LCNB Corp. (NASDAQ: LCNB) today announced 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 three and twelve months ended December 31, 2016, respectively. This compares to net income of $2,884,000 (total basic and diluted earnings per share of $0.29) and $11,474,000 (total basic and diluted earnings per share of $1.18 and $1.17, respectively) for the same three and twelve-month periods in 2015. Comparisons with 2015 were significantly affected by the acquisition of BNB Bancorp, Inc. ("BNB") on April 30, 2015. In addition, LCNB sold impaired loans with a carrying value of approximately $4.5 million during the second quarter 2015.

Commenting on the financial results, LCNB Chief Executive Officer Steve Foster said, "We are pleased to present our financial results for the three and twelve months ended December 31, 2016. We had solid financial results and continued growth in our loan and deposit relationships. Return on average assets ("ROAA") was 0.96% for 2016 and return on average equity ("ROAE") was 8.60%. This compares to an ROAA of 0.94% and an ROAE of 8.43% for 2015. Comparing December 31, 2016 to December 31, 2015, loans were $48.9 million or 6.3% greater and deposits were $23.7 million or 2.2% greater. In addition, LCNB continues to invest in technological advancements, including a new mobile banking platform introduced during the second quarter of 2016. New features included the ability to make mobile deposits and mobile payments. Construction continues on our new Operations Center in downtown Lebanon, Ohio. When complete in early Spring, the new facility will provide much needed additional space as LCNB continues to grow and expand and will allow us to more efficiently meet our customers' investment and borrowing needs."

Net interest income for the three and twelve months ended December 31, 2016 increased $433,000 and $915,000, respectively, from the comparable periods in 2015, due primarily to growth in LCNB's loan portfolio and the payoff of a now high-rate $5.0 million Federal Home Loan Bank borrowing during the first quarter 2016.

The provision for loan losses for the three and twelve months ended December 31, 2016 was $325,000 and $453,000 less than the comparable periods in 2015. Net loan charge-offs for the three and twelve months ended December 31, 2016 totaled $278,000 and $467,000, respectively. This compares to net charge-offs of $209,000 and $1,358,000 for the three and twelve months ended December 31, 2015, respectively. The 2015 balance includes charge-offs recognized as a result of the impaired loan sale mentioned above. Non-accrual loans and loans past due 90 days or more and still accruing interest increased $3,466,000, from $2,282,000 or 0.30% of total loans at December 31, 2015, to $5,748,000 or 0.70% of total loans at December 31, 2016, primarily due to five loans that were newly classified as non-accrual during 2016. Other real estate owned (which includes property acquired through foreclosure or deed-in-lieu of foreclosure) was $846,000 at December 31, 2015. LCNB did not own any such property at December 31, 2016 due to the sale of a commercial property during the fourth quarter 2016.

Non-interest income for the three and twelve months ended December 31, 2016 was $15,000 and $730,000 greater than the comparable periods in 2015, respectively. Non-interest income for the full year was greater primarily due to a $587,000 increase in gains from sales of investment securities, reflecting a higher volume of securities sales, and to a $121,000 increase in bank owned life insurance income, reflecting $4.0 million of new policies purchased during the first quarter 2016.

Non-interest expense for the three months ended December 31, 2016 was $321,000 less than the comparable period in 2015 primarily due to a $229,000 decrease in other real estate owned expense, a $104,000 decrease on salaries and employee benefits, and a $114,000 decrease in FDIC insurance premiums. Other real estate owned expense decreased due to the absence during the 2016 period of writedowns recognized during the fourth quarter 2015. Salaries and employee benefits decreased largely due to a decrease in pension expense. FDIC insurance premiums decreased due to a reduction in assessment levels resulting from the Reserve Ratio reaching 1.15% effective June 30, 2016. The Reserve Ratio is the total of the Deposit Insurance Fund divided by the total estimated insured deposits of the industry.

Non-interest expense for the year ended December 31, 2016 was $869,000 greater than the comparable period in 2015 primarily due to a $622,000 increase in salaries and employee benefits, a $251,000 penalty incurred to pre-pay the high-rate Federal Home Loan Bank borrowing mentioned above, a $135,000 increase in other real estate owned expense, and a $191,000 increase in various contracted services. Salaries and employee benefits increased primarily due to salary and wage increases, employees retained from the BNB acquisition, and an increase in the number of employees in addition to the acquisition. The FHLB advance had an interest rate of 5.25% and was paid off to reduce interest expense on long-term debt. Other real estate owned expense increased primarily due to writedowns recognized prior to the sale of the commercial property mentioned above. These increases were partially offset by the absence of merger-related expenses during the 2016 period.

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

Certain statements made in this news release regarding LCNB’s financial condition, results of operations, plans, objectives, future performance and business, are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. These forward-looking statements are identified by the fact they are not historical facts and include words such as “anticipate”, “could”, “may”, “feel”, “expect”, “believe”, “plan”, and similar expressions.

These forward-looking statements reflect management's current expectations based on all information available to management and its knowledge of LCNB’s business and operations. Additionally, LCNB’s financial condition, results of operations, plans, objectives, future performance and business are subject to risks and uncertainties that may cause actual results to differ materially. These factors include, but are not limited to:

  1. the success, impact, and timing of the implementation of LCNB’s business strategies;
  2. LCNB may incur increased charge-offs in the future;
  3. LCNB may face competitive loss of customers;
  4. changes in the interest rate environment may have results on LCNB’s operations materially different from those anticipated by LCNB’s market risk management functions;
  5. changes in general economic conditions and increased competition could adversely affect LCNB’s operating results;
  6. changes in other regulations and government policies affecting bank holding companies and their subsidiaries, including changes in monetary policies, could negatively impact LCNB’s operating results;
  7. LCNB may experience difficulties growing loan and deposit balances;
  8. the current economic environment poses significant challenges for us and could adversely affect our financial condition and results of operations;
  9. deterioration in the financial condition of the U.S. banking system may impact the valuations of investments LCNB has made in the securities of other financial institutions resulting in either actual losses or other than temporary impairments on such investments; and
  10. the effects of the Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) and the regulations promulgated and to be promulgated thereunder, which may subject LCNB and its subsidiaries to a variety of new and more stringent legal and regulatory requirements which adversely affect their respective businesses.

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

   
LCNB Corp. and Subsidiaries
Financial Highlights

(Dollars in thousands, except per share amounts)

(Unaudited)

 
Three Months Ended Twelve Months Ended
12/31/2016   9/30/2016   6/30/2016   3/31/2016   12/31/2015 12/31/2016   12/31/2015

Condensed Income Statement

Interest income $ 11,226 10,895 11,008 10,621 10,812 43,750 42,659
Interest expense 887   885   883   849   906   3,504   3,328  
Net interest income 10,339 10,010 10,125 9,772 9,906 40,246 39,331
Provision for loan losses 55   372   396   90   380   913   1,366  
Net interest income after provision 10,284 9,638 9,729 9,682 9,526 39,333 37,965
Non-interest income 2,615 2,846 2,750 2,642 2,600 10,853 10,123
Non-interest expense 7,908   8,593   8,468   8,292   8,229   33,261   32,392  
Income before income taxes 4,991 3,891 4,011 4,032 3,897 16,925 15,696
Provision for income taxes 1,337   995   1,043   1,068   1,013   4,443   4,222  
Net income $ 3,654   2,896   2,968   2,964   2,884   12,482   11,474  
Accreted income on acquired loans $ 495 223 304 343 292 1,365 2,227
Amortization of acquired deposit premiums $ 0 0 0 27 34 27 477
Tax-equivalent net interest income $ 10,772 10,432 10,538 10,166 10,298 41,908 40,798
 

Per Share Data

Dividends per share $ 0.16 0.16 0.16 0.16 0.16 0.64 0.64
Basic earnings per share $ 0.37 0.29 0.30 0.30 0.29 1.26 1.18
Diluted earnings per share $ 0.37 0.29 0.29 0.30 0.29 1.25 1.17
Book value per share $ 14.30 14.70 14.66 14.39 14.12 14.30 14.12
Tangible book value per share $ 10.86 11.24 11.17 10.88 10.58 10.86 10.58
Average basic shares outstanding 9,984,344 9,962,571 9,922,024 9,916,114 9,905,612 9,943,795 9,704,965
Average diluted shares outstanding 9,997,565 9,977,592 9,943,797 9,998,516 10,014,908 9,981,872 9,811,476
Shares outstanding at period end 9,998,025 9,993,695 9,937,262 9,931,788 9,925,547 9,998,025 9,925,547
 

Selected Financial Ratios

Return on average assets 1.10 % 0.87 % 0.92 % 0.93 % 0.89 % 0.96 % 0.94 %
Return on average equity 9.91 % 7.82 % 8.28 % 8.37 % 8.07 % 8.60 % 8.43 %
Dividend payout ratio 43.24 % 55.17 % 53.33 % 53.33 % 55.17 % 50.79 % 54.24 %
Net interest margin (tax equivalent) 3.56 % 3.42 % 3.55 % 3.49 % 3.46 % 3.51 % 3.64 %
Efficiency ratio (tax equivalent) 59.07 % 64.71 % 63.73 % 64.74 % 63.80 % 63.04 % 63.61 %
 

Selected Balance Sheet Items

Investment securities and stock $ 368,032 394,798 399,345 393,976 406,981
 
Loans:
Commercial and industrial $ 41,878 40,097 45,153 45,324 45,275
Commercial, secured by real estate 477,275 467,512 455,654 430,179 419,633
Residential real estate 265,788 268,574 266,625 271,812 273,139
Consumer 19,173 18,752 18,545 17,925 18,510
Agricultural 14,802 15,872 13,605 12,589 13,479
Other, including deposit overdrafts 633 619 635 643 665
Deferred net origination costs 254   236   248   242   237  
Loans, gross 819,803 811,662 800,465 778,714 770,938
Less allowance for loan losses 3,575   3,798   3,373   3,150   3,129  
Loans, net $ 816,228   807,864   797,092   775,564   767,809  
 
Total earning assets $ 1,188,322 1,222,614 1,201,563 1,180,719 1,178,750
Total assets 1,306,799 1,333,536 1,312,635 1,285,922 1,280,531
Total deposits 1,110,905 1,158,921 1,124,698 1,120,208 1,087,160
Short-term borrowings 42,040 16,989 30,541 11,668 37,387
Long-term debt 598 662 726 789 5,947

 

   
Three Months Ended Twelve Months Ended
12/31/2016   9/30/2016   6/30/2016   3/31/2016   12/31/2015 12/31/2016   12/31/2015

Selected Balance Sheet Items, continued

Total shareholders’ equity 142,944 146,906 145,710 142,933 140,108
Equity to assets ratio 10.94 % 11.02 % 11.10 % 11.12 % 10.94 %
Loans to deposits ratio 73.80 % 70.04 % 71.17 % 69.52 % 70.91 %
 
Tangible common equity (TCE) $ 108,178 111,946 110,541 107,567 104,529
Tangible common assets (TCA) 1,272,033 1,298,576 1,277,466 1,250,556 1,244,952
TCE/TCA 8.50 % 8.62 % 8.65 % 8.60 % 8.40 %
 

Selected Average Balance Sheet Items

Investment securities and stock $ 380,138 396,620 396,130 389,648 406,423 390,621 366,758
 
Loans $ 812,537 800,729 784,324 772,204 764,440 792,526 740,626
Less allowance for loan losses 3,654   3,382   3,103   3,130   2,929   3,318   2,888  
Net loans $ 808,883 797,347 781,221 769,074 761,511 789,208 737,738
 
Total earning assets $ 1,204,360 1,212,232 1,193,585 1,171,709 1,181,594 1,195,541 1,120,081
Total assets 1,316,037 1,323,532 1,303,073 1,278,014 1,285,114 1,305,132 1,225,112
Total deposits 1,138,740 1,147,981 1,133,403 1,104,330 1,107,214 1,131,179 1,059,095
Short-term borrowings 20,406 16,328 14,355 20,710 20,290 17,952 15,105
Long-term debt 620 684 747 1,256 5,970 826 6,177
Total shareholders’ equity 146,602 147,371 144,185 142,447 141,751 145,161 136,145
Equity to assets ratio 11.14 % 11.13 % 11.06 % 11.15 % 11.03 % 11.12 % 11.11 %
Loans to deposits ratio 71.35 % 69.75 % 69.20 % 69.93 % 69.04 % 70.06 % 69.93 %
 

Asset Quality

Net charge-offs $ 278 (53 ) 173 69 209
Other real estate owned 0 270 682 846 846
 
Non-accrual loans 5,725 4,619 2,697 3,328 1,723
Loans past due 90 days or more and still accruing 23   20   369   99   559  
Total nonperforming loans $ 5,748 4,639 3,066 3,427 2,282
 
Net charge-offs to average loans 0.14 % (0.03 )% 0.09 % 0.04 % 0.11 %
Allowance for loan losses to total loans 0.44 % 0.47 % 0.42 % 0.40 % 0.41 %
Nonperforming loans to total loans 0.70 % 0.57 % 0.38 % 0.44 % 0.30 %
Nonperforming assets to total assets 0.44 % 0.37 % 0.29 % 0.33 % 0.24 %
 

Assets Under Management

LCNB Corp. total assets $ 1,306,799 1,333,536 1,312,635 1,285,922 1,280,531
Trust and investments (fair value) 303,534 293,808 284,118 274,297 283,193
Mortgage loans serviced 100,982 105,018 107,189 107,992 111,837
Business cash management 9,058 7,647 8,551 6,773 7,271
Brokerage accounts (fair value) 188,663   179,244   163,596   157,713   148,956  
Total assets managed $ 1,909,036   1,919,253   1,876,089   1,832,697   1,831,788  
 

Non-GAAP Financial Measures

Net income $ 3,654 2,896 2,968 2,964 2,884 12,482 11,474
Less (add) net gain (loss) on sales of securities, net of tax 82 202 183 245 108 712 327
Add merger-related expenses, net of tax 0   0   0   0   2   0   463  
Core net income $ 3,572 2,694 2,785 2,719 2,778 11,770 11,610
Basic core earnings per share $ 0.36 0.27 0.28 0.27 0.28 1.18 1.20
Diluted core earnings per share $ 0.36 0.27 0.28 0.27 0.28 1.18 1.18
Adjusted return on average assets 1.08 % 0.81 % 0.86 % 0.85 % 0.86 % 0.90 % 0.95 %
Adjusted return on average equity 9.69 % 7.27 % 7.77 % 7.66 % 7.77 % 8.11 % 8.53 %
Core efficiency ratio (tax equivalent) 59.57 % 66.24 % 65.09 % 66.67 % 64.60 % 64.34 % 62.96 %
     
LCNB CORP. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
 

(Dollars in thousands)

 
December 31,
2016 December 31,
(Unaudited) 2015
ASSETS:
Cash and due from banks $ 18,378 14,155
Interest-bearing demand deposits 487   832  
Total cash and cash equivalents 18,865 14,987
Investment securities:
Available-for-sale, at fair value 320,659 377,978
Held-to-maturity, at cost 41,003 22,633
Federal Reserve Bank stock, at cost 2,732 2,732
Federal Home Loan Bank stock, at cost 3,638 3,638
Loans, net 816,228 767,809
Premises and equipment, net 30,244 22,100
Goodwill 30,183 30,183
Core deposit and other intangibles 4,582 5,396
Bank owned life insurance 27,307 22,561
Other assets 11,358   10,514  
TOTAL ASSETS $ 1,306,799   1,280,531  
 
LIABILITIES:
Deposits:
Noninterest-bearing $ 271,332 250,306
Interest-bearing 839,573   836,854  
Total deposits 1,110,905 1,087,160
Short-term borrowings 42,040 37,387
Long-term debt 598 5,947
Accrued interest and other liabilities 10,312   9,929  
TOTAL LIABILITIES 1,163,855   1,140,423  
 
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 and 12,000,000 shares at
December 31, 2016 and December 31, 2015, respectively; issued 10,751,652 and
10,679,174 shares at December 31, 2016 and December 31, 2015, respectively

76,490 76,908
Retained earnings 80,736 74,629
Treasury shares at cost, 753,627 shares at December 31, 2016 and December 31, 2015 (11,665 ) (11,665 )
Accumulated other comprehensive income, net of taxes (2,617 ) 236  
TOTAL SHAREHOLDERS' EQUITY 142,944   140,108  
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,306,799   1,280,531  
   
LCNB CORP. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(Dollars in thousands, except per share data)

(Unaudited)

 
Three Months Ended Twelve Months Ended
December 31, December 31,
2016   2015 2016   2015
INTEREST INCOME:
Interest and fees on loans $ 9,205 8,713 35,600 35,285
Interest on investment securities –
Taxable 1,054 1,214 4,582 4,197
Non-taxable 834 761 3,199 2,848
Other short-term investments 133   124   369   329
TOTAL INTEREST INCOME 11,226   10,812   43,750   42,659
INTEREST EXPENSE:
Interest on deposits 875 822 3,440 3,009
Interest on short-term borrowings 8 11 38 24
Interest on long-term debt 4   73   26   295
TOTAL INTEREST EXPENSE 887   906   3,504   3,328
NET INTEREST INCOME 10,339 9,906 40,246 39,331
PROVISION FOR LOAN LOSSES 55   380   913   1,366
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 10,284   9,526   39,333   37,965
NON-INTEREST INCOME:
Trust income 815 856 3,286 3,262
Service charges and fees on deposit accounts 1,296 1,265 5,008 4,920
Net gain (loss) on sales of securities 125 163 1,082 495
Bank owned life insurance income 193 155 746 625
Gains from sales of loans 69 55 244 343
Other operating income 117   106   487   478
TOTAL NON-INTEREST INCOME 2,615   2,600   10,853   10,123
NON-INTEREST EXPENSE:
Salaries and employee benefits 4,478 4,582 18,215 17,593
Equipment expenses 281 343 1,048 1,257
Occupancy expense, net 564 558 2,271 2,307
State franchise tax 278 248 1,114 1,001
Marketing 166 161 696 720
Amortization of intangibles 189 190 753 700
FDIC insurance premiums 52 166 547 598
Contracted services 283 213 1,033 842
Other real estate owned 17 246 624 489
Merger-related expenses — 2 — 643
Other non-interest expense 1,600   1,520   6,960   6,242
TOTAL NON-INTEREST EXPENSE 7,908   8,229   33,261   32,392
INCOME BEFORE INCOME TAXES 4,991 3,897 16,925 15,696
PROVISION FOR INCOME TAXES 1,337   1,013   4,443   4,222
NET INCOME $ 3,654   2,884   12,482   11,474
 
Dividends declared per common share $ 0.16 0.16 0.64 0.64
Earnings per common share:
Basic 0.37 0.29 1.26 1.18
Diluted 0.37 0.29 1.25 1.17
Weighted average common shares outstanding:
Basic 9,984,344 9,905,612 9,943,795 9,704,965
Diluted 9,997,565 10,014,908 9,981,872 9,811,476