LCNB Corp. Reports Financial Results for the Three Months Ended March 31, 2018

LEBANON, Ohio--()--LCNB Corp. ("LCNB") (NASDAQ: LCNB) today announced net income of $2,713,000 (total basic and diluted earnings per share of $0.27) for the three months ended March 31, 2018. This compares to net income of $3,246,000 (total basic and diluted earnings per share of $0.32) for the same three-month period in 2017. Items significantly affecting net income during the 2018 period were:

  • expenses relating to the pending merger with Columbus First Bancorp, Inc. ("Columbus First") totaling $758,000, and
  • a reduction in LCNB's federal tax rate from 34% to 21% as a result of the Tax Cuts and Jobs Act that was signed into law on December 22, 2017.

Commenting on the financial results, LCNB Chief Executive Officer Steve Foster said, "We are pleased to report our financial results for the first quarter 2018, including increased net interest and non-interest income as compared with the first quarter 2017, loan portfolio growth during 2018, and continued excellent credit quality. Net income for the quarter was less than last year due to merger-related expenses for the pending acquisition of Columbus First Bancorp, Inc. Eliminating this item from the income statement produces pro-forma net income of $3,334,000, which is an $88,000 increase over the first quarter 2017. In addition, we look forward to finalizing our pending merger with Columbus First and welcoming their shareholders, depositors, and borrowers to LCNB. This acquisition will strengthen our presence in the desirable Columbus, Ohio market area and open up new markets as we provide Columbus First's customers with a broader array of banking and investment services."

Net interest income for the three months ended March 31, 2018 was $201,000 greater than the comparable period in 2017, primarily due to growth in LCNB's loan portfolio, partially offset by a decrease in average investment securities and a market-driven increase in average rates paid on deposits and short-term borrowings.

The provision for loan losses for the three months ended March 31, 2018 was $64,000 greater than the comparable period in 2017. Non-accrual loans and loans past due 90 days or more and still accruing interest decreased $75,000, from $2,965,000 or 0.35% of total loans at December 31, 2017, to $2,890,000 or 0.34% of total loans at March 31, 2018.

Non-interest income for the three months ended March 31, 2018 was $206,000 greater than the comparable periods in 2017 primarily due to increases in fiduciary income and service charges and fees on deposit accounts.

Non-interest expense for the three months ended March 31, 2018 was $1,581,000 greater than the comparable period in 2017 primarily due to increases in salaries and employee benefits, merger-related expenses, and various expenses related to the new operations center. Merger-related expenses increased due to costs connected to the pending acquisition of 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 filed 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 included a joint proxy statement/prospectus which was 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 contain important information about LCNB, Columbus First and the proposed transaction. Investors and shareholders may obtain a free copy of these documents 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 2018 annual meeting of shareholders, as filed with the SEC on Schedule 14A on March 9, 2018. 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. Free copies of this document may be obtained as described in the preceding paragraph.

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;
  12. difficulties with technology or data security breaches, including cyberattacks, that could negatively affect LCNB's ability to conduct business and its relationships with customers, vendors, and others; and
  13. government intervention in the U.S. financial system, including the effects of recent legislative, tax, accounting and regulatory actions and reforms, including the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), the Jumpstart Our Business Startups Act, the Consumer Financial Protection Bureau, the capital ratios of Basel III as adopted by the federal banking authorities, and the Tax Cuts and Jobs Act.

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

 
LCNB Corp. and Subsidiaries
Financial Highlights

(Dollars in thousands, except per share amounts)

(Unaudited)

 

Three Months Ended
3/31/2018   12/31/2017   9/30/2017   6/30/2017   3/31/2017

Condensed Income Statement

Interest income $ 11,142 11,610 11,055 10,934 10,864
Interest expense 954   953   908   861   877  
Net interest income 10,188 10,657 10,147 10,073 9,987
Provision for loan losses 79   (10 ) (12 ) 222   15  
Net interest income after provision 10,109 10,667 10,159 9,851 9,972
Non-interest income 2,636 2,579 2,659 2,790 2,430
Non-interest expense 9,549   8,612   8,672   8,611   7,968  
Income before income taxes 3,196 4,634 4,146 4,030 4,434
Provision for income taxes 483   1,017   1,040   1,027   1,188  
Net income $ 2,713   3,617   3,106   3,003   3,246  
Accreted income on acquired loans $ 96 606 90 180 220
Tax-equivalent net interest income $ 10,375 11,062 10,569 10,494 10,410
 

Per Share Data

Dividends per share $ 0.16 0.16 0.16 0.16 0.16
Basic earnings per common share $ 0.27 0.37 0.31 0.30 0.32
Diluted earnings per common share $ 0.27 0.36 0.31 0.30 0.32
Book value per share $ 14.80 14.99 14.94 14.77 14.52
Tangible book value per share $ 11.47 11.64 11.57 11.38 11.11
Average basic common shares outstanding 10,020,611 10,013,777 10,008,807 10,004,422 9,995,054
Average diluted common shares outstanding 10,028,588 10,020,566 10,015,204 10,011,312 10,002,878
Shares outstanding at period end 10,041,152 10,023,059 10,018,507 10,014,004 10,009,642
 

Selected Financial Ratios

Return on average assets 0.85 % 1.11 % 0.94 % 0.91 % 1.01 %
Return on average equity 7.33 % 9.49 % 8.22 % 8.15 % 9.10 %
Dividend payout ratio 59.26 % 43.24 % 51.61 % 53.33 % 50.00 %
Net interest margin (tax equivalent) 3.59 % 3.73 % 3.52 % 3.50 % 3.55 %
Efficiency ratio (tax equivalent) 73.39 % 63.13 % 65.56 % 64.82 % 62.06 %
 

Selected Balance Sheet Items

Cash and cash equivalents $ 17,494 25,386 21,203 29,967 33,274
Investment securities and stock 310,009 317,413 353,634 373,595 371,501
 
Loans:
Commercial and industrial $ 37,118 36,057 36,049 38,651 40,039
Commercial, secured by real estate 542,890 527,947 510,158 495,255 475,594
Residential real estate 246,487 251,582 253,530 258,710 260,853
Consumer 17,176 17,450 17,956 17,475 17,646
Agricultural 12,217 15,194 15,677 16,014 15,459
Other, including deposit overdrafts 506 539 570 547 609
Deferred net origination costs 263   291   264   281   281  
Loans, gross 856,657 849,060 834,204 826,933 810,481
Less allowance for loan losses 3,529   3,403   3,407   3,382   3,328  
Loans, net $ 853,128   845,657   830,797   823,551   807,153  
 
Total earning assets $ 1,168,204 1,170,700 1,193,648 1,211,096 1,200,544
Total assets 1,288,791 1,295,638 1,314,319 1,335,571 1,319,074
Total deposits 1,123,463 1,085,821 1,121,523 1,143,920 1,148,198
Short-term borrowings 0 47,000 30,000 31,712 15,957
 
 
Three Months Ended
3/31/2018 12/31/2017 9/30/2017 6/30/2017 3/31/2017

Selected Balance Sheet Items, continued

Long-term debt 6,219 303 363 402 480
Total shareholders’ equity 148,584 150,271 149,713 147,927 145,318
Equity to assets ratio 11.53 % 11.60 % 11.39 % 11.08 % 11.02 %
Loans to deposits ratio 76.25 % 78.20 % 74.38 % 72.29 % 70.59 %
 
Tangible common equity (TCE) $ 114,801 116,289 115,527 113,542 110,745
Tangible common assets (TCA) 1,255,008 1,261,656 1,280,133 1,301,186 1,284,501
TCE/TCA 9.15 % 9.22 % 9.02 % 8.73 % 8.62 %
 

Selected Average Balance Sheet Items

Cash and cash equivalents $ 21,820 18,787 21,609 33,639 26,672
Investment securities and stock 313,689 332,225 363,039 373,295 366,499
 
Loans $ 853,152 840,526 824,183 811,186 813,597
Less allowance for loan losses 3,401   3,407   3,324   3,334   3,557  
Net loans $ 849,751 837,119 820,859 807,852 810,040
 
Total earning assets $ 1,170,708 1,175,180 1,190,860 1,202,129 1,188,383
Total assets 1,292,375 1,295,293 1,313,476 1,321,442 1,308,591
Total deposits 1,114,979 1,096,966 1,133,072 1,148,206 1,125,457
Short-term borrowings 14,086 34,440 17,936 15,030 28,500
Long-term debt 2,255 323 383 441 537
Total shareholders’ equity 150,058 151,154 150,032 147,826 144,672
Equity to assets ratio 11.61 % 11.67 % 11.42 % 11.19 % 11.06 %
Loans to deposits ratio 76.52 % 76.62 % 72.74 % 70.65 % 72.29 %
 

Asset Quality

Net charge-offs (recoveries) $ (47 ) (7 ) (36 ) 168 262
Other real estate owned 0 0 0 0 0
 
Non-accrual loans 2,744 2,965 4,387 3,747 3,869
Loans past due 90 days or more and still accruing 146   0   95   141   12  
Total nonperforming loans $ 2,890 2,965 4,482 3,888 3,881
 
Net charge-offs (recoveries) to average loans (0.02 )% 0.00 % (0.02 )% 0.08 % 0.13 %
Allowance for loan losses to total loans 0.41 % 0.40 % 0.41 % 0.41 % 0.41 %
Nonperforming loans to total loans 0.34 % 0.35 % 0.54 % 0.47 % 0.48 %
Nonperforming assets to total assets 0.22 % 0.23 % 0.34 % 0.29 % 0.29 %
 

Assets Under Management

LCNB Corp. total assets $ 1,288,791 1,295,638 1,314,319 1,335,571 1,319,074
Trust and investments (fair value) 359,766 362,486 326,642 315,450 316,856
Mortgage loans serviced 90,630 92,818 96,241 98,234 99,324
Cash management 72,372 84,344 77,780 45,519 29,102
Brokerage accounts (fair value) 230,168   229,006   219,960   209,019   199,019  
Total assets managed $ 2,041,727   2,064,292   2,034,942   2,003,793   1,963,375  
 

Non-GAAP Financial Measures

Net income $ 2,713 3,617 3,106 3,003 3,246
Add: merger-related expenses, net of tax 621   87   0   0   0  
Core net income $ 3,334   3,704   3,106   3,003   3,246  
Basic core earnings per share 0.33 0.37 0.31 0.30 0.32
Diluted core earnings per share 0.33 0.37 0.31 0.30 0.32
Adjusted return on average assets 1.05 % 1.16 % 0.94 % 0.91 % 1.01 %
Adjusted return on average equity 9.01 % 9.94 % 8.22 % 8.15 % 9.1 %
Core efficiency ratio (tax equivalent) 66.67 % 62.34 % 65.56 % 64.82 % 62.06 %
 
   
LCNB CORP. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
 

(Dollars in thousands)

 

March 31,

2018 December 31,
(Unaudited) 2017
ASSETS:
Cash and due from banks $ 12,713 21,159
Interest-bearing demand deposits 4,781   4,227  
Total cash and cash equivalents 17,494 25,386
Investment securities:
Equity securities with a readily determinable fair value, at fair value 2,144 2,161
Equity securities without a readily determinable fair value, at cost 1,099 1,099
Debt securities, available-for-sale, at fair value 267,894 275,212
Debt securities, held-to-maturity, at cost 32,502 32,571
Federal Reserve Bank stock, at cost 2,732 2,732
Federal Home Loan Bank stock, at cost 3,638 3,638
Loans, net 853,128 845,657
Premises and equipment, net 34,595 34,927
Goodwill 30,183 30,183
Core deposit and other intangibles 3,600 3,799
Bank owned life insurance 28,171 27,985
Other assets 11,611   10,288  
TOTAL ASSETS $ 1,288,791   1,295,638  
 
LIABILITIES:
Deposits:
Noninterest-bearing $ 286,186 283,212
Interest-bearing 837,277   802,609  
Total deposits 1,123,463 1,085,821
Short-term borrowings 47,000
Long-term debt 6,219 303
Accrued interest and other liabilities 10,525   12,243  
TOTAL LIABILITIES 1,140,207   1,145,367  
 
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 March 31, 2018 and December 31, 2017; issued 10,794,779 and 10,776,686 shares at March 31, 2018 and December 31, 2017, respectively 77,159 76,977
Retained earnings 88,933 87,301
Treasury shares at cost, 753,627 shares at March 31, 2018 and December 31, 2017 (11,665 ) (11,665 )
Accumulated other comprehensive loss, net of taxes (5,843 ) (2,342 )
TOTAL SHAREHOLDERS' EQUITY 148,584   150,271  
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,288,791   1,295,638  
 
 
 
LCNB CORP. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(Dollars in thousands, except per share data)

(Unaudited)

 
Three Months Ended
March 31,
2018   2017
INTEREST INCOME:
Interest and fees on loans

$

9,413

8,915
Dividends on equity securities with a readily determinable fair value 15 15
Dividends on equity securities without a readily determinable fair value 7 6
Interest on debt securities, taxable 931 1,072
Interest on debt securities, non-taxable 704 799
Other short-term investments   72   57
TOTAL INTEREST INCOME   11,142   10,864
INTEREST EXPENSE:
Interest on deposits 871 843
Interest on short-term borrowings 69 30
Interest on long-term debt   14   4
TOTAL INTEREST EXPENSE   954   877
NET INTEREST INCOME 10,188 9,987
PROVISION FOR LOAN LOSSES   79   15
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES   10,109   9,972
NON-INTEREST INCOME:
Fiduciary income 964 852
Service charges and fees on deposit accounts 1,305 1,222
Net gain on sales of securities
Bank owned life insurance income 186 189
Gains from sales of loans 22 39
Other operating income   159   128
TOTAL NON-INTEREST INCOME   2,636   2,430
NON-INTEREST EXPENSE:
Salaries and employee benefits 4,977 4,526
Equipment expenses 253 211
Occupancy expense, net 727 568
State financial institutions tax 303 284
Marketing 132 143
Amortization of intangibles 185 185
FDIC insurance premiums 99 104
Contracted services 315 248
Other real estate owned 2 5
Merger-related expenses 758
Other non-interest expense   1,798   1,694
TOTAL NON-INTEREST EXPENSE   9,549   7,968
INCOME BEFORE INCOME TAXES 3,196 4,434
PROVISION FOR INCOME TAXES   483   1,188
NET INCOME   2,713   3,246
 
Dividends declared per common share 0.16 0.16
Earnings per common share:
Basic 0.27 0.32
Diluted 0.27 0.32
Weighted average common shares outstanding:
Basic 10,020,611 9,995,054
Diluted 10,028,588 10,002,878
 

Contacts

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

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