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LCNB CORP. Reports Financial Results for the Three and Nine Months Ended September 30, 2020

·14-min read

LCNB Corp. ("LCNB") (NASDAQ: LCNB) today announced financial results for the three and nine months ended September 30, 2020.

Net income for the third quarter 2020 was $4,250,000, compared to $4,727,000 for the same period last year. Earnings per basic and diluted share for the third quarter 2020 were $0.33, compared to $0.36 for the same period last year. Net income for the nine-month period ended September 30, 2020 was $14,333,000, compared to $14,082,000 for the same period last year. Earnings per basic and diluted share for the nine-month period ended September 30, 2020 were $1.11 compared to $1.07 for the same period last year.

Earnings, before provisions for loan losses and income taxes, increased 3.4% to $6,154,000 for the third quarter 2020 compared to $5,952,000 for the same period last year. For the nine-month period ended September 30, 2020, earnings, before provisions for loan losses and income taxes, increased 12.4% to $19,300,000, compared to $17,170,000 for the nine-month period ended September 30, 2019.

Commenting on the financial results, LCNB President and Chief Executive Officer Eric Meilstrup said, "LCNB’s third quarter financial results demonstrate the resiliency of our business, employees, customers, and communities, as we navigate the unprecedented impacts of the COVID-19 pandemic. While our asset quality remains relatively stable, we prudently increased our allowance for loan and lease losses to account for uncertainty regarding the long-term economic impacts of the COVID-19 crisis. I am encouraged that our core earnings before provision and tax expenses increased 3.4% during the third quarter and are up 12.4% year-to-date, as we benefit from our diverse non-interest income generating businesses and improvements in our cost of funds. Third quarter non-interest income increased 27.5% over the prior year period, and now represents 21.8% of total revenues, compared to 17.0% of total revenues in the 2019 third quarter primarily due to strong residential mortgage demand and higher fiduciary income."

Mr. Meilstrup continued, "We are working hard to support our local communities and I am encouraged by the growth we experienced in net loans and total deposits which increased 7.6% and 6.1%, respectively, since December 31, 2019. Since the COVID-19 pandemic began, we have also supported our communities by offering customers impacted by the COVID-19 crisis the ability to defer certain loan payments and over the past three months we have experienced a material decline in the amount of deferrals. Overall, I am pleased with the underlying performance of our loan portfolio as third quarter 2020 net charge-offs were only $18,000, compared to $209,000 for the same period last year."

"As we enter the fourth quarter, we remain focused on providing our communities with personalized financial services and we have started assisting our Paycheck Protection Program loan customers through the Small Business Administration forgiveness process. I am extremely proud of the continued dedication and hard work of LCNB’s employees and the positive contributions they provide our customers and communities," concluded Mr. Meilstrup.

Net interest income for the three months ended September 30, 2020 was $13,529,000, compared to $13,578,000 for the comparable period in 2019. The slight decline for the three-month period was primarily due to market driven decreases in the average rates earned on loans and investments, partially offset by growth in the average balance of the loan portfolio. Net interest income for the nine-month period ended September 30, 2020 increased $1,146,000 to $41,705,000, as compared to the nine month period ended September 30, 2019. The increase for the nine-month period was primarily due to growth in the average balance of LCNB's loan portfolio, partially offset by a decrease in the average rate earned on that portfolio. Favorably contributing to the variances for both the three and nine month periods were market driven decreases in the average rates paid on deposits.

The provision for loan losses for the three and nine months ended September 30, 2020 were, respectively, $712,000 and $1,952,000 greater than the comparable periods in 2019 partially due to adjustments for estimated impacts from the economic downturn caused by the COVID-19 pandemic. Non-accrual loans and loans past due 90 days or more and still accruing interest increased $994,000, from $3,210,000, or 0.26%, of total loans at December 31, 2019 to $4,204,000, or 0.31%, of total loans at September 30, 2020. The increase was primarily due to three loans that were newly classified during 2020.

Non-interest income for the three and nine months ended September 30, 2020 was, respectively, $922,000 and $2,310,000 greater than the comparable periods in 2019 primarily due to increases in fiduciary income and gains from sales of loans, partially offset by a decrease in service charges and fees on deposit accounts. The increase for the nine month period included gains from the sale of equity securities, which is recorded in other operating income in the consolidated condensed statements of income, gains from the sale of debt securities, and an increase in income from bank owned life insurance. Income from bank owned life insurance increased year-to-date partially due to new policies purchased in the third quarter 2019 and partially due to a mortality benefit received during the first quarter 2020.

Non-interest expense for the three and nine months ended September 30, 2020 was, respectively, $671,000 and $1,326,000 greater than the comparable periods in 2019, primarily due to increases in salaries and employee benefits and other non-interest expenses. Salaries and employee benefits increased primarily due to salary and wage increases and newly hired employees, including additional business development positions. An increase in health insurance costs also contributed to the increase in employee benefits. Partially offsetting the increase for the nine month period was a decrease in FDIC insurance premiums due to a small bank assessment credit received during both the first and second quarters 2020. LCNB used the credit in full during those two quarters and the premium payment returned to a normal level for the third quarter 2020.

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, Franklin, 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. Please refer to LCNB’s Annual Report on Form 10-K for the year ended December 31, 2019, 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. the significant risks and uncertainties for LCNB's business, results of operations and financial condition, as well as its regulatory capital and liquidity ratios and other regulatory requirements, caused by the COVID-19 pandemic, which will depend on several factors, including the scope and duration of the pandemic, its influence on financial markets, the effectiveness of LCNB's work from home arrangements and staffing levels in operational facilities, the impact of market participants on which LCNB relies and actions taken by governmental authorities and other third parties in response to the pandemic;

  3. LCNB’s ability to integrate recent and future acquisitions may be unsuccessful, or may be more difficult, time-consuming or costly than expected;

  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 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. 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;

  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;

  13. adverse weather events and natural disasters and global and/or national epidemics; and

  14. 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 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

Nine Months Ended

9/30/2020

6/30/2020

3/31/2020

12/31/2019

9/30/2019

9/30/2020

9/30/2019

Condensed Income Statement

Interest income

$

15,322

15,957

16,556

16,424

16,329

47,835

48,770

Interest expense

1,793

1,959

2,378

2,577

2,751

6,130

8,211

Net interest income

13,529

13,998

14,178

13,847

13,578

41,705

40,559

Provision (credit) for loan losses

976

16

1,173

(6)

264

2,165

213

Net interest income after provision

12,553

13,982

13,005

13,853

13,314

39,540

40,346

Non-interest income

4,278

3,319

3,839

3,222

3,356

11,436

9,126

Non-interest expense

11,653

11,116

11,072

11,007

10,982

33,841

32,515

Income before income taxes

5,178

6,185

5,772

6,068

5,688

17,135

16,957

Provision for income taxes

928

1,128

746

1,238

961

2,802

2,875

Net income

$

4,250

5,057

5,026

4,830

4,727

14,333

14,082

Amort/Accret income on acquired loans

$

181

294

667

400

302

1,142

881

Amort/Accret expenses on acquired
interest-bearing liabilities

$

2

3

3

4

5

290

Tax-equivalent net interest income

$

13,594

14,066

14,254

13,937

13,679

41,914

40,915

Per Share Data

Dividends per share

$

0.18

0.18

0.18

0.18

0.17

0.54

0.51

Basic earnings per common share

$

0.33

0.39

0.39

0.37

0.36

1.11

1.07

Diluted earnings per common share

$

0.33

0.39

0.39

0.37

0.36

1.11

1.07

Book value per share

$

18.46

18.27

18.00

17.63

17.44

18.46

17.44

Tangible book value per share

$

13.66

13.47

13.18

12.78

12.57

13.66

12.57

Weighted average common shares outstanding:

Basic

12,937,865

12,940,975

12,926,077

12,912,106

12,932,950

12,934,987

13,135,134

Diluted

12,937,901

12,941,001

12,927,666

12,916,000

12,937,145

12,935,388

13,139,100

Shares outstanding at period end

12,926,686

12,975,879

12,969,076

12,936,783

12,927,463

12,926,686

12,927,463

Selected Financial Ratios

Return on average assets

0.97

%

1.19

%

1.23

%

1.17

%

1.13

%

1.13

%

1.15

%

Return on average equity

7.08

%

8.63

%

8.75

%

8.42

%

8.33

%

8.14

%

8.42

%

Return on average tangible equity

9.56

%

11.74

%

12.00

%

11.63

%

11.57

%

11.07

%

11.75

%

Dividend payout ratio

54.55

%

46.15

%

46.15

%

48.65

%

47.22

%

48.65

%

47.66

%

Net interest margin (tax equivalent)

3.47

%

3.70

%

3.92

%

3.76

%

3.67

%

3.69

%

3.70

%

Efficiency ratio (tax equivalent)

65.20

%

63.94

%

61.19

%

64.15

%

64.47

%

63.43

%

64.98

%

Selected Balance Sheet Items

Cash and cash equivalents

$

24,485

42,736

24,795

20,765

22,826

Debt and equity securities

199,044

194,883

183,123

219,791

239,730

Loans:

Commercial and industrial

$

124,628

125,492

85,356

78,306

71,576

Commercial, secured by real estate

843,943

833,286

829,461

804,953

797,842

Residential real estate

327,689

334,349

318,009

322,533

320,703

Consumer

36,504

32,859

28,955

25,232

23,918

Agricultural

8,920

11,071

10,519

11,509

11,525

Other, including deposit overdrafts

403

283

436

1,193

456

Deferred net origination fees

(1,927)

(1,902)

(349)

(275)

(128)

Loans, gross

1,340,160

1,335,438

1,272,387

1,243,451

1,225,892

Less allowance for loan losses

5,974

5,016

5,008

4,045

4,167

Loans, net

$

1,334,186

1,330,422

1,267,379

1,239,406

1,221,725

Total earning assets

$

1,547,538

1,554,537

1,462,485

1,466,988

1,470,074

Total assets

1,725,615

1,735,332

1,636,280

1,639,308

1,644,447

Total deposits

1,430,394

1,438,921

1,345,872

1,348,280

1,355,383

Three Months Ended

Nine Months Ended

9/30/2020

6/30/2020

3/31/2020

12/31/2019

9/30/2019

9/30/2020

9/30/2019

Selected Balance Sheet Items, continued

Long-term debt

31,999

33,998

35,996

40,994

41,990

Total shareholders’ equity

238,585

237,047

233,478

228,048

225,492

Equity to assets ratio

13.83

%

13.66

%

14.27

%

13.91

%

13.71

%

Loans to deposits ratio

93.69

%

92.81

%

94.54

%

92.22

%

90.45

%

Tangible common equity (TCE)

$

176,624

174,823

170,994

165,304

162,485

Tangible common assets (TCA)

1,663,654

1,673,108

1,573,796

1,576,564

1,581,440

TCE/TCA

10.62

%

10.45

%

10.87

%

10.49

%

10.27

%

Selected Average Balance Sheet Items

Cash and cash equivalents

$

42,661

46,292

25,101

26,501

28,293

37,988

27,600

Debt and equity securities

197,788

182,371

204,912

231,115

243,553

195,033

253,113

Loans

$

1,339,608

1,318,753

1,252,554

1,230,845

...

1,227,806

1,303,770

1,218,183

Less allowance for loan losses

5,250

4,998

3,938

4,076

3,986

4,730

4,049

Net loans

$

1,334,358

1,313,755

1,248,616

1,226,769

1,223,820

1,299,040

1,214,134

Total earning assets

$

1,558,886

1,528,610

1,462,946

1,469,469

1,480,096

1,516,967

1,479,983

Total assets

1,741,998

1,704,303

1,638,486

1,643,793

1,654,034

1,695,103

1,642,186

Total deposits

1,445,573

1,412,082

1,346,770

1,352,101

1,365,702

1,401,636

1,350,678

Short-term borrowings

0

82

1,415

622

468

497

7,898

Long-term debt

33,020

34,964

38,325

41,742

41,988

35,427

43,067

Total shareholders’ equity

238,990

235,587

231,058

227,595

225,216

235,225

223,644

Equity to assets ratio

13.72

%

13.82

%

14.10

%

13.85

%

13.62

%

13.88

%

13.62

%

Loans to deposits ratio

92.67

%

93.39

%

93.00

%

91.03

%

89.90

%

93.02

%

90.19

%

Asset Quality

Net charge-offs

$

18

8

210

115

209

236

92

Other real estate owned

197

197

197

Non-accrual loans

4,110

3,876

2,829

3,210

3,523

4,110

3,523

Loans past due 90 days or more and
still accruing

94

38

39

94

Total nonperforming loans

$

4,204

3,914

2,868

3,210

3,523

4,204

3,523

Net charge-offs to average loans

0.01

%

0.00

%

0.07

%

0.04

%

0.07

%

0.02

%

0.01

%

Allowance for loan losses to total loans

0.45

%

0.38

%

0.39

%

0.33

%

0.34

%

0.45

%

0.34

%

Nonperforming loans to total loans

0.31

%

0.29

%

0.23

%

0.26

%

0.29

%

0.31

%

0.29

%

Nonperforming assets to total assets

0.24

%

0.23

%

0.18

%

0.21

%

0.23

%

0.24

%

0.23

%

Assets Under Management

LCNB Corp. total assets

$

1,725,615

1,735,332

1,636,280

1,639,308

1,644,447

Trust and investments (fair value)

524,502

516,076

455,974

435,664

411,724

Mortgage loans serviced

120,546

100,189

94,805

93,596

90,784

Cash management

119,520

116,615

77,471

75,948

117,530

Brokerage accounts (fair value)

267,307

255,276

235,278

268,059

262,038

Total assets managed

$

2,757,490

2,723,488

2,499,808

2,512,575

2,526,523

LCNB CORP. AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

(Dollars in thousands)

September 30,
2020
(Unaudited)

December 31,
2019

ASSETS:

Cash and due from banks

$

16,151

17,019

Interest-bearing demand deposits

8,334

3,746

Total cash and cash equivalents

24,485

20,765

Investment securities:

Equity securities with a readily determinable fair value, at fair value

2,213

2,312

Equity securities without a readily determinable fair value, at cost

2,099

2,099

Debt securities, available-for-sale, at fair value

157,936

178,000

Debt securities, held-to-maturity, at cost

26,941

27,525

Federal Reserve Bank stock, at cost

4,652

4,652

Federal Home Loan Bank stock, at cost

5,203

5,203

Loans, net

1,334,186

1,239,406

Premises and equipment, net

35,309

34,787

Operating leases right of use asset

5,729

5,444

Goodwill

59,221

59,221

Core deposit and other intangibles

3,539

4,006

Bank owned life insurance

41,871

41,667

Interest receivable

9,559

3,926

Other assets

12,672

10,295

TOTAL ASSETS

$

1,725,615

1,639,308

LIABILITIES:

Deposits:

Noninterest-bearing

$

426,989

354,391

Interest-bearing

1,003,405

993,889

Total deposits

1,430,394

1,348,280

Long-term debt

31,999

40,994

Operating lease liabilities

5,790

5,446

Accrued interest and other liabilities

18,847

16,540

TOTAL LIABILITIES

1,487,030

1,411,260

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 14,157,303 and
14,111,810 shares at September 30, 2020 and December 31, 2019, respectively; outstanding
12,926,686 and 12,936,783 shares at September 30, 2020 and December 31, 2019, respectively

142,310

141,791

Retained earnings

111,760

104,431

Treasury shares at cost, 1,230,617 and 1,175,027 shares at September 30, 2020 and
December 31, 2019, respectively

(19,639)

(18,847)

Accumulated other comprehensive income, net of taxes

4,154

673

TOTAL SHAREHOLDERS' EQUITY

238,585

228,048

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

1,725,615

1,639,308

LCNB CORP. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(Dollars in thousands, except per share data)

(Unaudited)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2020

2019

2020

2019

INTEREST INCOME:

Interest and fees on loans

$

14,379

14,872

44,428

44,072

Dividends on equity securities with a readily determinable fair value

13

15

40

47

Dividends on equity securities without a readily determinable fair value

5

16

33

48

Interest on debt securities, taxable

633

918

2,250

2,720

Interest on debt securities, non-taxable

249

379

788

1,340

Interest on interest-bearing time deposits

3

11

Other investments

43

126

296

532

TOTAL INTEREST INCOME

15,322

16,329

47,835

48,770

INTEREST EXPENSE:

Interest on deposits

1,567

2,475

5,416

7,225

Interest on short-term borrowings

3

7

224

Interest on long-term debt

226

273

707

762

TOTAL INTEREST EXPENSE

1,793

2,751

6,130

8,211

NET INTEREST INCOME

13,529

13,578

41,705

40,559

PROVISION FOR LOAN LOSSES

976

264

2,165

213

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES

12,553

13,314

39,540

40,346

NON-INTEREST INCOME:

Fiduciary income

1,275

1,123

3,579

3,215

Service charges and fees on deposit accounts

1,506

1,616

4,038

4,421

Net gains (losses) on sales of debt securities

(20)

221

(37)

Bank owned life insurance income

275

289

1,163

654

Gains from sales of loans

999

114

1,436

207

Other operating income

223

234

999

666

TOTAL NON-INTEREST INCOME

4,278

3,356

11,436

9,126

NON-INTEREST EXPENSE:

Salaries and employee benefits

6,863

6,403

20,279

18,808

Equipment expenses

341

322

917

866

Occupancy expense, net

740

751

2,145

2,258

State financial institutions tax

424

433

1,280

1,307

Marketing

471

410

906

1,009

Amortization of intangibles

263

263

783

780

FDIC insurance premiums, net

112

(13)

142

225

Contracted services

435

455

1,312

1,394

Other real estate owned

2

1

(7)

52

Merger-related expenses

27

114

Other non-interest expense

2,002

1,930

6,084

5,702

TOTAL NON-INTEREST EXPENSE

11,653

10,982

33,841

32,515

INCOME BEFORE INCOME TAXES

5,178

5,688

17,135

16,957

PROVISION FOR INCOME TAXES

928

961

2,802

2,875

NET INCOME

$

4,250

4,727

14,333

14,082

Dividends declared per common share

$

0.18

0.17

0.54

0.51

Earnings per common share:

Basic

0.33

0.36

1.11

1.07

Diluted

0.33

0.36

1.11

1.07

Weighted average common shares outstanding:

Basic

12,937,865

12,932,950

12,934,987

13,135,134

Diluted

12,937,901

12,937,145

12,935,388

13,139,100

View source version on businesswire.com: https://www.businesswire.com/news/home/20201020006307/en/

Contacts

LCNB Corp.
Eric J. Meilstrup, CEO and President, 800-344-BANK
Robert C. Haines II, Executive Vice President and CFO, 800-344-BANK