LCNB Corp. Reports Financial Results for the Three and Twelve Months Ended December 31, 2017

LEBANON, Ohio--()--LCNB Corp. ("LCNB") (NASDAQ: LCNB) today announced net income of $3,617,000 (total basic and diluted earnings per share of $0.37 and $0.36, respectively) and $12,972,000 (total basic and diluted earnings per share of $1.30 and $1.29, respectively) for the three and twelve months ended December 31, 2017. This compares to net income of $3,654,000 (total basic and diluted earnings per share of $0.37) and $12,482,000 (total basic and diluted earnings per share of $1.26 and $1.25, respectively) for the same three and twelve-month periods in 2016.

As a result of the Tax Cuts and Jobs Act that was signed into law on December 22, 2017, LCNB revalued its net deferred tax liability position to reflect the reduction in its federal corporate income tax rate from 35% to 21%. This revaluation resulted in a one-time income tax benefit of approximately $224,000, or $0.02 of basic and diluted earnings per common share for the three and twelve months ended December 31, 2017.

Commenting on the financial results, LCNB Chief Executive Officer Steve Foster said, "We are pleased to report excellent results for 2017, including a $266,000 or 2.1% increase in net income, which does not include the one-time income tax benefit from a reduction in the federal tax rate. In addition, our loan portfolio grew $29.4 million or 3.6%. Return on average assets increased from 0.96% for 2016 to 0.99% for 2017 and return on average equity increased from 8.60% to 8.74%."

Net interest income for the three months and twelve months ended December 31, 2017 was, respectively, $318,000 and $618,000 greater than the comparable periods in 2016, primarily due to growth in LCNB's loan portfolio, partially offset by a decrease in average investment securities.

The provision for loan losses for the three and twelve months ended December 31, 2017 was, respectively, $65,000 and $698,000 less than the comparable periods in 2016. Non-accrual loans and loans past due 90 days or more and still accruing interest decreased $2,783,000, from $5,748,000 or 0.70% of total loans at December 31, 2016, to $2,965,000 or 0.35% of total loans at December 31, 2017.

Non-interest income for the three and twelve months ended December 31, 2017 was, respectively, $36,000 and $395,000 less than the comparable periods in 2016, primarily due to decreases in gains from the sale of investment securities and loans caused by a decrease in the volume of sales. These decreases were partially offset by increases in fiduciary income and service charges and fees on deposit accounts. The offset for the twelve month period also included an increase in bank owned life insurance income.

Non-interest expense for the three and twelve months ended December 31, 2017 was, respectively, $704,000 and $602,000 greater than the comparable periods in 2016 primarily due to increases in salaries and employee benefits, marketing, merger-related expenses, and various expenses related to the new operations center. These increases were partially offset by a decrease in other real estate owned expenses. Merger-related expenses increased due to costs connected to the pending acquisition of Columbus First Bancorp, Inc. ("Columbus First"). Subject to customary regulatory approvals, LCNB and Columbus First shareholder approvals, and other conditions set forth in the definitive merger agreement, this transaction is anticipated to close in the second quarter of 2018.

Important Information for Investors and Shareholders:

This press release does not constitute an offer to sell or the solicitation of an offer to buy securities of LCNB. LCNB will file a registration statement on Form S-4 and other documents regarding the proposed business combination transaction referenced in this press release with the Securities and Exchange Commission (“SEC”) to register the shares of LCNB’s common stock to be issued to the shareholders of Columbus First. The registration statement will include a joint proxy statement/prospectus which will be sent to the shareholders of Columbus First and LCNB in advance of respective special meetings of shareholders that will be held to consider the proposed merger. Investors and LCNB and Columbus First shareholders are urged to read the joint proxy statement/prospectus and any other relevant documents to be filed with the SEC in connection with the proposed transaction because they will contain important information about LCNB, Columbus First and the proposed transaction. Investors and shareholders may obtain a free copy of these documents (when available) through the website maintained by the SEC at www.sec.gov. These documents may also be obtained, without charge, by directing a request to LCNB Corp., Two North Broadway, P.O. Box 59, Lebanon, Ohio 45036: Investor Relations.

LCNB and Columbus First and certain of their directors and executive officers may be deemed to be participants in the solicitation of proxies from the shareholders of LCNB and Columbus First in connection with the proposed merger. Information about the directors and executive officers of LCNB is set forth in the proxy statement for LCNB’s 2017 annual meeting of shareholders, as filed with the SEC on Schedule 14A on March 10, 2017. Additional information regarding the interests of those participants and other persons who may be deemed participants in the transaction may be obtained by reading the joint proxy statement/prospectus regarding the proposed merger when it becomes available. Free copies of this document may be obtained as described in the preceding paragraph, when it becomes available.

LCNB Corp. is a financial holding company headquartered in Lebanon, Ohio. Through its subsidiary, LCNB National Bank (the “Bank”), it serves customers and communities in Southwest and South Central Ohio. A financial institution with a long tradition for building strong relationships with customers and communities, the Bank offers convenient banking locations in Butler, Clermont, Clinton, Fayette, Hamilton, Montgomery, Preble, Ross and Warren Counties, Ohio. A commercial loan office is located in Franklin County, Ohio. The Bank continually strives to exceed customer expectations and provides an array of services for all personal and business banking needs including checking, savings, online banking, personal lending, business lending, agricultural lending, business support, deposit and treasury, investment services, trust and IRAs and stock purchases. LCNB Corp. common shares are traded on the NASDAQ Capital Market Exchange® under the symbol “LCNB.” Learn more about LCNB Corp. at www.lcnb.com.

Certain statements made in this news release regarding LCNB’s financial condition, results of operations, plans, objectives, future performance and business, are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. These forward-looking statements are identified by the fact they are not historical facts and include words such as “anticipate”, “could”, “may”, “feel”, “expect”, “believe”, “plan”, and similar expressions. Please refer to LCNB’s Annual Report on Form 10-K for the year ended December 31, 2016, 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 future acquisitions, including the pending merger with Columbus First, may be unsuccessful, or may be more difficult, time-consuming or costly than expected;
  3. LCNB’s ability to obtain regulatory approvals of the proposed merger of LCNB with Columbus First on the proposed terms and schedule, and approval of the merger by the shareholders of LCNB or Columbus First may be unsuccessful;
  4. LCNB may incur increased charge-offs in the future;
  5. LCNB may face competitive loss of customers;
  6. changes in the interest rate environment may have results on LCNB’s operations materially different from those anticipated by LCNB’s market risk management functions;
  7. changes in general economic conditions and increased competition could adversely affect LCNB’s operating results;
  8. changes in other regulations and government policies affecting bank holding companies and their subsidiaries, including changes in monetary policies, could negatively impact LCNB’s operating results;
  9. LCNB may experience difficulties growing loan and deposit balances;
  10. the current economic environment poses significant challenges for us and could adversely affect our financial condition and results of operations;
  11. deterioration in the financial condition of the U.S. banking system may impact the valuations of investments LCNB has made in the securities of other financial institutions resulting in either actual losses or other than temporary impairments on such investments; and
  12. the effects of the Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) and the regulations promulgated and to be promulgated thereunder, which may subject LCNB and its subsidiaries to a variety of new and more stringent legal and regulatory requirements which adversely affect their respective businesses.

Forward-looking statements made herein reflect management's expectations as of the date such statements are made. Such information is provided to assist shareholders and potential investors in understanding current and anticipated financial operations of LCNB and is included pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. LCNB undertakes no obligation to update any forward-looking statement to reflect events or circumstances that arise after the date such statements are made.

   
LCNB Corp. and Subsidiaries
Financial Highlights

(Dollars in thousands, except per share amounts)

(Unaudited)

 
Three Months Ended Year Ended
12/31/2017   9/30/2017   6/30/2017   3/31/2017   12/31/2016 12/31/2017   12/31/2016

Condensed Income Statement

Interest income $ 11,610 11,055 10,934 10,864 11,226 44,463 43,750
Interest expense 953   908   861   877   887   3,599   3,504  
Net interest income 10,657 10,147 10,073 9,987 10,339 40,864 40,246
Provision for loan losses (10 ) (12 ) 222   15   55   215   913  
Net interest income after provision 10,667 10,159 9,851 9,972 10,284 40,649 39,333
Non-interest income 2,579 2,659 2,790 2,430 2,615 10,458 10,853
Non-interest expense 8,612   8,672   8,611   7,968   7,908   33,863   33,261  
Income before income taxes 4,634 4,146 4,030 4,434 4,991 17,244 16,925
Provision for income taxes 1,017   1,040   1,027   1,188   1,337   4,272   4,443  
Net income $ 3,617   3,106   3,003   3,246   3,654   12,972   12,482  
Accreted income on acquired loans $ 606 90 180 220 495 1,096 1,365
Tax-equivalent net interest income $ 11,062 10,569 10,494 10,410 10,772 42,549 41,908
 

Per Share Data

Dividends per share $ 0.16 0.16 0.16 0.16 0.16 0.64 0.64
Basic earnings per common share $ 0.37 0.31 0.30 0.32 0.37 1.30 1.26
Diluted earnings per common share $ 0.36 0.31 0.30 0.32 0.37 1.29 1.25
Book value per share $ 14.99 14.94 14.77 14.52 14.30 14.99 14.30
Tangible book value per share $ 11.64 11.57 11.38 11.11 10.86 11.64 10.86
Average basic common shares outstanding 10,013,777 10,008,807 10,004,422 9,995,054 9,985,936 10,005,575 9,948,057
Average diluted common shares outstanding 10,020,566 10,015,204 10,011,312 10,002,878 9,991,975 10,012,511 9,976,370
Shares outstanding at period end 10,023,059 10,018,507 10,014,004 10,009,642 9,998,025 10,023,059 9,998,025
 

Selected Financial Ratios

Return on average assets 1.11 % 0.94 % 0.91 % 1.01 % 1.10 % 0.99 % 0.96 %
Return on average equity 9.49 % 8.22 % 8.15 % 9.10 % 9.91 % 8.74 % 8.60 %
Dividend payout ratio 43.24 % 51.61 % 53.33 % 50.00 % 43.24 % 49.23 % 50.79 %
Net interest margin (tax equivalent) 3.73 % 3.52 % 3.50 % 3.55 % 3.56 % 3.58 % 3.51 %
Efficiency ratio (tax equivalent) 63.13 % 65.56 % 64.82 % 62.06 % 59.07 % 63.88 % 63.04 %
 

Selected Balance Sheet Items

Cash and cash equivalents $ 25,386 21,203 29,967 33,274 18,865
Investment securities and stock 317,413 353,634 373,595 371,501 368,032
 
Loans:
Commercial and industrial $ 36,057 36,049 38,651 40,039 41,878
Commercial, secured by real estate 527,947 510,158 495,255 475,594 477,275
Residential real estate 251,582 253,530 258,710 260,853 265,788
Consumer 17,450 17,956 17,475 17,646 19,173

Agricultural

15,194 15,677 16,014 15,459 14,802
Other, including deposit overdrafts 539 570 547 609 633
Deferred net origination costs 291   264   281   281   254  
Loans, gross 849,060 834,204 826,933 810,481 819,803
Less allowance for loan losses 3,403   3,407   3,382   3,328   3,575  
Loans, net $ 845,657   830,797   823,551   807,153   816,228  
 
 
 
Three Months Ended Year Ended
12/31/2017 9/30/2017 6/30/2017 3/31/2017 12/31/2016 12/31/2017 12/31/2016

Selected Balance Sheet Items, continued

Total earning assets $ 1,170,700 1,193,648 1,211,096 1,200,544 1,188,322
Total assets 1,295,638 1,314,319 1,335,571 1,319,074 1,306,799
Total deposits 1,085,821 1,121,523 1,143,920 1,148,198 1,110,905
Short-term borrowings 47,000 30,000 31,712 15,957 42,040
Long-term debt 303 363 402 480 598
Total shareholders’ equity 150,271 149,713 147,927 145,318 142,944
Equity to assets ratio 11.60 % 11.39 % 11.08 % 11.02 % 10.94 %
Loans to deposits ratio 78.20 % 74.38 % 72.29 % 70.59 % 73.80 %
 
Tangible common equity (TCE) $ 116,289 115,527 113,542 110,745 108,178
Tangible common assets (TCA) 1,261,656 1,280,133 1,301,186 1,284,501 1,272,033
TCE/TCA 9.22 % 9.02 % 8.73 % 8.62 % 8.50 %
 

Selected Average Balance Sheet Items

Cash and cash equivalents $ 18,787 21,609 33,639 26,672 28,422 25,132 29,346
Investment securities and stock 332,225 363,039 373,295 366,499 380,138 358,682 390,621
 
Loans $ 840,526 824,183 811,186 813,597 812,537 822,452 792,526
Less allowance for loan losses 3,407   3,324   3,334   3,557   3,654   3,405   3,318  
Net loans $ 837,119 820,859 807,852 810,040 808,883 819,047 789,208
 
Total earning assets $ 1,175,180 1,190,860 1,202,129 1,188,383 1,204,360 1,189,106 1,195,541
Total assets 1,295,293 1,313,476 1,321,442 1,308,591 1,316,037 1,309,501 1,305,132
Total deposits 1,096,966 1,133,072 1,148,206 1,125,457 1,138,740 1,125,866 1,131,179
Short-term borrowings 34,440 17,936 15,030 28,500 20,406 23,976 17,952
Long-term debt 323 383 441 537 620 421 826
Total shareholders’ equity 151,154 150,032 147,826 144,672 146,602 148,443 145,161
Equity to assets ratio 11.67 % 11.42 % 11.19 % 11.06 % 11.14 % 11.34 % 11.12 %
Loans to deposits ratio 76.62 % 72.74 % 70.65 % 72.29 % 71.35 % 73.05 % 70.06 %
 

Asset Quality

Net charge-offs (recoveries) $ (7 ) (36 ) 168 262 278 387 467
Other real estate owned 0 0 0 0 0 0 0
 
Non-accrual loans 2,965 4,387 3,747 3,869 5,725 2,965 5,725
Loans past due 90 days or more and still accruing 0   95   141   12   23   0   23  
Total nonperforming loans $ 2,965 4,482 3,888 3,881 5,748 2,965 5,748
 
Net charge-offs (recoveries) to average loans 0.00 % (0.02 )% 0.08 % 0.13 % 0.14 % 0.09 % 0.12 %
Allowance for loan losses to total loans 0.40 % 0.41 % 0.41 % 0.41 % 0.44 % 0.40 % 0.44 %
Nonperforming loans to total loans 0.35 % 0.54 % 0.47 % 0.48 % 0.70 % 0.35 % 0.70 %
Nonperforming assets to total assets 0.23 % 0.34 % 0.29 % 0.29 % 0.44 % 0.23 % 0.44 %
 

Assets Under Management

LCNB Corp. total assets $ 1,295,638 1,314,319 1,335,571 1,319,074 1,306,799
Trust and investments (fair value) 362,486 326,642 315,450 316,856 303,534
Mortgage loans serviced 92,818 96,241 98,234 99,324 100,982
Cash management 84,344,000 77,780,000 45,519,000 29,102,000 30,319,000
Brokerage accounts (fair value) 229,006   219,960   209,019   199,019   188,663  
Total assets managed $ 2,064,292   2,034,942   2,003,793   1,963,375   1,930,297  
 
       
LCNB CORP. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in thousands)
 
December 31,
2017 December 31,
(Unaudited) 2016
ASSETS:
Cash and due from banks $ 21,159 18,378
Interest-bearing demand deposits 4,227   487  
Total cash and cash equivalents 25,386 18,865
Investment securities:
Available-for-sale, at fair value 278,472 320,659
Held-to-maturity, at cost 32,571 41,003
Federal Reserve Bank stock, at cost 2,732 2,732
Federal Home Loan Bank stock, at cost 3,638 3,638
Loans, net 845,657 816,228
Premises and equipment, net 34,927 30,244
Goodwill 30,183 30,183
Core deposit and other intangibles 3,799 4,582
Bank owned life insurance 27,985 27,307
Other assets 10,288   11,358  
TOTAL ASSETS $ 1,295,638   1,306,799  
 
LIABILITIES:
Deposits:
Noninterest-bearing $ 283,212 271,332
Interest-bearing 802,609   839,573  
Total deposits 1,085,821 1,110,905
Short-term borrowings 47,000 42,040
Long-term debt 303 598
Accrued interest and other liabilities 12,243   10,312  
TOTAL LIABILITIES 1,145,367   1,163,855  
 
COMMITMENTS AND CONTINGENT LIABILITIES
 
SHAREHOLDERS' EQUITY:
Preferred shares – no par value, authorized 1,000,000 shares, none outstanding
Common shares – no par value, authorized 19,000,000 shares at December 31, 2017 and 2016; issued 10,776,686 and 10,751,652 shares at December 31, 2017 and 2016, respectively 76,977 76,490
Retained earnings 87,301 80,736
Treasury shares at cost, 753,627 shares at December 31, 2017 and 2016 (11,665 ) (11,665 )
Accumulated other comprehensive loss, net of taxes (2,342 ) (2,617 )
TOTAL SHAREHOLDERS' EQUITY 150,271   142,944  
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,295,638   1,306,799  
 
   
LCNB CORP. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(Dollars in thousands, except per share data)

(Unaudited)

 
Three Months Ended Year Ended
December 31, December 31,
2017   2016 2017   2016
INTEREST INCOME:
Interest and fees on loans $ 9,738 9,205 36,571 35,600
Interest on investment securities –
Taxable 978 1,054 4,328 4,582
Non-taxable 753 834 3,130 3,199
Other short-term investments 141   133   434   369
TOTAL INTEREST INCOME 11,610   11,226   44,463   43,750
INTEREST EXPENSE:
Interest on deposits 839 875 3,378 3,440
Interest on short-term borrowings 112 8 209 38
Interest on long-term debt 2   4   12   26
TOTAL INTEREST EXPENSE 953   887   3,599   3,504
NET INTEREST INCOME 10,657 10,339 40,864 40,246
PROVISION FOR LOAN LOSSES (10 ) 55   215   913
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 10,667   10,284   40,649   39,333
NON-INTEREST INCOME:
Fiduciary income 869 815 3,473 3,286
Service charges and fees on deposit accounts 1,350 1,296 5,236 5,008
Net gain on sales of securities 15 125 233 1,082
Bank owned life insurance income 191 193 867 746
Gains from sales of loans 30 69 166 244
Other operating income 124   117   483   487
TOTAL NON-INTEREST INCOME 2,579   2,615   10,458   10,853
NON-INTEREST EXPENSE:
Salaries and employee benefits 4,678 4,478 18,585 18,215
Equipment expenses 336 281 1,172 1,048
Occupancy expense, net 724 564 2,613 2,271
State financial institutions tax 286 278 1,137 1,114
Marketing 232 166 873 696
Amortization of intangibles 189 189 751 753
FDIC insurance premiums 103 52 423 547
Contracted services 325 283 1,255 1,033
Other real estate owned 2 17 10 624
Merger-related expenses 108 118
Other non-interest expense 1,629   1,600   6,926   6,960
TOTAL NON-INTEREST EXPENSE 8,612   7,908   33,863   33,261
INCOME BEFORE INCOME TAXES 4,634 4,991 17,244 16,925
PROVISION FOR INCOME TAXES 1,017   1,337   4,272   4,443
NET INCOME $ 3,617   3,654   12,972   12,482
 
Dividends declared per common share $ 0.16 0.16 0.64 0.64
Earnings per common share:
Basic 0.37 0.37 1.30 1.26
Diluted 0.36 0.37 1.29 1.25
Weighted average common shares outstanding:
Basic 10,013,777 9,985,936 10,005,575 9,948,057
Diluted 10,020,566 9,991,975 10,012,511 9,976,370

Contacts

LCNB Corp.
Steve P. Foster, CEO & President, 800-344-BANK
Robert C. Haines II, Executive Vice President and CFO, 800-344-BANK

Contacts

LCNB Corp.
Steve P. Foster, CEO & President, 800-344-BANK
Robert C. Haines II, Executive Vice President and CFO, 800-344-BANK