-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QG2VZyFhAml3R9/ZENfr2+WLvE/T4R2gTx9VGx6k3jC+LQyAIg4n7Tlr/6yaJpjJ x46OJ4vvh1YYVzXWzKolKg== /in/edgar/work/0001012364-00-000052/0001012364-00-000052.txt : 20001031 0001012364-00-000052.hdr.sgml : 20001031 ACCESSION NUMBER: 0001012364-00-000052 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001030 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LCNB CORP CENTRAL INDEX KEY: 0001074902 STANDARD INDUSTRIAL CLASSIFICATION: [6021 ] IRS NUMBER: 311626393 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-26121 FILM NUMBER: 748931 BUSINESS ADDRESS: STREET 1: 2 NORTH BROADWAY CITY: LEBANON STATE: OH ZIP: 45036 BUSINESS PHONE: 5139321414 MAIL ADDRESS: STREET 1: 2 NORTH BROADWAY CITY: LEBANON STATE: OH ZIP: 45036 10-Q 1 0001.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter ended September 30, 2000 Commission file number 000-26121 LCNB Corp. ----------------------------------------------------- (Exact name of registrant as specified in its charter) OHIO 31-1626393 ------------------------------- ------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification incorporation or organization) Number) 2 North Broadway, Lebanon, Ohio 45036 ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) (513) 932-1414 ---------------------------------------------------- (Registrant's telephone number, including area code) 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 X No The number of shares outstanding of the issuer's common stock, without par value, as of October 30, 2000, was 1,775,942 shares. LCNB Corp. INDEX Page PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets - September 30, 2000, and December 31, 1999 . . . . . . 1 Consolidated Statements of Income - Three and Nine Months Ended September 30, 2000 and 1999 2 Consolidated Statements of Comprehensive Income and Changes in Shareholders' Equity - Year Ended December 31, 1999 and Nine Months Ended September 30, 2000 . . . . . . . . . . . . . . 3 Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2000 and 1999 . . . . 4 Notes to Consolidated Financial Statements . . . . . . 5-7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . 8-16 Item 3. Quantitative and Qualitative Disclosures about Market Risks . . . . . . . . . . . . . . . . . . . . .16 Part II. Other Information Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . 17 Item 2. Changes in Securities and Use of Proceeds . . . . . . 17 Item 3. Defaults by the Company on its Senior Securities . . . 17 Item 4. Submission of Matters to a Vote of Security Holders . 17 Item 5. Other Information . . . . . . . . . . . . . . . . . . 17 Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . 17 Part I - Financial Information Item 1. Financial Statements LCNB Corp. and Subsidiaries Consolidated Balance Sheets At September 30, 2000, and December 31, 1999 (thousands)
September 30, December 31, 2000 1999 (unaudited) (a) ASSETS: Cash and due from banks $ 16,109 18,840 Federal funds sold 10,825 5,300 ------- ------- Total cash and cash equivalents 26,934 24,140 Interest-bearing deposits in banks 5,492 5,492 Federal Reserve Bank stock 647 647 Federal Home Loan Bank stock 857 - Securities available for sale, at market value 85,826 104,911 Loans 325,218 287,608 Less-allowance for loan losses 2,000 2,000 ------- ------- Net loans 323,218 285,608 Premises and equipment, net 10,627 8,231 Intangible assets 4,331 4,763 Accrued income receivable 3,459 3,363 Other assets 1,588 2,083 ------- ------- TOTAL ASSETS $462,979 439,238 ======= ======= LIABILITIES: Deposits- Noninterest-bearing $ 52,890 49,477 Interest-bearing 354,414 342,092 ------- ------- Total deposits 407,304 391,569 Accrued interest and other liabilities 10,278 4,982 ------- ------- TOTAL LIABILITIES 417,582 396,551 ------- ------- SHAREHOLDERS' EQUITY: Common stock-no par value, authorized 4,000,000 shares; issued and outstanding 1,775,942 shares 10,560 10,560 Surplus 10,553 10,553 Retained earnings 24,894 22,872 Accumulated other comprehensive loss, net of taxes (610) (1,298) ------- ------- TOTAL SHAREHOLDERS' EQUITY 45,397 42,687 ------- ------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $462,979 439,238 ======= ======= (a) Financial information as of December 31, 1999, has been derived from the audited, consolidated financial statements of the Registrant, as restated for the acquisition of Dakin Insurance Agency, Inc. The accompanying notes to financial statements are an integral part of these statements.
-1- LCNB Corp. and Subsidiaries Consolidated Statements of Income (In thousands except per share data) (unaudited)
Three Months Ended Nine Months Ended September 30 September 30 ------------------ ---------------- 2000 1999 2000 1999 INTEREST INCOME: Interest and fees on loans $6,733 5,785 19,314 16,843 Interest on federal funds sold 161 83 263 294 Interest on deposits in banks 71 71 215 210 Interest on Federal Reserve and Federal Home Loan Bank stock 3 - 22 19 Interest on investment securities- Taxable 833 1,262 2,752 3,802 Non-taxable 382 315 1,197 937 ----- ----- ------ ------ TOTAL INTEREST INCOME 8,183 7,516 23,763 22,105 ----- ----- ------ ------ INTEREST EXPENSE: Interest on deposits 4,111 3,328 11,469 9,785 Interest on borrowings 112 17 220 48 ----- ----- ------ ------ TOTAL INTEREST EXPENSE 4,223 3,345 11,689 9,833 ----- ----- ------ ------ NET INTEREST INCOME 3,960 4,171 12,074 12,272 PROVISION FOR LOAN LOSSES 52 42 134 166 ------ ----- ------ ------ NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 3,908 4,129 11,940 12,106 ----- ----- ------ ------ NON-INTEREST INCOME: Trust income 270 255 830 709 Service charges and fees 517 578 1,537 1,604 Net gain (loss) on sale of securities - - (13) 23 Insurance agency commissions 217 190 632 769 Other operating income 28 25 90 85 ----- ----- ------ ------ TOTAL NON-INTEREST INCOME 1,032 1,048 3,076 3,190 ----- ----- ------ ------ NON-INTEREST EXPENSE: Salaries and wages 1,409 1,443 4,246 4,231 Pension and other employee benefits 339 306 1,080 984 Equipment 169 141 431 394 Occupancy, net 276 224 807 716 State franchise tax 107 157 350 465 Marketing 112 84 297 278 Intangible amortization 129 156 454 463 Other 788 689 2,318 2,118 ----- ----- ------ ------ TOTAL NON-INTEREST EXPENSE 3,329 3,200 9,983 9,649 ----- ----- ------ ------ INCOME BEFORE INCOME TAXES 1,611 1,977 5,033 5,647 PROVISION FOR INCOME TAXES 468 578 1,413 1,613 ----- ----- ------ ------ NET INCOME $1,143 1,399 3,620 4,034 ===== ===== ====== ====== Dividends declared per common share $ .30 .25 .90 .75 Basic earnings per common share $ .64 .79 2.04 2.27 Average shares outstanding (000's) 1,776 1,776 1,776 1,776 The accompanying notes to financial statements are an integral part of these statements.
-2- LCNB Corp. and Subsidiaries Consolidated Statements of Comprehensive Income and Changes in Shareholders' Equity (thousands) (unaudited)
Accumulated Other Total Common Retained Comprehensive Shareholders' Comprehensive Shares Surplus Earnings Income Equity Income Balance January 1, 1999 $10,560 10,553 20,114 646 41,873 Comprehensive Income: Net income 5,574 5,574 $5,574 Net unrealized loss on available-for-sale securities (net of taxes of $995) (1,931) (1,931) (1,931) Reclassification adjustment for net realized gain on sale of available-for-sale securities included in net income (net of taxes of $7) (13) (13) (13) ----- Total comprehensive income $3,630 ===== Cash dividends declared (2,816) (2,816) ------ ------ ------ ------ ------ Balance December 31, 1999 $10,560 10,553 22,872 (1,298) 42,687 Comprehensive Income: Net income 3,620 3,620 $3,620 Net unrealized gain on available-for-sale securities (net of taxes of $350) 679 679 679 Reclassification adjustment for net realized loss on sale of available-for-sale securities included in net income (net of tax benefit of $4) 9 9 9 ----- Total comprehensive income $4,308 ===== Cash dividends declared (1,598) (1,598) ------ ------ ------ ------ ------ Balance September 30, 2000 $10,560 10,553 24,894 (610) 45,397 ====== ====== ====== ====== ====== The accompanying notes to financial statements are an integral part of these statements.
-3- LCNB Corp. and Subsidiaries Consolidated Statements of Cash Flows (thousands) (unaudited)
Nine Months Ended September 30 ----------------- 2000 1999 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 3,620 4,034 Adjustments for non-cash items - Depreciation and amortization 1,455 1,541 Provision for loan losses 134 166 Deferred tax benefit (69) (62) Realized (gain) loss on sales of securities 13 (23) Origination of mortgage loans for sale - (2,324) Proceeds from sales of mortgage loans - 2,324 Increase in accrued income receivable (96) (261) Increase (decrease) in accrued interest and other accrued expenses, net 430 (461) ------ ------ NET CASH PROVIDED BY OPERATING ACTIVITIES 5,487 4,934 ------ ------ CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from maturities of securities available for sale 21,446 32,320 Proceeds from sales of securities available for sale 3,988 8,175 Purchases of securities available for sale (5,566) (33,638) Purchases of securities held to maturity (857) - Net increase in loans (38,048) (14,254) Purchases of premises and equipment (2,944) (687) ------ ------ NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (21,981) (8,084) ------ ------ CASH FLOWS FROM FINANCING ACTIVITIES: Net increase (decrease) in deposits 15,735 (1,436) Net increase (decrease) in short-term borrowings (849) 2,283 Net increase in long-term borrowings 6,000 - Cash dividends paid (1,598) (1,320) ------ ------ NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 19,288 (473) ------ ------ NET CHANGE IN CASH AND CASH EQUIVALENTS 2,794 (3,623) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 24,140 20,785 ------ ------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $26,934 17,162 ====== ====== SUPPLEMENTAL CASH FLOW INFORMATION: Interest paid $11,291 9,838 Income taxes paid 1,521 1,934 NON CASH ADJUSTMENTS: Common shares purchased in exchange for a note payable $ - 448 The accompanying notes to financial statements are an integral part of these statements.
-4- LCNB Corp. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) NOTE 1 - BASIS OF PRESENTATION Effective May 18, 1999, Lebanon Citizens National Bank ("Lebanon Citizens"), was reorganized into a one-bank holding company structure. On April 11, 2000, LCNB Corp., the new consolidated holding company, elected to become a financial holding company pursuant to the Gramm-Leach-Bliley Act ("GLB Act"). The GLB Act, which became effective March 12, 2000, permits bank holding companies and national banks to own many types of non-banking subsidiaries such as insurance agencies and securities brokerage firms. The GLB Act allows a bank holding company to become a financial holding company and to make non-bank acquisitions. Substantially all of the assets, liabilities and operations of LCNB Corp. are attributable to its wholly-owned subsidiaries, Lebanon Citizens and its recently acquired Dakin Insurance Agency, Inc. (see Note 3). The accompanying unaudited consolidated financial statements include the accounts of LCNB Corp., Lebanon Citizens and Dakin Insurance Agency, Inc. ("Dakin"). The financial information prior to the reorganization consists of Lebanon Citizens and Dakin. The statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the unaudited consolidated financial statements include all adjustments (consisting of normal, recurring accruals) considered necessary for a fair presentation of financial position, results of operations and cash flows for the interim periods. The preparation of financial statements in conformity with 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 financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Results of operations for the three months and nine months ended September 30, 2000 are not necessarily indicative of the results to be expected for the full year ending December 31, 2000. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements, accounting policies and financial notes thereto included in LCNB Corp.'s 1999 Form 10-K filed with the Commission. NOTE 2 - EARNINGS PER SHARE Basic earnings per share is calculated by dividing net income by the weighted average number of common shares outstanding during the period. LCNB Corp.'s capital structure includes no potential for dilution. There are no warrants, options or other arrangements that would increase the number of shares outstanding. -5- LCNB Corp. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) (Continued) NOTE 3 - ACQUISITION On April 11, 2000, Dakin was acquired and became a wholly-owned subsidiary of LCNB Corp. Under the terms of the agreement, Dakin shareholders received 15,942 shares of LCNB Corp. common stock in a private offering. The transaction qualifies as a tax-free reorganization and has been accounted for using the pooling method of accounting. Accordingly, the consolidated financial statements of LCNB Corp. have been restated to retroactively combine the financial statements of LCNB Corp. and Dakin as if the acquisition had occurred at the beginning of the earliest period presented. The following table presents the revenues of Dakin included as a component of non-interest income, the net income of Dakin, and reconciles the net income and earnings per common share previously reported by LCNB Corp. to those items presented in the accompanying financial statements (thousands, except earnings per common share):
Three Months Ended Nine Months Ended September 30, September 30, 2000 1999 2000 1999 Dakin Insurance Agency, Inc. Revenues prior to acquisition $ - 193 182 777 Revenues since acquisition 220 - 458 - ----- ----- ----- ----- $ 220 193 640 777 ===== ===== ===== ===== Net income: Consolidated LCNB Corp. $1,120 1,405 3,569 3,967 Dakin Insurance Agency, Inc. 23 (6) 51 67 ----- ----- ----- ----- $1,143 1,399 3,620 4,034 ===== ===== ===== ===== Earnings per common share: As previously reported $ - 0.80 - 2.25 As restated - 0.79 - 2.27
-6- LCNB Corp. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) (Continued) NOTE 4 - BORROWINGS Accrued interest and other liabilities include the following short-term borrowings and long-term debt (thousands):
September 30, December 31, 2000 1999 ------------ ------------ U.S. Treasury demand notes $1,424 - ===== ===== Long-Term Debt: Federal Home Loan Bank notes $6,000 - Note payable to former shareholder of Dakin Insurance Agency, Inc. 368 403 ----- ----- Total $6,368 403 ===== =====
Maturities of long-term debt in the years ending December 31 are as follows: 2001 $ 50 2002 2,053 2003 56 2004 2,060 2005 2,064 The Federal Home Loan Bank borrowings consist of three notes with two, four and five-year maturities and have a weighted average interest rate of 7%. Interest on the notes is payable monthly. The notes are collateralized by a blanket pledge of certain residential loans. The note payable matures in 2006. Payments are due monthly at a nominal interest rate of 6%. -7- LCNB Corp. and Subsidiaries Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations COMPARATIVE FINANCIAL INFORMATION Effective May 18, 1999, Lebanon Citizens National Bank was reorganized into a one-bank holding company structure. On April 11, 2000, LCNB Corp, the new consolidated holding company, pursuant to the Gramm-Leach-Bliley Act, elected to become a financial holding company. Additionally, effective April 11, 2000, LCNB Corp. acquired Dakin. The transaction has been accounted for using the pooling method of accounting. Accordingly, the financial information included herein has been restated to retroactively combine the financial statements of LCNB Corp. and Dakin as if the acquisition had occurred at the beginning of the earliest period. Prior to May 18, 1999, the financial information presented represents the assets, liabilities and operations of Lebanon Citizens and Dakin. Comparative earnings per share information is presented on a pro forma basis. FORWARD-LOOKING STATEMENTS Certain matters disclosed herein may be deemed to be forward-looking statements that involve risks and uncertainties, including regulatory policy changes, interest rate fluctuations, loan demand, loan delinquencies and losses, and other risks. Actual strategies and results in future time periods may differ materially from those currently expected. Such forward- looking statements represent management's judgment as of the current date. The Company disclaims, however, any intent or obligation to update such forward-looking statements. RESULTS OF OPERATIONS LCNB Corp. earned $1.143 million for the three months ended September 30, 2000 compared to $1.399 million for the three months ended September 30, 1999. Earnings per share were $.64 for the third quarter of 2000, compared with $.79 per share earned in the third quarter of 1999. Annualized performance ratios included a return on average assets of 1.00% and a return on average equity of 10.19%, compared with the same ratios for the third quarter of 1999 of 1.28% and 12.99%, respectively. For the first nine months of 2000 LCNB Corp. earned $3.620 million compared to $4.034 million for the first nine months of 1999. Earnings per share were $2.04 in 2000, representing a 10.1% decline from the $2.27 per share earned the same period in 1999. Return on average assets was 1.06% for the first nine months of 2000 and return on average equity was 11.04% for the same period. The comparable ratios for the first nine months of 1999 were 1.25% and 12.62%, respectively. -8- NET INTEREST INCOME The table below presents net interest income, average balances and average rates.
Three Months Ended Nine Months Ended September 30, September 30, 2000 1999 2000 1999 NET INTEREST INCOME (in thousands) Book basis $ 3,960 4,171 12,074 12,272 Tax equivalent adjustment 135 132 417 319 ------- ------- ------- ------- Fully taxable basis $ 4,095 4,303 12,491 12,591 ======= ======= ======= ======= AVERAGE BALANCES (in thousands) Interest-earning assets $423,410 403,175 412,180 399,925 Interest-bearing liabilities 357,485 340,520 346,917 337,219 ------- ------- ------- ------- Earning assets financed by noninterest-bearing funds $ 65,925 62,655 65,263 62,706 ======= ======= ======= ======= AVERAGE RATES (fully taxable basis) Yield on interest-earning assets 7.82% 7.52% 7.84% 7.50% Cost of interest-bearing liabilities 4.70 3.90 4.50 3.90 ---- ---- ---- ---- Interest rate spread 3.12 3.62 3.34 3.60 Contribution of noninterest- bearing funds .73 .61 .71 .61 ---- ---- ---- ---- Net interest margin 3.85% 4.23% 4.05% 4.21% ==== ==== ==== ====
-9- Net interest income on a fully taxable basis for the third quarter of 2000 totaled $4.095 million, down $208 thousand from the third quarter of 1999. The $208 thousand decrease in net interest income was primarily due to a 38 basis point decrease in the net interest margin, partially offset by a $20.2 million increase in average earning assets. Net interest income on a fully taxable basis for the first nine months of 2000 totaled $12.491 million; down $100 thousand from the first nine months of 1999. The $100 thousand decrease was primarily due to a 16 basis point decrease in the net interest margin, partially offset by a $12.3 million increase in average earning assets. The net interest margin decreased from 4.23% in the third quarter of 1999 to 3.85% in the third quarter of 2000. This 38 basis point decrease was due in part to an 80 basis point increase in the cost of average interest bearing liabilities, partially offset by a 30 basis point increase in the yield on average interest-earning assets. The increase in the cost of average interest-bearing funds resulted from a general increase in market interest rates. The increase in the yield on average interest-earning assets is due to the same general increase in market rates, and to a change in the portfolio mix from investment securities to higher yielding assets, primarily commercial, installment and real estate loans. The net interest margin decreased from 4.21% in the first nine months of 1999 to 4.05% in the first nine months of 2000. This 16 basis point decrease resulted from a 60 basis point increase in the cost of interest-bearing liabilities partially offset by a 34 basis point increase in yield on interest-earning assets. These trends were attributable to the same factors as those noted in the quarterly net interest margin comparison above. Average interest-earning assets totaled $423.4 million for the third quarter of 2000, up $20.2 million, or 5.02%, from the same period in 1999. The increase was primarily attributable to increases in commercial, real estate and installment loan portfolios. Average earning assets for the nine-month period ended September 30, 2000 increased by $12.3 million when compared with the comparable period of 1999, primarily due to loan growth. Average interest-bearing liabilities totaled $357.5 million for the third quarter of 2000, up $17.0 million from the same period in 1999. Average interest- bearing liabilities totaled $346.9 million for the nine months ended September 30, 2000, an increase of $9.7 million from the nine-month period ended September 30, 1999. The increase in average interest bearing liabilities was attributable to $6.0 million of Federal Home Loan Bank long- term notes obtained in June, 2000. The balance was due to increases in deposit accounts. -10- PROVISION AND ALLOWANCE FOR LOAN LOSSES The total provision for loan 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. The total loan loss provision and the other changes in the allowance for loan losses are shown below.
Quarter Ended Nine Months Ended September 30, September 30, -------------- ----------------- 2000 1999 2000 1999 (thousands) (thousands) Balance, beginning of period $2,000 2,000 2,000 2,000 ----- ----- ----- ----- Charge-offs 63 64 170 204 Recoveries 12 27 36 43 ----- ----- ----- ----- Net charge-offs 51 37 134 161 ----- ----- ----- ----- Provision for loan losses 51 42 134 166 ----- ----- ----- ----- Balance, end of period $2,000 2,005 2,000 2,005 ===== ===== ===== =====
Of the total charge-offs for the nine months ended September 30, 2000, all $170 thousand is attributable to consumer loans including $27 thousand in credit cards. For the first nine months of 1999, consumer loans charged off amounted to $204 thousand. The following table sets forth information regarding the past-due, non- accrual and renegotiated loans of the Bank at the dates indicated:
September 30 December 31 2000 1999 ------------ ----------- (thousands) Loan accounted for on non-accrual basis $175 - Accruing loans which are past due 90 days or more 149 68 Renegotiated loans - - --- -- Total $324 68 === ==
-11- The loan accounted for on a non-accrual basis consists of one commercial loan, which has financially strong guarantors supporting the credit. The borrowers paid the loan off in October, 2000. The remaining accruing loans past due 90 days or more consist of real estate and consumer credits. NON-INTEREST INCOME Non-interest income of $1.032 million decreased $16 thousand, or 1.5% in the third quarter of 2000 compared to the third quarter of 1999. Trust income of $270 thousand increased $15 thousand, or 5.9%, from the third quarter of 1999 due to an increase in estate fees, partially offset by a decrease in the market value of assets under management on which fees are based. Total service charges and fees were approximately $61 thousand less than during the third quarter of 1999. This was primarily due to a $91 thousand reduction in merchant credit card processing fees resulting from the exiting of the business in the fourth quarter of 1999, partially offset by increases in bank card-related fee income and deposit account related fees. Insurance agency commissions increased $27 thousand, or 14.2%, compared to the third quarter of 1999. Non-interest income of $3.076 million in the first nine months of 2000 decreased $114 thousand, or 3.6%, compared with the first nine months in 1999. The decrease is due in part to a large commission earned in the first quarter of 1999 by Dakin, which did not recur in 2000. Also contributing to the decrease was a $13 thousand loss on the sale of securities in 2000 compared with a $23 thousand gain in the comparable nine-month period in 1999. Total service charges and fees declined $67 thousand due to the decline in merchant credit card processing, partially offset by an increase in deposit account related fees. The increase in trust income partially offset these decreases. NON-INTEREST EXPENSE Total non-interest expense increased $129 thousand, or 4.0% in the third quarter 2000 compared with the third quarter 1999. Salaries and wages decreased $34 thousand primarily due to decreases in incentive compensation expense, partially offset by normal increases in salaries and wages. Pension and other employee benefits increased $33 thousand due to increases in medical, pension, and Medicare and social security tax matching. Equipment and occupancy expenses increased $28 thousand and $52 thousand, respectively. During 2000 LCNB constructed new offices in Goshen and Oxford and extensively remodeled the Columbus Avenue office in Lebanon. The increase in occupancy expense reflects increased costs due to the new and remodeled offices and an increase in rent expense for leased offices. The increase in equipment expense is primarily due to depreciation recognized on new furniture and equipment purchased for the new and remodeled offices. Grand opening celebrations for the Goshen and Columbus Avenue offices and for Dakin Insurance Co. contributed to the $28 thousand increase in marketing costs. Other non-interest expenses increased $99 thousand due to increased volumes of ATM and credit card activity, increased data processing costs, increased Federal Deposit Insurance Corporation premiums, and costs related to investigation of data processing software replacement. These increases in other non-interest expense were partially offset by decreases related to merchant credit card processing and certain printing and supply expense control initiatives. Lower state franchise taxes and intangible amortization partially offset the overall increase in non-interest expenses. -12- Total non-interest expense increased $334 thousand, or 3.5%, in the nine months ended September 30, 2000 compared with the first nine months of 1999. Despite the decrease during the third quarter, salaries and wages for the nine months ended September 30, 2000 were $15 thousand greater than for the comparable period in 1999 primarily due to normal increases in salaries and wages. Changes in other items were substantially due to the same factors described above. FINANCIAL CONDITION The following table highlights the changes in the balance sheet. The analysis uses quarterly averages to give a better indication of balance sheet trends.
CONDENSED AVERAGE BALANCE SHEETS (thousands) 3rd Qtr. 2nd Qtr. 1st Qtr. 2000 2000 2000 ASSETS Interest-earning: Interest-bearing deposits with banks $ 5,492 5,492 5,492 Federal funds sold 10,207 2,037 5,023 Securities available for sale 90,598 97,086 103,515 Loans 317,113 304,195 290,168 ------- ------- ------- Total interest-earning assets 423,410 408,810 404,198 Noninterest-earning: Cash and due from banks 14,842 15,389 15,217 All other assets 19,313 18,037 18,467 Allowance for credit losses (2,002) (2,001) (2,002) ------- ------- ------- Total assets $455,563 440,235 435,880 ======= ======= ======= LIABILITIES Interest bearing: Interest-bearing deposits $350,456 338,446 338,341 Other borrowings 7,029 4,916 1,447 ------- ------- ------- Total interest-bearing liabilities 357,485 343,362 339,788 Noninterest-bearing: Noninterest-bearing deposits 51,703 52,183 51,339 All other liabilities 1,737 1,169 1,789 ------- ------- ------- Total liabilities 410,925 396,714 392,916 SHAREHOLDERS' EQUITY 44,638 43,521 42,964 ------- ------- ------- Total liabilities and shareholders' equity $455,563 440,235 435,880 ======= ======= =======
-13- Total average assets increased $15.3 million in the third quarter of 2000 from the second quarter and $19.7 million from the first quarter of 2000. The increase from the second quarter is primarily due to growth in real estate mortgage, commercial and installment loans and to an increase in the amount of federal funds sold to other institutions. LCNB Corp. continues to shift assets into the higher yielding loan portfolio. The increase from the first quarter of 2000 is due to a $26.9 million, or 9.29%, increase in average loans and to an increase in federal funds sold. Additionally, LCNB Corp. expended $2.9 million in additions to premises and equipment in the nine months ended September 30, 2000. These additions primarily related to the construction of two new branches opened in June 2000, which replaced branches existing in Oxford and Goshen, the remodeling of the Columbus Avenue branch and a new ATM at the Hamilton office location. Average interest-bearing deposits increased $12.0 million and $12.1 million from the second and first quarters of 2000, respectively. LCNB offers a corporate sweep checking account that automatically sweeps excess funds into a designated, non-Bank owned mutual fund. During the third quarter, LCNB introduced a savings product that was priced competitively with the mutual funds. As a result, several large account holders chose the new deposit product, which accounts for most of the increase in interest-bearing deposits. Other borrowings increased $2.1 million in the third quarter from the second quarter due to $6 million in borrowings with the Federal Home Loan Bank in June. Average noninterest-bearing deposits decreased $0.5 million from the second quarter of 2000 and increased $0.4 million from the first quarter of 2000. REGULATORY CAPITAL Lebanon Citizens and LCNB Corp. are required by regulators to meet certain minimum levels of capital adequacy. These are expressed in the form of certain ratios. Capital is separated into Tier I capital (essentially shareholders' equity less goodwill and other intangibles) and Tier II capital (essentially the allowance for loan losses limited to 1.25% of risk-weighted assets). The first two ratios, which are based on the degree of credit risk in LCNB Corp.'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. The ratio of Tier I capital to risk-weighted assets must be at least 4.0% and the ratio of Total capital (Tier 1 capital plus Tier 2 capital) to risk-weighted assets must be at least 8.0%. The capital leverage ratio supplements the risk-based capital guidelines. Banks are required to maintain a minimum ratio of Tier 1 capital to adjusted quarterly average total assets of 3.0%. A summary of the regulatory capital and capital ratios of LCNB Corp. follows: -14-
At At September 30, December 31, 2000 1999 Regulatory Capital: Shareholders' equity $45,397 42,687 Goodwill and other intangibles (4,331) (4,763) Net unrealized securities gains 610 1,298 ------ ------ Tier 1 risk-based capital 41,676 39,222 Eligible allowance for loan losses 2,000 2,000 ------ ------ Total risk-based capital $43,676 41,222 ====== ====== Capital Ratios: Total risk-based 14.8% 15.3% Tier 1 risk-based 14.1% 14.6% Leverage 9.2% 9.1%
-15- LIQUIDITY Liquidity is the ability to have funds available at all times to meet the commitments of Lebanon Citizens. Asset liquidity is provided by cash and assets which are readily marketable or pledgeable or which will mature in the near future. Liquid assets included cash and deposits in banks, federal funds sold and securities available for sale. Liquidity is also provided by access to core funding sources, primarily core depositors in the bank's trade area. Lebanon Citizens does not solicit brokered deposits as a funding source. The liquidity of Lebanon Citizens is enhanced by the fact that 84.8% of total deposits at September 30, 2000 were "core" deposits. Core deposits, for this purpose, are defined as total deposits less public funds and certificates of deposit greater than $100,000. At September 30, 2000, Lebanon Citizens liquid assets amounted to $118 million or 25.5% of total gross assets, down from $135 million or 30.6% at December 31, 1999. Secondary sources of liquidity include Lebanon Citizens' ability to sell loan participations, borrow funds from the Federal Home Loan Bank and purchase federal funds. 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. Loans to deposits were 79.8% and 73.5%, at September 30, 2000 and December 31, 1999, respectively. Lebanon Citizens experienced no liquidity or operational problems as a result of the current liquidity levels. YEAR 2000 COMPLIANCE LCNB Corp. experienced no difficulties resulting from Y2K in the date transition at year-end 1999 nor were any difficulties encountered within the first nine months of 2000. Lebanon Citizens' testing and preparation for Y2K included future dates beyond December 31, 1999. Management anticipates no difficulties from future date changes. Item 3. Quantitative and Qualitative Disclosures about Market Risks QUANTITATIVE AND QUALITATIVE DISLCOSURES ABOUT MARKET RISKS For a discussion of Lebanon Citizens' asset and liability management policies and gap analysis for the year ended December 31, 1999 see Item 3, Quantitative and Qualitative Disclosures about Market Risks in the recently filed Form S-4, as amended for the year ended December 31, 1999. There have been no material changes in Lebanon Citizens' market risks, which for Lebanon Citizens is primarily interest rate risk. -16- PART II. OTHER INFORMATION LCNB Corp. and Lebanon Citizens National Bank Item 1. Legal Proceedings - Not Applicable Item 2. Changes in Securities and Use of Proceeds - Not Applicable Item 3. Defaults by the Company on its Senior Securities - Not Applicable Item 4. Submission of Matters to a Vote of Security Holders - Not Applicable Item 5. Other Information - Not Applicable Item 6. Exhibits and Reports on Form 8-K a. Exhibits
Exhibit No. Description 27.1 Financial Data Schedule for the Nine Months Ended September 30, 2000. 27.2 Restated Financial Data Schedule for the Nine Months Ended September 30, 1999
b. On September 15, 2000, LCNB Corp. filed a Form 8-K with the Securities and Exchange Commission reporting the issuance of a letter containing financial information to its shareholders. SIGNATURES Pursuant to the requirements 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 Date: October 30, 2000 /s/Steve P. Foster -------------------------- Steve P. Foster Vice President and Chief Financial Officer -17- EX-27 2 0002.txt
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE QUARTERLY REPORT FOR LCNB CORP. ON FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30,2000, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0001074902 LCNB Corp. 1,000 9-MOS DEC-31-2000 JAN-01-2000 SEP-30-2000 16,109 5,492 10,825 0 85,826 0 0 325,218 2,000 462,979 407,304 1,425 2,485 6,368 0 0 10,560 34,837 462,979 19,314 3,949 500 23,763 11,469 11,689 12,074 134 (13) 9,983 5,033 5,033 0 0 3,620 2.04 2.04 7.70 175 149 0 0 2,000 170 36 2,000 2,000 0 2,000
EX-27 3 0003.txt RESTATED
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE QUARTERLY REPORT FOR LCNB CORP. ON FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0001074902 LCNB Corp. 1,000 9-MOS DEC-31-1999 JAN-01-1999 SEP-30-1999 14,662 5,492 2,500 0 113,533 0 0 281,398 2,005 434,154 385,570 3,037 2,028 414 0 0 10,560 32,545 434,154 16,843 4,739 523 22,105 9,785 9,833 12,272 166 23 9,649 5,647 5,647 0 0 4,034 2.27 2.27 7.39 0 34 0 0 2,000 64 27 2,005 0 0 2,005
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