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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2025
or
☐
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 000-26121
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 Exchange Act:
Title of Each Class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, No Par Value
LCNB
NASDAQ
Securities registered pursuant to 12(g) of the Exchange Act:
None
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
☐ Yes ☒ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
☐ Yes ☒ No
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
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Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued
its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing
reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by
any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ☒ No
The aggregate market value of the registrant’s outstanding voting common stock held by nonaffiliates on June 30, 2025, determined using a per share closing
price on that date of $14.53 as quoted on the NASDAQ Capital Market, was $205,966,252.
As of March 11, 2026, 14,237,966 common shares were issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement included in the Notice of Annual Meeting of Shareholders to be held April 27, 2026, which Proxy Statement will be mailed to
shareholders within 120 days from the end of the fiscal year ended December 31, 2025 are incorporated by reference into Part III.
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LCNB CORP.
For the Year Ended December 31, 2025
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PART I
4
Item 1. Business
5
Item 1A. Risk Factors
18
Item 1B. Unresolved Staff Comments
25
Item 1C. Cybersecurity
25
Item 2. Properties
26
Item 3. Legal Proceedings
26
Item 4. Mine Safety Disclosures
26
PART II
27
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities.
27
Item 6. [Reserved]
29
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
29
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
41
Item 8. Financial Statements and Supplementary Data
42
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
42
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
44
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
98
Item 9A. Controls and Procedures
98
Item 9B. Other Information
98
Item 9C. Disclosures Regarding Foreign Jurisdictions that Prevent Inspections
98
PART III
99
Item 10. Directors, Executive Officers and Corporate Governance
99
Item 11. Executive Compensation
99
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
99
Item 13. Certain Relationships and Related Transactions, and Director Independence
100
Item 14. Principal Accountant Fees and Services
100
PART IV
101
Item 15. Exhibit and Financial Statement Schedules
101
SIGNATURES
102
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LCNB CORP. AND SUBSIDIARIES
PART I
Glossary of Abbreviations and Acronyms
ACL
Allowance for Credit Losses
AFS
Available-for-Sale
ASC
Accounting Standards Codification
ASU
Accounting Standards Update
Bank
LCNB National Bank
BSA
Bank Secrecy Act
CECL
Current Expected Credit Losses
CEO
Chief Executive Officer
CFO
Chief Financial Officer
CFPB
Consumer Financial Protection Bureau
Citizens National
Citizens National Bank
CNNB
Cincinnati Bancorp, Inc.
Company
LCNB Corp. and its consolidated subsidiaries as a whole
CRA
Community Reinvestment Act of 1977
DCF
Discounted Cash Flow
DIF
Deposit Insurance Fund
Dodd-Frank Act
Dodd-Frank Wall Street Reform and Consumer Protection Act
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
FOMC
Federal Open Market Committee of the Federal Reserve System
GAAP
Generally Accepted Accounting Principles
HTM
Held-to-Maturity
ICS
Insured Cash Sweep
IRA
Individual Retirement Account
LCNB
LCNB Corp. and its consolidated subsidiaries as a whole
LDA
Loss Driver Analysis
LGD
Loss Given Default
LRA
Lender Risk Account
OAEM
Other Assets Especially Mentioned
OCC
Office of the Comptroller of the Currency
PCD
Purchased Credit Deteriorated
PD
Probability of Default
SEC
Securities and Exchange Commission
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LCNB CORP. AND SUBSIDIARIES
Item 1. Business
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”, “might”, “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’s ability to integrate recent and future acquisitions may be unsuccessful, or may be more difficult, time-consuming, or costly than expected;
3.
LCNB may incur increased loan charge-offs in the future and the allowance for credit losses may be inadequate;
4.
LCNB may face competitive loss of customers to both bank and nonbank financial institutions;
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;
6.
changes in general economic conditions, including the potential economic impacts of a prolonged U.S. government shutdown, 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;
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;
10. global and/or 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;
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
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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LCNB CORP. AND SUBSIDIARIES
DESCRIPTION OF LCNB'S BUSINESS
General Description
LCNB Corp., an Ohio corporation formed in December 1998, is a financial holding company headquartered in Lebanon, Ohio. Substantially all of the assets,
liabilities and operations of LCNB Corp. are attributable to its wholly-owned subsidiary, LCNB National Bank. The predecessor of LCNB Corp., the Bank,
was formed as a national banking association in 1877. On May 19, 1999, the Bank became a wholly-owned subsidiary of LCNB Corp. LCNB Risk
Management, Inc., a captive insurance agency, was incorporated in Nevada by LCNB Corp. during the second quarter of 2017.
Loan products offered include commercial and industrial loans, commercial and residential real estate loans, agricultural loans, construction loans, various
types of consumer loans, and Small Business Administration loans. The Bank's residential mortgage lending activities consist primarily of loans for purchasing
or refinancing personal residences, home equity lines of credit, and loans for commercial or consumer purposes secured by residential mortgages. Consumer
lending activities include automobile, boat, home improvement, and personal loans.
The Wealth Management Division of the Bank provides complete trust administration, estate settlement, and fiduciary services and also offers investment
management of trusts, agency accounts, individual retirement accounts, and foundations/endowments.
Security brokerage services are offered by the Bank through arrangements with LPL Financial LLC, a registered broker/dealer. Licensed brokers offer a full
range of investment services and products, including financial needs analysis, mutual funds, securities trading, annuities, and life insurance.
Other services offered include safe deposit boxes, night depositories, cashier's checks, bank-by-mail, ATMs, cash and transaction services, debit cards, wire
transfers, electronic funds transfer, utility bill collections, notary public service, cash management services, 24-hour telephone banking, PC Internet banking,
mobile banking, and other services tailored for both individuals and businesses.
The Bank is not dependent upon any one significant customer or specific industry. Business is not seasonal to any material degree.
The address of the main office of the Bank is 2 North Broadway, Lebanon, Ohio 45036; telephone (513) 932-1414.
Primary Market Area
The Bank considers its primary market area to consist of counties where it has a physical presence and neighboring counties, which includes Southwestern and
South Central Ohio and Northern Kentucky. At December 31, 2025, the Bank had:
•
35 offices, including a main office in Warren County, Ohio and branch offices in Warren, Butler, Clinton, Clermont, Fayette, Franklin, Hamilton,
Montgomery, Preble, and Ross Counties in Ohio,
•
an Operations Center in Warren County, Ohio, and
•
34 ATMs.
Competition
The Bank faces strong competition both in making loans and attracting deposits. The deregulation of the banking industry and the widespread enactment of
state laws that permit multi-bank holding companies as well as the availability of nationwide interstate banking has created a highly competitive environment
for financial services providers. The Bank competes with other national and state banks, savings and loan associations, credit unions, finance companies,
mortgage brokerage firms, realty companies with captive mortgage brokerage firms, mutual funds, insurance companies, cryptocurrency companies, brokerage
and investment banking companies, Financial Technology or "FinTech" companies including decentralized finance and cryptocurrency, and other financial
intermediaries operating in its market and elsewhere, many of whom have substantially larger financial and managerial resources.
The Bank seeks to minimize the competitive effect of other financial institutions through a community banking approach that emphasizes direct customer
access to the Bank's CEO, President, and other officers in an environment conducive to friendly, informed, and courteous personal services. Management
believes that the Bank is well-positioned to compete successfully in its primary market area. Competition among financial institutions is based upon interest
rates offered on deposit accounts, interest rates charged on loans and other credit and service charges, availability of electronic banking services, the quality and
scope of the services rendered, and the convenience of banking facilities and electronic banking technologies.
The ability to access and use technology, including the use of artificial intelligence, is an increasingly competitive factor in the financial services industry.
Technology relating to the delivery of financial services, the security and privacy of customer information, and the processing of information is evolving
rapidly. LCNB continually makes technology investments to remain competitive in the financial services industry.
Management believes the commitment of the Bank to personal service, innovation, and involvement in the communities and primary market areas it serves, as
well as its commitment to quality community banking service, are factors that contribute to its competitive advantage.
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LCNB CORP. AND SUBSIDIARIES
Supervision and Regulation
Both federal and state laws extensively regulate bank holding companies, financial holding companies, and banks. These laws (and the regulations promulgated
thereunder) are primarily intended to protect depositors and the DIF of the FDIC. The following information describes particular laws and regulatory
provisions relating to financial holding companies and banks. This discussion is qualified in its entirety by reference to the particular laws and regulatory
provisions. A change in any of these laws or regulations or in their enforcement may have a material effect on our business and the business of our subsidiaries.
Bank Holding Companies and Financial Holding Companies
LCNB elected to become a financial holding company on April 11, 2000. A financial holding company is essentially a bank holding company with significantly
expanded powers. Under the Gramm-Leach-Bliley Act, in addition to traditional lending activities, the following activities are among those that are deemed
“financial in nature” for financial holding companies: securities underwriting, dealing in or making a market in securities, sponsoring mutual funds and
investment companies, insurance underwriting and agency activities, activities which the Federal Reserve Board determines to be closely related to banking,
and certain merchant banking activities.
As a financial holding company, LCNB has very broad discretion to affiliate with securities firms and insurance companies, provide merchant banking
services, and engage in other activities that the Federal Reserve Board has deemed financial in nature. In order to continue as a financial holding company,
LCNB must continue to be well-capitalized, well-managed, and maintain compliance with the Community Reinvestment Act. Depending on the types of
financial activities that LCNB may elect to engage in, under the Gramm-Leach-Bliley Act’s functional regulation principles, it may become subject to
supervision by additional government agencies. The election to be treated as a financial holding company increases LCNB's ability to offer financial products
and services that historically it was either unable to provide or was only able to provide on a limited basis. As a result, LCNB faces increased competition in the
markets for any new financial products and services that it may offer. Likewise, an increased amount of consolidation among banks and securities firms or
banks and insurance firms could result in a growing number of large financial institutions that could compete aggressively with LCNB.
The Bank is subject to the provisions of the National Bank Act. The Bank is subject to primary supervision, regulation, and examination by the OCC. The
Bank is also subject to the rules and regulations of the Board of Governors of the Federal Reserve System and the FDIC.
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LCNB CORP. AND SUBSIDIARIES
Banking Operations.
LCNB Corp. and the Bank are subject to an extensive array of banking laws and regulations that are intended primarily for the protection of the Bank’s
customers and depositors. These laws and regulations govern such areas as permissible activities, loans and investments, and rates of interest that can be
charged on loans and reserves. LCNB Corp. and the Bank also are subject to general U.S. federal laws and regulations and to the laws and regulations of the
State of Ohio. Set forth below are brief descriptions of selected laws and regulations applicable to LCNB Corp. and the Bank.
Safe and Sound Banking Practices.
Bank holding companies are not permitted to engage in unsafe and unsound banking practices. The Federal Reserve Board’s Regulation Y, for example,
generally requires a holding company to give the Federal Reserve Board prior notice of any redemption or repurchase of its own equity securities, if the
consideration to be paid, together with the consideration paid for any repurchases or redemptions in the preceding year, is equal to 10% or more of the bank
holding company’s consolidated net worth. The Federal Reserve Board may oppose the transaction if it believes that the transaction would constitute an unsafe
or unsound practice or would violate any law or regulation. Depending upon the circumstances, the Federal Reserve Board could take the position that paying a
dividend would constitute an unsafe or unsound banking practice.
The Federal Reserve Board has broad authority to prohibit activities of bank holding companies and their nonbanking subsidiaries which represent unsafe and
unsound banking practices or which constitute violations of laws or regulations, and can assess civil money penalties for certain activities conducted on a
knowing and reckless basis, if those activities caused a substantial loss to a depository institution. The penalties can be as high as $1.0 million for each day the
activity continues.
Deposit Insurance Coverage and Assessments
The Bank is FDIC insured. Through the DIF, the FDIC provides deposit insurance protection that covers all deposit accounts in FDIC-insured depository
institutions up to applicable limits (currently $250 thousand per depositor).
The Bank must pay assessments to the FDIC under a risk-based assessment system for this federal deposit insurance protection. FDIC-insured depository
institutions pay insurance premiums at rates based on their risk classification. Institutions assigned to higher risk classifications (i.e., institutions that pose a
greater risk of loss to the DIF) pay assessments at higher rates than institutions assigned to lower risk classifications. An institution’s risk classification is
assigned based on its capital levels and the level of supervisory concern the institution poses to bank regulators. In addition, the FDIC can impose special
assessments to cover shortages in the DIF and has imposed special assessments in the past.
On October 18, 2022, the FDIC issued a final rule that increased the initial base deposit insurance assessment rate paid by insured depository institutions by
two basis points, beginning with the first quarterly assessment period of 2023. According to the FDIC, the new assessment rate increases the likelihood that its
designated reserve ratio will reach the required minimum level of 1.35% by the statutory deadline of September 30, 2028 and will support progress toward
achieving the long-term goal of a 2% ratio. The increase will remain in effect until the long-term goal of a 2% FDIC designated reserve ratio is achieved.
Progressively lower assessment rates will take effect when the reserve ratio reaches 2% and again when the reserve ratio reaches 2.5%.
Under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, an FDIC-insured depository institution can be held liable for any losses
incurred by the FDIC in connection with (1) the “default” of one of its FDIC-insured subsidiaries or (2) any assistance provided by the FDIC to one of its
FDIC-receivers. “In danger of default” is defined generally as the existence of certain conditions indicating that a default is likely to occur in the absence of
regulatory assistance. LCNB has never received an "in danger of default" categorization.
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LCNB CORP. AND SUBSIDIARIES
Dividends
LCNB Corp. is a legal entity separate and distinct from the Bank. LCNB Corp. receives most of its revenue from dividends paid to it by the Bank. During the
years ended December 31, 2025, 2024, and 2023, dividends paid by LCNB National Bank to LCNB Corp. totaled $15.1 million, $22.0 million, and $29.0
million, respectively.
Described below are some of the laws and regulations that apply when either LCNB Corp. or the Bank pay or are paid dividends.
The Federal Reserve Board and the OCC have issued policy statements that recommend that bank holding companies and insured banks should generally only
pay dividends to the extent net income is sufficient to cover both cash dividends and a rate of earnings retention consistent with capital needs, asset quality, and
overall financial condition. Further, the Federal Reserve Board’s policy provides that bank holding companies should not maintain a level of cash dividends
that undermines the bank holding company’s ability to serve as a source of strength to its banking subsidiaries. In addition, the Federal Reserve Board has
indicated that each bank holding company should carefully review its dividend policy and has discouraged payment ratios that are at maximum allowable
levels, which is the maximum dividend amount that may be issued and allow the Company to still maintain its target tier 1 capital ratio, unless both asset
quality and capital are very strong.
To pay dividends, the Bank must maintain adequate capital above regulatory guidelines. Under federal law, the Bank cannot pay a dividend if, after paying the
dividend, the Bank would be “undercapitalized.” National banks are required by federal law to obtain the prior approval of the OCC in order to declare and pay
dividends if the total of all dividends declared in any calendar year would exceed the total of (1) such bank’s net profits (as defined and interpreted by
regulation) for that year plus (2) its retained net profits (as defined and interpreted by regulation) for the preceding two calendar years, less any required
transfers to surplus. If dividends exceed net profit for a year, a bank is generally not required to carry forward the negative amount resulting from such excess if
the bank can attribute the excess to the preceding two years. If the excess is greater than the bank's previously undistributed net income for the preceding two
years, prior OCC approval of the dividend is required and a negative amount would be carried forward in future dividend calculations. In addition, these banks
may only pay dividends to the extent that retained net profits (including the portion transferred to surplus) exceed bad debts (as defined by regulation).
Affiliate Transactions
The Company and the Bank and other subsidiaries are "affiliates" within the meaning of the Federal Reserve Act. The Federal Reserve Act imposes limitations
on a bank with respect to extensions of credit to, investments in, and certain other transactions with, its parent bank holding company and the holding
company’s other subsidiaries. Loans and extensions of credit from the Bank to its affiliates are also subject to various collateral requirements. Further, the
Bank's authority to extend credit to the Company's directors, executive officers, and principal shareholders, including their immediate family members,
corporations, and other entities that they control, is subject to the restrictions and additional requirements of the Federal Reserve Act and Regulation O
promulgated thereafter. These statutes and regulations impose specific limits on the amount of loans the Bank may make to directors and other insiders and
specify approval procedures that must be followed in making loans that exceed certain amounts.
Capital
LCNB and the Bank are each required to comply with applicable capital adequacy standards established by the Federal Reserve Board and the OCC,
respectively. The current risk-based capital standards applicable to LCNB and the Bank are based on the December 2010 final capital framework for
strengthening international capital standards, known as Basel III.
In July 2013, the federal bank regulators approved final rules (the “Basel III Rules”) implementing the Basel III framework as well as certain provisions of the
Dodd-Frank Act. The Basel III Rules substantially revised the risk-based capital requirements applicable to bank holding companies and their depository
institution subsidiaries. The Basel III Rules became effective for LCNB and the Bank on January 1, 2015 (subject to a phase-in period for certain provisions).
The Basel III Rules established three components of regulatory capital: (1) common equity tier 1 capital (“CET1”); (2) additional tier 1 capital; and (3) tier 2
capital. Tier 1 capital is the sum of CET1 and additional tier 1 capital instruments meeting certain revised requirements. Total capital is the sum of tier 1 capital
and tier 2 capital. Under the Basel III Rules, for most banking organizations, the most common form of additional tier 1 capital is non-cumulative perpetual
preferred stock and the most common form of tier 2 capital is subordinated notes and a portion of the allocation for loan and lease losses, in each case, subject
to the Basel III Rules’ specific requirements. LCNB Corp. does not have any non-cumulative perpetual preferred stock or subordinated notes.
Under the Basel III Rules, the minimum capital ratios effective as of January 1, 2015 are: (i) 4.5% CET1 to risk-weighted assets; (ii) 6.0% tier 1 capital to risk-
weighted assets; (iii) 8.0% total capital to risk-weighted assets; and (iv) 4.0% tier 1 capital to average consolidated assets as reported on consolidated financial
statements (known as the “leverage ratio”). The Basel III Rules established a “capital conservation buffer” of 2.5% above the new regulatory minimum risk-
based capital requirements. The conservation buffer, when added to the capital requirements, resulted in the following minimum ratios: (i) a CET1 risk-based
capital ratio of 7.0%; (ii) a tier 1 risk-based capital ratio of 8.5% and (iii) a total risk-based capital ratio of 10.5%. An institution is subject to limitations on
certain activities including payment of dividends, share repurchases, and discretionary bonuses to executive officers if its capital level is below the buffer
amount. With respect to the Bank, the Basel III Rules also revised the “prompt corrective action” regulations pursuant to Section 38 of the Federal Deposit
Insurance Act, as discussed below under “Prompt Corrective Action.”
See Note 15 - Regulatory Matters and Impact on Payment of Dividends of the consolidated financial statements for more information concerning LCNB's
compliance with regulatory capital ratios.
In November 2019, the federal banking regulators published final rules implementing a simplified measure of capital adequacy for certain banking
organizations that have less than $10 billion in total consolidated assets. Under the final rules, which went into effect on January 1, 2020, depository
institutions and depository institution holding companies that have less than $10 billion in total consolidated assets and meet other qualifying criteria, including
a leverage ratio of greater than 9%, off-balance-sheet exposures of 25% or less of total consolidated assets, and trading assets plus trading liabilities of 5% or
less of total consolidated assets, are deemed “qualifying community banking organizations” and are eligible to opt into the “community bank leverage ratio
framework.” A qualifying community banking organization that elects to use the community bank leverage ratio framework and that maintains a leverage ratio
of greater than 9% is considered to have satisfied the generally applicable risk-based and leverage capital requirements under the Basel III Rules and, if
applicable, is considered to have met the “well capitalized” ratio requirements for purposes of its primary federal regulator’s prompt corrective action rules,
discussed below. LCNB Corp. and the Bank have not opted to use the community bank leverage ratio framework, but may make such an election in the future.
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LCNB CORP. AND SUBSIDIARIES
Prompt Corrective Action
A banking organization’s capital plays an important role in connection with regulatory enforcement as well. Federal law provides the federal banking regulators
with broad power to take prompt corrective action to resolve the problems of undercapitalized institutions. The extent of the regulators’ powers depends on
whether the institution in question is “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” or “critically undercapitalized,” in each case
as defined by regulation. Depending upon the capital category to which an institution is assigned, the regulators’ corrective powers include: (i) requiring the
institution to submit a capital restoration plan; (ii) limiting the institution’s asset growth and restricting its activities; (iii) requiring the institution to issue
additional capital stock (including additional voting stock) or to be acquired; (iv) restricting transactions between the institution and its affiliates; (v) restricting
the interest rate that the institution may pay on deposits; (vi) ordering a new election of directors of the institution; (vii) requiring that senior executive officers
or directors be dismissed; (viii) prohibiting the institution from accepting deposits from correspondent banks; (ix) requiring the institution to divest certain
subsidiaries; (x) prohibiting the payment of principal or interest on subordinated debt; and (xi) ultimately, appointing a receiver for the institution.
Under current regulations, the Bank was “well capitalized” as of December 31, 2025.
Community Reinvestment Act of 1977
The CRA subjects a bank to regulatory assessment to determine if the institution meets the credit needs of its entire community, including low-and moderate-
income neighborhoods served by the bank, and to take that determination into account in its evaluation of any application made by such bank for, among other
things, approval of the acquisition or establishment of a branch or other depository facility, an office relocation, a merger, or the acquisition of shares of capital
stock of another financial institution. The regulatory authority prepares a written evaluation of an institution’s record of meeting the credit needs of its entire
community and assigns a rating. These ratings are “Outstanding,” “Satisfactory,” “Needs Improvement,” and “Substantial Non-Compliance.” Institutions with
ratings lower than “Satisfactory” may be restricted from engaging in the aforementioned activities. Management believes the Bank has taken and takes
significant actions to comply with the CRA and it received a “Satisfactory” rating in its most recent review by federal regulators with respect to its compliance
with the CRA.
On October 24, 2023, the OCC, the Board of Governors of the Federal Reserve System, and the FDIC released a final rule that significantly changes how all
but the smallest banks will be evaluated for compliance with the CRA. Under the new regulations, banks with $2 billion or more in assets will be evaluated
under a Retail Lending Test, a Retail Services and Products Test, a Community Development Financing Test, and a Community Development Services Test.
Banks with total assets of $600 million or more and less than $2 billion will be evaluated under the Retail Lending Test and, at the bank's option, either the
current Intermediate Bank Community Development Test or the new Community Development Financing Test. The final rule became effective on April 1,
2024 with staggered compliance dates of January 1, 2026 and January 1, 2027. On July 16, 2025, the OCC, the Board of Governors of the Federal Reserve
System, and the FDIC issued a proposal to rescind the CRA final rule issued in October 2023 and to replace it with the prior CRA regulations. The prior CRA
regulations currently remain in effect.
BSA and AML
Under the BSA, financial institutions are required to monitor and report unusual or suspicious account activity that might signify money laundering, tax
evasion, or other criminal activities, as well as transactions involving the transfer or withdrawal of amounts in excess of prescribed limits. The BSA is
sometimes referred to as an “anti-money laundering” law (“AML”). Several AML acts, including provisions in Title III of the USA PATRIOT Act of 2001,
have been enacted to amend the BSA. Under the USA PATRIOT Act, financial institutions are subject to prohibitions against specified financial transactions
and account relationships as well as enhanced due diligence and “know your customer” standards in their dealings with financial institutions and foreign
customers.
In addition, under the USA PATRIOT Act, the Secretary of the U.S. Department of the Treasury ("Treasury") has adopted rules addressing a number of related
issues, including increasing the cooperation and information sharing between financial institutions, regulators, and law enforcement authorities regarding
individuals, entities, and organizations engaged in, or reasonably suspected based on credible evidence of engaging in, terrorist acts or money laundering
activities. Any financial institution complying with these rules will not be deemed to violate the privacy provisions of the Gramm-Leach-Bliley Act that are
discussed below. Finally, under the regulations of the Office of Foreign Asset Control ("OFAC") financial institutions are required to monitor and block
transactions with certain “specially designated nationals” who OFAC has determined pose a risk to U.S. national security.
Incentive Compensation
LCNB is subject to regulatory rules and guidance regarding employee incentive compensation policies intended to ensure that incentive-based compensation
does not undermine the safety and soundness of the institution by encouraging excess risk-taking. LCNB's incentive compensation arrangements must provide
employees with incentives that appropriately balance risk and reward and do not encourage imprudent risk, be compatible with effective controls and risk
managements, and be supported by strong corporate governance, including active and effective oversight by LCNB's board of directors.
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LCNB CORP. AND SUBSIDIARIES
Consumer Laws and Regulations
LCNB is also subject to certain consumer laws and regulations that are designed to protect consumers in transactions with banks. While the following list is not
exhaustive, these laws and regulations include the Truth in Lending Act, the Truth in Savings Act, the Electronic Funds Transfer Act, the Expedited Funds
Availability Act, the Equal Credit Opportunity Act, The Fair and Accurate Credit Transactions Act, The Real Estate Settlement Procedures Act, and the Fair
Housing Act, among others. These laws and regulations, among other things, prohibit discrimination on the basis of race, gender, or other designated
characteristics and mandate various disclosure requirements and regulate the manner in which financial institutions must deal with customers when taking
deposits or making loans to such customers. These and other laws also limit finance charges or other fees or charges earned for offering various services.
LCNB must comply with the applicable provisions of these consumer protection laws and regulations as part of its ongoing customer relations.
Consumer Privacy
State and federal banking regulators have issued various policy statements emphasizing the importance of technology risk management and supervision in
evaluating the safety and soundness of depository institutions with respect to banks that contract with outside vendors to provide data processing and core
banking functions. The use of technology-related products, services, delivery channels, and processes exposes a bank to various risks, particularly operational,
privacy, security, strategic, reputation, and compliance risk. Banks are generally expected to prudently manage technology-related risks as part of their
comprehensive risk management policies by identifying, measuring, monitoring, and controlling risks associated with the use of technology.
Under Section 501 of the Gramm-Leach-Bliley Act, the federal banking agencies have established appropriate standards for financial institutions regarding the
implementation of safeguards to ensure the security and confidentiality of customer records and information, protection against any anticipated threats or
hazards to the security or integrity of such records, and protection against unauthorized access to or use of such records or information in a way that could
result in substantial harm or inconvenience to a customer. Among other matters, the rules require each bank to implement a comprehensive written information
security program that includes administrative, technical, and physical safeguards relating to customer information.
Under the Gramm-Leach-Bliley Act, a financial institution must provide its customers with a notice of privacy policies and practices. Section 502 prohibits a
financial institution from disclosing nonpublic personal information about a customer to nonaffiliated third parties unless the institution satisfies various notice
and opt-out requirements and the customer has not elected to opt out of the disclosure. Under Section 504, the agencies are authorized to issue regulations as
necessary to implement notice requirements and restrictions on a financial institution’s ability to disclose nonpublic personal information about customers to
nonaffiliated third parties. Under the final rule the regulators adopted, all banks must develop initial and annual privacy notices which describe in general terms
the bank’s information sharing practices. Banks that share nonpublic personal information about customers with nonaffiliated third parties must also provide
customers with an opt-out notice and a reasonable period of time for the customer to opt out of any such disclosure, with certain exceptions. Limitations are
placed on the extent to which a bank can disclose an account number or access code for credit card, deposit, or transaction accounts to any nonaffiliated third
party for use in marketing.
Cybersecurity
In 2015, Federal regulators issued two statements regarding cybersecurity: (i) a statement indicating that financial institutions should design multiple layers of
security controls to establish lines of defense and to ensure that their risk management processes also address the risk posed by compromised customer
credentials, including security measures to reliably authenticate customers accessing internet-based services of the financial institutions; and (ii) a statement
indicating the expectation of a financial institution's management to maintain a sufficient business continuity planning process to ensure rapid recovery,
resumption and maintenance of the financial institution's operations after a cyber-attack involving destructive malware. A financial institution is also expected
to develop appropriate processes to: (a) enable recovery of data and business operations, (b) address rebuilding network capabilities, and (c) restore data if the
financial institution or any of its critical service providers fall victim to this type of cyber-attack. If the Company does not comply with this regulatory
guidance, it could be subject to various regulatory sanctions, as well as financial penalties.
In November 2021, federal banking agencies approved a final rule requiring banking agencies to notify regulators of any “significant computer-security
incident” as soon as possible and no later than 36 hours after a determination that such an incident occurred, with compliance required by May 2022. In
addition, banks must notify at least one designated point of contact at any affected customer as soon as possible when the bank experiences any computer-
security incident that has disrupted or degraded, or is reasonably likely to materially disrupt or degrade, covered services provided to such customer for four or
more hours. The bank and holding company are required to determine whether an incident arises to the level of requiring notification.
In April 2005, federal regulators issued guidance requiring financial institutions to develop and implement a response program designed to address incidents of
unauthorized access to sensitive customer information maintained by the financial institution or its service provider. The guidance requires several elements to
be included in an institution’s response program including notifications to an institution’s primary federal regulator as soon as possible when the institution
becomes aware of an incident involving unauthorized access to or use of sensitive customer information; and notification to its customers when, after a
reasonable investigation, the financial institution determines that misuse of the information has occurred or it is reasonably possible that misuse will occur.
State regulators have also been increasingly active in implementing data privacy and cybersecurity standards and regulations. Recently, several states have
adopted regulations requiring certain financial institutions to implement cybersecurity programs and providing detailed requirements with respect to these
programs, including data encryption requirements. Many states have also recently implemented or modified their data breach notification and data privacy
requirements. Many, but not all, state breach notification laws expressly exempt entities that are subject to federal regulatory breach notification mandates The
Company continues to monitor developments in the states in which its customers are located.
The Cybersecurity Information Sharing Act (“CISA”) is intended to improve cybersecurity in the U.S. by enhanced sharing of information about security
threats among the U.S. government and private sector entities, including financial institutions, and empowers the Cybersecurity and Infrastructure Security
Agency (“CISA Agency”) to oversee this information-sharing process. The CISA also authorizes companies to monitor their own systems notwithstanding any
other provision of law and allows companies to carry out defensive measures on their own systems from cyber-attacks or other information or security
breaches. The law includes liability protections for companies that share cyber-threat information with third parties so long as such sharing activity is conducted
in accordance with the CISA. Although the CISA originally expired on September 30, 2025 and was temporarily reauthorized to remain in effect through
September 30, 2026, the long-term status of the CISA remains uncertain pending further action by the U.S. Congress. In addition, the enactment of the Cyber
Incident Reporting for Critical Infrastructure Act (“CIRCIA”) in 2022, once rulemaking is complete, will require, among other things, certain companies to
report significant cyber incidents to the CISA Agency within 72 hours from the time the company reasonably believes the incident occurred (and within 24
hours of making a ransom payment as a result of a ransomware attack). On April 4, 2024, the CISA Agency proposed a rule under the CIRCIA that would
clarify the scope of cyber incidents to be reported and would further define covered entities subject to the CIRCIA to expressly include companies in the
financial services industry that are required to report cyber incidents to their primary federal regulators. Final rulemaking for CIRCIA has been extended to
May 2026.
On July 26, 2023, the SEC adopted final rules that require public companies to promptly disclose material cybersecurity incidents in a Current Report on Form
8-K and detailed information regarding their cybersecurity risk management, strategy, and governance on an annual basis in its Annual Reports on Form 10-K.
Companies are required to report on Form 8-K any cybersecurity incident they determine to be material within four business days of making that determination.
These SEC rules, and any other regulatory guidance, are in addition to notification and disclosure requirements under state and federal banking law and
regulations.
See Item 1C for further discussion related to the Company's risk management, strategy, and governance of cybersecurity.
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LCNB CORP. AND SUBSIDIARIES
Dodd-Frank Act and Regulatory Relief Act
The Dodd-Frank Act, which was enacted in July 2010, effected a fundamental restructuring of federal banking regulation. In addition to those provisions
discussed above, among the Dodd-Frank Act provisions that have affected LCNB are the following:
•
creation of a new Financial Stability Oversight Council to identify systemic risks in the financial system and gives federal regulators new authority to
take control of and liquidate financial firms;
•
elimination of the federal statutory prohibition against the payment of interest on business checking accounts;
•
prohibition on state-chartered banks engaging in derivatives transactions unless the loans to one borrower of the state in which the bank is chartered
takes into consideration credit exposure to derivative transactions. For this purpose, derivative transactions include any contract, agreement, swap,
warrant, note or option that is based in whole or in part on the value of, any interest in, or any quantitative measure or the occurrence of any event
relating to, one or more commodity securities, currencies, interest or other rates, indices, or other assets;
•
requirement that the amount of any interchange fee charged by a debit card issuer with respect to a debit card transaction must be reasonable and
proportional to the cost incurred by the issuer. On June 29, 2011, the Federal Reserve Board set the interchange rate cap at $0.21 per transaction
plus an ad valorem component of 5 basis points multiplied by the value of the transaction. While the restrictions on interchange fees do not apply to
banks that, together with their affiliates, have assets of less than $10 billion, the rule could affect the competitiveness of debit cards issued by smaller
banks; and
•
restrictions under the Volcker Rule of the Company’s ability to engage in proprietary trading and to invest in, sponsor and engage in certain types of
transactions with certain private funds. The Company had until July 15, 2015 to fully conform to the Volcker Rule's restrictions.
Management continues to review actively the provisions of the Dodd-Frank Act and assess its probable impact on its business, financial condition, and results
of operations.
The Economic Growth, Regulatory Relief, and Consumer Protection Act (the "Regulatory Relief Act") was signed into law on May 24, 2018. The Regulatory
Relief Act scales back certain aspects of the Dodd-Frank Act and provides other regulatory relief for financial institutions. Certain provisions affecting LCNB
include:
•
Simplifying regulatory capital requirements by providing that banks with less than $10 billion in total consolidated assets that meet a to-be-developed
community bank leverage ratio of tangible equity to average consolidated assets between eight and ten percent will be deemed to be in compliance
with risk-based capital and leverage requirements.
•
Changing how federal financial institution regulators classify certain municipal securities assets under the liquidity coverage ratio rule;
•
Exempting certain reciprocal deposits from treatment as brokered deposits under the FDIC's brokered deposits rule;
•
Exempting banks with less than $10 billion in total consolidated assets from certain provisions under the Volcker Rule; and
•
Authorizing new banking procedures to better facilitate online transactions.
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LCNB CORP. AND SUBSIDIARIES
Consumer Financial Protection Bureau
The Dodd-Frank Act created an independent federal agency called the Consumer Financial Protection Bureau, which is granted broad rulemaking, supervisory,
and enforcement powers under various federal consumer financial protection laws, including the Equal Credit Opportunity Act, Truth in Lending Act, Real
Estate Settlement Procedures Act, Fair Credit Reporting Act, Fair Debt Collection Act, the Consumer Financial Privacy provisions of the Gramm-Leach-Bliley
Act, and certain other statutes. The CFPB has examination and primary enforcement authority with respect to depository institutions with $10 billion or more
in assets. Smaller institutions are subject to rules promulgated by the CFPB but continue to be examined and supervised by federal banking regulators for
consumer compliance purposes. The Dodd-Frank Act permits states to adopt consumer protection laws and standards that are more stringent than those adopted
at the federal level and, in certain circumstances, permits the state attorney general to enforce compliance with both the state and federal laws and regulations.
The CFPB has finalized rules relating to, among other things, remittance transfers under the Electronic Fund Transfer Act, which requires companies to provide
consumers with certain disclosures before the consumer pays for a remittance transfer. These rules became effective in October 2013. The CFPB has also
amended certain rules under Regulation C relating to home mortgage disclosure to reflect a change in the asset-size exemption threshold for depository
institutions based on the annual percentage change in the Consumer Price Index for Urban Wage Earners and Clerical Workers. In addition, on January 10,
2013, the CFPB released its final “Ability-to-Repay/Qualified Mortgage” rules, which amended the Truth in Lending Act (Regulation Z). Regulation Z
prohibits a creditor from making a higher-priced mortgage loan without regard to the consumer’s ability to repay the loan. The final amended rule implemented
sections 1411 and 1412 of the Dodd-Frank Act, which generally require creditors to make a reasonable, good faith determination of a consumer’s ability to
repay any consumer credit transaction secured by a dwelling (excluding an open-end credit plan, timeshare plan, reverse mortgage, or temporary loan) and
establishes certain protections from liability under this requirement for “qualified mortgages.” The final rule also implemented section 1414 of the Dodd-Frank
Act, which limits prepayment penalties. Finally, the final rule requires creditors to retain evidence of compliance with the rule for three years after a covered
loan is consummated. This rule became effective January 10, 2014.
Monetary Policy
Banks are affected by the credit policies of monetary authorities, including the Federal Reserve Board, that affect the national supply of credit. The Federal
Reserve Board regulates the supply of credit in order to influence general economic conditions, primarily through open market operations in United States
government obligations, varying the discount rate on financial institution borrowings, varying reserve requirements against financial institution deposits, and
restricting certain borrowings by financial institutions and their subsidiaries. The monetary policies of the Federal Reserve Board have had a significant effect
on the operating results of banks in the past and are expected to continue to do so in the future.
Regulatory Reform and Legislation
From time to time, various legislative and regulatory initiatives are introduced in Congress and state legislatures, as well as by regulatory agencies. Such
initiatives may include proposals to expand or contract the powers of bank holding companies and depository institutions or proposals to substantially change
the financial institution regulatory system. Such legislation could change banking statutes and the operating environment of LCNB and the Bank in substantial
and unpredictable ways. If enacted, such legislation could increase or decrease the cost of doing business, limit or expand permissible activities, or affect the
competitive balance among banks, savings associations, credit unions, and other financial institutions. LCNB and the Bank cannot predict whether any such
legislation will be enacted, and, if enacted, the effect that it, or any implementing regulations, would have on the financial condition or results of operations of
LCNB and the Bank. A change in statutes, regulations, or regulatory policies applicable to LCNB and the Bank could have a material effect on LCNB’s
business, financial condition, and results of operations. At this time, LCNB and the Bank do not expect material costs and effects to result from any federal,
state, or local environmental laws that may be enacted.
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LCNB CORP. AND SUBSIDIARIES
Human Capital
As of December 31, 2025, LCNB employed 328 full-time and 35 part-time employees working throughout the ten Ohio counties in which LCNB operates.
LCNB considers these individuals the most important influence contributing to the Bank’s success and is committed to investing in their ongoing growth and
development.
Through an ongoing collaboration with a local non-profit organization, LCNB's employee council is working to expand education and share experiences; to
acknowledge, celebrate, and encourage various backgrounds, interests, and lifestyles; and to broaden recruitment efforts in order to source untapped potential.
LCNB places a high priority on training and development and has enjoyed a long history of promoting from within the organization, as evidenced by the
executive management team. Through a blend of strong internal talent and new talent, the Bank has been able to successfully navigate the ongoing challenges
related to talent depth. As LCNB grows and develops new products and services, the Bank continues to seek innovative, cost effective, and efficient ways to
educate and develop its employees. Through a blend of online education, interactive training sessions, and experiential learning, LCNB provides opportunities
for those who desire to fine-tune existing skills as well as those who desire to prepare for the next steps along their career path.
LCNB values and invests in overall employee well-being and satisfaction, providing compensation and benefits that are competitive with those provided by
other financial institutions and major employers within LCNB's market area. In addition to traditional benefits, which include health, dental, life, vision, and
long-term disability insurance, LCNB offers other voluntary coverages. Some of these benefits are paid by the Bank, others are shared cost, and some are
employee-paid. LCNB also provides all employees access to a personal care advocate through the LCNB Care Center. Advocates provide independent,
confidential support in navigating all aspects of health care benefits. Additional benefits include a matching 401(k) plan, a performance bonus plan, and tuition
reimbursement plans.
LCNB has an active Wellness Committee comprised of employees from across the Bank. The committee promotes activities, education, and consultation that
improve the health and lives of employees and their families. A no-cost Employee Assistance Program (EAP) offers benefits that are available to both full-time
and part-time employees and members of their households. Services include 24/7 access to licensed mental health professionals, ongoing personal coaching
sessions, and referrals to additional support resources based on needs. As part of evolving wellness efforts, LCNB provides employees with an interactive
online Health and Wellness Portal, which offers employees access to personalized one-on-one sessions with a certified health coach, trainer, licensed dietician,
or registered nurse.
Fostering and enhancing a culture of open and transparent communication remains extremely important to the Bank. In 2020, the Bank initiated quarterly Town
Hall Meetings and weekly informational emails from senior management that allowed all employees to participate and receive information. The Bank will do
the same in 2026 along with some smaller scheduled group meetings to further communicate important initiatives and information. In addition, senior
management is available to participate in department and branch staff meetings upon request.
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LCNB CORP. AND SUBSIDIARIES
Availability of Financial Information
LCNB files unaudited quarterly financial reports on Form 10-Q, annual financial reports on Form 10-K, current reports on Form 8-K, and amendments to these
reports are filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 with the SEC. Copies of these reports are available free
of charge in the shareholder information section of the Bank's website, www.lcnb.com, as soon as reasonably practicable after they are electronically filed or
furnished to the SEC, or by writing to:
Andrew M. Wallace
Executive Vice President, CFO
LCNB Corp.
2 North Broadway
P.O. Box 59
Lebanon, Ohio 45036
The SEC also maintains an internet site (www.sec.gov) that contains reports, proxy and information statements, and other information regarding registrants that
file reports electronically, as LCNB does. LCNB's filings are available on the SEC's website under the ticker name "LCNB".
STATISTICAL INFORMATION
The following tables and certain tables appearing in Item 7, Management's Discussion and Analysis present additional statistical information about LCNB
Corp. and its operations and financial condition. They should be read in conjunction with the consolidated financial statements and related notes and the
discussion included in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, and Item 7A, Quantitative and
Qualitative Disclosures about Market Risk.
Distribution of Assets, Liabilities and Shareholders' Equity; Interest Rates and Interest Differential
The table presenting an average balance sheet, interest income and expense, and the resultant average yield for average interest-earning assets and average
interest-bearing liabilities is included in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations.
The table analyzing changes in interest income and expense by volume and rate is included in Item 7, Management's Discussion and Analysis of Financial
Condition and Results of Operations.
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LCNB CORP. AND SUBSIDIARIES
Contractual maturities of debt securities at December 31, 2025, were as follows. Actual maturities may differ from contractual maturities when issuers have
the right to call or prepay obligations. Weighted average yield is based on amortized cost.
Available-for-Sale
Held-to-Maturity
Weighted
Weighted
Amortized
Fair
Average
Amortized
Fair
Average
Cost
Value
Yield
Cost
Value
Yield
(Dollars in thousands)
U.S. Treasury notes:
Within one year
$
7,043
6,884
1.01%
—
—
—%
One to five years
45,583
43,574
1.02%
—
—
—%
Five to ten years
—
—
—%
—
—
—%
After ten years
—
—
—%
—
—
—%
Total U.S. Treasury notes
52,626
50,458
1.19%
—
—
—%
U.S. Agency notes:
Within one year
17,439
17,256
1.19%
—
—
—%
One to five years
49,341
46,816
1.09%
—
—
—%
Five to ten years
8,519
8,332
3.59%
—
—
—%
After ten years
—
—
—%
—
—
—%
Total U.S. Agency notes
75,299
72,404
1.40%
—
—
—%
Corporate bonds:
Within one year
—
—
—%
—
—
—%
One to five years
—
—
—%
—
—
—%
Five to ten years
11,013
10,733
5.62%
—
—
—%
After ten years
1,000
1,000
7%
—
—
—%
Total corporate bonds
12,013
11,733
5.74%
—
—
—%
Municipal securities, tax-exempt (1):
Within one year
1,030
1,030
4.95%
279
274
2.24%
One to five years
2,431
2,343
2.19%
772
730
3.50%
Five to ten years
730
632
3.69%
7,960
7,643
4.92%
After ten years
—
—
—%
4,102
3,818
5.25%
Total Municipal securities
4,191
4,005
3.13%
13,113
12,465
4.88%
Municipal securities, taxable:
Within one year
1,195
1,173
1.29%
—
—
0.00%
One to five years
28,996
27,477
2.10%
112
108
3.85%
Five to ten years
2,707
2,504
2.49%
172
154
2.30%
After ten years
—
—
—%
2,683
2,386
6.45%
Total Municipal securities
32,898
31,154
2.10%
2,967
2,648
6.11%
U.S. Agency mortgage-backed securities
68,085
62,517
2.32%
—
—
—%
Totals
$
245,112
232,271
1.92%
16,080
15,113
5.11%
(1) Yields on tax-exempt obligations are computed on a taxable-equivalent basis based upon a 21.0% statutory Federal income tax rate.
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 December 31, 2025.
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LCNB CORP. AND SUBSIDIARIES
Loan Portfolio
The following table summarizes loan maturities and sensitivities to interest rate change at December 31, 2025 (in thousands):
Commercial,
Commercial
Secured by Residential
& Industrial
Real Estate Real Estate
Consumer Agricultural
Other
Totals
Maturing in one year or less
$
25,735
76,139
5,863
1,649
13,046
210
122,642
Maturing after one year through five years
61,106
179,222
14,510
12,250
1,404
—
268,492
Maturing after five years through 15 years
17,264
454,793
114,075
3,056
1,249
—
590,437
Maturing after 15 years
—
388,057
335,903
—
—
—
723,960
Totals
$
104,105
1,098,211
470,351
16,955
15,699
210
1,705,531
Loans maturing beyond one year:
Fixed rate
$
33,378
289,704
208,900
15,306
1,825
—
549,113
Variable rate
44,992
732,368
255,588
—
828
—
1,033,776
Totals
$
78,370
1,022,072
464,488
15,306
2,653
—
1,582,889
Allocation of the Allowance for Credit Losses on Loans
The following table presents the allocation of the allowance for credit losses on loans:
At December 31,
2025
2024
2023
Percent
Percent
Percent
of Loans
of Loans
of Loans
in Each
in Each
in Each
Category
Category
Category
to Total
to Total
to Total
Amount
Loans
Amount
Loans
Amount
Loans
(Dollars in thousands)
Commercial and industrial
$
2,463
6.1%
1,573
6.9%
1,039
7.0%
Commercial, secured by real estate
6,514
64.4%
6,537
64.6%
5,414
64.3%
Residential real estate
4,492
27.6%
3,634
26.5%
3,816
26.6%
Consumer
188
1.0%
220
1.2%
238
1.5%
Agricultural
30
0.9%
24
0.8%
18
0.6%
Other loans, including deposit overdrafts
17
—%
13
—%
—
—%
Total
$
13,704
100.0%
12,001
100.0%
10,525
100.0%
Ratio of the allowance for credit losses to total loans
outstanding
0.80%
0.70%
0.61%
Ratio of the allowance for credit losses to total non-
accrual loans
763.88%
265.04%
13,090.42%
Deposits
The statistical information regarding average amounts and average rates paid for the deposit categories is included in the "Distribution of Assets, Liabilities and
Shareholders' Equity" table included in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations.
The estimated amount of uninsured deposits including related interest accrued and unpaid was $304.1 million and $245.8 million at December 31, 2025 and
2024, respectively.
The following table presents an estimate of the contractual maturities of time deposits that exceed the FDIC insurance limit of $250 thousand at December 31,
2025:
(In thousands)
Maturity within 3 months
$
8,005
After 3 but within 6 months
9,491
After 6 but within 12 months
27,197
After 12 months
6,688
$
51,381
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LCNB CORP. AND SUBSIDIARIES
Item 1A. Risk Factors
There are risks inherent in LCNB’s operations, many beyond management’s control, which may adversely affect its financial condition and results from
operations and should be considered in evaluating the Company. Credit, market, operational, liquidity, interest rate and other risks are described elsewhere in
this report. Other risk factors may include the items described below.
Risks Related to Economic and Market Conditions
Weakness in the economy and in the real estate market, including weakness specific to LCNB's geographic footprint, may negatively affect its financial
condition and earnings.
LCNB’s success depends, in part, on economic and political conditions, local and national, as well as governmental fiscal and monetary policies. Conditions
such as inflation, recession, unemployment, changes in interest rates, fiscal and monetary policy, prolonged government shutdown, tariffs and trade policy
including impositions of retaliatory tariffs, and other factors beyond LCNB’s control may affect its deposit levels and composition, demand for loans, the
ability of borrowers to repay their loans, and the value of the collateral securing the loans it makes. Economic turmoil in different regions of the world affect
the economy and stock prices in the United States, which can affect LCNB’s earnings and capital and the ability of its customers to repay loans. Due to
LCNB’s volume of real estate loans, declining real estate values could affect the value of property used as collateral as well as LCNB’s ability to sell the
collateral upon foreclosure. In 2025, the federal government was shut down from October 1, 2025 to November 12, 2025. The economic impact of a future
long-spanning government shutdown is inherently uncertain and could have a material effect on LCNB’s business, financial condition, and operations.
If the strength of the United States economy in general and the strength of the local economies in which LCNB conducts operations weakens, this could result
in, among other things, a deterioration of credit quality or a reduced demand for credit, including a resultant effect on the loan portfolio and allowance for
credit losses. These factors could also result in higher delinquencies and greater charge-offs in future periods, which would materially affect LCNB's financial
condition and results of operations.
There is no assurance that LCNB's loan borrowers will not experience financial difficulties or that properties securing loans will not suffer deterioration in
value. The fluctuations in national, regional and local economic conditions, including those related to local residential, commercial real estate and construction
markets, may result in increased charge-offs. These fluctuations are not predictable, cannot be controlled, and may have a material impact on LCNB's
operations and financial condition even if other favorable events occur.
Declining values of real estate, increases in unemployment, insurance market disruptions, and the related effects on local economies may increase LCNB's
credit losses, which would negatively affect financial results.
LCNB offers a variety of secured loans, including commercial lines of credit, commercial term loans, real estate, construction, home equity, consumer, and
other loans. Many loans are secured by real estate (both residential and commercial) within LCNB's market area. A major change in the real estate market, such
as deterioration in the value of collateral or in the local or national economy, could affect LCNB's ability to liquidate foreclosed property, which in turn could
impact LCNB's results of operations and financial condition. Additionally, increases in unemployment may also affect the ability of certain clients to repay
loans and the financial results of commercial clients in localities with higher unemployment may result in loan defaults and foreclosures and may impair the
value of loan collateral. Loan defaults and foreclosures are unavoidable in the banking industry. LCNB cannot fully eliminate credit risk and, as a result, credit
losses may increase in the future.
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Risks Related to LCNB's Operations
LCNB’s loan portfolio includes a substantial amount of commercial and industrial loans and commercial real estate loans, which may have more risks than
residential or consumer loans.
LCNB’s commercial and industrial and commercial real estate loans comprise a substantial portion of its total loan portfolio. These loans generally carry larger
loan balances and can involve a greater degree of financial and credit risk than home equity, residential mortgage, or consumer loans. The potential for
increased financial and credit risk associated with these types of loans is a result of several factors, including the concentration of principal in a limited number
of loans, the size of loan balances, and the effects of general economic conditions on businesses and loans secured by income-producing properties. In order to
mitigate these heightened risks, LCNB continually evaluates and monitors these types of loans.
Approximately 90.2% of our total commercial loans or about 64.4% of our total loans relate to commercial real estate. The repayment of loans secured by
commercial real estate is often dependent upon the successful operation, development, or sale of the related real estate or commercial business and may,
therefore, be subject to adverse conditions in the real estate market or economy. If the cash flow from operations is reduced, the borrower’s ability to repay the
loan may deteriorate. In such cases, LCNB may take actions to protect its financial interest in the loan. Such actions may include foreclosure on the real estate
securing the loan, taking possession of other collateral that may have been pledged as security for the loan, or modifying the terms of the loan. If foreclosed
on, commercial real estate is often unique and may be difficult to liquidate.
LCNB’s value of intangible assets may decline, due to continued competition for deposits and other factors.
As of December 31, 2025, LCNB had total core deposit and other intangibles, net totaling $9.271 million. Core deposit and other intangibles net decreased due
to amortization of core deposit and mortgage servicing rights intangibles. A significant decline in LCNB’s expected future cash flows, a significant adverse
change in the business climate, slower growth rates or a significant and sustained decline in the price of LCNB common stock may necessitate taking charges in
the future related to the impairment of LCNB’s deposit intangible assets. Additionally, increased competition for deposits, whether from competitive financial
institutions or from nonbank financial institutions or competitive technologies, like cryptocurrency, could lead to further decreases in core deposits.
Competition for deposits will likely continue to increase as technology evolves. If LCNB were to conclude that a future write-down of core deposit intangible
assets is necessary, LCNB would record the appropriate charge, which could have a negative effect on LCNB’s business, financial condition and results of
operations.
Future growth and expansion opportunities may contain risks that could negatively affect us.
From time to time, LCNB may seek to acquire other financial institutions or parts of those institutions or may open new branch offices. It may also consider
and enter into new lines of business or offer new products or services. Such activities involve a number of risks, which may include potential inaccuracies in
estimates and judgments used to evaluate the expansion opportunity, diversion of management and employee attention, lack of experience in a new market or
product or service, and difficulties in integrating a future acquisition or introducing a new product or service. There is no assurance that such growth or
expansion activities will be successful or that they will achieve desired profitability levels.
Liquidity risk could impair LCNB's ability to fund operations and could jeopardize financial results.
LCNB faces liquidity risk, which is the possibility that LCNB may not be able to meet its obligations as they come due, both to creditors and customers, or
may not be able to fully capitalize on growth opportunities because of a lack of liquidity. A lack of liquidity may be caused by an inability to favorably
liquidate assets or obtain adequate financing on a timely basis, at a reasonable cost and on other reasonable terms, and within acceptable risk tolerances.
LCNB’s controls and procedures may fail or be circumvented.
Management regularly reviews and updates LCNB’s internal controls, disclosure controls and procedures, and corporate governance policies and procedures.
Any system of controls, however well designed and operated, is based, in part, on certain assumptions and can provide only reasonable, not absolute,
assurances that the objectives of the system are met. Any failure or circumvention of LCNB’s controls and procedures or failure to comply with regulations
related to its controls and procedures could have a material adverse effect on LCNB’s business, results of operations, and financial condition.
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LCNB’s information systems may experience an interruption, cyberattack, or other breach in security.
LCNB relies heavily on electronic communications and information systems to conduct its business. Although significant resources are devoted to maintaining
and regularly updating LCNB’s data systems, there can be no assurance that these security measures will provide absolute security. Any failure, interruption,
cyberattack, email phishing scam, or other breach in security of these systems could result in failures or disruptions in LCNB’s customer relationship
management, general ledger, deposit, loan, and other systems. Emerging technologies, such as artificial intelligence, may further increase the risk of a cyber-
attack. While LCNB has policies and procedures designed to prevent or limit the effect of the failure, interruption, cyberattack, or other security breach of its
information systems, there can be no assurance that any such occurrences will not occur or, if they do occur, that they will be adequately addressed. The
occurrence of any failures, interruptions, cyberattacks, phishing scams, or other security breaches of LCNB’s information systems could significantly disrupt
LCNB's operations, allow misappropriation of LCNB’s confidential information, allow misappropriation of customer confidential information, damage
LCNB’s reputation, result in a loss of customer business, subject LCNB to additional regulatory scrutiny, or expose LCNB to significant civil litigation and
possible financial liability, any of which could have a material adverse effect on its financial condition and results of operations.
LCNB’s ability to pay cash dividends is limited.
LCNB is dependent upon the earnings of the Bank for funds to pay dividends on its common shares. The payment of dividends by LCNB and the Bank is
subject to certain regulatory restrictions. As a result, any payment of dividends in the future will be dependent, in large part, on the ability of LCNB and the
Bank to satisfy these regulatory restrictions and on the Bank’s earnings, capital levels, financial condition, and other factors. Although LCNB’s financial
earnings and financial condition have allowed it to declare and pay periodic cash dividends to shareholders, there can be no assurance that the current dividend
policy or the amount of dividend distributions will continue in the future.
LCNB must compete to hire and retain employees.
LCNB’s success depends, in large part, on its ability to attract, retain, motivate, and develop key employees. Competition for key employees is ongoing and
LCNB may not be able to attract, retain, or hire the key employees who are wanted or needed, which may also negatively impact its ability to execute identified
business strategies. Because LCNB operates primarily in Southwestern and South Central Ohio, its hiring pool is also limited by those markets. Competition
for key employees may require LCNB to offer higher compensation to attract or retain key employees, which may adversely affect salaries and employee
benefit costs.
Various restrictions on the compensation which may be paid to certain executive officers were imposed under the Dodd-Frank Act and other legislation and
regulations. In addition, LCNB’s incentive compensation structure is subject to review by regulators, who may identify deficiencies in the structure or issue
additional guidance on LCNB’s compensation practices, causing LCNB to make changes that may affect its ability to offer competitive compensation to these
individuals or that place it at a disadvantage to non-financial service competitors. LCNB’s ability to attract and retain talented employees may be affected by
these restrictions or any new executive compensation limits or regulations.
Risk factors related to LCNB’s Wealth Management business.
LCNB's Wealth Management business is subject to intense competition, general market risk, and inherent risks to the business of managing trust accounts.
Competition for wealth management business is intense. Competitors include other commercial bank and trust companies, brokerage firms, investment
advisory firms, mutual fund companies, accountants, and attorneys.
LCNB’s Wealth Management business is directly affected by conditions in the debt and equity securities markets. The debt and equity securities markets are
affected by, among other factors, domestic and foreign economic conditions, political uncertainties, and the monetary and fiscal policies of the United States
government, all of which are beyond LCNB’s control. Changes in economic conditions may directly affect the economic performance of the trust accounts in
which clients’ assets are invested. A decline in the fair value of the trust accounts caused by a decline in general economic conditions directly affects LCNB’s
trust fee income because such fees are primarily based on the fair value of the trust accounts. In addition, a sustained decrease in the performance of the trust
accounts or a lack of sustained growth may encourage clients to seek alternative investment options.
The management of trust accounts is subject to the risk of mistaken distributions, poor investment choices, and miscellaneous other incorrect decisions. Such
mistakes may give rise to surcharge actions by beneficiaries, with damages substantially in excess of the fees earned from management of the accounts.
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General Risk Factors
Failure to meet regulatory capital requirements could adversely affect LCNB’s business.
The Bank is subject to regulations requiring it to satisfy minimum capital requirements, see Note 15 - Regulatory Matters and Impact on Payment of Dividends
of the consolidated financial statements for more information. While management expects that LCNB's capital ratios under Basel III will continue to exceed
well capitalized minimum capital requirements, there can be no assurance that such will be the case. If LCNB is unable to meet or exceed applicable minimum
capital requirements, it may become subject to supervisory actions including, but not limited to, requirements to raise additional capital or dispose of assets, the
loss of its financial holding company status, limitations on its ability to engage in new acquisitions or new activities, or other informal or formal regulatory
enforcement actions.
Changes in economic or political conditions could adversely affect LCNB's earnings.
LCNB’s financial performance generally, and in particular the ability of borrowers to pay interest on and repay principal of outstanding loans and the value of
collateral securing those loans, as well as demand for loans and other products and services that LCNB offers, is highly dependent upon the business
environment in the markets where LCNB operates and in the United States as a whole. Recessions, periods of unemployment, changes in interest rates,
inflationary pressures, money supply, tariffs and trade policy including retaliatory tariffs, and other factors beyond LCNB’s control may adversely affect its
asset quality, deposit levels, loan demand, and earnings. Inflationary pressures directly affect the level of interest rates earned from loans and investments and
paid for deposits and borrowings. In addition, salaries and employee benefits and other non-interest expenses tend to increase during periods of inflation.
Adverse changes in the economy may have a negative effect on the ability of borrowers to make timely repayments of their loans, increasing the risk of loan
defaults and losses. Because LCNB has a significant amount of commercial and residential real estate loans, decreases in real estate values could adversely
affect the value of property used as collateral. As a result, LCNB may need to increase its allowance for credit losses, negatively affecting earnings.
LCNB’s earnings are significantly affected by market interest rates.
Fluctuations in interest rates may negatively impact LCNB’s profitability. A primary source of income from operations is net interest income, which is equal to
the difference between interest income earned on loans and investment securities and the interest paid for deposits and other borrowings. These rates are highly
sensitive to many factors beyond LCNB’s control, including general economic conditions, the slope of the yield curve (that is, the relationship between short
and long-term interest rates), and the monetary and fiscal policies of the United States Federal government. For example, the existing Chair of the Federal
Reserve’s term ends on May 15, 2026 and recent political commentary has introduced additional uncertainty about how interest rate policy may evolve under
the new leadership of the Board of Governors later in 2026.
Increases in general interest rates could have a negative impact on LCNB’s results of operations by reducing the ability of borrowers to repay their current loan
obligations. Some residential real estate mortgage loans, most home equity line of credit loans, and many of LCNB’s commercial and industrial loans and
commercial real estate loans have adjustable rates. Borrower inability to make scheduled loan payments due to a higher loan cost could result in increased loan
defaults, foreclosures, and write-offs and may necessitate additions to the allowance for credit losses. In addition, increases in the general level of interest rates
may decrease the demand for new consumer and commercial loans, thus limiting LCNB’s growth and profitability. A general increase in interest rates may also
result in deposit disintermediation, which is the flow of deposits away from banks and other depository institutions into direct investments that have the
potential for higher rates of return, such as stocks, bonds, and mutual funds. If this occurs, LCNB may have to rely more heavily on borrowings as a source of
funds in the future, which could negatively impact its net interest margin.
Gains from sales of mortgage loans may experience significant volatility.
Gains from sales of mortgage loans are highly influenced by the level and direction of mortgage interest rates, real estate activity, and refinancing activity. A
decrease in market interest rates may create a refinancing demand for residential fixed-rate mortgage loans, which may cause an increase in gains from sales of
mortgage loans if LCNB sells these loans in the secondary market. An increase in market interest rates may decrease the demand for refinanced loans and
decrease the gains from sales of mortgage loans recognized in LCNB’s Consolidated Statements of Income. Gains from sales of mortgage loans may also be
impacted by changes in LCNB’s strategy to manage its residential mortgage portfolio. For example, LCNB may occasionally change the proportion of loan
originations that are sold in the secondary market and instead add a greater proportion to its loan portfolio.
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Banking competition is intense.
The banking industry and related financial service providers operate in a highly competitive market. LCNB competes with financial service providers such as
other commercial banks, savings and loan associations, credit unions, mortgage banking firms, Financial Technology or “FinTech” companies including
decentralized finance and cryptocurrency, consumer finance companies, securities brokerage firms, insurance companies, money market mutual funds, and
other financial intermediaries.
Technology has lowered barriers to entry and made it possible for non-banks to offer products and services traditionally provided by banks, such as automatic
transfer and automatic payment systems. Nonfinancial institution competitors may have fewer regulatory constraints and, due to technology related product
delivery systems, a greater access to customers and lower cost structures.
Many of LCNB’s competitors include major financial institutions that have been in business for many years and have established customer bases, broader
geographic service areas, substantially higher regulatory lending limits, and the ability to mount extensive promotional and advertising campaigns. In addition,
credit unions are growing larger due to more flexible membership requirement regulations and are offering more financial services than they legally could in
the past.
LCNB also competes with numerous real estate brokerage firms, some owned by realty companies, for residential real estate mortgage loans. The banking
industry now competes with brokerage firms and mutual fund companies for funds that would have historically been held as bank deposits. Many of these
competitors have fewer regulatory constraints and may have lower cost structures.
If LCNB is unable to attract and retain loan, deposit, brokerage, and Wealth Management customers, its growth and profitability levels may be negatively
impacted.
Economic conditions in LCNB's market areas could adversely affect its financial condition and results of operations.
LCNB conducts its operations from offices that are located in nine Southwestern Ohio counties and Franklin County, Ohio, from which substantially all of its
customer base is drawn. Because of this geographic concentration of operations and customer base, LCNB's financial performance is heavily influenced by
economic conditions in these areas. Any material deterioration in economic conditions in these markets could have material direct or indirect adverse impacts
on LCNB's customers and on LCNB. Such deterioration could increase the number of customers experiencing financial distress, negatively impacting their
ability to obtain new loans or to repay existing loans. As a result, LCNB may experience increases in the levels of impaired loans, increased charge-offs, and
increased provisions for loan losses. Deteriorating economic conditions may also affect the ability of depositors to maintain or add to deposit balances and may
affect the demand for loans, Wealth Management, brokerage, and other products and services offered by LCNB. Such losses and decreased demand could have
material adverse effects on LCNB's financial position, results of operations, and cash flows.
New lines of business or new products and services may subject LCNB to additional risks.
From time to time, LCNB may implement new lines of business or offer new products and services within existing lines of business. There are substantial risks
and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed. In developing and marketing new lines of
business and/or products and services, LCNB may invest significant time and resources. External factors, such as compliance with regulations, competitive
alternatives, and shifting market preferences, may also impact the successful implementation of a new line of business or a new product or service. If LCNB is
unable to successfully manage these risks in the development and implementation of new lines of business or new products or services, it could have a material
adverse effect on LCNB’s business, financial condition, and result of operations.
The allowance for credit losses may be inadequate.
The provision for credit losses is determined by management based upon its evaluation of the amount needed to maintain the allowance for credit losses at a
level considered appropriate in relation to the estimated risk of losses inherent in the portfolio. In addition to historic charge-off percentages, factors taken into
consideration to determine the adequacy of the allowance for credit losses include the nature, volume, and consistency of the loan portfolio, overall portfolio
quality, a review of specific problem loans, the fair value of any underlying collateral, borrowers’ cash flows, and current economic conditions that may affect
borrowers’ ability to make payments. Increases in the allowance result in an expense for the period. By its nature, the evaluation is imprecise and requires
significant judgment. Actual results may vary significantly from management’s assumptions. If, as a result of general economic conditions or a decrease in
asset quality, management determines that additional increases in the allowance for credit losses are necessary, LCNB will incur additional expenses.
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The fair value of LCNB’s investments could decline.
Most of LCNB’s investment securities portfolio is designated as available-for-sale. Accordingly, unrealized gains and losses, net of tax, in the estimated fair
value of the available-for-sale portfolio is recorded as other comprehensive income (loss), a separate component of shareholders’ equity. The fair value of
LCNB’s investment portfolio may decline, causing a corresponding decline in shareholders’ equity. Management believes that several factors will affect the
fair values of the investment portfolio including, but not limited to, changes in interest rates or expectations of changes, the degree of volatility in the securities
markets, inflation rates or expectations of inflation, and the slope of the interest rate yield curve. These and other factors may impact specific categories of the
portfolio differently and the effect any of these factors may have on any specific category of the portfolio cannot be predicted.
State and local governmental authorities may experience deterioration of financial condition due to declining tax revenues, increased demand for services, and
various other factors. To the extent LCNB has any municipal securities in its portfolio from issuers who are experiencing deterioration of financial condition or
who may experience future deterioration of financial condition, the value of such securities may decline and could result in other-than-temporary impairment
charges, which could have an adverse effect on LCNB’s financial condition and results of operations. Additionally, a general, industry-wide decline in the fair
value of municipal securities could significantly affect LCNB’s financial condition and results of operations.
LCNB's investments in equity securities with readily determinable fair values are recorded at fair value with changes in fair value recognized in earnings.
Accordingly, declines in the fair value of LCNB's equity investments will immediately decrease net income.
Changes in tax law and accounting standards could materially affect LCNB's operations.
Changes in tax laws, or changes in the interpretation of existing tax laws, could materially adversely affect LCNB’s operations. Similarly, new accounting
standards, changes to existing accounting standards, and changes to the methods of preparing financial statements could impact LCNB’s reported financial
condition and results of operations. These factors are outside LCNB’s control and it is impossible to predict changes that may occur and the effect of such
changes.
LCNB is subject to environmental liability risk associated with lending activities.
A significant portion of the Bank’s loan portfolio is secured by real property. During the ordinary course of business, the Bank may foreclose on and take title
to properties securing certain loans. In doing so, there is a risk that hazardous or toxic substances could be found on these properties. If hazardous or toxic
substances are found, the Bank may be liable for remediation costs, as well as for personal injury and property damage. Environmental laws may require the
Bank to incur substantial expenses and may materially reduce the affected property’s value or limit the Bank’s ability to use or sell the affected property. In
addition, future laws or more stringent interpretations or enforcement policies with respect to existing laws may increase the Bank’s exposure to environmental
liability. Although the Bank has policies and procedures to perform an environmental review before approving a loan or initiating any foreclosure action on real
property, these reviews may not be sufficient to detect all potential environmental hazards. The remediation costs and any other financial liabilities associated
with an environmental hazard could have a material adverse effect on LCNB’s financial condition and results of operations.
The banking industry is highly regulated and is thus subject to larger impacts due to regulatory uncertainty.
LCNB is subject to regulation, supervision, and examination by the Federal Reserve Board and the Bank is subject to regulation, supervision, and examination
by the OCC. LCNB and the Bank are also subject to regulation and examination by the FDIC as the deposit insurer. The CFPB is responsible for most
consumer protection laws and has historically had broad authority, with certain exceptions, to regulate financial products offered by banks. Federal and state
laws and regulations govern numerous matters including, but not limited to, changes in the ownership or control of banks, maintenance of adequate capital,
permissible business operations, maintenance of deposit insurance, protection of customer financial privacy, the level of reserves held against deposits,
restrictions on dividend payments, the making of loans, and the acceptance of deposits. See the previous section titled “Supervision and Regulation” for more
information on this subject.
Federal regulators may initiate various enforcement actions against a financial institution that violates laws or regulations or that operates in an unsafe or
unsound manner. These enforcement actions may include, but are not limited to, the assessment of civil money penalties, the issuance of cease-and-desist or
removal orders, and the imposition of written agreements.
Proposals to change the laws governing financial institutions are periodically introduced in Congress and proposals to change regulations are periodically
considered by the regulatory bodies. Furthermore, depending on presidential administrative priorities, there may be widespread initiatives to either regulate or
deregulate financial institutions, which can lead to uncertainty for financial institutions as they navigate changes on a relatively frequent basis. Such future
legislation and/or changes in regulations could increase or decrease the cost of doing business, limit or expand permissible activities, or affect the competitive
balance among banks, savings associations, credit unions, and other financial institutions. The likelihood of any major changes in the future and their effects
are indeterminable.
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FDIC deposit insurance assessments may materially increase in the future.
Deposits of LCNB are insured up to statutory limits by the FDIC and, accordingly, LCNB and other banks and financial institutions pay quarterly premiums to
the FDIC to maintain the DIF. On October 18, 2022, the FDIC issued a final rule that increased the initial base deposit insurance assessment rate paid by
insured depository institutions by two basis points, beginning with the first quarterly assessment period of 2023. The likelihood and extent of any further rate
increases in the future are indeterminable.
Failure to adopt new technologies may result in customer dissatisfaction.
The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and
services, including the emergence of artificial intelligence. LCNB’s future success depends, in part, upon its ability to address customer needs by using
technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in LCNB’s operations. LCNB has
implemented technologies that utilize artificial intelligence in connection with LCNB’s business and operations in order to scale its business, but the outcome
of implementation may not realize all the benefits LCNB is hoping to scale. LCNB may not be able to effectively implement new technology-driven products
and services or be successful in marketing these products and services to its customers, or customers may be averse to the adoption of new technologies.
Failure to successfully keep pace with technological change affecting the financial services industry could negatively affect LCNB’s growth, revenue and
profit.
Emergence of non-bank alternatives to the financial system may result in customer disintermediation.
Consumers may decide not to use banks to complete their financial transactions. Technology and other changes, including the emergence of Fintech
Companies, are allowing parties to complete financial transactions through alternative methods that historically have involved banks. For example, consumers
can complete transactions, such as paying bills and/or transferring funds, directly without the assistance of banks. The process of eliminating banks as
intermediaries, known as “disintermediation,” could result in the loss of fee income, as well as the loss of customer deposits and the related income generated
from those deposits. The loss of these revenue streams and the lower cost of deposits as a source of funds could have a material adverse effect on our financial
condition and results of operations.
Climate change, severe weather, natural disasters, acts of war or terrorism, political instability, epidemics and other external events could significantly impact
LCNB’s business.
Climate change presents multi-faceted risks, including operational risk from the physical effects of climate events on LCNB and its customers’ facilities and
other assets; credit risk from borrowers with significant exposure to climate risk; risks associated with the transition to a less carbon-dependent economy; and
reputational risk from stakeholder concerns about our practices related to climate change, LCNB’s carbon footprint, and LCNB’s business relationships with
clients who operate in carbon-intensive industries.
Natural disasters, including severe weather events of increasing strength and frequency due to climate change, acts of war or terrorism, political instability, and
other adverse external events could have a significant impact on LCNB’s ability to conduct business or upon third parties who perform operational services for
LCNB or its customers. Such events could affect the stability of LCNB’s deposit base, impair the ability of borrowers to repay outstanding loans, impair the
value of collateral securing loans, cause significant property damage, result in lost revenue, or cause LCNB to incur additional expenses.
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Item 1B. Unresolved Staff Comments
None.
Item 1C. Cybersecurity
Cybersecurity Risk Management and Strategy
LCNB recognizes the critical importance of cybersecurity in safeguarding its business operations, intellectual property, and sensitive information.
Cybersecurity risk management and strategy are integral to LCNB’s overall risk management framework. The following outlines LCNB’s approach to
identifying, assessing, and mitigating cybersecurity risks.
LCNB conducts regular risk assessments to identify, prevent, and mitigate potential cybersecurity threats and vulnerabilities. These assessments consider the
evolving threat landscape, the sensitivity of our data, and the potential impact on business operations. These risk assessments are utilized to develop our
Information Security Program.
LCNB leverages threat intelligence sources to continually evaluate current and emerging cyber threats. This proactive approach allows LCNB to anticipate and
respond to potential risks promptly.
LCNB’s cybersecurity controls are designed to protect against unauthorized access, data breaches, and other cyber threats. These controls encompass a multi-
layered defense strategy, including firewalls, intrusion detection systems, encryption, and continuous monitoring.
LCNB recognizes that employees are a critical line of defense. Regular training programs ensure that our staff is aware of cybersecurity best practices, social
engineering tactics, and the importance of safeguarding sensitive information. In the event of a cybersecurity incident, a well-defined incident response plan is
in place. This plan includes a structured approach to containing, eradicating, and recovering from the incident, as well as communication protocols with
stakeholders.
To further mitigate the potential financial impacts of cybersecurity incidents, LCNB maintains cybersecurity insurance coverage. This coverage is regularly
reviewed and adjusted to align with the evolving threat landscape and risk profile.
LCNB is committed to a culture of continuous improvement in its cybersecurity practices. Regular evaluations, feedback mechanisms, and participation in
industry collaborations help us adapt and enhance the strategy in response to emerging threats.
LCNB’s cybersecurity risk management and strategy reflect the dedication to maintaining the confidentiality, integrity, and availability of our information
assets. LCNB believes that this proactive approach positions the Company well to navigate the evolving cybersecurity landscape. As of the report date, risks
from cybersecurity threats have not materially affected our company.
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Governance
LCNB’s cybersecurity strategy is underpinned by a robust governance framework overseen by the Board of Directors. The Board plays an active role in
shaping cybersecurity policies, conducting regular reviews of the effectiveness of the cybersecurity program, and ensuring its alignment with overarching
business objectives. The Board’s oversight is further strengthened by the presence of a director with extensive information technology leadership experience,
including service as a former Chief Information Officer and responsibility for establishing information security frameworks for global operations. This
governance ensures a comprehensive and proactive approach to managing cybersecurity risks.
The Privacy Committee, together with the Information Security Officer, provides dedicated oversight of the Company’s cybersecurity and data privacy risk
management activities. Committee members possess experience relevant to risk oversight, regulatory compliance, and technology governance. The Information
Security Officer has significant experience in information security, cybersecurity risk management, and compliance with applicable regulatory requirements,
and provides subject‑matter expertise regarding cybersecurity threats, controls, and mitigation strategies. The Committee meets regularly to evaluate the
evolving threat landscape, with meeting outcomes reported to executive management and the Board of Directors to support informed decision‑making and
effective governance.
LCNB’s first line of defense against cybersecurity threats involves leveraging its workforce and engaging various Third Parties. Employees play a crucial role
in maintaining a vigilant stance, while external partners contribute specialized expertise to enhance the overall cybersecurity posture. This collaborative
approach strengthens LCNB’s defense mechanisms against evolving cyber threats.
Internal and external audits serve as essential tools to evaluate the efficacy of LCNB’s cybersecurity processes. These audits are conducted periodically to
identify vulnerabilities, assess compliance with established policies, and ensure the effectiveness of implemented security controls. The insights gained from
audits contribute to the continuous improvement and refinement of cybersecurity measures.
The Bank is equipped with a cadre of IT professionals boasting extensive industry experience in cybersecurity. These dedicated individuals bring years of
knowledge to the table, staying abreast of the latest developments in the field. Their expertise enhances LCNB’s ability to address emerging threats proactively
and reinforces the resilience of our cybersecurity framework.
LCNB’s governance structure ensures that cybersecurity is a top-level priority, with the Board, committees, employees, and external partners collaborating
seamlessly to safeguard systems and data. Through continuous evaluation, robust defense mechanisms, and a skilled workforce, LCNB remains committed to
maintaining the highest standards of cybersecurity.
Item 2. Properties
LCNB owns its main office in Lebanon, Ohio, which is approximately 28 thousand square feet and houses its executive, wealth management, and certain
administrative personnel. As of December 31, 2025, LCNB owns an additional 27 branch locations and leases an additional seven branch locations, pursuant to
operating leases. The Main Office, Oxford, Eaton, Bridgetown, and Hyde Park locations have excess space that is currently being leased to third parties. An
operations center in Lebanon, Ohio is currently being leased from the Warren County Port Authority. Upon expiration of the lease in 2027, LCNB has the
option to purchase the property for $1.00. Management believes that LCNB's banking and other offices are in good condition and suitable to its needs.
Item 3. Legal Proceedings
Except for routine litigation incidental to its businesses, LCNB is not a party to any material pending legal proceedings and none of its property is the subject of
any material proceedings.
Item 4. Mine Safety Disclosures
Not Applicable.
-26-
Table of Contents
LCNB CORP. AND SUBSIDIARIES
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities
LCNB had approximately 1,123 registered holders of its common stock as of March 11, 2026. The number of shareholders includes banks and brokers who act
as nominees, each of whom may represent more than one shareholder. LCNB’s stock trades on the NASDAQ Capital Market® exchange under the symbol
“LCNB.”
LCNB depends on dividends from the Bank for the majority of its liquid assets, including the cash needed to pay dividends to its shareholders. National
banking law limits the amount of dividends the Bank may pay to the sum of retained net income, as defined, for the current year plus retained net income for
the previous two calendar years. Prior approval from the OCC, the Bank’s primary regulator, would be necessary for the Bank to pay dividends in excess of this
amount. If dividends exceed retained net income for a year, a bank is generally not required to carry forward the negative amount resulting from such excess if
the bank can attribute the excess to the preceding two years. If the excess is greater than the bank's previously undistributed net income for the preceding two
years, prior OCC approval of the dividend is required and a negative amount would be carried forward in future dividend calculations. In addition, dividend
payments may not reduce capital levels below minimum regulatory guidelines.
The 2025 Ownership Incentive Plan (the "2025 Plan") was approved by LCNB's shareholders at the annual meeting on May 19, 2025 and supersedes the 2015
Ownership Plan, which terminated on April 28, 2025. Both plans allow for stock-based awards to eligible employees, as determined by the Compensation
Committee of LCNB's Board of Directors ("Compensation Committee"). 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. It will terminate on May 19, 2035
and is subject to earlier termination by the Compensation Committee.
On February 27, 2023, LCNB's Board of Directors authorized a new Issuer Stock Repurchase Plan Agreement (the “Program”). Under the terms of the
Program, LCNB is authorized to repurchase up to 500 thousand of its outstanding common shares. The Program replaced and superseded LCNB’s prior Issuer
Stock Repurchase Plan Agreement, which was adopted on May 27, 2022.
Under the Program, 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 will be 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 Program 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 Program, 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.
No purchases were made under the Program during the three months ended December 31, 2025. The maximum number of shares that may yet be purchased
under the Program is approximately 311 thousand.
-27-
Table of Contents
LCNB CORP. AND SUBSIDIARIES
Stock Performance Graph
The graph below provides an indicator of cumulative total shareholder returns for LCNB as compared with the NASDAQ Composite Index and the S&P U.S.
BMI Banks - Midwest Region Index. This graph covers the period from December 31, 2020 through December 31, 2025. The cumulative total shareholder
returns included in the graph reflect the returns for the shares of common stock of LCNB. The information provided in the graph assumes that $100 was
invested on December 31, 2020 in LCNB common stock, the NASDAQ Composite Index, and the S&P U.S. BMI Banks - Midwest Region Index and that all
dividends were reinvested. This graph shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, unless the Company specifically incorporates this report by reference. It will not be otherwise filed under such
Acts.
Period Ending
Index
12/31/2020
12/31/2021
12/31/2022
12/31/2023
12/31/2024 12/31/2025
LCNB Corp.
$ 100.00
138.78
134.10
124.07
126.15
144.71
NASDAQ Composite Index
$ 100.00
122.18
82.43
119.22
154.48
187.14
S&P U.S. BMI Banks - Midwest Region Index
$ 100.00
132.12
114.02
116.4
142.02
159.02
Source: S&P Global Market Intelligence
© 2026
Unregistered Sales of Equity Securities and Repurchases.
There were no unregistered sales of securities during the fiscal year. As previously disclosed, there were no repurchases of shares or other units of LCNB’s
securities registered in the fourth quarter of the fiscal year.
-28-
Table of Contents
LCNB CORP. AND SUBSIDIARIES
Item 6. [Reserved]
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Introduction
This discussion and analysis of the consolidated financial condition and consolidated results of operations of LCNB is intended to amplify certain financial
information regarding LCNB and should be read in conjunction with the consolidated financial statements and related notes thereto contained in this Annual
Report to Shareholders on Form 10-K.
Overview
Net income for 2025 was $23.1 million (basic and diluted earnings per share of $1.63), compared to $13.5 million (basic and diluted earnings per share of
$0.97) in 2024 and $12.6 million (basic and diluted earnings per share of $1.10) in 2023.
The following items affected financial position and results of operations for the years indicated:
•
Cincinnati Bancorp, Inc. merged with and into LCNB Corp. on November 1, 2023 and Eagle Financial Bancorp, Inc. merged with and into LCNB
Corp. on April 12, 2024.
•
Merger related expenses connected with the above two acquisitions totaled $3.4 million and $4.7 million during 2024 and 2023, respectively.
•
Net interest income in 2025 was $70.2 million, compared to $60.8 million in 2024 and $56.3 million 2023.
•
The provision for credit losses in 2025 totaled $1.9 million, compared to a provision of $2.0 million for 2024 and $2.1 for 2023. Included in the
provision for credit losses for 2025 was a $1.4 million provision to fully reserve against two commercial and industrial loans made to the same
borrower. Included in the provision for 2024 was a $763 thousand provision related to loans acquired through the Eagle Financial Bancorp acquisition
that were not considered purchased with credit deterioration ("non-PCD loans"). A comparable provision of $1.7 million was recognized on non-PCD
loans acquired through the Cincinnati Bancorp acquisition in 2023.
•
Net gains from sales of loans totaled $2.9 million in 2025, $3.4 million in 2024, and $697 thousand in 2023. Gains were higher in 2024 primarily due
to the volume of loans sold.
•
Other non-interest expense for 2025 included $265 thousand in impairment charges on a closed office building held-for-sale. Other non-interest
expense for 2024 and 2023 were partially offset by gains recognized on the sales of closed office buildings of $455 thousand and $425 thousand,
respectively. The offices were closed as a result of LCNB's branch consolidation strategy.
Net Interest Income
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 years indicated, 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.
-29-
Table of Contents
LCNB CORP. AND SUBSIDIARIES
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
Years ended December 31,
2025
2024
2023
Average
Interest
Average
Average
Interest
Average
Average
Interest
Average
Outstanding
Earned/
Yield/
Outstanding
Earned/
Yield/
Outstanding
Earned/
Yield/
Balance
Paid
Rate
Balance
Paid
Rate
Balance
Paid
Rate
(Dollars in thousands)
Loans (1)
$
1,705,520 $
94,313
5.53%
1,765,672
96,477
5.46%
1,467,981
71,894
4.90%
Interest-bearing demand deposits
9,592
577
6.02%
15,486
880
5.68%
13,039
734
5.63%
Interest-bearing time deposits
443
14
3.16%
401
10
2.49%
—
—
0.00%
Federal Reserve Bank stock
6,405
384
6.00%
6,143
369
6.01%
4,722
283
5.99%
Federal Home Loan Bank stock
20,710
1,785
8.62%
19,460
1,641
8.43%
8,293
590
7.11%
Investment securities:
Equity securities
5,064
173
3.42%
5,012
184
3.67%
3,879
175
4.51%
Debt securities, taxable
247,671
4,876
1.97%
261,856
4,847
1.85%
277,157
5,235
1.89%
Debt securities, non-taxable (2)
17,870
791
4.43%
19,005
768
4.04%
24,031
871
3.62%
Total earning assets
2,013,275
102,913
5.11%
2,093,035
105,176
5.03%
1,799,102
79,782
4.43%
Non-earning assets
270,348
267,554
210,509
Allowance for credit losses
(12,107)
(11,263)
(8,046)
Total assets
$
2,271,516
2,349,326
2,001,565
Interest-bearing demand and money
market deposits
$
609,615
9,686
1.59%
607,144
12,877
2.12%
535,865
7,850
1.46%
Savings deposits
361,650
805
0.22%
368,401
1,028
0.28%
398,299
725
0.18%
IRA and time certificates
437,913
16,657
3.80%
481,516
21,933
4.55%
233,604
7,996
3.42%
Short-term borrowings
47
3
6.38%
18,987
1,117
5.88%
75,383
4,060
5.39%
Long-term debt
110,324
5,374
4.87%
156,683
7,265
4.64%
56,798
2,619
4.61%
Total interest-bearing liabilities
1,519,549
32,525
2.14%
1,632,731
44,220
2.71%
1,299,949
23,250
1.79%
Noninterest-bearing demand deposits
468,117
450,147
472,232
Other liabilities
19,880
20,880
21,557
Capital
263,970
245,568
207,827
Total liabilities and capital
$
2,271,516
2,349,326
2,001,565
Net interest rate spread (3)
2.97%
2.32%
2.64%
Net interest income and net interest
margin on a tax equivalent basis (4)
$
70,388
3.50%
60,956
2.91%
56,532
3.14%
Ratio of interest-earning assets to
interest-bearing liabilities
132.49%
128.19%
138.40%
(1)
Includes non-accrual loans if any.
(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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Table of Contents
LCNB CORP. AND SUBSIDIARIES
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
The following table presents the changes in 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 years indicated. 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.
For the years ended December 31,
2025 vs. 2024
2024 vs. 2023
Increase (decrease) due to
Increase (decrease) due to
Volume
Rate
Total
Volume
Rate
Total
(In thousands)
Interest income attributable to:
Loans (1)
$
(3,316)
1,152
(2,164)
15,653
8,930
24,583
Interest-bearing demand deposits
(352)
49
(303)
140
16
156
Interest-bearing time deposits
1
3
4
—
—
—
Federal Reserve Bank stock
16
(1)
15
85
1
86
Federal Home Loan Bank stock
107
37
144
924
127
1,051
Investment securities:
Equity securities
2
(13)
(11)
45
(36)
9
Debt securities, taxable
(270)
299
29
(285)
(103)
(388)
Debt securities, non-taxable (2)
(48)
71
23
(196)
93
(103)
Total interest income
(3,860)
1,597
(2,263)
16,366
9,028
25,394
Interest expense attributable to:
Interest-bearing demand and money market
deposits
52
(3,243)
(3,191)
1,151
3,876
5,027
Savings deposits
(19)
(204)
(223)
(58)
361
303
IRA and time certificates
(1,870)
(3,406)
(5,276)
10,625
3,312
13,937
Short-term borrowings
(1,202)
88
(1,114)
(3,287)
344
(2,943)
Long-term debt
(2,242)
351
(1,891)
4,631
15
4,646
Total interest expense
(5,281)
(6,414)
(11,695)
13,062
7,908
20,970
Net interest income
$
1,421
8,011
9,432
3,304
1,120
4,424
(1) Non-accrual loans, if any, are included in average loan balances.
(2) Change in interest income from non-taxable investment securities is computed based on interest income determined on a taxable-equivalent yield basis.
Interest income has been divided by a factor comprised of the complement of the incremental tax rate of 21%.
2025 vs. 2024. Net interest income on a fully tax-equivalent basis for 2025 totaled $70.4 million, an increase of $9.4 million from 2024. The increase resulted
from a decrease in total interest expense of $11.7 million, partially offset by a decrease in total taxable-equivalent interest income of $2.3 million.
The decrease in total interest income was due primarily to a $2.2 million decrease in interest income from loans due to a $60.2 million decrease in average
loans, partially offset by a 7 basis point increase in the average rate earned.
The decrease in total interest expense was primarily due to a $5.3 million decrease in interest paid on IRA and time certificates and to a $3.2 million decrease in
interest paid on interest-bearing demand and money market deposit accounts. Interest on IRA and time certificates decreased due to a $43.6 million decrease in
average balances and to a 75 basis point decrease in the average rate paid. Interest paid on interest-bearing demand and money market deposit accounts
decreased due to a 53 basis point decrease in the average rate paid, partially offset by $2.5 million increase in average deposit balances. In addition, interest
paid on short-term borrowings and long-term debt decreased due to decreases in average balances outstanding. The decrease in average IRA and time
certificate balances and the corresponding decrease in average rates reflects a strategic reduction in higher-cost certificates of deposit and IRA balances as part
of LCNB's funding optimization strategy.
2024 vs. 2023. Net interest income on a fully tax-equivalent basis for 2024 totaled $61.0 million, an increase of $4.4 million from 2023. The increase resulted
from an increase in total taxable-equivalent interest income of $25.4 million, which was partially offset by an increase in total interest expense of $21.0 million.
The increase in total interest income was due primarily to a $24.6 million increase in interest income from loans due to a $297.7 million increase in average
loans and to a 56 basis point increase in the average rate earned. Average loans increased due to organic growth in the portfolio in addition to loans acquired
through the merger with CNNB in the fourth quarter of 2023 and EFBI in the second quarter of 2024.
The increase in total interest expense was primarily due to a $13.9 million increase in interest paid on IRA and time certificates due to a $247.9 million increase
in average balances and to a 113 basis point increase in the average rate paid. Interest paid on interest-bearing demand and money market deposit accounts
increased due to a $71.3 million increase in average deposit balances and to a 66 basis point increase in the average rate paid. Interest paid on long-term debt
increased due to a $99.9 million increase in average balances and to a 3 basis point increase in the average rate paid.
The increased rates paid on interest-bearing liabilities and the increased yield earned on interest-earning assets is largely the result of fluctuations in market
rates.
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Table of Contents
LCNB CORP. AND SUBSIDIARIES
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
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. New credits meeting specific criteria are analyzed prior to origination and are reviewed by 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 provisions for credit losses and unfunded commitments totaling $1.9 million for 2025, $2.0 million for 2024 and $2.1 million for 2023. The
provision for 2025 includes $1.4 million to fully reserve for two commercial and industrial loans to the same borrower within the logistics sector. Management
does not believe there will be any additional reserves associated with this loan and anticipates the loan will be charged off during the first quarter of
2026. Management believes this event does not reflect the overall strength, diversity, or performance of its loan portfolio or the markets
that LCNB serves. Included in the provision for credit losses for 2024 and 2023 were $763 thousand and $1.7 million, respectively, related to non-PCD loans
acquired through the EFBI and CNNB acquisitions.
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.
Net charge-offs for 2025, 2024, and 2023 totaled $273 thousand, $741 thousand, and $185 thousand, respectively. Charge-offs during 2024 were greater
because of a $589 thousand charge-off on a commercial & industrial loan.
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Table of Contents
LCNB CORP. AND SUBSIDIARIES
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
Non-Interest Income
A comparison of non-interest income for 2025, 2024, and 2023 is as follows:
Increase (Decrease)
2025
2024
2023
2025 vs. 2024 2024 vs. 2023
(In thousands)
Fiduciary income
$
9,531
8,445
7,091
1,086
1,354
Service charges and fees on deposit accounts
7,384
6,759
5,856
625
903
Net losses on sales of debt securities
—
(214)
—
214
(214)
Bank owned life insurance income
1,422
1,665
1,136
(243)
529
Net gains from sales of loans
2,937
3,433
697
(496)
2,736
Other operating income
501
316
631
185
(315)
Total non-interest income
$
21,775
20,404
15,411
1,371
4,993
Reasons for changes include:
• Fiduciary income increased in 2025, 2024, and 2023, primarily due to increases in the fair values of trust and brokerage assets managed, on which fees are
based. The increases in fair value were due to the opening of new Wealth Management customer accounts and to an increase in the market values of
managed assets.
• Service charges and fees on deposit accounts increased during 2025 primarily due to an increased volume in overdraft fees collected and secondarily to an
increase in fee income received on the ICS product. Service charges and fees on deposit accounts increased during 2024 primarily due to increases in check
card income and fee income received on the ICS product, partially offset by a decrease in overdraft fees and deposit account fees in general. LCNB reduced
overdraft fees from $35 per occurrence to $25 effective November 1, 2023. A higher volume of check cards were outstanding during 2024 due to the
mergers with EFBI and CNNB.
• Net losses from sales of debt securities during 2024 reflect losses recognized on sales of municipal securities with amortized cost bases of approximately
$9.8 million. There were no sales of debt securities during 2025 or 2023.
• Bank-owned life insurance ("BOLI") income was elevated in 2024 primarily due to mortality proceeds recognized. The 2025 and 2023 periods did not
include mortality proceeds. BOLI income also increased to a lesser extent from 2023 to 2024 and 2025 due to insurance policies acquired in the mergers
with EFBI and CNNB.
• Net gains from sales of loans were greater during 2025 and 2024 primarily due to a higher volume of residential real estate loans sold. Included in these
gains for the 2024 period were an $843 thousand loss on the sale of approximately $48.9 million of below market rate loans acquired from CNNB and a
$359 thousand gain on the sale of approximately $29.8 million of below market rate loans predominately acquired from EFBI. The funds from these
acquired loan sales were used to fund new loans and pay down debt.
• Other operating income decreased in 2024 as compared to 2023 primarily due to amortization of capitalized mortgage servicing rights obtained in the
merger with CNNB, which amortization is netted for accounting purposes against fee income recognized from the servicing of sold residential mortgage
loans. Other operating income for 2025 increased primarily due to a decrease in amortization of capitalized mortgage servicing rights.
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Table of Contents
LCNB CORP. AND SUBSIDIARIES
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
Non-Interest Expense
A comparison of non-interest expense for 2025, 2024, and 2023 is as follows:
Increase (Decrease)
2025
2024
2023
2025 vs. 2024 2024 vs. 2023
(In thousands)
Salaries and employee benefits
$
35,496
35,170
29,108
326
6,062
Equipment expenses
1,517
1,584
1,616
(67)
(32)
Occupancy expense, net
3,983
3,725
3,301
258
424
State financial institutions tax
1,716
1,881
1,628
(165)
253
Marketing
1,223
1,047
1,101
176
(54)
Amortization of intangibles
1,075
1,142
532
(67)
610
FDIC premiums
1,487
1,895
932
(408)
963
Computer maintenance and supplies
1,506
1,425
1,358
81
67
Contracted services
3,520
3,212
2,776
308
436
Merger-related expenses
140
3,442
4,656
(3,302)
(1,214)
Other non-interest expense
10,246
8,753
7,415
1,493
1,338
Total non-interest expense
$
61,909
63,276
54,423
(1,367)
8,853
Reasons for changes include:
•
Salaries and employee benefits were 0.9% greater in 2025 than in 2024 and 20.8% greater in 2024 than in 2023. The increase in 2025 was primarily
due to increases in miscellaneous employee related costs, largely offset by a decrease in wages and benefits caused by a reduction in the number of
employees. The increase in 2024 was due to overall wage and benefit increases, an increased number of employees due to the acquisitions of EFBI
and CNNB, higher sales commissions, and higher health insurance costs. The increase in 2023 was primarily due to overall wage and benefit
increases, a higher number of employees during November and December as a result of the CNNB merger, and a higher amount recognized for
401(k) plan matching. These increases were partially offset by decreased pension and health insurance expenses and to a higher amount of personnel
expenses deferred during 2023 as a cost of loan originations.
•
Occupancy expense, net increased during 2025 primarily due to increased real estate taxes and depreciation. Occupancy expense, net increased during
2024 primarily due to increased utility and depreciation expenses caused by the additional offices acquired from EFBI and CNNB. Maintenance and
repair costs related to LCNB's office facilities also contributed to the increase.
•
Amortization of intangibles increased during 2024 as compared to 2023 due to the amortization of core deposit intangibles recognized from the
acquisitions of EFBI and CNNB. Amortization decreased during 2025 because the core deposit intangibles related to the BNB Bancorp, Inc. and
Columbus First Bancorp, Inc. acquisitions were amortized in full during the year.
•
FDIC insurance premiums increased during 2024 due to a higher assessment base, partially reflecting increased assets resulting from the acquisitions
of EFBI and CNNB, and to increases in the assessment rate charged. FDIC insurance premiums decreased in 2025 because of decreased assessment
bases, reflecting decreases in total assets, and to reductions in the assessment rate charged.
•
Merger- related expenses reflect costs incurred in connection with the acquisitions of EFBI and CNNB.
•
Other non-interest expense for 2025 includes $265 thousand in impairment charges related to a closed office building that is classified as held-for-
sale. The remaining net increases for 2025 can be attributed to smaller increases in various other accounts. Other non-interest expense increased in
2024 partially due to increased outside accounting and auditing fees and partially due to smaller increases in various other accounts. Partially
offsetting the net increase in 2024 was a $455 thousand gain recognized on the sale of an office building that was closed as a result of LCNB's office
consolidation strategy, which was netted against other non-interest expense for accounting purposes. Other non-interest expense for 2023 was
partially offset by a $425 thousand gain recognized on the sale of an office building that was closed as a result of LCNB's office consolidation
strategy, which was netted against other non-interest expense for accounting purposes.
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Table of Contents
LCNB CORP. AND SUBSIDIARIES
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
Income Taxes
LCNB's effective tax rates for the years ended December 31, 2025, 2024, and 2023 were 17.9%, 15.5%, and 17.2%, respectively. The difference between the
statutory rate of 21% and the effective tax rate 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 rate for 2024 was 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.
Financial Condition
A comparison of balance sheet line items at December 31 is as follows (in thousands):
2025
2024
Difference $
Difference %
ASSETS:
Total cash and cash equivalents
$
21,614
35,744
(14,130)
(39.53)%
Interest-bearing time deposits
2,710
250
2,460
984.00%
Investment securities:
Equity securities with a readily determinable fair value, at fair value
1,433
1,363
70
5.14%
Equity securities without a readily determinable fair value, at cost
3,666
3,666
—
0.00%
Debt securities, available-for-sale, at fair value
232,271
258,327
(26,056)
(10.09)%
Debt securities, held-to-maturity, at cost
16,080
16,324
(244)
(1.49)%
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, net
1,691,827
1,709,811
(17,984)
(1.05)%
Loans held for sale
1,718
5,556
(3,838)
(69.08)%
Premises and equipment, net
39,196
41,049
(1,853)
(4.51)%
Operating lease right-of-use assets
6,475
5,785
690
11.93%
Goodwill
90,310
90,310
—
0.00%
Core deposit and other intangibles, net
9,271
11,104
(1,833)
(16.51)%
Bank owned life insurance
55,424
54,002
1,422
2.63%
Interest receivable
7,968
8,701
(733)
(8.42)%
Other assets, net
33,691
38,287
(4,596)
(12.00)%
Total assets
$
2,240,769
2,307,394
(66,625)
(2.89)%
LIABILITIES:
Deposits:
Non-interest-bearing
$
466,094
459,619
6,475
1.41%
Interest-bearing
1,374,261
1,418,673
(44,412)
(3.13)%
Total deposits
1,840,355
1,878,292
(37,937)
(2.02)%
Short-term borrowings
—
—
—
NM
Long-term debt
104,428
155,153
(50,725)
(32.69)%
Operating leases liability
6,877
6,115
762
12.46%
Accrued interest and other liabilities
15,180
14,798
382
2.58%
Total liabilities
1,966,840
2,054,358
(87,518)
(4.26)%
SHAREHOLDERS' EQUITY:
Common shares
188,212
186,937
1,275
0.68%
Retained earnings
151,938
141,290
10,648
7.54%
Treasury shares, at cost
(56,071)
(56,002)
(69)
0.12%
Accumulated other comprehensive loss, net of taxes
(10,150)
(19,189)
9,039
(47.11)%
Total shareholders' equity
273,929
253,036
20,893
8.26%
Total liabilities and shareholders' equity
$
2,240,769
2,307,394
(66,625)
(2.89)%
NM - Not Meaningful
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Table of Contents
LCNB CORP. AND SUBSIDIARIES
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
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 2025 were minimal.
• Loans, net decreased due to timing of borrower payoffs and efforts to rebalance the composition of the portfolio.
• Premises and equipment, net decreased due to depreciation and the transfer of the Florence building to premises held-for-sale, which is included in the other
assets classification.
• Operating lease right-of-use assets and operating lease liabilities increased due the renewal of expiring leases.
• Core deposit and other intangibles, net decreased due to amortization of core deposit and mortgage servicing rights intangibles.
• Bank owned life insurance increased due to increases in the cash values of the policies. No new policies were purchased during 2025.
• Other assets, net decreased primarily due to a reduction in deferred tax assets resulting from utilization of prior-year loss carryforwards and a decline in
unrealized losses on available-for-sale debt securities.
• Total interest-bearing deposits decreased primarily due to decreases in IRA and time certificate deposits and to decreases in interest-bearing demand and
money market deposit accounts, partially offset by an increase in deposits obtained through the ICS service. The decline in interest‑bearing balances reflects
a strategic decrease of higher‑cost certificates of deposit and IRA balances as part of LCNB’s funding optimization strategy.
•
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. Prepayment penalties incurred were minimal.
• Retained earnings increased due to net income retained during 2025.
• 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 64.4% of total loans at December 31, 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 December 31, 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
$
274,742
26%
Retail
147,030
14%
Office
126,175
12%
Mixed Use
94,378
9%
Hotel/Motel
90,887
9%
Other
70,187
7%
Self storage
48,568
5%
Warehouse (one tenant)
42,113
4%
Farmland
35,561
3%
Light Industrial
29,385
3%
Warehouse (more than one tenant)
28,752
3%
Manufacturing
24,414
2%
Healthcare Facilities
19,105
2%
Dental
11,334
1%
Total
$
1,042,631
100%
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Table of Contents
LCNB CORP. AND SUBSIDIARIES
Item 7. 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 December 31, 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
$
296,096
28%
Hamilton County, Ohio
184,090
17%
Montgomery County, Ohio
99,729
9%
Butler County, Ohio
89,310
8%
Warren County, Ohio
83,338
8%
Delaware County, Ohio
61,686
6%
Other counties, Ohio
40,631
4%
Greene County, Ohio
38,476
4%
Boone County, Kentucky
36,751
4%
Clermont County, Ohio
19,313
2%
Preble County, Ohio
17,986
2%
Licking County, Ohio
17,662
2%
Kenton County, Kentucky
15,079
1%
Fayette County, Ohio
10,942
1%
Ross County, Ohio
9,265
1%
Fairfield County, Ohio
9,045
1%
Other counties, Indiana
6,585
1%
Other counties, Kentucky
6,647
1%
Total
$
1,042,631
100%
Liquidity
LCNB Corp. depends on dividends from the Bank for the majority of its liquid assets, including the cash needed to pay dividends to its shareholders. Federal
banking law limits the amount of dividends the Bank may pay to the sum of retained net income for the current year plus retained net income for the previous
two years. Prior approval from the OCC, the Bank's primary regulator, is necessary for the Bank to pay dividends in excess of this amount. If dividends exceed
net profit for a year, a bank is generally not required to carry forward the negative amount resulting from such excess if the bank can attribute the excess to the
preceding two years. If the excess is greater than the bank's previously undistributed net income for the preceding two years, prior OCC approval of the
dividend is required and a negative amount would be carried forward in future dividend calculations. In addition, dividend payments may not reduce capital
levels below minimum regulatory guidelines.
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 FHLB, line of
credit arrangements totaling $115.0 million with three correspondent banks, and interest and repayments received from LCNB's loan and investment portfolios.
Total remaining borrowing capacity with the FHLB at December 31, 2025 was approximately $149.1 million. Additional borrowings of approximately
$115.0 million were available through the line of credit arrangements at year-end.
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.
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Table of Contents
LCNB CORP. AND SUBSIDIARIES
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
Commitments to extend credit at December 31, 2025 totaled $262.2 million and are more fully described in Note 14 - Commitments and Contingent Liabilities
to LCNB's 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 requirements.
The following table provides information concerning LCNB's commitments at December 31, 2025:
Amount of Commitment Expiration Per Period
Total
Over 1
Over 3
Amounts
1 year
through 3
through 5
More than
Committed
or less
years
years
5 years
(In thousands)
Commitments to extend credit
$
36,427
36,427
—
—
—
Unused lines of credit
225,773
68,573
46,527
26,158
84,515
Standby letters of credit
5
5
—
—
—
Total
$
262,205
105,005
46,527
26,158
84,515
Capital Resources
The Bank is required by banking regulators to meet certain minimum levels of capital adequacy. 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 LCNB's and the Bank's
financial statements. These minimum levels are expressed in the form of certain ratios. Capital is separated into Tier 1 capital (essentially shareholders' equity
less goodwill and other intangibles) and Tier 2 capital (essentially the allowance for credit losses limited to 1.25% of risk-weighted assets). Common Equity
Tier 1 Capital is the sum of common stock, related surplus, and retained earnings, net of treasury stock, accumulated other comprehensive income, and other
adjustments. The first three ratios, which are based on the degree of credit risk in the Bank's assets, provide for weighting assets based on assigned risk factors
and include off-balance sheet items such as loan commitments and stand-by letters of credit. Information summarizing the regulatory capital of the Bank at
December 31, 2025 and 2024 and corresponding regulatory minimum requirements is included in Note 15 - Regulatory Matters and Impact on Payment of
Dividends.
The FDIC, the insurer of deposits in financial institutions, has adopted a risk-based insurance premium system based in part on an institution's capital adequacy.
Under this system, a depository institution is required to pay successively higher premiums depending on its capital levels and its supervisory rating by its
primary regulator. It is management's intention to maintain sufficient capital to permit the Bank to maintain a "well capitalized" designation, which is the
FDIC's highest rating.
On February 27, 2023, LCNB's Board of Directors authorized the Program, which replaced and superseded LCNB's prior share repurchase program, which was
adopted on May 27, 2022 and expired on or around December 31, 2022. Under the terms of the Program, LCNB is authorized to repurchase up to 500
thousand of its outstanding common shares.
Under the Program, 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 will be 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 Program 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 Program, 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.
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Table of Contents
LCNB CORP. AND SUBSIDIARIES
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
The 2025 Plan was approved by LCNB's shareholders at the annual meeting on May 19, 2025 and superseded the 2015 Ownership Incentive Plan, which
terminated on April 28, 2025. Both plans allows for stock-based awards to eligible employees, as determined by the Compensation Committee of the Board of
Directors. 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. The 2025 Plan will terminate on May 19, 2035 and is subject to earlier termination by the Compensation Committee.
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 herein. 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.
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 to 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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Table of Contents
LCNB CORP. AND SUBSIDIARIES
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
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 value on the date of
acquisition. LCNB employs a variety of means in determining fair value, 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 market place 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.
Loans Held-For-Sale. Loans held-for-sale (“LHFS”) represent mortgage loans intended to be sold in the secondary market and other loans that management
has an active plan to sell. LHFS are carried at the lower-of-cost-or-fair value as determined on an aggregate basis by type of loan. Any writedowns to fair value
upon the transfer of loans to LHFS are reflected in loan charge-offs. Any further decreases are recognized in non-interest income and increases in fair value
above the loan cost basis are not recognized until the loans are sold.
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Table of Contents
LCNB CORP. AND SUBSIDIARIES
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market risk for LCNB is primarily 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 ("ALCO") primarily uses a combination of Interest Rate Sensitivity Analysis ("IRSA") and Economic
Value of Equity ("EVE") analysis for measuring and managing interest rate risk. The IRSA model is used to estimate the effect on net interest income 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 base
projection uses a current interest rate scenario. As shown below, the December 31, 2025 IRSA indicates that either an increase or decrease in interest rates will
have a positive effect on net interest income. The changes in net interest income for all rate assumptions are within LCNB’s acceptable ranges.
$ Change in
% Change in
Rate Shock Scenario in
Amount
Net Interest
Net Interest
Basis Points
(In thousands)
Income
Income
Limits
Up 300
$
81,381
1,556
1.95%
15%
Up 200
81,309
1,484
1.86%
10%
Up 100
81,374
1,549
1.94%
5%
Base
79,825
—
0.00%
Down 100
80,626
801
1.00%
5%
Down 200
80,520
695
0.87%
10%
Down 300
80,936
1,111
1.39%
15%
IRSA shows the effect on net interest income during a one-year period only. A more long-range model is the EVE analysis, which shows 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 December 31, 2025 EVE analysis indicates that an increase in interest rates will have a negative effect on the EVE and that a
decrease in interest rates will have a positive effect. The changes in the EVE for all rate assumptions are within LCNB's acceptable ranges.
Rate Shock Scenario in
Amount
$ Change in
% Change in
Basis Points
(In thousands)
EVE
EVE
Limits
Up 300
$
275,209
(53,240)
(16.21)%
25%
Up 200
291,755
(36,694)
(11.17)%
20%
Up 100
308,360
(20,089)
(6.12)%
15%
Base
328,449
—
0.00%
Down 100
340,242
11,793
3.59%
15%
Down 200
367,742
39,293
11.96%
20%
Down 300
373,438
44,989
13.70%
25%
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 shape, 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 net interest income 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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LCNB CORP. AND SUBSIDIARIES
Item 8. Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of LCNB Corp.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of LCNB Corp. (the “Company”) as of December 31, 2025 and 2024, the related consolidated
statements of operations, comprehensive income (loss), shareholders' equity, and cash flows for each of the years in the three-year period ended December 31,
2025, and the related notes (collectively referred to as the “financial statements”). We also have audited the Company's internal control over financial reporting
as of December 31, 2025, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations
of the Treadway Commission (the “COSO framework”).
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025
and 2024, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2025, in conformity with
accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2025, based on criteria established in the COSO framework.
Basis for Opinion
The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its
assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on the Company’s financial statements
and an opinion on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over
financial reporting was maintained in all material respects.
Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding
of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness
of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We
believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company's internal control over financial reporting is a process designed 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. A company's internal control over
financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being
made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
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Table of Contents
LCNB CORP. AND SUBSIDIARIES
To the Shareholders and Board of Directors of LCNB Corp.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to
be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our
especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial
statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on
the accounts or disclosures to which it relates.
Allowance for Credit Losses on Collectively Evaluated Loans – Refer to Notes 1 and 4 to the financial statements
Critical Audit Matter Description
Management’s estimate of the allowance for credit losses (ACL) includes a reserve on collectively evaluated loans. The reserve on collectively evaluated loans
is based on historical loss rates adjusted for qualitative factors. Significant assumptions in management’s estimate of the reserve on collectively evaluated loans
include (i) the criteria used, and selection of, its peer group, (ii) the historical loss period, (iii) the selection of the loss driver models, and (iv) qualitative factor
adjustments. In evaluating whether qualitative factor adjustments are necessary, management considers internal and external qualitative and credit market risk
factors as described in Note 1 to the consolidated financial statements.
Significant judgment was required by management in the selection and application of key assumptions in determining the ACL on collectively evaluated loans.
Accordingly, performing audit procedures to evaluate the Company’s estimate involved a high degree of auditor judgment and required significant effort,
including the involvement of professionals with specialized skill and knowledge.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the Company’s estimate of the ACL on collectively evaluated loans included, but were not limited to, the following:
●
Evaluation of the appropriateness of management’s methodology.
●
Testing of the design and operating effectiveness of management’s controls over the determination of the inputs and assumptions used in
determining the reserve on collectively evaluated loans.
●
Evaluation of the relevance and reliability of information used by management in the development of the estimate.
●
Testing the completeness and accuracy of data utilized by management.
●
Evaluation of reasonableness of significant assumptions used in the quantitative analysis.
●
Evaluation of the reasonableness of significant assumptions used in the estimate, including consideration of whether the adjustments applied were
reasonable given portfolio composition; relevant external factors, including economic conditions; and consideration of historical or recent
experience and conditions and events affecting the Company.
/s/ Plante & Moran PLLC
Columbus, Ohio
March 11, 2026
We have served as the Company’s auditor since 2022.
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Table of Contents
LCNB CORP. AND SUBSIDIARIES
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
LCNB CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
At December 31,
(Dollars in thousands)
2025
2024
ASSETS:
Cash and due from banks
$
18,353
20,393
Interest-bearing demand deposits
3,261
15,351
Total cash and cash equivalents
21,614
35,744
Interest-bearing time deposits
2,710
250
Investment securities:
Equity securities with a readily determinable fair value, at fair value
1,433
1,363
Equity securities without a readily determinable fair value, at cost
3,666
3,666
Debt securities, available-for-sale, at fair value
232,271
258,327
Debt securities, held-to-maturity, at cost, net of allowance for credit losses of $11 and $5 at December 31, 2025
and December 31, 2024, respectively
16,080
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
1,718
5,556
Loans, net of allowance for credit losses of $13,704 and $12,001 at December 31, 2025 and December 31,
2024, respectively
1,691,827
1,709,811
Premises and equipment, net
39,196
41,049
Operating lease right-of-use assets
6,475
5,785
Goodwill
90,310
90,310
Core deposit and other intangibles, net
9,271
11,104
Bank-owned life insurance
55,424
54,002
Interest receivable
7,968
8,701
Other assets, net
33,691
38,287
TOTAL ASSETS
$
2,240,769
2,307,394
LIABILITIES:
Deposits:
Noninterest-bearing
$
466,094
459,619
Interest-bearing
1,374,261
1,418,673
Total deposits
1,840,355
1,878,292
Short-term borrowings
—
—
Long-term debt
104,428
155,153
Operating lease liabilities
6,877
6,115
Accrued interest and other liabilities
15,180
14,798
TOTAL LIABILITIES
1,966,840
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 17,409,085 and 17,329,423 shares at
December 31, 2025 and December 31, 2024, respectively; outstanding 14,193,577 and 14,118,040 shares at
December 31, 2025 and December 31, 2024, respectively
$
188,212
186,937
Retained earnings
151,938
141,290
Treasury shares at cost, 3,215,508 and 3,211,383 shares at December 31, 2025 and December 31, 2024,
respectively
(56,071)
(56,002)
Accumulated other comprehensive loss, net of taxes
(10,150)
(19,189)
TOTAL SHAREHOLDERS' EQUITY
273,929
253,036
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$
2,240,769
2,307,394
The accompanying notes to consolidated financial statements are an integral part of these statements.
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Table of Contents
LCNB CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the years ended December 31,
(Dollars in thousands, except per share data)
2025
2024
2023
INTEREST INCOME:
Interest and fees on loans
$
94,313
96,477
71,894
Dividends on equity securities:
With a readily determinable fair value
43
38
43
Without a readily determinable fair value
130
146
132
Interest on debt securities:
Taxable
4,876
4,847
5,235
Non-taxable
625
607
688
Other investments
2,760
2,900
1,607
TOTAL INTEREST INCOME
102,747
105,015
79,599
INTEREST EXPENSE:
Interest on deposits
27,148
35,838
16,571
Interest on short-term borrowings
3
1,117
4,060
Interest on long-term debt
5,374
7,265
2,619
TOTAL INTEREST EXPENSE
32,525
44,220
23,250
NET INTEREST INCOME
70,222
60,795
56,349
PROVISION FOR CREDIT LOSSES
1,936
1,962
2,077
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES
68,286
58,833
54,272
NON-INTEREST INCOME:
Fiduciary income
9,531
8,445
7,091
Service charges and fees on deposit accounts
7,384
6,759
5,856
Net losses on sales of debt securities, available-for-sale
—
(214)
—
Bank owned life insurance income
1,422
1,665
1,136
Net gains from sales of loans
2,937
3,433
697
Other operating income
501
316
631
TOTAL NON-INTEREST INCOME
21,775
20,404
15,411
NON-INTEREST EXPENSE:
Salaries and employee benefits
35,496
35,170
29,108
Equipment expenses
1,517
1,584
1,616
Occupancy expense, net
3,983
3,725
3,301
State financial institutions tax
1,716
1,881
1,628
Marketing
1,223
1,047
1,101
Amortization of core deposit intangibles
1,075
1,142
532
FDIC insurance premiums, net
1,487
1,895
932
Computer maintenance and supplies
1,506
1,425
1,358
Contracted services
3,520
3,212
2,776
Merger-related expenses
140
3,442
4,656
Other non-interest expense
10,246
8,753
7,415
TOTAL NON-INTEREST EXPENSE
61,909
63,276
54,423
INCOME BEFORE INCOME TAXES
28,152
15,961
15,260
PROVISION FOR INCOME TAXES
5,032
2,469
2,632
NET INCOME
$
23,120
13,492
12,628
Earnings per common share:
Basic
$
1.63
0.97
1.10
Diluted
1.63
0.97
1.10
Weighted average common shares outstanding:
Basic
14,086,379
13,764,985
11,417,857
Diluted
14,086,379
13,764,985
11,417,857
The accompanying notes to consolidated financial statements are an integral part of these statements.
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Table of Contents
LCNB CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
For the years ended December 31,
(Dollars in thousands)
2025
2024
2023
Net income
$
23,120
13,492
12,628
Other comprehensive income:
Net unrealized gain on available-for-sale securities (net of tax expense of $2,045,
$777, and $2,032 for 2025, 2024, and 2023, respectively)
9,047
2,922
7,646
Reclassification adjustment for net realized loss on sale of available- for-sale
securities included in net income (net of tax expense (benefit) of $0, $(45), and $0 for
2025, 2024, and 2023, respectively)
—
169
—
Change in nonqualified pension plan unrecognized net gain (loss) and unrecognized
prior service cost (net of tax expense (benefit) of $(2), $15, and $(7) for 2025, 2024,
and 2023, respectively)
(8)
56
(28)
Other comprehensive income
9,039
3,147
7,618
TOTAL COMPREHENSIVE INCOME
$
32,159
16,639
20,246
SUPPLEMENTAL INFORMATION:
COMPONENTS OF ACCUMULATED OTHER COMPREHENSIVE LOSS, NET OF
TAXES, AS OF YEAR-END:
Net unrealized loss on securities available-for-sale
$
(10,143)
(19,190)
(22,281)
Net prepaid (unfunded) asset (liability) for nonqualified pension plan
(7)
1
(55)
Balance at year-end
$
(10,150)
(19,189)
(22,336)
The accompanying notes to consolidated financial statements are an integral part of these statements.
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Table of Contents
LCNB CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
For the years ended December 31,
(Dollars in thousands, except share data)
Accumulated
Common
Other
Total
Shares
Common
Retained
Treasury Comprehensive
Shareholders'
Outstanding
Shares
Earnings
Shares
Income (Loss)
Equity
Balance, January 1, 2023
11,259,080 $
144,069
139,249
(52,689)
(29,954)
200,675
Cumulative change in accounting principle -
ASC 326
—
—
(1,922)
—
—
(1,922)
Balance at January 1, 2023, adjusted
11,259,080
144,069
137,327
(52,689)
(29,954)
198,753
Net income
—
—
12,628
—
—
12,628
Other comprehensive loss, net of taxes
—
—
—
—
7,618
7,618
Dividend Reinvestment and Stock Purchase
Plan
27,654
428
—
—
—
428
Stock issued for acquisition of Cincinnati
Bancorp, Inc.
2,042,598
28,577
—
—
—
28,577
Repurchase of common stock
(199,913)
—
—
(3,326)
—
(3,326)
Compensation expense relating to restricted
stock
44,150
563
—
—
—
563
Common stock dividends, $0.85 per share
—
—
(9,938)
—
—
(9,938)
Balance, December 31, 2023
13,173,569
173,637
140,017
(56,015)
(22,336)
235,303
Net income
—
—
13,492
—
—
13,492
Other comprehensive income, net of taxes
—
—
—
—
3,147
3,147
Dividend Reinvestment and Stock Purchase
Plan
34,767
525
—
—
—
525
Stock issued for acquisition of Eagle
Financial Bancorp, Inc.
868,001
12,187
—
—
—
12,187
Repurchase of common stock
—
—
—
13
—
13
Compensation expense relating to restricted
stock
41,703
588
—
—
—
588
Common stock dividends, $0.88 per share
—
—
(12,219)
—
—
(12,219)
Balance, December 31, 2024
14,118,040
186,937
141,290
(56,002)
(19,189)
253,036
Net income
—
—
23,120
—
—
23,120
Other comprehensive income, net of taxes
—
—
—
—
9,039
9,039
Dividend Reinvestment and Stock Purchase
Plan
40,712
625
—
—
—
625
Repurchase of common stock
(4,125)
—
—
(69)
—
(69)
Compensation expense relating to restricted
stock
38,950
650
—
—
—
650
Common stock dividends, $0.88 per share
—
—
(12,472)
—
—
(12,472)
Balance, December 31, 2025
14,193,577 $
188,212
151,938
(56,071)
(10,150)
273,929
The accompanying notes to consolidated financial statements are an integral part of these statements.
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Table of Contents
LCNB CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31,
(Dollars in thousands)
2025
2024
2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
$
23,120
13,492
12,628
Adjustments to reconcile net income to net cash flows from operating activities-
Depreciation, amortization and accretion
668
604
2,989
Provision for credit losses
1,936
1,962
2,077
Deferred income tax provision (benefit)
2,782
1,951
(323)
Increase in cash surrender value of bank owned life insurance
(1,422)
(1,359)
(1,136)
Bank-owned life insurance benefits in excess of cash surrender value
—
(306)
—
Realized and unrealized (gains) losses from equity securities, net
(30)
9
5
Realized losses from sales of debt securities available-for-sale, net
—
214
—
Realized gains from sales of premises and equipment, net
—
(455)
(422)
Origination of mortgage loans for sale
(98,637)
(143,963)
(4,306)
Realized gains from sales of loans
(2,937)
(3,917)
(697)
Proceeds from sales of originated loans
105,413
146,508
4,346
Realized losses from sales of acquired loans
—
484
—
Proceeds from sales of acquired loans
—
78,698
—
Compensation expense related to restricted stock
650
588
563
Changes in:
Accrued income receivable
733
(5)
245
Other assets
7
(2,467)
8,694
Accrued interest and other liabilities
2,113
1,198
(1,303)
TOTAL ADJUSTMENTS
11,276
79,744
10,732
NET CASH FLOWS PROVIDED BY (USED IN) OPERATING
ACTIVITIES
34,396
93,236
23,360
CASH FLOWS FROM INVESTING ACTIVITIES:
Equity securities:
Proceeds from sales
—
—
963
Purchases of securities
(40)
(36)
(1,598)
Available for-sale debt securities:
Proceeds from sales
—
9,615
5,210
Proceeds from maturities, prepayments and calls
42,324
32,149
22,609
Purchases of securities
(5,006)
(20,294)
(497)
Held-to-maturity debt securities:
Proceeds from maturities, prepayments and calls
1,616
3,091
3,295
Purchases of securities
(1,378)
(2,558)
(280)
Purchase of interest-bearing time deposits
(2,460)
(250)
—
Proceeds from redemption of Federal Reserve Bank stock
—
24
—
Purchase of Federal Reserve Bank stock
—
(1,343)
(434)
Proceeds from redemption of Federal Home Loan Bank stock
—
93
1,369
Purchase of Federal Home Loan Bank stock
—
(1,293)
(4,622)
Net decrease (increase) in loans
19,565
48,877
(83,709)
Proceeds from bank owned life insurance death benefits
—
514
—
Purchases of premises and equipment
(959)
(3,798)
(2,606)
Proceeds from sales of premises and equipment
13
848
654
Cash and cash equivalents acquired, net of cash paid for acquisition
—
(2,144)
1,893
Funding of tax credit investments
(1,623)
(2,101)
(2,658)
NET CASH FLOWS PROVIDED BY (USED IN) INVESTING
ACTIVITIES
52,052
61,394
(60,411)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits
(37,937)
(78,532)
8,887
Net decrease in short-term borrowings
—
(110,395)
(30,059)
Proceeds from issuance of long-term debt
363
50,000
95,000
Principal payments on long-term debt
(51,088)
(8,001)
(6,919)
Proceeds from issuance of common stock
625
525
428
Repurchase of common stock
(69)
13
(3,326)
Cash dividends paid on common stock
(12,472)
(12,219)
(9,938)
NET CASH FLOWS PROVIDED BY (USED IN) FINANCING
ACTIVITIES
(100,578)
(158,609)
54,073
NET CHANGE IN CASH AND CASH EQUIVALENTS
(14,130)
(3,979)
17,022
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
35,744
39,723
22,701
CASH AND CASH EQUIVALENTS AT END OF YEAR
$
21,614
35,744
39,723
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Table of Contents
LCNB CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For the years ended December 31,
(Dollars in thousands)
2025
2024
2023
SUPPLEMENTAL CASH FLOW INFORMATION:
CASH PAID DURING THE YEAR FOR:
Interest
$
33,474
42,532
21,740
Income taxes
(83)
—
2,735
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING ACTIVITY:
Transfer from loans held-for-investment to held-for sale
—
64,809
—
Transfer from loans held-for-sale to held-for-investment
—
4,817
—
Transfer from premises and equipment to premises held-for-sale
525
—
—
Right-of-use assets obtained in exchange for lease obligations
1,292
167
—
See Note 2 - Business Combinations regarding non-cash transactions included in the acquisition.
The accompanying notes to consolidated financial statements are an integral part of these statements.
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Table of Contents
LCNB CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2025
(Continued)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
LCNB Corp. (the "Company" or “LCNB”), an Ohio corporation formed in December 1998, is a financial holding company whose principal activity is the
ownership of LCNB National Bank (the "Bank"). The Bank was founded in 1877 and provides full banking services, including Wealth Management and
Investment services, to customers primarily in Southwestern Ohio, Franklin County, Ohio, and contiguous areas.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company and its subsidiaries. Significant intercompany accounts and transactions are
eliminated in consolidation. The accounting and reporting policies of the Company conform with U.S. generally accepted accounting principles and with
general practices in the banking industry.
Certain prior period data presented in the Consolidated Balance Sheets for cash and due from banks and interest-bearing demand deposits have been
reclassified to conform with the current year presentation. Certain prior period data presented in the Consolidated Statements of Cash Flows for other liabilities
cash flows from operating activities and tax credit investments cash flows from investing activities have been reclassified to conform with the current year
presentation.
USE OF ESTIMATES
The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and 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.
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, cash and cash equivalents include cash, balances due from banks, federal funds sold, and interest-bearing demand
deposits with original maturities of twelve months or less. Deposits with other banks routinely have balances greater than FDIC insured limits.
INVESTMENT SECURITIES
Certain municipal debt securities that management has the positive intent and ability to hold to maturity are classified as HTM and recorded at amortized
cost. Debt securities not classified as HTM are classified as AFS and recorded at fair value, with unrealized gains and losses excluded from earnings and
reported in other comprehensive income, a separate component of shareholders’ equity. Amortization of premiums and accretion of discounts are recognized as
adjustments to interest income using the level-yield method. Realized gains or losses from the sale of securities are recorded on the trade date and are
computed using the specific identification method.
Expected credit losses on HTM municipal debt securities are measured on a collective basis by major security types. The estimate of expected credit losses
considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. Substantially all of LCNB's
portfolio of held-to-maturity municipal debt securities were issued by local municipalities and governmental authorities.
- 50-
LCNB CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2025
(Continued)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
For AFS debt securities in an unrealized loss position, LCNB first assesses whether 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 of the criteria regarding intent or requirement to sell is met, the security's amortized cost basis
is written down to fair value through income. For available-for-sale debt securities that do not meet the aforementioned criteria, LCNB evaluates whether the
decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than
amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If
this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security is compared to the amortized cost
basis of the security. If the present value of expected cash flows is less that the amortized cost basis, a provision for credit losses is recorded for the amount of
the difference. Any impairment that is not recorded through an allowance for credit losses is recognized in other comprehensive income.
Changes in the allowance for credit losses are recorded as credit loss expense or recovery. Losses are charged against the allowance when management believes
the uncollectibility of an available-for sale debt security is confirmed or when either of the criteria regarding intent or requirement to sell is met.
Accrued interest receivable on HTM securities totaled $54 thousand and $53 thousand at December 31, 2025 and 2024, respectively, and accrued interest
receivable on AFS debt securities totaled $841 thousand and $940 thousand at December 31, 2025 and 2024, respectively, and are reported in interest
receivable in the Consolidated Balance Sheets. Management has made the accounting policy election to exclude accrued interest receivable on HTM and AFS
securities from the estimate of credit losses as accrued interest is written off in a timely manner when deemed uncollectible.
Equity securities with a readily determinable fair value are measured at fair value with changes in fair value recognized in net income.
FHLB stock is an equity interest in the FHLB of Cincinnati. It can be sold only at its par value of $100 per share and only to the FHLB or to another member
institution. In addition, the equity ownership rights are more limited than would be the case for a public company because of the oversight role exercised by
the Federal Housing Finance Agency in the process of budgeting and approving dividends. Federal Reserve Bank stock is similarly restricted in marketability
and value. Both investments are carried at cost, which is their par value.
FHLB and Federal Reserve Bank stock are both subject to minimum ownership requirements by member banks. The required investments in common stock
are based on predetermined formulas.
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Table of Contents
LCNB CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2025
(Continued)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
LOANS
The Company’s loan portfolio includes most types of commercial and industrial loans, commercial loans secured by real estate, residential real estate loans,
consumer loans, agricultural loans and other types of loans. Most of the properties collateralizing the loan portfolio are located within the Company’s market
area.
Originated loans are stated at the principal amount outstanding, net of unearned income, deferred origination fees and costs, and the allowance for credit
losses. Interest income is accrued on the unpaid principal balance. The delinquency status of a loan is based on contractual terms and not on how recently
payments have been received. Generally, a loan is placed on non-accrual status when there is an indication that the borrower’s cash flow may not be sufficient
to make payments as they come due, unless the loan is well secured and in the process of collection. Subsequent cash receipts on non-accrual loans are
recorded as a reduction of principal and interest income is recorded once principal recovery is reasonably assured. The current year's accrued interest on loans
placed on non-accrual status is charged against earnings. Previous years' accrued interest is charged against the allowance for credit losses. Non-accrual loans
are returned to accrual status when, in the opinion of management, the financial position of the borrower indicates there is no longer a reasonable doubt as to
the timely collection of interest or principal.
Loan origination fees and certain direct loan origination costs are deferred and the net amount amortized as an adjustment of loan yields. These amounts are
being amortized over the lives of the related loans.
In the ordinary course of business, the Company enters into off-balance sheet financial instruments consisting of commitments to extend credit and standby
letters of credit. Such financial instruments are recorded in the consolidated financial statements when they are funded. The credit risk associated with these
commitments is evaluated in a manner similar to the allowance for credit losses on loans.
Loans acquired from mergers are initially recorded at fair value with no carryover of the acquired entity's previously established allowance for credit losses.
The excess of expected cash flows over the estimated fair value of acquired loans is recognized as interest income over the remaining contractual lives of the
loans using the level yield method. Subsequent decreases in expected cash flows will require additions to the allowance for credit losses.
Loans acquired from mergers that have experienced more than insignificant credit deterioration since origination are recorded at the amount paid. An allowance
for credit losses is determined using the same methodology as other loans held for investment. The initial allowance for credit losses determined on a collective
basis is allocated to individual loans. The sum of the loan's purchase price and allowance for credit losses becomes its initial amortized cost basis. The
difference between the initial amortized cost basis and the par value of the loan is a noncredit discount or premium, which is amortized into interest income
over the life of the loan. Subsequent changes to the allowance for credit losses are recorded through a provision for credit losses.
ALLOWANCE FOR CREDIT LOSSES ON LOANS
The allowance for credit losses ("ACL") is a valuation account that is deducted from the loans' amortized cost basis to present the net amount expected to be
collected on the loans. Loans are charged off against the allowance when management believes that the uncollectability of a loan balance is confirmed.
Consumer loans are charged off when they reach 120 days past due. Subsequent recoveries, if any, are credited to the allowance. Expected recoveries do not
exceed the aggregate of amounts previously charged-off and expected to be charged-off.
Under ASC 326, management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events,
current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses.
Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards,
portfolio mix, delinquency level, or term as well as changes in external conditions, such as changes in unemployment rates, property values, or other relevant
factors. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.
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Table of Contents
LCNB CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2025
(Continued)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The allowance for credit losses is measured on a pool basis when similar risk characteristics exist. LCNB has identified the following portfolio segments and
measures the allowance for credit losses using the following methods:
Portfolio Segment
Pool
Methodology
Loss Driver(s)
Commercial & industrial
Commercial & Industrial
Discounted Cash Flow
Weighted Combined MSA Unemployment and Coincident Economic Activity (CEA)
Index for Ohio
Commercial & industrial
Commercial & Industrial - Banc Alliance/Alliance
Partners Program
Discounted Cash Flow
Weighted Combined MSA Unemployment and Coincident Economic Activity (CEA)
Index for Ohio
Commercial, secured by real
estate
Commercial Real Estate (CRE) Non-Owner
Occupied
Discounted Cash Flow
Weighted Combined MSA Unemployment
Commercial, secured by real
estate
Commercial Real Estate (CRE) Owner Occupied Discounted Cash Flow
Weighted Combined MSA Unemployment
Commercial, secured by real
estate
Farm Real Estate
Discounted Cash Flow
Weighted Combined MSA Unemployment
Commercial, secured by real
estate
Multifamily
Discounted Cash Flow
Weighted Combined MSA Unemployment
Commercial, secured by real
estate
Other Construction, Land Development, and Other
Land
Discounted Cash Flow
Weighted Combined MSA Unemployment and Weighted Combined MSA Home Price
Index
Residential real estate
Real Estate Mortgage
Discounted Cash Flow
Weighted Combined MSA Unemployment and Weighted Combined MSA Home Price
Index
Residential real estate
Second Mortgage (Residential)
Discounted Cash Flow
Weighted Combined MSA Unemployment and Weighted Combined MSA Home Price
Index
Residential real estate
Home Equity Line of Credit
Discounted Cash Flow
Weighted Combined MSA Unemployment and Weighted Combined MSA Home Price
Index
Residential real estate
Residential 1-4 Family Construction
Discounted Cash Flow
Weighted Combined MSA Unemployment and Weighted Combined MSA Home Price
Index
Consumer
Installment - Direct and ODP (Consumer)
Discounted Cash Flow
Weighted Combined MSA Unemployment and Coincident Economic Activity (CEA)
Index for Ohio
Consumer
Letter of Credit
Manual
N/A
Consumer
Demand Deposit Account Overdrafts
Manual
N/A
Agricultural
Ag Production and Other Farm
Discounted Cash Flow
Weighted Combined MSA Unemployment
*"MSA" referenced above combines forecasts for Cincinnati, Dayton and Columbus metro areas.
**"Weighted" referenced above refers to weighted average of baseline and alternative scenarios
Management has chosen the discounted cash flow ("DCF") methodology to estimate the quantitative portion of the allowance for credit losses on loans for all
loan pools. A Loss Driver Analysis (“LDA”) was performed for the September 30, 2025 ACL calculation, based on relevant information available at June 30,
2025, for each segment to identify potential loss drivers and create a regression model for use in forecasting cash flows. The LDA for all DCF-based pools
utilized LCNB’s data and peer data from the Federal Financial Institutions Examination Council's (“FFIEC”) Call Report filings.
In creating the DCF model, as well as reviewing the model quarterly, management established a four-quarter reasonable and supportable forecast period with a
six-quarter straight line reversion to the long-term historical average. Due to the infrequency of losses within the farm real estate and agricultural loan
portfolios, LCNB elected to use peer data for a more statistically sound calculation.
Key assumptions in the DCF model include the probability of default (“PD”), loss given default (“LGD”), and prepayment/curtailment rates. The model-driven
PD and LGD are derived using company specific and peer historical data. Prepayment and curtailment rates were calculated using third party studies of
LCNB's data.
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LCNB CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2025
(Continued)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Expected credit losses are estimated over the contractual term of the loans, adjusted for prepayments when appropriate. The contractual term excludes
extensions, renewals, and modifications unless the extension or renewal options are included in the original or modified contract at the reporting date and are
not unconditionally cancellable by the Company.
Qualitative factors for the DCF methodology includes the following:
•
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;
•
Model risk including statistical risk, reversion risk, timing risk, and model limitation risk;
•
Changes in the nature and volume of the portfolio and terms of loans; and
•
The lending policies and procedures, including changes in underwriting standards and practices for collections, write-offs, and recoveries.
Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not included in the collective evaluation.
When the borrower is experiencing financial difficulty at the reporting date and repayment is expected to be provided substantially through the operation or
sale of the collateral, expected credit losses are based on the fair value of the collateral at the reporting date adjusted for estimated selling costs.
Accrued interest receivable totaling $7.1 million and $7.7 million at December 31, 2025 and 2024, respectively, was excluded from the amortized cost basis of
the estimate of credit losses and is reported in interest receivable on the Consolidated Balance Sheets. Loans are generally placed on non-accrual status at 90
days past due or when the borrower's ability to repay becomes doubtful. When a loan is placed on non-accrual status, any accrued interest is reversed and
charged against interest income.
ALLOWANCE FOR CREDIT LOSSES ON OFF-BALANCE SHEET CREDIT EXPOSURES
Per the guidance in ASC 326, LCNB estimates expected credit losses over the contractual period during which it is exposed to credit risk by a contractual
obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The allowance for credit losses on off-balance sheet credit
exposures is adjusted as a provision for (or recovery of) credit loss expense. The estimate includes consideration of the likelihood that funding will occur and
an estimate is made of expected credit losses on commitments expected to be funded over their estimated lives. Funding rates are based on a historical analysis
of the Company’s portfolio, while estimates of credit losses are determined using the same loss rates as funded loans.
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LCNB CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2025
(Continued)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
LOANS HELD FOR SALE
Mortgage loans originated and intended for sale in the secondary market are carried at the lower of aggregate cost or fair value, as determined by outstanding
commitments from investors. Net unrealized losses, if any, are recorded as a valuation allowance and charged to earnings. Prior to January 1, 2024, mortgage
loans held for sale were generally sold with servicing rights retained. Servicing rights were released to the loan purchaser during 2024 and 2025. Gains and
losses on sales of mortgage loans are based on the difference between the selling price and the carrying value of the related mortgage loan sold, which is
reduced by the cost allocated to the servicing right. LCNB generally locks in the sale price to the purchaser of the mortgage loan at the same time an interest
rate commitment is made to the borrower.
FINANCIAL INSTRUMENTS AND LOAN COMMITMENTS
Financial instruments include off-balance-sheet credit instruments, such as commitments to make loans and commercial letters of credit, issued to meet
customer financing needs. The face amount for these items represents the exposure to loss before considering customer collateral or ability to repay. Such
financial instruments are recorded when they are funded. Instruments, such as standby letters of credit, that are considered financial guarantees are recorded at
fair value. Reserves for unfunded commitments are recorded as an "other liability" in the Consolidated Balance Sheets.
LENDER RISK ACCOUNT
Certain loan sale transactions with the FHLB provide for establishment of a LRA. The LRA consists of amounts withheld from loan sale proceeds by the
FHLB-Cincinnati for absorbing projected losses that are probable on those sold loans. These withheld funds are an asset as they are scheduled to be paid to
LCNB in future years, net of any credit losses on those loans sold. The receivables are estimated by discounting the expected cash flows over the life of each
master commitment contract. Changes in the discounted cash flow are recorded as gain and loss on sale of loans. Expected cash flows are re-evaluated at each
measurement date. If there is an adverse change in expected cash flows, the gain and loss on sale of loans would be adjusted on a prospective basis and the
asset would be evaluated for impairment.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated depreciation. Land is stated at cost. Depreciation is computed on both the straight-line and
accelerated methods over the estimated useful lives of the assets, generally 15 to 40 years for premises and 3 to 10 years for equipment. Leasehold
improvements are amortized over the terms of the respective leases or the estimated useful lives of the improvements, whichever is shorter. Costs incurred for
maintenance and repairs are expensed as incurred. Premises and equipment are evaluated for impairment whenever events or changes in circumstances indicate
that the carrying amount of a particular asset may not be recoverable.
LEASES
LCNB determines if a contract is a lease or contains a lease at its inception. A liability to make lease payments ("the lease liability") and a right-of-use asset
representing the right to use the underlying asset for the lease term, initially measured at the present value of the lease payments, are recorded in the
consolidated balance sheet. The discount rate is LCNB's incremental borrowing rate for periods similar to the respective lease terms. LCNB management is
reasonably certain that it will exercise the renewal options contained within the contracts for its leased offices and these additional terms have been included in
the calculation of the right-of-use assets and the lease liabilities. Most variable lease payments are excluded except for those that depend on an index or a rate
or are in substance fixed payments.
A lease is classified as a finance lease if it meets any of five designated criteria. If the lease does not meet any of the five criteria, the lease is classified as an
operating lease. All leases entered into by LCNB through December 31, 2025 are classified as operating leases. Lease expense is recognized on a straight-line
basis over the lease term for operating leases. LCNB has adopted an accounting policy election to not recognize lease assets and lease liabilities for leases with
a term of twelve months or less. Lease expense for such leases is generally recognized on a straight-line basis over the lease term.
OTHER REAL ESTATE OWNED
Other real estate owned includes properties acquired through foreclosure. Such property is held for sale and is initially recorded at fair value, less costs to sell,
establishing a new cost basis. Fair value is primarily based on a property appraisal obtained at the time of transfer and any periodic updates that may be
obtained thereafter. The allowance for credit losses is charged for any write down of the loan’s carrying value to fair value at the date of transfer. Any
subsequent reductions in fair value and expenses incurred from holding other real estate owned are charged to other non-interest expense. Costs, excluding
interest, relating to the improvement of other real estate owned are capitalized. Gains and losses from the sale of other real estate owned are included in other
non-interest expense.
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LCNB CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2025
(Continued)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
GOODWILL AND OTHER INTANGIBLE ASSETS
The acquisition method of accounting requires that assets and liabilities acquired in a business combination are recorded at fair value as of the acquisition date.
The valuation of assets and liabilities often involves estimates based on third- party valuations, or internal valuations, based on discounted cash flow analyses
or other valuation techniques, all of which are inherently subjective. Goodwill is the excess of the purchase price over the fair value of the net identifiable
assets acquired in a business combination. Goodwill is not amortized, but is instead subject to an annual review for impairment. A review for impairment may
be conducted more frequently than annually if circumstances indicate a possible impairment. Impairment indicators that may be considered include the
condition of the economy and banking industry; estimated future cash flows; government intervention and regulatory updates; the impact of recent events to
financial performance and cost factors of the reporting unit; performance of LCNB’s stock, and other relevant events. These and other factors could lead to a
conclusion that goodwill is impaired, which would require LCNB to write off the difference between the current estimated fair value of the Company and its
carrying value.
LCNB performs a goodwill impairment test on an annual basis or more often if events or circumstances indicate that it is more-likely-than-not that the fair
value of a reporting unit is below its carrying value. Based on the annual impairment analysis on November 30, 2025, it was determined that the fair value was
in excess of its respective carrying value and therefore, goodwill is considered not impaired.
The Company’s other intangible assets relate to core deposits acquired from business combinations. These intangible assets are amortized on a straight-line
basis over their estimated useful lives. Management evaluates whether events or circumstances have occurred that indicate the remaining useful life or
carrying value of the amortizing intangible should be revised.
MORTGAGE SERVICING RIGHTS
Mortgage loan servicing rights are recognized as assets based on the allocated value of retained servicing rights on mortgage loans sold. Mortgage loan
servicing rights are carried at the lower of amortized cost or fair value and are expensed in proportion to, and over the period of, estimated net servicing
revenues. Impairment is evaluated based on the fair value of the rights using groupings of the underlying mortgage loans as to interest rates. Any impairment of
a grouping is reported as a valuation allowance.
Servicing fee income is recorded for fees earned for servicing mortgage loans. The fees are based on a contractual percentage of the outstanding principal or a
fixed amount per loan and are recorded as income when earned. Amortization of mortgage loan servicing rights is netted against mortgage loan servicing
income and recorded in other operating income in the Consolidated Statements of Income.
BANK OWNED LIFE INSURANCE
The Company has purchased life insurance policies on certain officers of the Company. The Company is the beneficiary of these policies and has recorded the
estimated cash surrender value in the Consolidated Balance Sheets. Income on the policies, based on the increase in cash surrender value and any incremental
death benefits, is included in non-interest income in the Consolidated Statements of Income.
AFFORDABLE HOUSING TAX CREDIT LIMITED PARTNERSHIP
LCNB has elected to account for its investment in an affordable housing tax credit limited partnership using the proportional amortization method.
Accordingly, LCNB amortizes the initial cost of the investment to income tax expense in proportion to the tax credits and other tax benefits received and
recognizes the net investment performance in the income statement as a component of income tax expense. The investment in the limited partnership is
included in other assets and the unfunded commitment is included in accrued interest and other liabilities in LCNB's Consolidated Balance Sheets.
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LCNB CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2025
(Continued)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
FAIR VALUE MEASUREMENTS
Accounting guidance establishes a fair value hierarchy to prioritize the inputs to valuation techniques used to measure fair value. A financial instrument’s level
within the hierarchy is based on the lowest level of input that is significant to the fair value measurement. The three broad input levels are:
•
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; and
•
Level 3 - inputs that are unobservable for the asset or liability.
Accounting guidance permits, but does not require, companies to measure many financial instruments and certain other items, including loans and debt
securities, at fair value. The decision to elect the fair value option is made individually for each instrument and is irrevocable once made. Changes in fair
value for the selected instruments are recorded in earnings.
The Company did not select any financial instruments for the fair value election in 2025 or 2024.
SHORT-TERM BORROWINGS
Short- term borrowings consist of Federal funds purchased, FHLB advances, and borrowings from non-affiliated banks. Short-term borrowings mature within
one day to 365 days of the transaction date.
ADVERTISING EXPENSE
Advertising costs are expensed as incurred and are recorded as a marketing expense, a component of non-interest expense.
PENSION PLANS
The Company sponsors two pension plans, both of which are frozen to new participants.
Eligible employees of the Company hired before 2009 participate in a multiple-employer qualified noncontributory defined benefit retirement plan. This plan
is accounted for as a multi-employer plan because assets contributed by an employer are not segregated in a separate account or restricted to provide benefits
only to employees of that employer.
Two companies previously acquired by the Company had defined benefit pension plans, which were assumed by the Company. One of the assumed plans
was merged into the Company's plan during 2024.
TREASURY STOCK
Common shares repurchased are recorded at cost. Cost of shares retired or reissued is determined using the weighted average method.
STOCK-BASED COMPENSATION
As of December 31, 2025, the only stock-based compensation awards outstanding are restricted stock awards. The compensation cost for restricted stock
awards is based on the market price of the Company's common stock at the date of grant multiplied by the number of shares granted that are expected to vest.
The estimated cost is recognized on a straight-line basis over the period the employee is required to provide services in exchange for the award, usually the
vesting period.
REVENUE FROM CONTRACTS WITH CUSTOMERS
LCNB record's revenue from contracts with customers in accordance with ASC Topic 606, “Revenue from Contracts with Customers” (“Topic 606”). Under
Topic 606, LCNB must identify the contract with a customer, identify the performance obligations in the contract, determine the transaction price, allocate the
transaction price to the performance obligations in the contract, and recognize revenue when, or as, the performance obligation is satisfied. Significant revenue
has not been recognized in the current reporting period that results from performance obligations satisfied in previous periods.
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LCNB CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2025
(Continued)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
LCNB's primary sources of revenue are derived from interest and dividends earned on loans, securities, and other financial instruments that are not within the
scope of Topic 606. LCNB has evaluated the nature of its contracts with customers and determined that further disaggregation of revenue from contracts with
customers into more granular categories beyond what is presented in the Consolidated Statements of Income is not necessary.
LCNB generally satisfies its performance obligations on contracts with customers as services are rendered, and the transaction prices are typically fixed and
charged either on a periodic basis, generally monthly, or based on activity. Because performance obligations are satisfied as services are rendered and the
transaction prices are fixed, there is little judgment involved in applying Topic 606 that significantly affects the determination of the amount and timing of
revenue from contracts with customers.
Revenue- generating activities that are within the scope of ASC 606 and that are presented as non-interest income in LCNB's Consolidated Statements of
Income include:
•
Fiduciary income - this includes periodic fees due from Wealth Management and Investment Services customers for managing the customers' financial
assets. Fees are generally charged on a quarterly or annual basis and are recognized ratably throughout the period, as the services are provided on an
ongoing basis.
•
Service charges and fees on deposit accounts - these include general service fees charged for deposit account maintenance and activity and
transaction-based fees charged for certain services, such as debit card, wire transfer, or overdraft activities. Revenue is recognized when the
performance obligation is completed, which is generally after a transaction is completed or monthly for account maintenance services.
INCOME TAXES
Deferred income taxes are determined using the asset and liability method of accounting. Under this method, the net deferred tax asset or liability is
determined based on the tax effects of temporary differences between the book and tax basis of the various balance sheet assets and liabilities and gives current
recognition to changes in tax rates and laws.
Management analyzes material tax positions taken in any income tax return for any tax jurisdiction and determines the likelihood of the positions being
sustained in a tax examination. A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax
examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of
being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded.
EARNINGS PER SHARE
Basic earnings per share allocated to common shareholders is calculated using the two-class method and is computed by dividing net income allocated to
common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share is adjusted for the dilutive
effects of stock-based compensation and is calculated using the two-class method or the treasury stock method. The diluted average number of common shares
outstanding has been increased for the assumed exercise of stock-based compensation with the proceeds used to purchase treasury shares at the average market
price for the period.
ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS
ASU No. 2023-02, "Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional
Amortization Method (a Consensus of the Emerging Issues Task Force)"
ASU No. 2023-02 was issued in March 2023 and became effective for LCNB on January 1, 2024. It allows reporting entities the option to use the proportional
amortization method to account for equity investments made primarily for the purpose of receiving income tax credits and other income tax benefits when
certain requirements are met, regardless of the tax credit program from which the income tax credits are received. The proportional amortization method was
previously limited to Low-Income Housing Tax Credit investments. Under the proportional amortization method, an entity amortizes the initial cost of the
investment in proportion to the income tax credits and other income tax benefits received and recognizes the net amortization and income tax credits and other
income tax benefits in the income statement as a component of income tax expense (benefit). Adoption of ASU No. 2023-02 did not have a material impact on
LCNB's results of consolidated operations or financial position.
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LCNB CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2025
(Continued)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
ASU No. 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures"
ASU 2023-07 was issued in November 2023 and became effective for LCNB on January 1, 2024. It changes the requirements for segment disclosures,
primarily through enhancing disclosure requirements for significant segment expenses, enhancing interim disclosure requirements, clarifying circumstances in
which an entity can disclose multiple segment measures of profit or loss, providing new segment disclosure requirements for entities with a single reportable
segment, and modifying other disclosure requirements. A public entity should apply the amendments retrospectively to all prior periods presented in the
financial statements. Upon transition, the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment
expense categories identified and disclosed in the period of adoption. Adoption of ASU No 2023-07 did not have a material impact on LCNB's results of
consolidated operations or financial position.
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. The following information provides brief summaries of newly issued but
not yet effective ASUs that could have an effect on LCNB’s financial position or results of consolidated operations:
ASU 2025-08 “Financial Instruments — Credit Losses (Topic 326): Purchased Loans”
In November 2025, the FASB issued ASU 2025-08 Financial Instruments—Credit Losses (Topic 326) — Purchased Loans. The amendments in this Update
expand the population of acquired financial assets subject to the gross-up approach in Topic 326. In accordance with the amendments in this Update, loans
(excluding credit cards) acquired without credit deterioration and deemed “seasoned” are purchased seasoned loans and accounted for using the gross-up
approach at acquisition. All non-PCD (purchased financial asset with credit deterioration) loans (excluding credit cards) that are acquired in a business
combination are deemed seasoned. Other non-PCD loans (excluding credit cards) are seasoned if they were purchased at least 90 days after origination and the
acquirer was not involved in the origination of the loans. The amendments in this Update are effective for all entities for annual reporting periods beginning
after December 15, 2026, and interim reporting periods within those annual reporting periods. The amendments in this Update should be applied prospectively
to loans that are acquired on or after the initial application date. Early adoption is permitted in an interim or annual reporting period in which financial
statements have not yet been issued or made available for issuance. Management is currently evaluating the Update and does not expect adoption of the Update
to have a material effect on the Company’s financial position or results of operations.
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LCNB CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2025
(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.
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, 2024 and as adjusted at June 30, 2025 (in thousands):
June 30, 2024
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
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.
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, which was conducted on November 30, 2025, 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 and $3.1 million during the years ended December 31, 2025 and 2024, respectfully, and
were expensed as incurred and are recorded as Merger-related expenses in the Consolidated Statements of Income.
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Table of Contents
LCNB CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2025
(Continued)
NOTE 3 - INVESTMENT SECURITIES
The amortized cost and estimated fair value of debt securities at December 31 are summarized as follows (in thousands):
Amortized
Unrealized
Unrealized
Fair
Cost
Gains
Losses
Value
2025
Debt Securities Available-for-Sale:
U.S. Treasury notes
$
52,626
—
2,168
50,458
U.S. Agency notes
75,299
38
2,933
72,404
Corporate bonds
12,013
64
344
11,733
U.S. Agency mortgage-backed securities
68,085
3
5,571
62,517
Municipal securities:
Non-taxable
4,191
—
186
4,005
Taxable
32,898
1
1,745
31,154
$
245,112
106
12,947
232,271
Debt Securities Held-to-Maturity:
Municipal securities:
Non-taxable
$
13,113
18
666
12,465
Taxable
2,967
—
319
2,648
$
16,080
18
985
15,113
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 Company estimated the expected credit losses at December 31, 2025 and December 31, 2024 to be immaterial based on the composition of the securities
portfolio.
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Table of Contents
LCNB CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2025
(Continued)
NOTE 3 - INVESTMENT SECURITIES (Continued)
Information concerning debt securities with gross unrealized losses at December 31, 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 More
Fair
Unrealized
Fair
Unrealized
Value
Losses
Value
Losses
2025
Available-for-Sale:
U.S. Treasury notes
$
—
—
50,458
2,168
U.S. Agency notes
—
—
68,169
2,933
Corporate bonds
2,119
81
5,237
263
U.S. Agency mortgage-backed securities
6,785
50
55,533
5,521
Municipal securities:
Non-taxable
—
—
2,975
186
Taxable
—
—
30,252
1,745
$
8,904
131
212,624
12,816
Held-to-Maturity:
Municipal securities:
Non-taxable
$
1,364
13
8,608
653
Taxable
—
—
2,650
319
$
1,364
13
11,258
972
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
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Table of Contents
LCNB CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2025
(Continued)
NOTE 3 - INVESTMENT SECURITIES (Continued)
At December 31, 2025, LCNB’s securities portfolio consisted of 153 securities, 139 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. After considering the issuers of the securities, LCNB
management determined that that the unrealized losses were due to changing interest rate environments. At December 31, 2025, as LCNB had no intent to sell
its debt securities before recovery of their cost basis and as it was more likely than not that it will not be required to sell its debt securities before recovery of
the cost basis, no unrealized losses were deemed to represent credit losses.
Contractual maturities of debt securities at December 31, 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
Fair
Amortized
Fair
Cost
Value
Cost
Value
Due within one year
$
26,707
26,343
279
274
Due from one to five years
126,351
120,210
884
838
Due from five to ten years
22,969
22,201
8,132
7,797
Due after ten years
1,000
1,000
6,785
6,204
177,027
169,754
16,080
15,113
U.S. Agency mortgage-backed securities
68,085
62,517
—
—
$
245,112
232,271
16,080
15,113
Debt securities with a market value of $121.4 and $116.2 million at December 31, 2025 and 2024, respectively, were pledged to secure public deposits and for
other purposes required or permitted by law.
Certain information concerning the sale of debt securities available-for-sale for the years ended December 31 was as follows (in thousands):
2025
2024
2023
Proceeds from sales
$
—
9,615
5,210
Gross realized gains
—
—
—
Gross realized losses
—
214
—
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 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 December 31, 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 December 31 are summarized as follows (in
thousands):
2025
2024
Amortized
Fair
Amortized
Fair
Cost
Value
Cost
Value
Mutual funds
$
1,491
1,345
1,451
1,265
Equity securities
10
88
10
98
Total equity securities with a readily determinable fair value
$
1,501
1,433
1,461
1,363
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Table of Contents
LCNB CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2025
(Continued)
NOTE 3 - INVESTMENT SECURITIES (Continued)
Certain information concerning changes in fair value of equity securities with a readily determinable fair value for the years ended December 31 was as follows
(in thousands):
2025
2024
2023
Net gains (losses) recognized during the period on equity securities
$
30
(9)
(5)
Less net losses recognized on equity securities sold during the period
—
—
(61)
Net unrealized gains (losses) recognized during the reporting period on equity
securities still held at period end
$
30
(9)
56
NOTE 4 - LOANS
Major classifications of loans at December 31 were as follows (in thousands):
2025
2024
Commercial and industrial
$
104,105
118,611
Commercial, secured by real estate:
Owner occupied
219,273
210,327
Non-owner occupied
505,182
508,531
Farmland
35,561
37,860
Multi-family
253,051
264,260
Construction
85,144
91,154
Residential real estate:
Secured by senior liens on 1-4 family dwellings
395,552
392,513
Secured by junior liens on 1-4 family dwellings
20,690
21,522
Home equity line-of-credit loans
54,109
43,064
Consumer
16,955
20,498
Agricultural
15,699
13,293
Other loans, including deposit overdrafts
210
179
1,705,531
1,721,812
Less allowance for credit losses
13,704
12,001
Loans-net
$
1,691,827
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 $1.1 million and $796
thousand at December 31, 2025 and 2024, respectively.
Accrued interest receivable of $7.1 million and $7.7 million are excluded from the balances above as of December 31, 2025 and 2024, respectively, and are
recorded in interest receivable in the consolidated condensed balance sheets.
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Table of Contents
LCNB CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2025
(Continued)
NOTE 4 - LOANS (Continued)
Non-accrual loans by class of receivable at December 31 were as follows (dollars in thousands):
2025
2024
Non-accrual
Loans
Non-accrual
Loans
with no
Allowance
Total
with no
Allowance
Total
for Credit
Losses
Non-accrual
Loans
for Credit
Losses
Non-accrual
Loans
Commercial and industrial
$
—
1,391
—
1,375
Commercial, secured by real estate
Owner occupied
—
—
—
—
Non-owner occupied
—
—
—
2,642
Farmland
—
—
16
16
Multi-family
—
—
—
—
Construction
—
—
—
—
Residential real estate
Secured by senior liens on 1-4 family dwellings
52
384
73
467
Secured by junior liens on 1-4 family dwellings
—
—
—
—
Home equity line-of-credit loans
—
—
—
—
Consumer
19
19
28
28
Agricultural
—
—
—
—
Total non-accrual loans
$
71
1,794
117
4,528
Interest income recognized on nonaccrual loans totaled $9 thousand and $234 thousand during the twelve months ended December 31, 2025 and 2024,
respectively. Accrued interest reversed and charged against interest income for these loans totaled approximately $9 thousand and $48 thousand during the
twelve months ended December 31, 2025 and 2024, respectively.
The ratio of non-accrual loans to total loans outstanding at December 31, 2025 and 2024 was 0.11% and 0.26%, respectively.
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.
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Table of Contents
LCNB CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2025
(Continued)
NOTE 4 - LOANS (Continued)
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, 2025 ACL
calculation based on relevant information available at June 30, 2025.
•
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, a loan is greater than 90 days past due, or financial difficulty modification status change.
The forecast model is utilized to estimate PDs.
•
Loss given default – LGD is the percentage of the asset not expected to be collected upon 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.
•
Forecast and reversion – At December 31, 2025, the Company utilized a four-quarter reasonable and supportable forecast period with a six-quarter
straight line reversion to the long-term historical average and will continue to do so until there is a substantial change in the reliability of the Moody’s
forecast provided or significant economic events.
•
Economic forecast – the Company utilizes Moody's to provide economic forecasts under various scenarios, which are assessed against economic
indicators and management’s observations in the market. As of December 31, 2025, the Company selected a forecasted data model which projects
unemployment between 5.45% and 6.22%, the change in Coincident Economic Activity between 0.07% and 0.58%, and the change in the Home Price
Index between -3.3% and 1.24% during the forecast periods. Management believes that the resulting quantitative reserve appropriately balances
economic indicators with identified risks. As of September 30, 2025, the Company selected a forecast model which projects unemployment between
5.33% and 6.21%, the change in Coincident Economic Activity between 0.27% and 0.60%, and the change in the Home Price Index between -2.60%
and -0.48% during the forecast periods. Management believes the resulting quantitative reserve appropriately balances economic indicators with
identified risks. The historical averages for LCNB’s economic indicators are unemployment – 5.72%, change in Coincident Economic Activity –
1.94%, and change in Home Price Index – 2.82%.
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;
•
Model risk including statistical risk, reversion risk, timing risk and model limitation risk;
•
Changes in the nature and volume of the portfolio and terms of loans; and
•
The lending policies and procedures, including changes in underwriting standards and practices for collections, write-offs, and recoveries.
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Table of Contents
LCNB CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2025
(Continued)
NOTE 4 - LOANS (Continued)
The following table presents activity in the allowance for credit losses and a breakdown of the recorded investment in the allowance for credit losses by
portfolio segment for the three years ended December 31 and a breakdown of the recorded investment in the loan portfolio by portfolio segment for the two
years ended December 31 (in thousands):
Commercial,
Commercial
Secured by
Residential
& Industrial
Real Estate
Real Estate
Consumer
Agricultural
Other
Total
2025
Allowance for credit losses on loans:
Balance, beginning of year
$
1,573
6,537
3,634
220
24
13
12,001
Provision for (recovery of) credit losses
890
33
912
(10)
6
145
1,976
Losses charged off
—
(110)
(58)
(34)
—
(206)
(408)
Recoveries
—
54
4
12
—
65
135
Balance, end of year
$
2,463
6,514
4,492
188
30
17
13,704
Individually evaluated for credit loss
$
1,391
—
25
—
—
—
1,416
Collectively evaluated for credit loss
1,072
6,514
4,467
188
30
17
12,288
Balance, end of year
$
2,463
6,514
4,492
188
30
17
13,704
Loans:
Individually evaluated for credit loss
$
1,444
—
1,058
—
—
—
2,502
Collectively evaluated for credit loss
102,661
1,098,211
469,293
16,955
15,699
210
1,703,029
Balance, end of year
$
104,105
1,098,211
470,351
16,955
15,699
210
1,705,531
Percent of loans in each category to total loans
6.1%
64.4%
27.6%
1.0%
0.9%
0.0%
100.0%
Ratio of net charge-offs to average loans
—%
0.01%
0.01%
0.12%
—%
73.44%
0.02%
2024
Allowance for credit losses on loans:
Balance, beginning of year
$
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
987
869
(736)
(44)
62
128
1,266
Acquisition of Eagle Financial Bancorp, Inc. - provision for credit
losses on non-PCD loans charged to expense
51
246
466
—
—
—
763
Losses charged off
(610)
—
—
(43)
(57)
(193)
(903)
Recoveries
5
—
9
69
1
78
162
Balance, end of year
$
1,573
6,537
3,634
220
24
13
12,001
Individually evaluated for credit loss
$
121
1,204
53
—
—
—
1,378
Collectively evaluated for credit loss
1,452
5,333
3,581
220
24
13
10,623
Balance, end of year
$
1,573
6,537
3,634
220
24
13
12,001
Loans:
Individually evaluated for credit loss
$
1,431
3,205
499
—
—
—
5,135
Collectively evaluated for credit loss
117,180
1,108,927
456,600
20,498
13,293
179
1,716,677
Balance, end of year
$
118,611
1,112,132
457,099
20,498
13,293
179
1,721,812
Percent of loans in each category to total loans
6.9%
64.6%
26.5%
1.2%
0.8%
0.0%
100.0%
Ratio of net charge-offs to average loans
0.50%
—%
—%
(0.11)%
0.45%
54.09%
0.04%
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Table of Contents
LCNB CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2025
(Continued)
NOTE 4 - LOANS (Continued)
Commercial,
Commercial
Secured by
Residential
& Industrial
Real Estate
Real Estate
Consumer
Agricultural
Other
Total
2023
Allowance for credit losses on loans:
Balance, beginning of year, prior to adoption of ASC 326
$
1,300
3,609
624
86
22
5
5,646
Impact of adopting ASC 326
(512)
1,440
836
446
(9)
(5)
2,196
Acquisition of Cincinnati Bancorp, Inc. - PCD Loans
—
90
403
—
—
—
493
Provision for (recovery of) loan losses
266
(176)
689
(219)
5
88
653
Acquisition of Cincinnati Bancorp, Inc. - provision for credit losses on
non-PCD loans charged to expense
—
451
1,268
3
—
—
1,722
Losses charged off
(15)
—
(4)
(83)
—
(166)
(268)
Recoveries
—
—
—
5
—
78
83
Balance, end of year
$
1,039
5,414
3,816
238
18
—
10,525
Individually evaluated for impairment
$
2
12
5
—
—
—
19
Collectively evaluated for impairment
1,037
5,402
3,811
238
18
—
10,506
Balance, end of year
$
1,039
5,414
3,816
238
18
—
10,525
Percent of loans in each category to total loans
7.0%
64.2%
26.7%
1.5%
0.6%
—%
100.0%
Ratio of net charge-offs to average loans
0.01%
—%
—%
0.28%
—%
117.65%
0.01%
The ratio of the allowance for credit losses for loans to total loans at December 31, 2025 and 2024 was 0.80% 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 for the years ended
December 31 (in thousands):
2025
2024
Amortized
Related
Amortized
Related
Cost Basis
Allowance
Cost Basis
Allowance
Commercial & industrial
$
—
—
—
—
Commercial, secured by real estate
Owner occupied
—
—
48
—
Non-owner occupied
—
—
2,642
1,201
Farmland
—
—
16
—
Multi-family
—
—
—
—
Construction
—
—
—
—
Residential real estate
Secured by senior liens on 1-4 family dwellings
1,024
23
527
50
Secured by junior liens on 1-4 family dwellings
37
—
—
—
Home equity line-of-credit loans
—
—
75
—
Consumer
—
—
—
—
Agricultural
—
—
—
—
Other loans, including deposit overdrafts
—
—
—
—
Total
$
1,061
23
3,308
1,251
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Table of Contents
LCNB CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2025
(Continued)
NOTE 4 - LOANS (Continued)
The risk characteristics of LCNB's material loan portfolio segments were as follows:
Commercial & Industrial Loans. LCNB’s commercial and industrial loan portfolio consists of loans for various 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 and 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.
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 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. Home equity lines of credit have a variable rate 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 or 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 34 days with a
negative balance.
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Table of Contents
LCNB CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2025
(Continued)
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.
LCNB evaluates the loan risk grading system definitions and allowance for loan loss methodology on an ongoing basis. No significant changes were made to
either during the past year.
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Table of Contents
LCNB CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2025
(Continued)
NOTE 4 - LOANS (Continued)
The following table presents the amortized cost basis of loans by vintage and credit quality indicators at December 31 (in thousands). The December 31, 2024
table is shown for comparison purposes.
Term Loans by Origination Year
Revolving
Loans
Revolving
Loans
2025
2024
2023
2022
2021
Prior
Amortized Cost
Basis
Converted to
Term
Total
2025
Commercial & industrial
Pass
$
15,763
12,931
9,383
20,832
14,842
6,225
16,190
—
96,166
OAEM
95
148
—
611
628
1,189
222
—
2,893
Substandard
—
—
62
2,919
—
195
406
73
3,655
Doubtful
—
1,391
—
—
—
—
—
—
1,391
Total
15,858
14,470
9,445
24,362
15,470
7,609
16,818
73
104,105
Gross charge-offs
—
—
—
—
—
—
—
—
—
Commercial, secured by real
estate
Pass
73,115
51,350
117,825
221,380
147,240
352,335
98,073
—
1,061,318
OAEM
—
—
—
4,947
4,254
6,602
—
—
15,803
Substandard
—
—
2,418
12,508
1,451
4,546
—
167
21,090
Doubtful
—
—
—
—
—
—
—
—
—
Total
73,115
51,350
120,243
238,835
152,945
363,483
98,073
167
1,098,211
Gross charge-offs
—
—
—
—
—
110
—
—
110
Residential real estate
Pass
42,199
31,209
52,824
73,538
80,450
133,502
52,488
—
466,210
OAEM
—
—
—
—
192
855
—
—
1,047
Substandard
—
—
643
188
277
1,864
122
—
3,094
Doubtful
—
—
—
—
—
—
—
—
—
Total
42,199
31,209
53,467
73,726
80,919
136,221
52,610
—
470,351
Gross charge-offs
—
—
27
—
—
31
—
—
58
Consumer
Pass
5,598
3,954
3,047
2,254
1,305
683
54
—
16,895
OAEM
—
—
—
—
—
—
—
—
—
Substandard
—
—
15
27
5
13
—
—
60
Doubtful
—
—
—
—
—
—
—
—
—
Total
5,598
3,954
3,062
2,281
1,310
696
54
—
16,955
Gross charge-offs
—
18
—
4
10
2
—
—
34
Agricultural
Pass
2,285
51
1,246
224
54
199
11,640
—
15,699
OAEM
—
—
—
—
—
—
—
—
Substandard
—
—
—
—
—
—
—
—
Doubtful
—
—
—
—
—
—
—
—
Total
2,285
51
1,246
224
54
199
11,640
—
15,699
Gross charge-offs
—
—
—
—
—
—
—
—
—
Other
Pass
—
—
—
—
—
—
210
—
210
OAEM
—
—
—
—
—
—
—
—
—
Substandard
—
—
—
—
—
—
—
—
—
Doubtful
—
—
—
—
—
—
—
—
—
Total
—
—
—
—
—
—
210
—
210
Gross charge-offs
—
—
—
—
—
—
206
—
206
Total loans
$
139,055
101,034
187,463
339,428
250,698
508,208
179,405
240
1,705,531
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Table of Contents
LCNB CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2025
(Continued)
NOTE 4 - LOANS (Continued)
Term Loans by Origination Year
Revolving
Loans
Revolving
Loans
2024
2023
2022
2021
2020
Prior
Amortized Cost
Basis
Converted to
Term
Total
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
—
—
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
—
—
—
—
—
—
—
—
—
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
—
—
—
—
—
—
—
—
—
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
—
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
—
—
—
—
57
—
—
—
57
Other
Pass
—
—
—
—
—
—
179
—
179
OAEM
—
—
—
—
—
—
—
—
—
Substandard
—
—
—
—
—
—
—
—
—
Doubtful
—
—
—
—
—
—
—
—
—
Total
—
—
—
—
—
—
179
—
179
Gross charge-offs
—
—
—
—
—
—
193
—
193
Total loans
$
103,420
190,757
307,234
275,765
163,241
458,020
223,375
—
1,721,812
- 72-
Table of Contents
LCNB CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2025
(Continued)
NOTE 4 - LOANS (Continued)
A loan portfolio aging analysis by class segment at December 31 is as follows (in thousands):
90 Days
or More
30-59 Days 60-89 Days
90 Days or
More
Total
Total Loans
Past Due
Past Due
Past Due
Past Due
Past Due
Current
Receivable
and
Accruing
2025
Commercial & industrial
$
74
—
—
74
104,031
104,105
—
Commercial, secured by real estate:
Owner occupied
—
—
—
—
219,273
219,273
—
Non-owner occupied
2,418
—
—
2,418
502,764
505,182
—
Farmland
—
—
—
—
35,561
35,561
—
Multi-family
—
—
—
—
253,051
253,051
—
Construction
72
—
—
72
85,072
85,144
—
Residential real estate:
Secured by senior liens on 1-4 family
dwellings
1,220
360
838
2,418
393,134
395,552
505
Secured by junior liens on 1-4 family
dwellings
47
—
—
47
20,643
20,690
—
Home equity line-of-credit loans
176
122
11
309
53,800
54,109
11
Consumer
29
—
15
44
16,911
16,955
15
Agricultural
—
—
—
—
15,699
15,699
—
Other
210
—
—
210
—
210
—
Total
$
4,246
482
864
5,592
1,699,939
1,705,531
531
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
- 73-
Table of Contents
LCNB CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2025
(Continued)
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 table presents the amortized cost basis of
loans modified during the year 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 December 31:
Combination
-
Combination
-
Combination
-
Interest
Rate
Extended
Principal Payment
Interest Rate
Reduction
and
Interest Rate
Reduction
and
Extended
Maturity and
Total
Percent of
Reduction Maturity Forgiveness Deferral
Extended
Maturity
Payment
Delay
Payment
Delay
Modifications
Total
Class
2025
Commercial & industrial
—
269
—
—
1,022
—
1,918
3,209
3.08%
Commercial, secured by
real estate, owner
occupied
—
477
—
—
—
—
—
477
0.22%
Residential real estate,
secured by senior liens on
1-4 family dwellings
—
—
—
—
—
—
—
—
—%
Consumer
—
19
—
—
—
—
—
19
0.11%
Total
$
—
765
—
—
1,022
—
1,918
3,705
2024
Commercial & industrial $
—
77
—
—
—
—
—
77
0.06%
Commercial, secured by
real estate, non-owner
occupied
—
175
—
—
—
—
—
175
0.08%
Residential real estate,
secured by senior liens on
1-4 family dwellings
—
—
—
—
—
20
—
20
0.01%
Consumer
—
—
—
—
28
—
—
28
0.14%
Total
$
—
252
—
—
28
20
—
300
The amortized cost basis of loans that were modified for borrowers experiencing financial difficulty during 2023 was zero as of December 31, 2023.
LCNB was not committed to lend additional funds to borrowers who were granted loan modifications while experiencing financial difficulty at December 31,
2025 or December 31, 2024.
During the year ended December 31, 2024, one borrower defaulted on two consumer loans which, during the twelve months prior to their default, underwent
maturity-extension and payment-deferral modifications while the borrower was known to be experiencing financial difficultly. The borrower remained in
default through February 2025. At December 31, 2025, the amortized cost basis of these two consumer loans totaled $20 thousand. No other loans defaulted
during 2025 which, within twelve months prior to their default, were modified for borrowers experiencing financial difficulty. During the year ended December
31, 2023, no loans defaulted which, within the twelve months preceding their default, were modified for borrowers 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
Balance Sheets. The unpaid principal balances of those loans at December 31, 2025 and 2024 were approximately $333.5 million and $397.6 million,
respectively.
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Table of Contents
LCNB CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2025
(Continued)
NOTE 5 - PURCHASED CREDIT DETERIORATED LOANS
Activity during 2025 and 2024 for the accretable discount related to PCD loans acquired from EFBI and CNNB is as follows (in thousands):
Twelve Months Ended December 31,
2025
2024
Accretable discount, beginning of period
1,113
1,467
Accretable discount acquired during period from merger with EFBI
—
253
Less loans transferred to held-for-sale
—
396
Less accretion
270
211
Accretable discount, end of year
843
1,113
NOTE 6 – OTHER REAL ESTATE OWNED
Other real estate owned includes property acquired through foreclosure or deed-in-lieu of foreclosure and are included in other assets in the Consolidated
Balance Sheets. LCNB did not hold other real estate owned properties at December 31, 2025 or 2024, and there were no changes in other real estate owned
during 2025 or 2024.
LCNB's investment in residential consumer mortgage loans secured by residential real estate in the process of foreclosure was approximately $331
thousand and $33 thousand at December 31, 2025 and 2024, respectively.
NOTE 7 - PREMISES AND EQUIPMENT
Premises and equipment at December 31 are summarized as follows (in thousands):
2025
2024
Land
$
9,101
9,256
Buildings
42,173
42,518
Equipment
20,214
19,588
Construction in progress
61
15
Total
71,549
71,377
Less accumulated depreciation
32,353
30,328
Premises and equipment, net
$
39,196
41,049
Depreciation charged to expense was $2.2 million in 2025, $2.1 million in 2024, and $1.9 million in 2023.
- 75-
Table of Contents
LCNB CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2025
(Continued)
NOTE 8 - LEASES
LCNB has capitalized operating leases for its Union Village, Fairfield, Barron Street, and Worthington offices, for the land at its Oxford and Oakwood
offices, for certain office equipment, and for its ATMs. The Oakwood lease has a remaining term of 10.6 years with options to renew for six additional periods
of five years each. The Oxford lease has a remaining term of 33.5 years with no renewal options. The other leases have remaining terms of less than one year
up to six years, some of which contain options to renew the leases for additional five-year periods.
Lease expenses for offices are included in the Consolidated Statements of Income in occupancy expense, net and lease expenses for equipment and ATMs are
included in equipment expenses. Components of lease expense for the years ended December 31 are as follows (in thousands):
2025
2024
2023
Operating lease expense
$
920
959
890
Short-term lease expense
5
47
70
Variable lease expense
81
41
8
Other
39
38
29
Total lease expense
$
1,045
1,085
997
Other information related to leases at December 31 are as follows (dollars in thousands):
2025
2024
2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
$
974
1,011
911
Right-of-use assets obtained in exchange for new operating lease liabilities
$
1,292
167
—
Weighted average remaining lease term in years for operating leases
29.1
33.2
33.0
Weighted average discount rate for operating leases
3.75%
3.67%
3.53%
Future payments due under operating leases as of December 31, 2025 are as follows (in thousands):
2026
$
717
2027
692
2028
543
2029
465
2030
352
Thereafter
9,432
12,201
Less effects of discounting
5,324
Operating lease liabilities recognized
$
6,877
- 76-
Table of Contents
LCNB CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2025
(Continued)
NOTE 9 - GOODWILL AND OTHER INTANGIBLE ASSETS
Changes in goodwill during 2025 and 2024 were as follows (in thousands):
2025
2024
Balance, beginning of year
$
90,310
79,509
Additions from acquisition of CNNB
—
524
Additions from acquisition of EFBI
—
10,277
Balance, end of year
$
90,310
90,310
Core deposit and other intangible assets in the Consolidated Balance Sheets at December 31 were as follows (in thousands):
2025
2024
Gross
Net
Gross
Net
Intangible
Accumulated
Intangible
Intangible
Accumulated
Intangible
Assets
Amortization
Assets
Assets
Amortization
Assets
Core deposit intangibles
$
17,268
10,337
6,931
17,268
9,263
8,005
Mortgage servicing rights
5,575
3,235
2,340
5,575
2,476
3,099
Total
$
22,843
13,572
9,271
22,843
11,739
11,104
The estimated aggregate future amortization expense for each of the next five years for core deposit intangible assets as of December 31, 2025 is as follows (in
thousands):
2026
$
914
2027
913
2028
916
2029
913
2030
914
Amortization of mortgage servicing rights is an adjustment to loan servicing income, which is included with other operating income in the Consolidated
Statements of Income. Activity in mortgage servicing rights included in other assets in the Consolidated Balance Sheets during the years ended December 31
was as follows (in thousands):
2025
2024
2023
Balance, beginning of year
$
3,099
4,106
871
Amount obtained through merger with CNNB
—
—
3,427
Amount capitalized to mortgage servicing rights
—
—
48
Amortization of mortgage servicing rights
(759)
(1,007)
(240)
Balance, end of year
$
2,340
3,099
4,106
- 77-
Table of Contents
LCNB CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2025
(Continued)
NOTE 9 - GOODWILL AND OTHER INTANGIBLE ASSETS (continued)
At December 31, 2025, the fair value of servicing rights was $4.0 million, which was determined using a discount rate of 9.75% and an average prepayment
rate of 6.93%. At December 31, 2024, the fair value of servicing rights was $4.5 million, which was determined using discount rate of 10.50% and an average
prepayment rate of 6.63%. As estimated fair values were greater than the carrying value of LCNB's mortgage servicing rights, management determined that a
valuation allowance was not necessary.
NOTE 10 - AFFORDABLE HOUSING TAX CREDIT LIMITED PARTNERSHIPS
LCNB is a limited partner in limited partnerships that sponsor affordable housing projects utilizing the Low Income Housing Tax Credit (LIHTC) 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 investment and related unfunded commitment at December 31 (in
thousands):
2025
2024
Affordable housing tax credit investment
$
20,950
18,950
Less amortization
7,689
6,044
Net affordable housing tax credit investment
$
13,261
12,906
Unfunded commitment
$
4,804
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 Balance Sheets.
LCNB expects to fund the unfunded commitment over eleven years.
The following table presents other information relating to LCNB's affordable housing tax credit investment for the years indicated (in thousands):
Year ended December 31,
2025
2024
2023
Tax credits and other tax benefits recognized
$
1,905
1,737
1,658
Tax credit amortization expense included in provision for income taxes
1,645
1,419
1,358
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Table of Contents
LCNB CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2025
(Continued)
NOTE 11 - DEPOSITS
The following table presents the composition of LCNB's deposits at December 31, 2025 and 2024 (in thousands):
December 31,
December 31,
2025
2024
Demand deposits
$
466,094
459,619
Interest-bearing demand and money fund deposits
673,415
540,884
Savings deposits
355,880
367,205
IRA and time certificates
344,966
510,584
Total
$
1,840,355
1,878,292
Contractual maturities of time deposits at December 31, 2025 were as follows (in thousands):
Three months or less
$
58,254
Over three through six months
82,881
Over six through twelve months
159,108
Total 2026
300,243
2027
28,995
2028
12,870
2029
1,247
2030
1,434
Thereafter
177
Total contractual maturities
$
344,966
The aggregate amount of time deposits in denominations of $250 thousand or more at December 31, 2025 and 2024 was $66.3 million and $107.8 million,
respectively.
NOTE 12 - BORROWINGS
Long-term debt at December 31 was as follows (in thousands):
2025
2024
Weighted
Average
Weighted
Average
Amount
Interest Rate
Amount
Interest Rate
Term loan
$
9,428
6.50%
10,153
4.25%
FHLB advances
$
95,000
4.83%
145,000
4.62%
Total long-term debt
$
104,428
4.98% $
155,153
4.60%
The term loan is with a correspondent financial institution and 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 December 31 by year of maturity were as follows (dollars in thousands):
2025
2024
Maturing within one year
$
26,203
10,153
Maturing one year through two years
26,284
25,000
Maturing two years through three years
31,941
35,000
Maturing three years through four years
10,000
45,000
Maturing four years through five years
10,000
30,000
Thereafter
—
10,000
Total
$
104,428
155,153
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Table of Contents
LCNB CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2025
(Continued)
NOTE 12 - BORROWINGS (continued)
There were no short-term borrowings at December 31, 2025 or December 31, 2024.
At December 31, 2025 and 2024, LCNB Corp. 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 December 31, 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 the borrowing. At
December 31, 2025 and 2024, 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 December 31, 2025 and 2024, respectively. Remaining borrowing capacity with the FHLB,
including both long-term and short-term borrowings, at December 31, 2025 was approximately $149.1 million. LCNB could increase its remaining borrowing
capacity by purchasing more stock in the FHLB.
NOTE 13 - INCOME TAXES
Pretax income from continuing operations is as follows:
2025
Domestic
$
28,152
Total
$
28,152
The Company has no foreign activity and no foreign income tax. ASU 2023-09 was adopted on January 1, 2025, on a prospective basis.
Income tax expense (benefit) from continuing operations was as follows:
2025
2024
2023
Current Tax Expense
Federal
$
2,235
518
2,955
State
15
—
—
Deferred Expense (Benefit)
Federal
2,782
1,951
(323)
State
—
—
—
Provision for income taxes
$
5,032
2,469
2,632
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Table of Contents
LCNB CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2025
(Continued)
NOTE 13 - INCOME TAXES (continued)
A reconciliation between the statutory income tax and the Company's effective tax rate follows:
2025
Amount
Percent
Federal statutory tax rate
$
5,912
21.0%
State and local income taxes, net of federal income tax effect (a)
12
—%
Tax credits:
Low income housing tax credits (b)
(261)
(0.9)%
Nontaxable or nondeductible items:
Tax exempt interest
(121)
(0.4)%
Tax exempt income on bank owned life insurance
(299)
(1.1)%
Captive insurance premium income
(244)
(0.9)%
Other, net
33
0.2%
Total
$
5,032
17.9%
(a) State taxes in Kentucky made up the majority (greater than 50 percent) of the tax effect in this category.
(b) Net of amortization and tax benefits.
Effective tax rates differ from the federal statutory rate for 2024 and 2023 applied to income before income taxes due to the following:
2024
2023
Statutory tax rate
21.0%
21.0%
Increase (decrease) resulting from:
Tax exempt interest
(0.7)%
(0.9)%
Tax exempt income on bank owned life insurance
(2.2)%
(1.6)%
Captive insurance premium income
(1.5)%
(0.8)%
Affordable housing tax credit limited partnerships
(2.0)%
(2.0)%
Nondeductible merger-related expenses
0.9%
1.7%
Other, net
0.0%
(0.2)%
Effective tax rate
15.5%
17.2%
Income taxes paid (refunded) were as follows:
2025
Federal
$
(98)
State and local
Kentucky
15
Total
$
(83)
Deferred tax assets and liabilities, included in the Consolidated Balance Sheets with other assets, consist of the following at December 31 (in thousands):
2025
2024
Deferred tax assets:
Allowance for credit losses
$
2,900
2,530
Net unrealized losses on investment securities available-for-sale
2,696
5,101
Fair value adjustment on loans acquired from mergers
4,242
4,981
Benefit plans
421
203
Deferred compensation
504
556
Operating lease liabilities
1,349
1,198
Net operating loss carryforwards
1,879
4,551
Tax credit carryforwards
627
718
Other
313
420
14,931
20,258
Deferred tax liabilities:
Depreciation of premises and equipment
(1,574)
(1,527)
Amortization of intangibles
(3,601)
(3,588)
Mortgage servicing rights
(495)
(653)
Prepaid expenses
(581)
(575)
FHLB stock dividends
(591)
(589)
Operating lease right-of-use assets
(1,349)
(1,198)
Deferred gain on loans sold
(166)
(305)
Other, net
(66)
(130)
(8,423)
(8,565)
Net deferred tax assets
$
6,508
11,693
As of December 31, 2025 and 2024 there were no unrecognized tax benefits and the Company does not anticipate the total amount of unrecognized tax benefits
will significantly change within the next twelve months. There were no amounts recognized for interest and penalties in the Consolidated Statements of
Income for the three-year period ended December 31, 2025.
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Table of Contents
LCNB CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2025
(Continued)
NOTE 13 - INCOME TAXES (continued)
As of December 31, 2025, as a result of the acquisitions of CNNB and EFBI, the Company has federal net operating loss carryforwards of $339
thousand, which expire beginning in 2027, and $8.6 million that do not expire. The use of the federal net operating loss carryforwards are limited by Internal
Revenue Code Section 382, but they are currently expected to be utilized before their respective expiration dates.
The Company is no longer subject to examination by federal tax authorities for years before 2022.
NOTE 14 - 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. They involve, to varying degrees, elements of credit and interest rate risk in excess of the amount
recognized in the balance sheets. The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for
commitments to extend credit is represented by the contract amount of those instruments.
The Account Protection product, a customer deposit overdraft program, is offered as a service 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.
Financial instruments whose contract amounts represent off-balance-sheet credit risk at December 31 were as follows (in thousands):
2025
2024
Commitments to extend credit:
Commercial loans
$
20,565
7,881
Other loans:
Fixed rate
3,458
21,613
Adjustable rate
12,404
1,998
Unused lines of credit:
Fixed rate
5,776
10,403
Adjustable rate
203,384
231,046
Unused overdraft protection amounts on demand accounts
16,613
17,566
Standby letters of credit
5
5
$
262,205
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 or
agreement. 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.
The Company evaluates each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company, is
based on management’s credit evaluation of the borrower. Collateral held varies, but may include accounts receivable; inventory; property, plant and
equipment; residential realty; and income-producing commercial properties.
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Table of Contents
LCNB CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2025
(Continued)
NOTE 14 - COMMITMENTS AND CONTINGENT LIABILITIES (continued)
Activity in the allowance for credit losses on off-balance sheet credit exposures for the years ended December 31, 2025 and 2024 is as follows (in thousands):
Twelve Months Ended December 31,
2025
2024
Balance, beginning of year
$
263
281
Acquisition of Eagle Financial Bancorp, Inc.
—
48
Provision for (recovery of) credit losses
(47)
(66)
Losses charged off
—
—
Balance, end of year
$
216 $
263
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 December 31, 2025 totaled
approximately $92 thousand.
The Company and the Bank 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.
NOTE 15 - REGULATORY MATTERS AND IMPACT ON PAYMENT OF DIVIDENDS
The principal source of income and funds for LCNB Corp. is dividends paid by the Bank. The payment of dividends is subject to restriction by regulatory
authorities. For 2026, the restrictions generally limit dividends to the aggregate of net income for the year 2026 plus the net earnings retained for 2025 and
2024. If dividends exceed net income for a year, a bank is generally not required to carry forward the negative amount resulting from such excess if the bank
can attribute the excess to the preceding two years. If the excess is greater than the bank's previously undistributed net income for the preceding two years,
prior OCC approval of the dividend is required and a negative amount would be carried forward in future dividend calculations. In addition, dividend payments
may not reduce capital levels below minimum regulatory guidelines.
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 Bank's financial
statements. 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% will be
subject to increasingly stringent limitations on capital distributions as the buffer approaches zero.
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Table of Contents
LCNB CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2025
(Continued)
NOTE 15 - REGULATORY MATTERS AND IMPACT ON PAYMENT OF DIVIDENDS (continued)
For various regulatory purposes, financial institutions are classified into categories based upon capital adequacy:
Minimum
Requirement
with Capital
Minimum
Conservation
To Be Considered
Requirement
Buffer
Well-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%
N/A
5.0%
As of the most recent notification from its regulators, the Bank was 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 category.
On September 17, 2019, the FDIC finalized a rule that introduced an optional simplified measure of capital adequacy for qualifying community banking
organizations, as required by the Economic Growth, Regulatory Relief and Consumer Protection Act. The simplified rule was designed to reduce burden by
removing the requirements for calculating and reporting risk-based capital ratios for qualifying community banking organizations that opt into the framework.
It could be used beginning with the March 31, 2020 Call Report. Qualifications to use the simplified 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 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 approach for its December 31, 2025 or December 31, 2024 regulatory capital calculations.
A summary of the regulatory capital of the Bank at December 31 follows (dollars in thousands):
2025
2024
Regulatory Capital:
Shareholders' equity
$
278,356
259,811
Goodwill and other intangible assets
(97,502)
(100,279)
Accumulated other comprehensive loss
10,151
19,189
Tier 1 risk-based capital
191,005
178,721
Eligible allowance for credit losses
13,613
11,805
Total risk-based capital
$
204,618
190,526
Capital Ratios:
Common Equity Tier 1 Capital to risk-weighted assets
11.02%
9.94%
Tier 1 capital to risk-weighted assets
11.02%
9.94%
Total capital (tier 1 capital plus tier 2 capital) to risk-weighted assets
11.81%
10.60%
Leverage ratio (tier 1 capital to adjusted quarterly average total assets)
8.94%
7.94%
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Table of Contents
LCNB CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2025
(Continued)
NOTE 16 - ACCUMULATED OTHER COMPREHENSIVE LOSS
Changes in accumulated other comprehensive loss for 2025 and 2024 were as follows (in thousands):
2025
2024
Unrealized
Gains
Changes in
Unrealized
Gains
Changes in
(Losses) on
Pension Plan
Assets
(Losses) on
Pension Plan
Assets
Available-for-
Sale
and Benefit
Available-for-
Sale
and Benefit
Securities
Obligations
Total
Securities
Obligations
Total
Balance at beginning of year
$
(19,190)
1
(19,189)
(22,281)
(55)
(22,336)
Other comprehensive income (loss), net of
taxes
9,047
(8)
9,039
2,922
56
2,978
Reclassifications
—
—
—
169
—
169
Balance at end of year
$
(10,143)
(7)
(10,150)
(19,190)
1
(19,189)
Reclassifications out of accumulated other comprehensive loss for 2025 and 2024 and the affected line items in the consolidated statements of income were as
follows (in thousands):
2025
2024
Affected Line Item in the Consolidated Statements of
Income
Realized losses from sales of debt securities, available-
for-sale
$
—
(214)
Net losses on sales of debt securities, available-for-
sale
Income tax benefit
—
(45) Provision for income taxes
Reclassification adjustment, net of taxes
$
—
(169)
NOTE 17 - RETIREMENT PLANS
Prior to January 1, 2009, the Company had a single-employer qualified noncontributory defined benefit retirement plan that covered substantially all regular
full-time employees. Effective January 1, 2009, the Company redesigned the plan and merged it into a multiple-employer plan, which is accounted for as a
multi-employer plan because assets contributed by an employer are not segregated in a separate account or restricted to provide benefits only to employees of
that employer. Employees hired on or after January 1, 2009 are not eligible to participate in this plan. Effective February 1, 2009, the Company amended the
plan to reduce benefits for those whose age plus vesting service equaled less than 65 at that date. The plan was hard-frozen on March 1, 2025, meaning that
benefit increases no longer accrued to covered employees as of that date. The plan was unfrozen during the fourth quarter of 2025 to allow for amendments that
enhanced benefits for active employees currently participating in the plan. The plan was then refrozen on November 30, 2025 and LCNB withdrew from the
plan by the end of December 2025. Annuity purchases for active employees participating in the plan will occur during the first quarter of 2026, finishing
LCNB's involvement in the plan.
Also effective February 1, 2009, an enhanced 401(k) plan was made available to those hired on or after January 1, 2009 and to those who received benefit
reductions from the amendments to the noncontributory defined benefit retirement plan. 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 company contribution of 3% of each individual employee’s annual
compensation. Employees who received a benefit reduction under the retirement plan amendments receive an automatic contribution of 5% or 7% of annual
compensation, depending on the sum of an employee’s age and vesting service, into the 401(k) plan, 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, at which time they started receiving matches.
CNNB operated a similar multi-employer plan, accounted for as a multi-employer plan, at the time of the merger, which was assumed by LCNB.
Certain information pertaining to the LCNB qualified noncontributory defined benefit retirement plans is as follows:
Legal name
Pentegra Defined Benefit Plan for Financial Institutions
Plan's employer identification number
13-5645888
Plan number
333
The LCNB plan was at least 80% funded as of July 1, 2025 and 2024. A funding improvement or rehabilitation plan has not been implemented for either plan,
nor has a surcharge been paid to either plan. The Company’s contributions to the qualified noncontributory defined benefit retirement plan do not represent
more than 5% of total contributions to the plan.
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Table of Contents
LCNB CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2025
(Continued)
NOTE 17 - RETIREMENT PLANS (continued)
Funding and administrative costs of the qualified noncontributory defined benefit retirement plan and 401(k) plan charged to salaries and employee benefits in
the Consolidated Statements of Income for the years ended December 31 were as follows (in thousands):
2025
2024
2023
Qualified noncontributory defined benefit retirement plan
$
1,132
1,246
1,211
401(k) plan
889
798
701
Citizens National had a qualified noncontributory defined benefit pension plan which covered employees hired before May 1, 2005. The Company assumed
this plan at the time of the merger. At December 31, 2025 and 2024, the amount of the liability for this plan was, respectively, $115 thousand and $115
thousand, representing the funded status of the plan.
The Bank has a benefit plan which permits eligible officers to defer a portion of their compensation. The deferred compensation balance, which accrues
interest at 8% annually, is distributable in cash after retirement or termination of employment. The amount of such deferred compensation liability at
December 31, 2025 and 2024 was $2.4 million and $2.6 million, respectively.
The Bank also has supplemental income plans which provide certain employees an amount based on a percentage of average compensation, payable in
accordance with individually defined schedules upon retirement. The projected benefit obligation included in other liabilities for the supplemental income plans
at December 31, 2025 and 2024 is $47 thousand and $138 thousand, respectively. The average discount rate used to determine the present value of the
obligations was approximately 5.25% in 2025 and 4.75% in 2024. There were no service costs associated with the plans for 2025, 2024, or 2023. Interest costs
were $4 thousand, $9 thousand, and $26 thousand for 2025, 2024, and 2023, respectively.
The deferred compensation plan and supplemental income plans are nonqualified and unfunded. Participation in each plan is limited to a select group of
management.
Effective February 1, 2009, the Company established a nonqualified defined benefit retirement plan, which is also unfunded, for certain highly compensated
employees. 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.
The components of net periodic pension cost of the nonqualified defined benefit retirement plan for the years ended December 31 are summarized as follows
(in thousands):
2025
2024
2023
Service cost
$
—
—
—
Interest cost
75
72
77
Amortization of unrecognized (gain) loss
—
—
—
Net periodic pension cost
$
75
72
77
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Table of Contents
LCNB CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2025
(Continued)
NOTE 17 - RETIREMENT PLANS (continued)
A reconciliation of changes in the projected benefit obligation of the nonqualified defined benefit retirement plan at December 31 follows (in thousands):
2025
2024
2023
Projected benefit obligation at beginning of year
$
1,428
1,573
1,606
Service cost
—
—
—
Interest cost
75
72
77
Actuarial (gain) or loss
10
(72)
35
Benefits paid
(143)
(145)
(145)
Projected benefit obligation at end of year
$
1,370
1,428
1,573
Projected benefit obligations for the nonqualified defined benefit retirement plan are included in other liabilities in the Consolidated Balance Sheets.
The accumulated benefit obligation for the nonqualified defined benefit retirement plan at December 31, 2025 and 2024 was $1.4 million and $1.4 million
respectively.
At December 31, 2025 and 2024, unrecognized net gain of $7 thousand and $1 thousand, respectively, were included in accumulated other comprehensive
income (loss).
Amounts recognized in accumulated other comprehensive loss, net of tax, at December 31 for the nonqualified defined benefit retirement plan consists of (in
thousands):
2025
2024
2023
Net actuarial (gain) loss
$
8
(57)
28
The estimated unrecognized net actuarial gain that will be amortized from accumulated other comprehensive income into net periodic benefit cost during
2026 for the nonqualified defined benefit retirement plan is $0.
Key weighted-average assumptions used to determine the benefit obligation and net periodic pension costs for the nonqualified defined benefit retirement plan
for the years ended December 31 were as follows:
2025
2024
2023
Benefit obligation:
Discount rate
5.61%
5.54%
4.83%
Salary increase rate
N/A
N/A
N/A
Net periodic pension cost:
Discount rate
5.54%
4.83%
5.02%
Salary increase rate
N/A
N/A
N/A
Amortization period in years
16.83
17.82
18.61
- 87-
Table of Contents
LCNB CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2025
(Continued)
NOTE 17 - RETIREMENT PLANS (continued)
The nonqualified defined benefit retirement plan is not funded. Therefore, no contributions will be made in 2026.
Estimated future benefit payments reflecting expected future service for the years ended after December 31, 2025 are (in thousands):
2026
$
144
2027
144
2028
143
2029
139
2030
133
2031 - 2035
582
NOTE 18 - STOCK-BASED COMPENSATION
The 2025 Ownership Incentive Plan (the "2025 Plan") was ratified by LCNB'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 LCNB's Board of Directors ("Compensation
Committee"). The 2025 Plan 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 is subject to earlier termination by the Compensation Committee.
Stock-based awards may be in the form of treasury shares or newly issued shares.
LCNB has not granted stock options since 2012.
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Table of Contents
LCNB CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2025
(Continued)
NOTE 18 - STOCK-BASED COMPENSATION (continued)
Restricted stock awards granted under the 2015 Plan were as follows:
2025
2024
2023
Weighted
Weighted
Weighted
Average
Average
Average
Grant Date
Grant Date
Grant Date
Shares
Fair Value
Shares
Fair Value
Shares
Fair Value
Nonvested at January 1,
84,593 $
16.59
79,017 $
17.94
58,314 $
17.99
Granted
38,950
14.60
41,703
13.87
44,150
17.84
Vested
(43,647)
16.18
(36,127)
16.39
(23,447)
17.89
Forfeited
—
—
—
—
—
—
Nonvested at December 31,
79,896 $
15.84
84,593 $
16.59
79,017 $
17.94
No stock-based awards have been granted under the 2025 Plan.
At December 31, 2025, there were 79,896 restricted stock awards outstanding with an approximate stock value of $1.3 million based on that day's closing stock
price. At December 31, 2024, there were 84,593 restricted stock awards outstanding with an approximate stock value of $1.3 million based on that day's closing
stock price. The grant date fair value of restricted stock awards was $569 thousand and $578 thousand in 2025 and 2024, respectively. 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
income over the vesting period.
Total expense related to restricted stock awards included in salaries and wages in the Consolidated Statements of Income for the years ended December 31,
2025, 2024, and 2023 was $650 thousand, $588 thousand, and $563 thousand respectively. The related tax benefit for the years ended December 31, 2025,
2024, and 2023 was $136 thousand, $124 thousand, and $118 thousand, respectively.
Unrecognized compensation expense for restricted stock awards was $819,000 at December 31, 2025 and is expected to be recognized over a weighted average
period of 4.2 years.
NOTE 19 - EARNINGS PER 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 FASB ASC 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.
Earnings per share for the years ended December 31 were calculated as follows (in thousands, except share and per share data):
2025
2024
2023
Net income
$
23,120
13,492
12,628
Less allocation of earnings and dividends to participating securities
131
82
86
Net income allocated to common shareholders
$
22,989
13,410
12,542
Weighted average common shares outstanding, gross
14,166,275
13,849,578
11,497,330
Less average participating securities
79,896
84,593
79,473
Weighted average number of shares outstanding used in the calculation of basic
earnings per common share
14,086,379
13,764,985
11,417,857
Add dilutive effect of:
Stock options
—
—
—
Adjusted weighted average number of shares outstanding used in the calculation of
diluted earnings per common share
14,086,379
13,764,985
11,417,857
Earnings per common share:
Basic
$
1.63
0.97
1.10
Diluted
1.63
0.97
1.10
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Table of Contents
LCNB CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2025
(Continued)
NOTE 20 - RELATED PARTY TRANSACTIONS
LCNB has entered into related party transactions with various directors and executive officers. Management believes these transactions do not involve more
than a normal risk of collectability or present other unfavorable features. The following table provides a summary of the loan activity for these officers and
directors for the years ended December 31 (in thousands):
2025
2024
Beginning balance
$
2,324
2,464
New loans and advances
430
75
Change in composition of related parties
—
178
Reductions
(204)
(393)
Ending Balance
$
2,550
2,324
Deposits from executive officers, directors and related interests of such persons held by the Company at December 31, 2025 and 2024 amounted to $2.3
million and $2.6 million, respectively.
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Table of Contents
LCNB CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2025
(Continued)
NOTE 21 - FAIR VALUE OF FINANCIAL INSTRUMENTS
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.
•
Level 3 – inputs that are unobservable for the asset or liability.
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 are as follows:
•
Fair value 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.
Lender Risk Account
The Company's lender risk account is carried at fair value. Fair value is determined using an income approach with various assumptions including expected
cash flows, market discount rates, prepayment speeds, and other factors. As such, the lender risk account is considered level 3.
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. 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.
Other real estate owned is adjusted to fair value, less costs to sell, upon transfer of the loan to foreclosed assets, usually based on an appraisal of the property.
Subsequently, foreclosed assets are carried at the lower of carrying value or fair value. Other repossessed assets are valued at estimated sales prices, less costs
to sell. The inputs for other real estate owned and other repossessed assets are considered to be level 3.
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Table of Contents
LCNB CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2025
(Continued)
NOTE 21 - FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)
The following table summarizes the valuation of LCNB’s assets recorded at fair value by input levels as of December 31 (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)
2025
Recurring fair value measurements:
Equity securities with a readily determinable fair value:
Equity securities
$
88
88
—
—
Mutual funds measured at net asset value
1,345
1,345
—
—
Debt securities available-for-sale:
U.S. Treasury notes
50,458
50,458
—
—
U.S. Agency notes
72,404
—
72,404
—
Corporate bonds
11,733
—
11,733
—
U.S. Agency mortgage-backed securities
62,517
—
62,517
—
Municipal securities:
Non-taxable
4,005
—
4,005
—
Taxable
31,154
—
31,154
—
Other assets:
Lender Risk Account
6,165
—
—
6,165
Total recurring fair value measurements
$
239,869
51,891
181,813
6,165
Nonrecurring fair value measurements:
Individually evaluated collateral dependent loans
$
309
—
—
309
Total nonrecurring fair value measurements
$
309
—
—
309
2024
Recurring fair value measurement:
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
—
Other assets:
Lender Risk Account
6,033
—
—
6,033
Total recurring fair value measurements
$
265,723
67,543
192,147
6,033
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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Table of Contents
LCNB CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2025
(Continued)
NOTE 21 - FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)
The following table presents a reconciliation of the Level 3 lender risk account measured at fair value on a recurring basis for the years ended December 31,
2025 and 2024 (dollars in thousands):
For the year ended December 31,
2025
2024
Beginning of period
$
6,033
2,262
Additions from acquisition of EFBI
-
2,922
Due to loan sales
12
13
Releases and claims paid to the Company
(646)
(624)
Changes in fair value recognized in gain on sale of loans
766
1,460
End of period
$
6,165
6,033
The following table presents quantitative information about unobservable inputs used in nonrecurring Level 3 fair value measurements at December 31, 2025
and 2024 (dollars in thousands):
Range
Fair Value
Valuation Technique
Unobservable Inputs
High
Low
Weighted
Average
2025
Individually evaluated collateral
dependent loans
$
309 Estimated sales price
Adjustments for comparable properties, discounts to
reflect current market conditions
Not applicable
2024
Individually evaluated collateral
dependent loans
$
1,816 Estimated sales price
Adjustments for comparable properties, discounts to
reflect current market conditions
Not applicable
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Table of Contents
LCNB CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2025
(Continued)
NOTE 21 - FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)
Carrying amounts and estimated fair values of financial instruments as of December 31, excluding financial instruments recorded at fair value, 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)
2025
FINANCIAL ASSETS:
Cash and cash equivalents
$
21,614
21,614
21,614
—
—
Debt securities, held-to-maturity
16,080
15,113
—
15,113
—
Loans, net
1,691,827
1,655,360
—
—
1,655,360
Loans held-for-sale
1,718
1,718
—
1,718
—
Accrued interest receivable
7,968
7,968
—
7,968
—
Lender risk account
6,165
6,165
—
—
6,165
FINANCIAL LIABILITIES:
Deposits
1,840,355
1,841,661
1,495,389
346,272
—
Long-term debt
104,428
106,456
—
106,456
—
Accrued interest payable
1,533
1,533
—
1,533
—
2024
FINANCIAL ASSETS:
Cash and cash equivalents
$
35,744
35,744
35,744
—
—
Debt securities, held-to-maturity
16,324
14,929
—
14,929
—
Loans, net
1,709,811
1,659,244
—
—
1,659,244
Loans held-for-sale
5,556
5,556
—
5,556
—
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 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 December 31, 2025 and
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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Table of Contents
LCNB CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2025
(Continued)
NOTE 22 - PARENT COMPANY FINANCIAL INFORMATION
Condensed financial information for LCNB Corp., at the parent company level only, follows (in thousands):
Condensed Balance Sheets:
December 31,
2025
2024
Assets:
Cash on deposit with subsidiary
$
1,902
55
Cash on deposit with unrelated depository institution
81
54
Investment in subsidiaries
281,026
262,297
Other assets
540
1,123
Total assets
$
283,549
263,529
Liabilities:
Long-term debt
9,428
10,153
Other liabilities
192
340
Total liabilities
9,620
10,493
Shareholders' equity
273,929
253,036
Total liabilities and shareholders' equity
$
283,549
263,529
Condensed Statements of Income
Year ended December 31,
2025
2024
2023
Income:
Dividends from subsidiaries
$
16,200
22,540
30,015
Interest and dividends
—
2
10
Other income (loss), net
11
11
(62)
Total income
16,211
22,553
29,963
Total expenses
3,491
3,511
4,112
Income before income tax benefit and equity in undistributed income of subsidiaries
12,720
19,042
25,851
Income tax benefit
709
703
738
Equity in undistributed income (loss) of subsidiaries
9,691
(6,253)
(13,961)
Net income
$
23,120 $
13,492 $
12,628
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Table of Contents
LCNB CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2025
(Continued)
NOTE 22 - PARENT COMPANY FINANCIAL INFORMATION (continued)
Condensed Statements of Cash Flows
Year ended December 31,
2025
2024
2023
Cash flows from operating activities:
Net income
$
23,120
13,492
12,628
Adjustments for non-cash items -
Increase (decrease) in undistributed income of subsidiaries
(9,691)
6,253
13,961
Other, net
1,086
1,011
292
Net cash flows provided by operating activities
14,515
20,756
26,881
Cash flows from investing activities:
Proceeds from sales of equity securities
—
—
963
Cash paid for business acquisition, net of cash received
—
(9,382)
(9,208)
Net cash flows provided by (used in) investing activities
—
(9,382)
(8,245)
Cash flows from financing activities:
Net increase (decrease) in short-term borrowings
—
—
(3,000)
Proceeds from long-term debt
363
—
—
Principal payments on long-term debt
(1,088)
(2,001)
(1,918)
Proceeds from issuance of common stock
625
525
428
Payments to repurchase common stock
(69)
12
(3,326)
Cash dividends paid on common stock
(12,472)
(12,219)
(9,938)
Net cash flows used in financing activities
(12,641)
(13,683)
(17,754)
Net change in cash
1,874
(2,309)
882
Cash at beginning of year
109
2,418
1,536
Cash at end of year
$
1,983
109
2,418
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Table of Contents
LCNB CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2025
(Continued)
NOTE 23 - 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, 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, and deposits provide the 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. Segment performance is evaluated using consolidated net income.
NOTE 24 - SUBSEQUENT EVENTS
In the first quarter of 2026, the Company became aware of significant adverse developments related to a logistics loan. After year‑end, the borrower’s sponsor
withdrew from restructuring discussions and presented a discounted debt‑repurchase proposal which was accepted by the lending group. These circumstances
arose after December 31, 2025, and the related credit impairment and charge off of $1.3 million was recognized in the first quarter of 2026.
Additionally, during the first quarter of 2026, the Company charged off a separate logistics sector loan that carried a specific reserve of approximately $1.4
million at December 31, 2025. Because the loan was fully reserved at year‑end, the charge‑off resulted in no additional income‑statement impact. This loan is
not correlated with the logistics loan credit above and involves a borrower operating in a different segment of the logistics industry.
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Table of Contents
LCNB CORP. AND SUBSIDIARIES
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
An evaluation of the effectiveness of LCNB’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) was carried out under
the supervision and with the participation of LCNB’s management, including the Chief Executive Officer and Chief Financial Officer as of December 31, 2025.
Based upon that evaluation, LCNB’s Chief Executive Officer, and LCNB’s Chief Financial Officer have concluded that:
(a) information required to be disclosed by LCNB in this Form 10-K and other reports LCNB files or submits under the Exchange Act would be
accumulated and communicated to LCNB’s management, including its Chief Executive Officer, and its Chief Financial Officer, as appropriate to
allow timely decisions regarding required disclosure;
(b) information required to be disclosed by LCNB in this Form 10-K and other reports LCNB files or submits under the Exchange Act would be
recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms; and
(c) LCNB’s disclosure controls and procedures were effective as of the end of the period covered by this Form 10-K.
Internal Control Over Financial Reporting
LCNB is responsible for the preparation, integrity, and fair presentation of the consolidated financial statements included in this annual report. Management of
LCNB and its subsidiaries is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in
Exchange Act Rules 13a-15f. LCNB’s internal control over financial reporting is a process designed under the supervision of LCNB’s Chief Executive Officer
and the Chief Financial Officer. The purpose is to provide reasonable assurance to the Board of Directors regarding the reliability of financial reporting and the
preparation of LCNB’s consolidated financial statements for external purposes in accordance with U.S. generally accepted accounting principles.
Management maintains internal controls over financial reporting. The internal controls contain control processes and actions are taken to correct deficiencies as
they are identified. The internal controls are evaluated on an ongoing basis by LCNB’s management and Audit Committee. Even effective internal controls, no
matter how well designed, have inherent limitations – including the possibility of circumvention or overriding of controls – and therefore can provide only
reasonable assurance with respect to financial statement preparation. Also, because of changes in conditions, internal control effectiveness may vary over time.
Management assessed LCNB’s internal controls as of December 31, 2025, in relation to criteria for effective internal control over financial reporting described
in “Internal Control – Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission. Based on
this assessment, management believes that, as of December 31, 2025, LCNB’s internal control over financial reporting met the criteria.
LCNB’s registered public accounting firm that audited the financial statements included in this annual report containing the disclosure required by this Item 9,
Plante & Moran PLLC, has issued an attestation report on LCNB’s internal control over financial reporting, included in Item 8. Financial Statements and
Supplementary Data of this Annual Report on Form 10-K for the fiscal year ended December 31, 2025.
Changes in Internal Control over Financial Reporting
During the fourth quarter 2025, 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.
/s/ Eric J. Meilstrup
Eric J. Meilstrup, Chief Executive
Officer & Director
(Principal Executive Officer)
March 11, 2026
/s/ Andrew M. Wallace
Andrew M. Wallace
Executive Vice President & Chief Financial Officer
(Principal Financial and Accounting Officer)
March 11, 2026
Item 9B. Other Information
(a) Information required to be disclosed in a report on Form 8-K.
None.
(b) Insider trading arrangements.
During the three months ended December 31, 2025, no director or executive officer of the Company adopted or terminated a “Rule 10b5-1 trading
arrangement” or “non-Rule 10b5-1
trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
Item 9C. Disclosures Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
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Table of Contents
LCNB CORP. AND SUBSIDIARIES
PART III
Portions of the Company’s Definitive Proxy Statement included in the Notice of Annual Meeting of Shareholders to be held April 27, 2026 (the "Proxy
Statement"), which will be filed no later than 120 days from the end of the fiscal year ended December 31, 2025, are incorporated by reference into Part III.
Item 10. Directors, Executive Officers and Corporate Governance
The information required by this item concerning the Executive Officers and Directors of the Registrant is incorporated herein by reference under the caption
"Directors and Executive Officers" of the Proxy Statement.
The information required by this item concerning the Audit Committee is incorporated herein by reference under the captions "Board of Directors Meetings,
Committees, and Compensation" and "Audit Committee Report," of the Proxy Statement.
The Code of Business Conduct and Ethics is included as Exhibit 14.1 to this Annual Report. The Code of Business Conduct and Ethics is also available online
at https://www.lcnbcorp.com/corporate-profile/corporate-governance/default.aspx.
The information required by this item concerning Delinquent Section 16(a) Reports is incorporated herein by reference under the caption "Delinquent Section
16(a) Reports" of the Proxy Statement.
LCNB has adopted insider trading policies and procedures governing the purchase, sale, and/or dispositions of LCNB’s securities by directors, officers and
employees, or the registrant itself, that are reasonably designed to promote compliance with insider trading laws, rules and regulations, and listing standards.
The LCNB Corp. Insider Trading Policy is included as Exhibit 19 to this Annual Report.
Item 11. Executive Compensation
The information contained in the Proxy Statement under the captions "Board of Directors Meetings, Committees, and Compensation," "Compensation
Committee Interlocks and Insider Participation," "Equity Compensation Plan Information," "Compensation of Executive Officers," and "Compensation
Committee Report" is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information contained in the Proxy Statement under the captions "Market Price of Stock and Dividend Data" and "Voting Securities" is incorporated herein
by reference.
LCNB currently maintains the 2025 Plan, which was approved by LCNB's shareholders at the annual meeting on May 19, 2025 and allows for stock-based
awards to eligible employees, as determined by the Compensation Committee of the Board of Directors. No stock-based awards were issued under the 2025
plan as of December 31, 2025.
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LCNB CORP. AND SUBSIDIARIES
The following table shows information relating to stock-based compensation outstanding at December 31, 2025:
Number of Securities
Number of Securities
to be Issued
Weighted Average
Remaining Available
upon Exercise of
Exercise Price of
for Future Issuance
Outstanding Options, Outstanding Options,
Under Equity
Plan Category
Warrants, and Rights Warrants, and Rights Compensation Plans
Equity compensation plans approved by security holders
79,896
$15.84
600,000
Equity compensation plans not approved by security holders
—
—
—
Total
79,896
$15.84
600,000
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information contained in the Proxy Statement under the captions "Election of Directors," "Directors and Executive Officers," "Board of Directors
Meetings, Committees, and Compensation," and "Certain Relationships and Related Transactions" is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services
The information contained in the Proxy Statement under the captions "Independent Registered Public Accounting Firm" and "Board of Directors Meetings,
Committees, and Compensation" is incorporated herein by reference.
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Table of Contents
LCNB CORP. AND SUBSIDIARIES
PART IV
em 15. Exhibit and Financial Statement Schedules
(a)1. Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID 166)
FINANCIAL STATEMENTS
Consolidated Balance Sheets as of December 31, 2025 and 2024.
Consolidated Statements of Income for the Years Ended December 31, 2025, 2024, and 2023.
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2025, 2024, and 2023.
Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 2025, 2024, and 2023.
Consolidated Statements of Cash Flows for the Years Ended December 31, 2025, 2024, and 2023.
Notes to Consolidated Financial Statements
2.
Financial Statement Schedules – None
3.
Exhibits required by Item 601 Regulation S-K.
(a) 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).
4.1
Description of Registrant's Securities - Incorporated by reference to Registrant's Form 10-K for the fiscal year ended December 31, 2019,
Exhibit 4.1.
10.1
LCNB Corp. Ownership Incentive Plan - incorporated by reference to Registrant's Form DEF 14A Proxy Statement pursuant to Section
14(a), dated March 15, 2002, Exhibit A (000-26121).
10.2
LCNB Corp. 2015 Ownership Incentive Plan - incorporated by reference to Registrant's Form DEF 14A Proxy Statement pursuant to
Section 14(a), dated March 13, 2015, Exhibit A (001-35292).
10.3
Form of Option Grant Agreement under the LCNB Corp. Ownership Incentive Plan - incorporated by reference to the Registrant's Form 10-
K for the fiscal year ended December 31, 2005, Exhibit 10.2.
10.4
Nonqualified Executive Retirement Plan – incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the period
ended June 30, 2009, Exhibit 10.4.
10.5
Form of Restricted Share Grant Agreement under the LCNB Corp. 2015 Ownership Incentive Plan - incorporated by reference to
Registrant's 2015 Form 10-K, Exhibit 10.7.
10.6
Form of Business Loan Agreement between LCNB Corp. and Bankers' Bank - incorporated by reference to Registrant's Current Report on
Form 8-K filed on February 14, 2022, Exhibit 10.1.
10.7
LCNB Corp. 2025 Ownership Incentive Plan, incorporated herein by reference to Exhibit A of the Company’s definitive Proxy Statement on
Schedule 14A filed on April 21, 2025 (File No. 001-35292).
14.1
LCNB Corp. Code of Business Conduct and Ethics
19
LCNB Corp. Insider Trading Policy - incorporated by reference to Registrant's Form 10-K for the fiscal year ended December 31, 2023,
Exhibit 19.
21
LCNB Corp. subsidiaries.
23
Consent of Independent Registered Public Accounting Firm.
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.
97.1
LCNB Corp. Amended & Restated Clawback Policy - incorporated by reference to Registrant's Form 10-K for the fiscal year ended
December 31, 2023, Exhibit 97.1.
101
The following financial information from LCNB Corp.’s Annual Report on Form 10-K for the year ended December 31, 2025 is formatted
in Extensible Business Reporting Language: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the
Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Shareholders’ Equity, (v) the Consolidated
Statements of Cash Flows, and (vi) the Notes to Consolidated Financial Statements, tagged as blocks of text.
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
-101-
Table of Contents
LCNB CORP. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
(Registrant)
/s/ Eric J. Meilstrup
Eric J. Meilstrup, Chief Executive Officer
March 11, 2026
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated:
/s/ Eric J. Meilstrup
/s/ Robert C. Haines II
Eric J. Meilstrup, Chief Executive
Robert C. Haines II, President
Officer & Director
March 11, 2026
(Principal Executive Officer)
March 11, 2026
/s/ Andrew M. Wallace
/s/ Spencer S. Cropper
Andrew M. Wallace
Spencer S. Cropper
Executive Vice President & Chief Financial Officer
Chairman of the Board of Directors
(Principal Financial and Accounting Officer)
March 11, 2026
March 11, 2026
/s/ Craig M. Johnson
Craig M. Johnson, Director
Michael J. Johrendt, Director
March 11, 2026
March 11, 2026
/s/ Mary E. Bradford
/s/ William H. Kaufman
Mary E Bradford, Director
William H. Kaufman, Director
March 11, 2026
March 11, 2026
/s/ Steve P. Foster
/s/ Anne E. Krehbiel
Steve P. Foster, Director
Anne E. Krehbiel, Director
March 11, 2026
March 11, 2026
/s/ William G. Huddle
William G. Huddle, Director
Takeitha W. Lawson, Director
March 11, 2026
March 11, 2026
/s/ Stephen P. Wilson
Stephen P. Wilson, Director
March 11, 2026
-102-
Exhibit 14.1
Policy:
Code of Business Conduct and Ethics
Last Revision Date:
Most Recently Reviewed/ Approved Date:
April 28, 2025
LCNB Corp. Code of Business Conduct and Ethics Policy
Policy Statement
The Board of Directors of LCNB Corp. ("LCNB") has developed and adopted this Code of Business Conduct and Ethics (the "Code"). The Code is a general
outline of the standards by which all directors, officers and employees ("employee") of LCNB should conduct themselves. The purpose of this Code is to
promote honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; to
promote full, fair, accurate, timely and understandable disclosure in periodic reports; and to promote compliance with all applicable laws, rules and regulations
that apply to LCNB
The Code is not intended to cover every applicable law or provide answers to all questions that might arise but it is an integral part of the policies and
procedures governing all of us at LCNB. The Code reflects general principles to guide employees in making ethical decisions and is not intended to address
every specific situation. As such, nothing in this Code prohibits or restricts LCNB from taking disciplinary action on any matters pertaining to employee
conduct, whether or not they are expressly discussed in this document. Additionally, the Code is not intended to and does not in any way constitute an
employment contract or assurance of continued employment and does not create any rights in any director, officer, employee, client, supplier, competitor,
shareholder or any other person or entity.
Honest and Ethical Conduct
LCNB and each of its associates must conduct their affairs with uncompromising honesty and integrity. In order to maintain the highest degree of integrity in
the conduct of the LCNB's business, conflicts of interest must be avoided.
A "conflict of interest" occurs when a director, officer or employee has any duties or interests, whether professional or personal, that are mutually incompatible
and may conflict with the proper and impartial fulfillment of those duties, responsibilities or obligations. In particular, a director, officer or employee must
never use or attempt to use his or her position at LCNB to obtain any improper personal benefit for himself or herself, or for any other person.
All directors, officers and employees are obligated to disclose all the facts in any situation where a conflict of interest may arise. Those who knowingly fail to
disclose conflicts of interest are subject to discipline, up to and including dismissal.
LCNB National Bank
This code of ethics prohibits any employee, officer, director or attorney of the Bank from:
A.
Soliciting for himself or for a third party (other than the Bank itself) anything of value from anyone in return for any business, service or confidential
information of the Bank; and
B.
Accepting anything of value (other than bona fide salary, wages, fees, or other compensation paid in the usual course of business) from anyone in
connection with the Bank either before or after a transaction is discussed or consummated.
If you are offered or receive something of value beyond what is authorized in this code, you should disclose that fact in writing to the LCNB Board of Directors
Audit Committee. It is important to note that individuals cannot avoid the prohibitions of the Bank Bribery Statue by simply reporting to management the
acceptance of various gifts, but the reporting of same is a requirement of the code.
The Federal Bribery Law (18USC 215) is very restrictive in its prohibitions and all employees need to be aware of the letter of the law. *
*Approval by LCNB of a material departure from the Code or LCNB's failure to take action within a reasonable period of time regarding a material departure
from a provision of the Code that has been made known to the Chairman of the LCNB Audit Committee.
Disclosure
Public disclosure of the entire Code and any subsequent changes to the Code are required. This disclosure can be found at LCNB's web site www.lcnb.com. In
addition, any waiver1 of the Code for officers or directors can be made only by the Board of Directors and must be promptly filed and/or disclosed to the
shareholders, along with the reasons for the waiver. Disclosure of waiver to shareholders should be made in LCNB's regular public filings, not later than the
next periodic report.
Directors, officers and employees who are involved in the process of preparing the periodic reports are responsible for ensuring that the disclosure in the
Company's periodic reports is full, fair, accurate, timely and understandable. Financial activities must be recorded in compliance with all applicable laws and
accounting practices. Knowingly making false, misleading or incomplete entries, records or documentation is strictly prohibited. An employee will be
considered to have knowingly made false, misleading or incomplete entries, records or documentation if he or she knowingly makes, or permits or directs
another to make, materially false, misleading or incomplete entries in LCNB's financial statements or records; (ii) fails to correct materially false, misleading or
incomplete financial statements or records; (iii) signs, or permits another to sign, a document containing materially false, misleading or incomplete information,
or (iv) falsely responds, or fails to respond, to specific inquiries of the LCNB's independent auditors.
Compliance
It is LCNB's policy to conduct business in a responsible and ethical manner. As such, LCNB complies with all laws, rules and governmental regulations that
are applicable to its activities and expects that all directors, officers and employees acting on behalf of LCNB will obey the law. If an employee suspects that a
situation violates any applicable law, rule of regulation or this Code of Ethics, he or she is to report that situation as per the guidelines in Section V.
Enforcement of the Code
All directors, officers and employees are required to certify in writing that they have reviewed the Code, are familiar with its terms and will abide the policies
contained within.
Directors, officers and employees shall report any known or suspected violation of laws, rules or regulations or of this Code to LCNB's Board of Directors
Audit Committee. Directors, officers and employees may report any violations to the Audit Committee by following the link "report it" that is available in the
LCNB intranet website or is available on the internet at www.reportit.net. In addition, a toll-free number 1-877-778-5463 may be called to report a violation.
LCNB will not allow any retaliation against a director, officer or employee who acts in good faith in reporting any such violation.
The Audit Committee will investigate all reported violations and will oversee an appropriate response, including corrective action and preventative measures.
Violation of any laws, rules or regulations or this Code will face appropriate, case specific, disciplinary actions, which may include demotion or discharge.
Code of Business Conduct and Ethics Policy (Corp.)
Approved: April 28, 2025
EXHIBIT 21
LCNB CORP. SUBSIDIARIES
LCNB National Bank, a national banking association, organized under the laws of the United States, and headquartered in Lebanon, Ohio.
LCNB Risk Management, Inc., organized under the laws of the State of Nevada, and headquartered in Las Vegas, Nevada.
EXHIBIT 23
Consent of Independent Registered Public Accounting Firm
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-103801 and 333-289631) and Form S-3 (No. 333-
290468) of LCNB Corp. of our report dated March 11, 2026 relating to the financial statements which appear in this Form 10-K.
/s/ Plante & Moran, PLLC
Columbus, Ohio
March 11, 2026
EXHIBIT 31.1
CERTIFICATIONS
In connection with the Annual Report of LCNB Corp. on Form 10-K for the period ending December 31, 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 annual report on Form 10-K 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
March 11, 2026
EXHIBIT 31.2
CERTIFICATIONS
In connection with the Annual Report of LCNB Corp. on Form 10-K for the period ending December 31, 2025, as filed with the Securities and Exchange
Commission on the date hereof (the "Report"), I, Andrew M. Wallace, Executive Vice President & Chief Financial Officer of LCNB Corp., certify, that:
1)
I have reviewed this annual report on Form 10-K 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/ Andrew M. Wallace
Andrew M. Wallace
Executive Vice President &
Chief Financial Officer
March 11, 2026
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 Annual Report of LCNB Corp. (the "Company") on Form 10-K for the period ending December 31, 2025 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), we, Eric J. Meilstrup, Chief Executive Officer and Andrew M. Wallace, Executive Vice President and
Chief Financial Officer, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 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/ Andrew M. Wallace
Eric J. Meilstrup
Andrew M. Wallace
Chief Executive Officer
Executive Vice President and
Chief Financial Officer
Date: March 11, 2026