Plan Unrealized Pension Plan
Losses on Assets and Losses on Assets and
Available-for- Benefit Available-for- Benefit
Sale Debt Securities Obligations Total Sale Debt Securities Obligations Total
2025 **** **** **** **** **** ****
Balance at beginning of period $ (15,528 ) 1 (15,527 ) (19,190 ) 1 (19,189 )
Other comprehensive income, net of taxes 1,798 — 1,798 5,460 — 5,460
Reclassifications — — — — — —
Balance at end of period $ (13,730 ) 1 (13,729 ) (13,730 ) 1 (13,729 )
2024 **** **** **** **** **** ****
Balance at beginning of period $ (23,399 ) (55 ) (23,454 ) (22,281 ) (55 ) (22,336 )
Other comprehensive loss, net of taxes 605 — 605 (682 ) — (682 )
Reclassifications — — — 169 — 169
Balance at end of period $ (22,794 ) (55 ) (22,849 ) (22,794 ) (55 ) (22,849 )

Reclassifications out of accumulated other comprehensive loss during the three and six months ended June 30, 2025 and 2024 and the affected line items in the condensed consolidated statements of income were as follows (in thousands):

Three Months Ended Six Months Ended Affected Line Item in the
June 30, June 30, Consolidated Condensed
2025 2024 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 and six-month period ended  June 30, 2025 and 2024 were as follows (in thousands):

Three Months Ended Six Months Ended
June 30, June 30,
2025 2024 2025 2024
Qualified noncontributory defined benefit retirement plan $ 316 327 632 654
401(k) plan 223 200 483 420

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 $18 thousand and $37 thousand for the three and six months ended June 30, 2025 and $18 thousand and $36 thousand for the three and six months ended June 30, 2024.

NOTE 14 – STOCK BASED COMPENSATION

The 2025 Ownership Incentive Plan  (the "2025 Plan") was ratified by LCNB Corp.'s shareholders at the annual meeting on May 19, 2025 and allows for stock-based awards to eligible employees and non-employee directors, as determined by the Compensation Committee of the Board of Directors. It replaced the 2015 Ownership Incentive Plan (the "2015 Plan"), which terminated on *April 28, 2025.*Awards may be made in the form of stock options, appreciation rights, restricted shares, and/or restricted share units. The 2025 Plan provides for the issuance of up to 600 thousand shares of common stock, where the 2015 Plan provided for the issuance of up to 450 thousand shares of common stock. The 2025 Plan will terminate on May 19, 2035 and could be subject to earlier termination by the Board Compensation Committee.

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 six months ended June 30, 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 (43,647 ) 16.18 (36,127 ) 16.39
Forfeited — — — —
Nonvested at June 30, 79,896 $ 15.84 84,593 $ 16.59

No stock-based awards have been granted under the 2025 Plan during the period ended June 30, 2025.

At June 30, 2025, there were 79,896 restricted stock awards outstanding with an approximate stock value of $1.2 million based on that day's closing stock price. At June 30, 2024, there were 84,593 restricted stock awards outstanding with an approximate stock value of $1.2 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 and six months ended June 30, 2025 and 2024 (in thousands):

Three Months Ended Six Months Ended
June 30, June 30,
2025 2024 2025 2024
Restricted stock expense $ 101 92 385 407
Tax effect 21 19 81 85

Unrecognized compensation expense for restricted stock awards was $1.1 million at June 30, 2025 and is expected to be recognized over a period of 3.3 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 and six months ended June 30, 2025 and 2024 were calculated as follows (dollars in thousands, except share and per share data):

Three Months Ended Six Months Ended
June 30, June 30,
2025 2024 2025 2024
Net income $ 5,919 925 10,528 2,840
Less allocation of earnings and dividends to participating securities 32 6 60 18
Net income allocated to common shareholders $ 5,887 919 10,468 2,822
Weighted average common shares outstanding, gross 14,165,660 14,033,264 14,150,313 13,610,854
Less average participating securities 79,896 84,593 79,896 84,593
Adjusted weighted average number of shares outstanding used in the calculation of basic and diluted earnings per common share 14,085,764 13,948,671 14,070,417 13,526,261
Earnings per common share:
Basic $ 0.41 0.07 0.74 0.21
Diluted 0.41 0.07 0.74 0.21

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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.
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• 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.
--- ---

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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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

(Continued)

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 June 30, 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)
June 30, 2025
Recurring fair value measurements:
Equity securities with a readily determinable fair value:
Equity securities $ 97 97 — —
Mutual funds measured at net asset value 1,308 1,308 — —
Debt securities, available-for-sale:
U.S. Treasury notes 64,522 64,522 — —
U.S. Agency notes 79,148 — 79,148 —
Corporate bonds 8,585 — 8,585 —
U.S. Agency mortgage-backed securities 65,383 — 65,383 —
Municipal securities:
Non-taxable 4,002 — 4,002 —
Taxable 31,680 — 31,680 —
Total recurring fair value measurements $ 254,725 65,927 188,798 —
Nonrecurring fair value measurements:
Individually evaluated collateral dependent loans $ 2,723 — — 2,723
Total nonrecurring fair value measurements $ 2,723 — — 2,723
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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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

(Continued)

NOTE 16 - FAIR VALUE MEASUREMENTS (continued)

The following table presents quantitative information about unobservable inputs used in nonrecurring level 3 fair value measurements at June 30, 2025 and December 31, 2024 (dollars in thousands):

Range
Valuation Unobservable Weighted
Fair Value Technique Inputs High Low Average
June 30, 2025
Individually evaluated collateral dependent loans $ 2,723 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 June 30, 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)
June 30, 2025
FINANCIAL ASSETS:
Cash and cash equivalents $ 49,778 49,778 49,778 — —
Debt securities, held-to-maturity, net 17,429 16,038 — 16,038 —
Loans held-for-sale 6,026 6,026 — 6,026 —
Loans, net 1,700,902 1,642,659 — — 1,642,659
Accrued interest receivable 8,795 8,795 — 8,795 —
Lender risk account 6,191 6,191 — — 6,191
FINANCIAL LIABILITIES:
Deposits 1,919,372 1,922,785 1,474,699 448,086 —
Long-term debt 105,000 107,046 — 107,046 —
Accrued interest payable 1,639 1,639 — 1,639 —
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 June 30, 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  June 30, 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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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

(Continued)

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, fiduciary income, and deposit service charges and fees provide the significant 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 of Form 10-K for the year ended December 31, 2024. 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 may be unsuccessful or may be more difficult, time-consuming, or costly than expected;
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3. LCNB may incur increased loan charge-offs in the future and the allowance for credit losses may be inadequate;
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4. LCNB may face competitive loss of customers;
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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;
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6. changes in general economic conditions and increased competition could adversely affect LCNB’s operating results;
--- ---
7. changes in or instability regarding 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;
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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;
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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;
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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
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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.

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

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 respective three and six months ended June 30, 2025 was $5.9 million (total basic and diluted earnings per share of $0.41) and $10.5 million (total basic and diluted earnings per share of $0.74). This compares to net income of $0.9 million (total basic and diluted earnings per share of $0.07) and $2.8 million (total basic and diluted earnings per share of $0.21) for the same three and six-month periods in 2024. Results for the 2024 periods were affected by expenses incurred in connection with the acquisition of EFBI on April 12, 2024 and CNNB on November 1, 2023.

Net interest income for the three and six months ended June 30, 2025 was $17.5 million and $33.8 million, respectively. This compares to net interest income of $15.2 million and $29.1 million for the same three and six-month periods in 2024. The growth in net interest income was primarily due to a decrease on the average rate paid on interest-bearing liabilities and a decrease in the average balances of these liabilities, partially offset by a decrease in the average balance of loans outstanding. LCNB's tax equivalent net interest margin for the first six months of 2025 was 3.36%, compared to 2.80% for the same period last year.

LCNB recorded a provision for credit losses of $18 thousand and $215 thousand for the three and six months ended June 30, 2025. This compares to a provision of $528 thousand and $653 thousand for the same three and six-month periods in 2024. The provisions for 2024 included $763 thousand recognized on non-PCD loans acquired through the EFBI merger.

Non-interest income for the three and six months ended June 30, 2025 was $5.2 million and $10.5 million, respectively. This compares to non-interest income of $4.1 million and $8.0 million for the same periods in 2024. The increases were primarily due to higher amounts of net gains from sales of loans, fiduciary income, service charges and fees on deposit accounts, and other income. Partially offsetting non-interest income during the three and six months ended June 30, 2024 was an $843 thousand pretax loss on the sale of approximately $48.9 million of below market rate loans acquired from CNNB.

Non-interest expense for the three and six months ended June 30, 2025 was $15.6 million and $31.4 million, respectively. This compares to non-interest expense of $17.8 million and $33.3 million for the same three and six-month periods in 2024. The decreases were primarily due to lower merger related expenses, partially offset by operating expenses associated with the EFBI acquisition during April 2024 and increased marketing expenses compared to the same period last year. LCNB had $2.3 million and $3.1 million of one-time merger-related expenses that occurred during the three and six months ended June 30 2024, respectively, compared to $140 thousand of such expenses for the three and six months ended June 30, 2025.

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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 June 30, 2025 vs. June 30, 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 June 30, 2025 and June 30, 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 June 30,
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) $ 1,718,959 23,838 5.56 % $ 1,818,253 24,836 5.49 %
Interest-bearing demand deposits 9,573 140 5.87 % 14,143 215 6.11 %
Interest-bearing time deposits 254 6 9.47 % — — 0.00 %
Federal Reserve Bank stock 6,405 98 6.14 % 6,248 180 11.59 %
Federal Home Loan Bank stock 20,710 447 8.66 % 20,152 367 7.32 %
Investment securities:
Equity securities 5,053 36 2.86 % 4,985 39 3.15 %
Debt securities, taxable 251,920 1,213 1.93 % 259,768 1,183 1.83 %
Debt securities, non-taxable (2) 18,387 204 4.45 % 18,515 184 4.00 %
Total earnings assets 2,031,261 25,982 5.13 % 2,142,064 27,004 5.07 %
Non-earning assets 271,147 274,104
Allowance for credit losses (12,123 ) (11,386 )
Total assets $ 2,290,285 $ 2,404,782
Interest-bearing demand and money market deposits $ 603,066 2,374 1.58 % $ 648,772 3,575 2.22 %
Savings deposits 363,679 199 0.22 % 372,240 307 0.33 %
IRA and time certificates 466,065 4,546 3.91 % 493,297 5,808 4.74 %
Short-term borrowings 63 1 6.37 % 11,291 181 6.45 %
Long-term debt 104,701 1,278 4.90 % 162,555 1,877 4.64 %
Total interest-bearing liabilities 1,537,574 8,398 2.19 % 1,688,155 11,748 2.80 %
Demand deposits 473,495 451,678
Other liabilities 18,023 21,022
Equity 261,193 243,927
Total liabilities and equity $ 2,290,285 $ 2,404,782
Net interest rate spread (3) 2.94 % 2.27 %
Net interest income and net interest margin on a taxable-equivalent basis (4) 17,584 3.47 % 15,256 2.86 %
Ratio of interest-earning assets to interest-bearing liabilities 132.11 % 126.89 %
(1) Includes non-accrual loans and loans held-for-sale.
--- ---
(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 June 30, 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
June 30, 2025 vs. 2024
Increase (decrease) attributable to:
Volume Rate Total
(In thousands)
Interest-earning Assets: **** **** ****
Loans $ (1,372 ) 374 (998 )
Interest-bearing demand deposits (67 ) (8 ) (75 )
Interest-bearing time deposits 6 — 6
Federal Reserve Bank stock 4 (86 ) (82 )
Federal Home Loan Bank stock 10 70 80
Investment securities:
Equity securities 1 (4 ) (3 )
Debt securities, taxable (36 ) 66 30
Debt securities, non-taxable (1 ) 21 20
Total interest income (1,455 ) 433 (1,022 )
Interest-bearing Liabilities: **** **** ****
Interest-bearing demand and money market deposits (238 ) (963 ) (1,201 )
Savings deposits (7 ) (101 ) (108 )
IRA and time certificates (307 ) (955 ) (1,262 )
Short-term borrowings (178 ) (2 ) (180 )
Long-term debt (701 ) 102 (599 )
Total interest expense (1,431 ) (1,919 ) (3,350 )
Net interest income $ (24 ) 2,352 2,328

Net interest income on a fully taxable-equivalent basis for the three months ended June 30, 2025 totaled $17.6 million, an increase of $2.3 million from the comparable period in 2024.  Total interest expense decreased $3.3 million, partially offset by a $1.0 million decrease in total interest income .

The $1.0 million decrease in total interest income was primarily due to a $1.0 million decrease in loan interest income. The decrease in loan interest income was primarily due to a $99.3 million decrease in average loan balances, partially offset by a 7 basis point (a basis point equals 0.01%) increase in the average rate earned on the loan portfolio.

The $3.3 million decrease in total interest expense was primarily due to a $150.6 million decrease in average interest-bearing liabilities and to a 61 basis point decrease in the average rate paid for these liabilities.

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Six Months Ended June 30, 2025 vs. June 30, 2024

The following table presents, for the six months ended June 30, 2025 and June 30, 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.

Six Months Ended June 30,
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) $ 1,720,418 47,019 5.51 % $ 1,770,410 47,518 5.40 %
Interest-bearing demand deposits 9,953 272 5.51 % 18,730 539 5.79 %
Interest-bearing time deposits 252 6 4.80 % — — — %
Federal Reserve Bank stock 6,405 192 6.05 % 5,879 176 6.02 %
Federal Home Loan Bank stock 20,710 915 8.91 % 18,196 708 7.82 %
Investment securities:
Equity securities 5,048 75 3.00 % 4,990 79 3.18 %
Debt securities, taxable 253,434 2,469 1.96 % 262,467 2,415 1.85 %
Debt securities, non-taxable (2) 17,776 389 4.41 % 18,690 365 3.93 %
Total earnings assets 2,033,996 51,337 5.09 % 2,099,362 51,800 4.96 %
Non-earning assets 272,217 261,367
Allowance for credit losses (12,062 ) (10,954 )
Total assets $ 2,294,151 $ 2,349,775
Interest-bearing demand and money market deposits $ 586,860 4,711 1.62 % $ 645,986 7,492 2.33 %
Savings deposits 364,771 394 0.22 % 370,145 513 0.28 %
IRA and time certificates 481,536 9,573 4.01 % 431,714 9,875 4.60 %
Short-term borrowings 67 2 6.02 % 38,171 1,116 5.88 %
Long-term debt 115,933 2,735 4.76 % 156,366 3,615 4.65 %
Total interest-bearing liabilities 1,549,167 17,415 2.27 % 1,642,382 22,611 2.77 %
Demand deposits 468,235 447,423
Other liabilities 18,576 20,447
Equity 258,173 239,523
Total liabilities and equity $ 2,294,151 $ 2,349,775
Net interest rate spread (3) 2.82 % 2.19 %
Net interest income and net interest margin on a taxable-equivalent basis (4) 33,922 3.36 % 29,189 2.80 %
Ratio of interest-earning assets to interest-bearing liabilities 131.30 % 127.82 %
(1) Includes non-accrual loans and loans held-for-sale.
--- ---
(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 six months ended June 30, 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.

Six Months Ended
June 30, 2025 vs. 2024
Increase (decrease) attributable to:
Volume Rate Total
(In thousands)
Interest-earning Assets: **** **** ****
Loans $ (1,357 ) 858 (499 )
Interest-bearing demand deposits (241 ) (26 ) (267 )
Interest-bearing time deposits 6 — 6
Federal Reserve Bank stock 16 — 16
Federal Home Loan Bank stock 105 102 207
Investment securities:
Equity securities 1 (5 ) (4 )
Debt securities, taxable (85 ) 139 54
Debt securities, non-taxable (18 ) 42 24
Total interest income (1,573 ) 1,110 (463 )
Interest-bearing Liabilities: **** **** ****
Interest-bearing demand and money market deposits (637 ) (2,144 ) (2,781 )
Savings deposits (7 ) (112 ) (119 )
IRA and time certificates 1,070 (1,372 ) (302 )
Short-term borrowings (1,137 ) 23 (1,114 )
Long-term debt (952 ) 72 (880 )
Total interest expense (1,663 ) (3,533 ) (5,196 )
Net interest income $ 90 4,643 4,733

Net interest income on a fully taxable-equivalent basis for the six months ended June 30, 2025 totaled $33.9 million, an increase of $4.7 million from the comparable period in 2024.  Total interest income decreased $463 thousand and total interest expense decreased $5.2 million.

The $463 thousand decrease in total interest income was primarily due to a $499 thousand decrease in loan interest income. The decrease in loan interest income was primarily due to a $50.0 million decrease in average loan balances, partially offset by an 11 basis point increase in the average rate earned on the loan portfolio.

The $5.2 million decrease in total interest expense was primarily due to a $93.2 million decrease in average interest-bearing liabilities and to a 50 basis point decrease in the average rate paid for these liabilities.

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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 $18 thousand for the second quarter of 2025, compared to $528 thousand for the comparable period in 2024. The provision for the 2025 period included a provision for credit losses on loans of $63 thousand and a recovery on off-balance-sheet credit exposures of $45 thousand. The provision for the 2024 period included a provision for credit losses on loans of $542 thousand and a net recovery for off-balance-sheet credit exposures of $16 thousand. For the six months ended June 30, 2025, LCNB recorded a provision for credit losses of $215 thousand, compared to a provision of $653 thousand for the comparable period in 2024. The provision for the six months ended June 30, 2025 included a provision for credit losses on loans of $225 thousand and a recovery on off-balance-sheet credit exposures of $11 thousand. The provision for the 2024 six-month period included a provision for credit losses on loans of $620 thousand and a provision for off-balance-sheet credit exposures of $33 thousand.

The provisions for credit losses on loans during the three and six-month 2024 periods included $763,000 recognized on non-PCD loans acquired through the EFBI merger and the six-month period included a $1.2 million increase for a commercial real estate, non-owner occupied loan that was individually evaluated for the first time during the first quarter 2024. These increases were largely offset by a recovery of credit losses in the pooled real estate mortgage loan category. The residential real estate mortgage loan category had a recovery of credit losses primarily due to a decrease in loss rates and a decrease in loan balances caused by a transfer to the loans held-for-sale category.

The provisions for credit losses on loans during the three and six-month 2025 periods benefited from a reversal of the $1.2 million increase for a commercial real estate, non-owner occupied loan originally recognized during the first quarter 2024 and mentioned in the previous paragraph.  LCNB entered into a contract to sell the property during the second quarter of 2025.

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 and six months ended June 30, 2025 totaled $79 thousand and $118 thousand, respectively, compared to net charge-offs of $18 thousand and $63 thousand for the same respective periods 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 and six months ended June 30, 2025 and June 30, 2024 is as follows (in thousands):

Three Months Ended Six Months Ended
June 30, June 30,
2025 2024 Difference 2025 2024 Difference
Fiduciary income $ 2,262 2,067 195 4,426 4,040 386
Service charges and fees on deposit accounts 1,884 1,537 347 3,650 2,921 729
Net losses from sales of debt securities, available-for-sale — — — — (214 ) 214
Bank-owned life insurance income 353 341 12 699 659 40
Net gains from sales of loans 615 50 565 1,456 572 884
Other operating income (loss) 134 85 49 239 31 208
Total non-interest income $ 5,248 4,080 1,168 10,470 8,009 2,461

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 market-related increases in the fair value of these assets and 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 Insured Cash Sweep product and secondarily to an increase in overdraft fees.
--- ---
• There were no sales of debt securities during the six months ended June 30, 2025.
--- ---
• Net gains from sales of loans increased because net gains for 2024 included an $843,000 pretax loss on the sale of approximately $48.9 million of below market rate loans acquired from CNNB.
--- ---
• Other operating income increased primarily due to unrealized gains recognized from increases in the market value of equity security investments and 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 and six months ended June 30, 2025 and June 30, 2024 is as follows (in thousands):

Three Months Ended Six Months Ended
June 30, June 30,
2025 2024 Difference 2025 2024 Difference
Salaries and employee benefits $ 8,872 9,006 (134 ) 18,044 17,560 484
Equipment expenses 371 395 (24 ) 753 785 (32 )
Occupancy expense, net 1,022 944 78 2,032 1,949 83
State financial institutions tax 449 476 (27 ) 902 904 (2 )
Marketing 281 210 71 596 384 212
Amortization of intangibles 301 298 3 598 534 64
FDIC insurance premiums, net 380 394 (14 ) 790 898 (108 )
Contracted services 859 844 15 1,729 1,628 101
Other real estate owned, net — — — — — —
Merger-related expenses 140 2,320 (2,180 ) 140 3,095 (2,955 )
Other non-interest expense 2,892 2,938 (46 ) 5,792 5,560 232
Total non-interest expense $ 15,567 17,825 (2,258 ) 31,376 33,297 (1,921 )

Reasons for changes include:

• Salaries and employee benefits for the six-month period 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.
--- ---
• Merger-related expenses during 2025 and 2024 reflect costs incurred in connection with the acquisitions of EFBI and CNNB.
--- ---
• Other non-interest expense for the first half of 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.
--- ---

Income Taxes

LCNB's effective tax rate for the three and six months ended June 30, 2025 was 17.8% and 17.2%, respectively, compared to 2.0% and 10.4% for the same respective periods 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 rates for 2024 were lower due to tax-exempt items not decreasing in proportion to the overall decrease in earnings, partially offset by the tax effect of non-deductible merger-related expenses.

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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 June 30, 2025 and December 31, 2024 is as follows (dollars in thousands):

June 30, 2025 December 31, 2024 Difference Difference %
ASSETS: **** **** **** ****
Total cash and cash equivalents $ 49,778 35,744 39.26 %
Interest-bearing time deposits 256 250 2.40 %
Investment securities:
Equity securities with a readily determinable fair value, at fair value 1,405 1,363 3.08 %
Equity securities without a readily determinable fair value, at cost 3,666 3,666 0.00 %
Debt securities, available-for-sale, at fair value 253,320 258,327 ) (1.94 )%
Debt securities, held-to-maturity, net, at cost 17,429 16,324 6.77 %
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 6,026 5,556 8.46 %
Loans, net 1,700,902 1,709,811 ) (0.52 )%
Premises and equipment, net 39,662 41,049 ) (3.38 )%
Operating lease right-of-use assets 6,020 5,785 4.06 %
Goodwill 90,310 90,310 0.00 %
Core deposit and other intangibles, net 10,106 11,104 ) (8.99 )%
Bank-owned life insurance 54,701 54,002 1.29 %
Interest receivable 8,795 8,701 1.08 %
Other assets, net 38,309 38,287 0.06 %
TOTAL ASSETS $ 2,307,800 2,307,394 0.02 %
LIABILITIES: **** **** **** ****
Deposits:
Noninterest-bearing $ 463,123 459,619 0.76 %
Interest-bearing 1,456,249 1,418,673 2.65 %
Total deposits 1,919,372 1,878,292 2.19 %
Short-term borrowings — — 0.00 %
Long-term debt 105,000 155,153 ) (32.32 )%
Operating lease liabilities 6,401 6,115 4.68 %
Accrued interest and other liabilities 13,553 14,798 ) (8.41 )%
TOTAL LIABILITIES 2,044,326 2,054,358 ) (0.49 )%
SHAREHOLDERS' EQUITY: **** **** **** ****
Common shares 187,653 186,937 0.38 %
Retained earnings 145,621 141,290 3.07 %
Treasury shares, at cost (56,071 ) (56,002 ) ) 0.12 %
Accumulated other comprehensive loss, net of taxes (13,729 ) (19,189 ) (28.45 )%
TOTAL SHAREHOLDERS' EQUITY 263,474 253,036 4.13 %
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,307,800 2,307,394 0.02 %

All values are in US Dollars.

NM - Not Meaningful

Reasons for changes include:

• Debt securities, available-for-sale, decreased due to maturities and paydowns, partially offset by a decrease in unrealized losses.  Purchases of new securities during the period were minimal.
• 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.
--- ---
• Loans, net decreased primarily due to decreases in commercial and industrial loans, non-owner occupied commercial real estate loans, and multi-family commercial real estate loans.  These decreases were partially offset by an increase in owner occupied commercial real estate loans.
• 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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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 June 30, 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 June 30, 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 $ 269,386 26 %
Retail 158,584 15 %
Office 123,749 12 %
Hotel/Motel 95,187 9 %
Mixed Use 94,889 9 %
Other 67,603 7 %
Self storage 51,976 5 %
Warehouse (one tenant) 44,396 4 %
Farmland 36,173 3 %
Light Industrial 31,266 3 %
Warehouse (more than one tenant) 25,096 2 %
Healthcare Facilities 19,120 2 %
Manufacturing 18,829 2 %
Dental 11,832 1 %
Total $ 1,048,086 100 %

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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 June 30, 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 $ 293,485 28 %
Hamilton County, Ohio 199,126 19 %
Montgomery County, Ohio 102,081 10 %
Butler County, Ohio 90,244 9 %
Warren County, Ohio 81,958 8 %
Other, Ohio 52,831 5 %
Delaware County, Ohio 45,209 4 %
Greene County, Ohio 40,771 4 %
Boone County, Kentucky 28,493 3 %
Kenton County, Kentucky 21,466 2 %
Clermont County, Ohio 20,115 2 %
Licking County, Ohio 17,768 2 %
Preble County, Ohio 16,620 2 %
Ross County, Ohio 12,867 1 %
Fairfield County, Ohio 10,050 1 %
Other, Indiana 7,492 0 %
Other, Kentucky 6,741 0 %
Other, West Virginia 769 0 %
Other, West Virginia $ 1,048,086 100 %

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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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):

June 30, 2025 December 31, 2024
Regulatory Capital:
Shareholders' equity $ 268,215 259,811
Goodwill and other intangibles (99,688 ) (100,279 )
Accumulated other comprehensive loss, net 13,729 19,189
Tier 1 risk-based capital 182,256 178,721
Eligible allowance for credit losses 12,020 11,805
Total risk-based capital $ 194,276 190,526
Capital ratios:
Common Equity Tier 1 Capital to risk-weighted assets 10.21 % 9.94 %
Tier 1 Capital to risk-weighted assets 10.21 % 9.94 %
Total Capital to risk-weighted assets 10.88 % 10.60 %
Leverage 8.32 % 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 June 30, 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 $60.9 million in off-balance sheet insured cash sweeps immediately available for liquidity.

Total remaining borrowing capacity with the Federal Home Loan Bank at June 30, 2025 was approximately $148.1 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 June 30, 2025 totaled $280.9 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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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 annual base projection uses a current interest rate scenario.  As shown below, the June 30, 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 $ 85,971 ) (1.16 )% 15 %
Up 200 86,518 ) (0.53 )% 10 %
Up 100 86,939 ) (0.05 )% 5 %
Base 86,981 — % 0 %
Down 100 87,076 0.11 % 5 %
Down 200 87,499 0.60 % 10 %
Down 300 87,875 1.03 % 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 June 30, 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 $ 216,596 ) (13.39 )% 25 %
Up 200 231,131 ) (7.57 )% 20 %
Up 100 245,953 ) (1.65 )% 15 %
Base 250,066 — % — %
Down 100 270,180 8.04 % 15 %
Down 200 282,844 13.11 % 20 %
Down 300 299,585 19.80 % 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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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 June 30, 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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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.

The following table sets forth information related to repurchases made under the Plan during the three months ended June 30, 2025:

Total Number of Maximum Number
Shares Purchased of Shares that May
Total Number as Part of Publicly Yet Be Purchased
of Shares Average Price Announced Plans Under the Plans
Period Purchased Paid Per Share or Programs or Programs
April 1 - 30, 2025 4,125 $ 16.59 4,125 310,922
May 1 - 31, 2025 — $ — — 310,922
June 1 - 30, 2025 — $ — — 310,922

Item 3.         Defaults Upon Senior Securities

None.

Item 4.         Mine Safety Disclosures

Not applicable.

Item 5.         Other Information

During the three months ended June 30, 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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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 June 30, 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).

57

Table of Contents

LCNB CORP. AND SUBSIDIARIES

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.
August 6, 2025 /s/ Eric J. Meilstrup
Eric J. Meilstrup
Chief Executive Officer and President
August 6, 2025 /s/ Robert C. Haines, II
Robert C. Haines, II
Executive Vice President and Chief Financial Officer

58

ex_816280.htm

Exhibit 31.1

CERTIFICATIONS

In connection with the Quarterly Report of LCNB Corp. on Form 10-Q for the period ending June 30, 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 control 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
August 6, 2025

ex_816281.htm

Exhibit 31.2

CERTIFICATIONS

In connection with the Quarterly Report of LCNB Corp. on Form 10-Q for the period ending June 30, 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 control 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
August 6, 2025

ex_816282.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 June 30, 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: August 6, 2025

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