10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.   20549

FORM 10-K

(Mark One)

(  X  )

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES

EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2004

 (      )

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

(I.R.S. Employer

incorporation or organization)

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 under Section 12(b) of the Exchange Act:

Name of each exchange

  Title of Each Class

   on which registered   

None

None

Securities registered pursuant to 12(g) of the Exchange Act:

COMMON STOCK NO PAR VALUE

(Title of Class)

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   

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     (     )

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).

Yes   X  No   

The issuer's common shares are not traded on any securities exchange and are not quoted by a national quotation service.  Management is aware of a sale of the issuer's shares for $37.05 per share on February 24, 2005.  Based upon such price, the aggregate market value of the issuer's shares held by nonaffiliates was $105,247,749.75.

As of February 27, 2005, 3,325,249 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 12, 2005, dated March 10, 2005, are incorporated by reference into Part III.

LCNB Corp.

For the year ended December 31, 2004

TABLE OF CONTENTS

			Page
PART I.
	Item 1.	Business	3-16
	Item 2.	Properties	17-18
	Item 3.	Legal proceedings	18
	Item 4.	Submission of matters to a vote of security holders	18
PART II.
	Item 5.	Market for registrant's common equity, related   stockholder matters, and issuer purchases of   equity securities	19-21
	Item 6.	Selected financial data	22-23
	Item 7.	Management's discussion and analysis of financial   condition and results of operations	24-38
		Quarterly financial data (unaudited)	39-40
	Item 7A.	Quantitative and qualitative disclosures about market risk	41-43
	Item 8.	Financial statements and supplementary data	44
	Item 9.	Disagreements with accountants on accounting   and financial disclosures	44
	Item 9A.	Controls and procedures	45-47
	Item 9B.	Other information	47
PART III.
	Item 10.	Directors and executive officers of the registrant	48
	Item 11.	Executive compensation	48
	Item 12.	Security ownership of certain beneficial owners   and management	48
	Item 13.	Certain relationships and related transactions	48
	Item 14.	Principal accounting fees and services	48
PART IV.
	Item 15.	Exhibits, financial statement schedules	49
Signatures			50

PART I

Item 1.  Business

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.  LCNB Corp. disclaims, however, any intent or obligation to update such forward-looking statements.

DESCRIPTION OF LCNB CORP.'S BUSINESS

General Description

LCNB Corp. ("LCNB"), an Ohio corporation formed in December, 1998, is a financial holding company headquartered in Lebanon, Ohio.  Through its subsidiaries, Lebanon Citizens National Bank ("the Bank") and Dakin Insurance Agency, Inc. ("Dakin"), LCNB is engaged in the commercial banking and insurance agency businesses.  

The predecessor of LCNB, the Bank, was formed as a national banking association in 1877.  On May 19, 1999, the Bank became a wholly owned subsidiary of LCNB.  The Bank's main office is located in Warren County, Ohio and 19 branch offices are located in Warren, Butler, Clinton, Clermont, and Hamilton Counties, Ohio.  In addition, the Bank operates 30 automated teller machines ("ATMs") in its market area.

The Bank is a full service community bank offering a wide range of commercial and personal banking services.  Deposit services include checking accounts, NOW accounts, savings accounts, Christmas and vacation savings, money market deposit accounts, Classic 50 accounts (a Senior Citizen program), individual retirement accounts, and certificates of deposit.  Deposits of the Bank are insured up to applicable limits by the Bank Insurance Fund, which is administered by the Federal Deposit Insurance Corporation (the “FDIC”).

Loan products offered include commercial loans, commercial and residential real estate loans, construction loans, various types of consumer loans, Small Business Administration loans, and commercial leases.  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 Bank also offers indirect financing through various automotive, boat, and lawn and garden dealers.

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The Trust and Investment Management Division of the Bank performs complete trust administrative functions and offers agency and trust services, retirement savings products, and mutual fund investment products to individuals, partnerships, corporations, institutions and municipalities.

Security brokerage services were first offered by the Bank in April, 2002 through arrangements with UVEST Investment Services, Inc., a registered broker/dealer.  Two 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, U.S. savings bonds, travelers' checks, money orders, cashier's checks, bank-by-mail, ATMs, cash and transaction services, debit cards, wire transfers, electronic funds transfer, utility bill collections, notary public service, personal computer based cash management services, 24 hour telephone banking, PC Internet 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.  Its primary market area encompasses all of Butler and Warren Counties and portions of Clinton, Clermont and Hamilton Counties.

Dakin, an Ohio corporation, has been an independent insurance agency in Lebanon, Ohio since 1876.  Its primary office is at 24 East Mulberry Street, Lebanon, Ohio 45036; telephone (513) 932-4010.  Since being acquired by LCNB on April 11, 2000, Dakin  now maintains additional offices in the Bank's Columbus Avenue, Maineville, and Mason offices.  Dakin is engaged in selling and servicing personal and commercial insurance products and annuity products and is regulated by the Ohio Department of Insurance.

Effective September 1, 2002, Dakin purchased substantially all of the insurance renewal rights and client list of an insurance agency located in Dayton, Ohio.  As part of the purchase, Dakin will receive all commission income received after September 1, 2002, and assignments of agency agreements that the agency has with insurers with whom Dakin does not already have an agreement.  In consideration for the assets purchased, Dakin will pay to the seller certain percentages of the commissions received from the agency's customer base over a four-year period.

Competition

The Bank faces strong competition both in making loans and attracting deposits.  The deregulation of the banking industry and the wide spread 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, mutual funds, insurance companies, brokerage and investment banking companies, and other financial intermediaries operating in its market and elsewhere, many of whom have substantially larger financial and managerial resources.  

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The Bank seeks to minimize the competitive effect of other financial corporations through a community banking approach that emphasizes direct customer access to the Bank's 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, the quality and scope of the services rendered, the convenience of the banking facilities, and, in the case of loans to commercial borrowers, relative lending limits.

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.

Dakin competes with numerous other independent and exclusive insurance agencies (an exclusive agent sells for only one insurance company) and with insurance companies that sell direct to individuals and businesses without using agents.  Dakin competes by representing high quality insurance companies, providing personalized and responsive service to its clients, and providing convenient office locations.

Supervision and Regulation

The Sarbanes-Oxley Act of 2002 ("SOA") was signed into law by President George W. Bush on July 30, 2002.  The purpose of SOA is to strengthen accounting oversight and corporate accountability by enhancing disclosure requirements, increasing accounting and auditor regulation, creating new federal crimes, and increasing penalties for existing federal crimes.  SOA directly impacts publicly traded companies, certified public accounting firms auditing public companies, attorneys who work for public companies or have public companies as clients, brokerage firms, investment bankers, and financial analysts who work for brokerage firms or investment bankers.  Key provisions affecting LCNB include:

1.

Certification of financial reports by chief executive officers ("CEOs") and chief financial officers ("CFOs"), who are responsible for designing and monitoring internal controls to ensure that material information relating to the issuer and its consolidated subsidiaries is made known to the certifying officers by others within the company;

2.

Inclusion of an internal controls report in annual reports that include management's assessment of the effectiveness of a company's internal controls over financial reporting and a report by the company's auditors attesting to management's assessment of internal controls;

3.

Accelerated reporting of stock trades on Form 4 by directors and executive officers;

4.

Disgorgement requirements of incentive pay or stock-based compensation profits received within twelve months of the release of financial statements if the company is later required to restate those financial statements due to material noncompliance with any financial reporting requirement that resulted from misconduct;

5.

Disclosure in a company's periodic reports stating if it has adopted a code of ethics for its CFO and principal accounting officer or controller and, if such code of ethics has been implemented,  immediate disclosure of any change in or waiver of the code of ethics;

- 5 -

6.

Disclosure in a company's periodic reports stating if at least one member of the audit committee is a "financial expert," as that term is defined by the Securities and Exchange Commission (the "SEC"); and

7.

Implementation of new duties and responsibilities for a company's audit committee, including independence requirements, the direct responsibility to appoint the outside auditing firm and to provide oversight of the auditing firm's work, and a requirement to establish procedures for the receipt, retention, and treatment of complaints from a company's employees regarding questionable accounting, internal control, or auditing matters.

Some SOA provisions became effective upon enactment; others have delayed implementation;  and others awaited rulemaking by the SEC, which is now substantially complete.  In addition, the SEC adopted final rules on September 5, 2002, requiring accelerated filing of quarterly and annual reports by a newly defined class of "accelerated filers."  After an initial phase-in period, accelerated filers will be required to file their annual reports on Form 10-K no later than 60 days after fiscal year end and their quarterly reports on Form 10-Q no later than 35 days after fiscal quarter ends.  LCNB meets the requirements for accelerated filing.

LCNB and the Bank are subject to an extensive array of banking laws and regulations that are intended primarily for the protection of the customers and depositors of LCNB's subsidiaries rather than holders of LCNB's securities.  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 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 and the Bank.

LCNB, as a financial holding company, is regulated under the Bank Holding Company Act of 1956, as amended (the "Act"), and is subject to the supervision and examination of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board").  The Act requires the prior approval of the Federal Reserve Board for a bank or financial holding company to acquire or hold more than a 5% voting interest in any bank and restricts interstate banking activities.

On September 29, 1994, the Act was amended by the Interstate Banking and Branch Efficiency Act of 1994, which authorizes interstate bank acquisitions anywhere in the country, effective one year after the date of enactment, and interstate branching by acquisition and consolidation, effective June 1, 1997, in those states that have not opted out by that date.   

The Gramm-Leach-Bliley Act, which amended the Bank Holding Company Act of 1956 and other banking related laws, was signed into law on November 12, 1999.  The Gramm-Leach-Bliley Act repealed certain sections of the Glass-Steagall Act and substantially eliminated the barriers separating the banking, insurance, and securities industries.  Effective March 11, 2000, qualifying bank holding companies could elect to become financial holding companies.  Financial holding companies have expanded investment powers, including affiliating with securities and insurance firms and engaging in other activities that are "financial in nature or incidental to such financial activity" or "complementary to a financial activity."  The Gramm-Leach-Bliley Act defines "financial in nature" to include:

- 6 -

a.

securities underwriting, dealing, and market making;

b.

sponsoring mutual funds and investment companies;

c.

insurance underwriting and agency;

d.

merchant banking activities; and

e.

other activities that the Federal Reserve Board, in consultation with and subject to the approval of the Treasury Department, determines are financial in nature.

Financial holding companies may commence the activities listed above or acquire a company engaged in any of those activities without additional approval from the Federal Reserve.  Notice of the commencement or acquisition must be provided to the Federal Reserve within thirty days of the start of the activity.   Sixty days advance notice is required before the start of any activity that is "complementary to a financial activity."

The Financial Reform, Recovery and Enforcement Act of 1989 ("FIRREA") provides that a holding company and its controlled insured depository institutions are liable for any loss incurred by the FDIC in connection with the default of any FDIC assisted transaction involving an affiliated insured bank or savings association.

The Bank is subject to the provisions of the National Bank Act.  The Bank is subject to primary supervision, regulation and examination by the Office of the Comptroller of the Currency (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.  Under the Bank Holding Company Act of 1956, as amended, and under Regulations of the Federal Reserve Board pursuant thereto, a bank or financial holding company and its subsidiaries are prohibited from engaging in certain tie-in arrangements in connection with the extension of credit.  

The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") substantially revised the bank regulatory and funding provisions of the Federal Deposit Insurance Act and several other federal banking statutes.  Among its many reforms, FDICIA:

1.

Required regulatory agencies to take "prompt corrective action" with financial  institutions that do not meet minimum capital requirements;

2.

Established five capital tiers:  well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized;

3.

Imposed significant restrictions on the operations of a financial institution that is not rated well-capitalized or adequately capitalized;

4.

Prohibited a depository institution from making any capital distributions, including payments of dividends, or paying any management fee to its holding company if the institution would be undercapitalized as a result;

5.

Implemented a risk-based premium system;

6.

Required an audit committee to be comprised of independent, outside directors;

7.

Required a financial institution with more than $500 million in total assets to issue annual, audited financial statements prepared in conformity with U.S. generally accepted accounting principles; and

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8.

Required a financial institution with more than $500 million in total assets to document, evaluate, and report on the effectiveness of the entity's internal control system and required an independent public accountant to attest to management's assertions concerning the bank's internal control system.

At December 31, 2004, the Bank was well capitalized based on FDICIA's guidelines.  

LCNB and the Bank are also subject to the state banking laws of Ohio.  Ohio adopted nationwide reciprocal interstate banking effective October, 1988.  However, banking laws of other states may restrict branching of banks to other counties within the state and acquisitions or mergers involving banks and bank holding companies located in other states.  Additionally, Dakin Insurance Agency, Inc. is subject to State of Ohio insurance regulations and rules and its activities are regulated by The State of Ohio Department of Insurance.

Noncompliance with laws and regulations by bank holding companies and banks can lead to monetary penalties and/or an increased level of supervision or a combination of these two items.  Management is not aware of any current instances of noncompliance with laws and regulations and does not anticipate any problems maintaining compliance on a prospective basis.  Recent regulatory inspections and examinations of LCNB and the Bank have not disclosed any significant instances of noncompliance.

The earnings and growth of LCNB are affected not only by general economic conditions, but also by the fiscal and monetary policies of the federal government and its agencies, particularly the Federal Reserve Board.  Its policies influence the amount of bank loans and deposits and the interest rates charged and paid thereon and thus have an effect on earnings.  The nature of future monetary policies and the effect of such policies on the future business and earnings of LCNB and the Bank cannot be predicted.

A substantial portion of LCNB's cash revenues is derived from dividends paid by the Bank.  These dividends are subject to various legal and regulatory restrictions.  Generally, dividends are limited to the aggregate of current year net income plus the retained net earnings, as defined, of the two most previous prior years.  In addition, dividend payments may not reduce capital levels below minimum regulatory guidelines.

Employees

As of December 31, 2004, LCNB, the Bank, and Dakin employed 218 full-time equivalent employees.  LCNB is not a party to any collective bargaining agreement.  Management considers its relationship with its employees to be very good.  Employee benefits programs are considered by Management to be competitive with benefits programs provided by other financial institutions and major employers within LCNB’s market area.

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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 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 web site, www.lcnb.com, as soon as reasonably practicable after they are electronically filed or furnished to the SEC, or by writing to:

Steve P. Foster

Executive Vice President, CFO

LCNB Corp.

2 N. Broadway

P.O. Box 59

Lebanon, Ohio  45036

Financial reports and other materials filed by LCNB with the SEC may also be read and copied at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549.  Information on the operation of the Public Reference Room may be obtained from the SEC by calling 1-800-SEC-0330.  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.  

FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT

SALES

LCNB and its subsidiaries do not have any offices located in foreign countries and have no foreign assets, liabilities or related income and expense for the years presented.

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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Investment Portfolio

The following table presents the carrying values of securities for the years indicated:

		At December 31,
		2004	2003	2002
		(Dollars in thousands)
Securities available for sale:
U.S. Treasury notes	$	1,194	2,149	1,019
U.S. Agency notes		23,789	61,822	47,089
U.S. Agency mortgage-backed securities		28,503	20,988	19,052
Municipal securities		59,951	65,980	69,018
Total securities available for sale		113,437	150,939	136,178
Federal Reserve Bank Stock		647	647	647
Federal Home Loan Bank Stock		2,411	2,315	2,224
Total securities	$	116,495	153,901	139,049

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Contractual maturities of debt securities at December 31, 2004, were as follows.  Actual maturities may differ from contractual maturities when issuers have the right to call or prepay obligations.

	Amortized		Market
		Cost	Value	Yield
		(Dollars in thousands)
U.S. Treasury notes:
Within one year	$	-	-	-%
One to five years		1,193	1,194	3.20%
Five to ten years		-	-	-%
After ten years		-	-	-%
Total U.S. Treasury notes	$	1,193	1,194	3.20%
U.S. Agency notes:
Within one year	$	4,556	4,581	3.64%
One to five years		19,384	19,208	2.69%
Five to ten years		-	-	-%
After ten years		-	-	-%
Total U.S. Agency notes	$	23,940	23,789	2.87%
Municipal securities (1):
Within one year	$	11,198	11,248	4.41%
One to five years		26,541	27,043	4.68%
Five to ten years		12,152	12,427	5.43%
After ten years		8,957	9,233	7.69%
Total Municipal securities	$	58,848	59,951	5.24%
U.S. Agency mortgage-backed securities	$	28,659	28,503	3.83%
	$	112,640	113,437	4.36%

(1)

Yields on tax-exempt obligations are computed on a tax equivalent basis based upon a 34% 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, 2004.

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Loan Portfolio

The following table summarizes the distribution of the loan portfolio for the years indicated:

		At December 31,
		2004	2003	2002	2001	2000
		(Dollars in thousands)
Commercial and industrial	$	32,931	30,519	35,198	40,486	36,449
Commercial, secured by    real estate		107,138	99,461	80,882	72,477	59,043
Residential real estate		159,286	139,305	151,502	165,710	185,013
Consumer, excluding    credit cards		34,672	43,283	51,184	41,006	40,860
Agricultural		1,653	1,192	1,314	2,020	2,238
Credit card		-	2,707	2,689	2,658	3,049
Lease Financing		253	588	1,256	2,088	2,219
Other		167	212	57	112	863
Total loans		336,100	317,267	324,082	326,557	329,734
Deferred costs, net		490	566	750	608	705
		336,590	317,833	324,832	327,165	330,439
Allowance for loan losses		(2,150)	(2,150)	(2,000)	(2,000)	(2,000)
Loans, net	$	334,440	315,683	322,832	325,165	328,439

As of December 31, 2004, there were no concentrations of loans exceeding 10% of total loans that are not already disclosed as a category of loans in the above table.

The following table summarizes the commercial and agricultural loan maturities and sensitivities to interest rate change at December 31, 2004:

	(Dollars in thousands)
Maturing in one year or less	$	28,958
Maturing after one year, but within five years		11,445
Maturing beyond five years		101,319
Total commercial and agricultural loans	$	141,722
Loans maturing beyond one year:
Fixed rate	$	64,540
Variable rate		48,224
Total	$	112,764

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Risk Elements

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 meet payments as they become due, unless the loan is well secured and in the process of collection.  Subsequent cash receipts on a non-accrual loan 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 loan losses.

The following table summarizes non-accrual, past-due, and restructured loans for the dates indicated:

		At December 31,
		2004	2003	2002	2001	2000
		(Dollars in thousands)
Non-accrual loans	$	-	794	-	-	-
Past-due 90 days or more     and still accruing		165	2,442	232	146	111
Restructured loan		1,817	-	-	-	-
Total	$	1,982	3,236	232	146	111

The restructured loan at December 31, 2004 consists of a commercial loan whose predecessor loans were classified as loans past due 90 days or more and still accruing at December 31, 2003, at which time they had a total balance of $2,030,000.  Information received during the first quarter, 2004, raised uncertainties concerning the collectibility of certain collateral and management transferred the loans to the non-accrual classification, where they remained until they were re-written in October, 2004.  The $213,000 difference in the loan balances at December 31, 2004 and 2003 is due to principal payments received.  All related interest due on the predecessor loans was paid during October, 2004, and the loans were re-written at that time.  Such interest has been recorded on a cash basis as received.  The restructured loan is secured by a combination of mortgages and other collateral.

Non-accrual loans at December 31, 2003 included a commercial loan in the amount of $564,000, which was paid in full during the second quarter, 2004; a consumer loan in the amount of $146,000; and residential real estate mortgage loans in the amount of $84,000.  Interest income that would have been recorded during 2003 if loans on a non-accrual status at December 31, 2003 had been current and in accordance with their original terms was approximately $72,000.

The following is a summary of information pertaining to loans considered to be impaired in accordance with SFAS No. 114 (000’s):

		December 31,
		2004	2003
Impaired loans without a valuation allowance	$	71	84
Impaired loans with a valuation allowance		2,049	2,740
Total impaired loans		2,120	2,824
Valuation allowance related to impaired loans	$	540	674

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The average balance of impaired loans during 2004 and 2003 was $2,629,000 and $2,857,000, respectively.  During 2004 LCNB received and recognized $164,000 of interest income on impaired loans.  During 2003 LCNB accrued interest income totaling $183,000 on impaired loans classified as past due 90 days or more and still accruing because they were considered well secured and in the process of collection.  This accrued interest was received during the first quarter, 2004.  

LCNB is not committed to lend additional funds to debtors whose loans have been modified to provide a reduction or deferral of principal or interest because of deterioration in the financial position of the borrower.

At December 31, 2004, there were no material additional loans not already disclosed as non-accrual, restructured, or accruing loans past due 90 days or more where known information about possible credit problems of the borrowers causes management to have serious doubts as to the ability of such borrowers to comply with present loan repayment terms.

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Summary of Loan Loss Experience

The table summarizing the activity related to the allowance for loan losses is included in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following table presents the allocation of the allowance for loan loss:

		At December 31,
		2004			2003				2002			2001			2000
		Amount	Percent of Loans in Each Category to Total Loans		Amount	Percent of Loans in Each Category to Total Loans			Amount	Percent of Loans in Each Category to Total Loans		Amount	Percent of Loans in Each Category to Total Loans		Amount	Percent of Loans in Each Category to Total Loans
								(Dollars in thousands)
Commercial and   industrial	$	135		9.80%	420		9.62%		744		10.86%	647		12.40%	381			11.05%
Commercial, secured   by real estate		695		31.88	649		31.35		-		24.96	-		22.19	-			17.91
Residential real estate		21		47.39	-		43.91		-		46.75	-		50.75	-		.	56.11
Consumer		690		10.32	676		13.64		871		15.79	774		12.56	714			12.39
Agricultural		-		0.49	-		0.38		-		0.40	-		0.62	-			0.68
Credit card		-		-	42		0.85		77		0.83	82		0.81	40			0.93
Lease financing		-		0.07	-		0.07		-		0.39	-		0.64	-			0.67
Other		36		0.05	-		0.18		-		0.02	-		0.03	-			0.26
Unallocated		573			363				308			497			865
Total	$	2,150		100.00%	2,150		100.00%		2,000		100.00%	2,000		100.00%	2,000			100.00%

This allocation is made for analytical purposes.  The total allowance is available to absorb losses from any category of the portfolio.  The decrease in the allocation to the commercial and industrial category at December 31, 2004 as compared to December 31, 2003 reflects decreased delinquencies.  There is not an allocation to the credit card category for 2004 because this portfolio was sold during the first quarter, 2004.  Allocations to the consumer and credit card categories were less at December 31, 2003 as compared to December 31, 2002 because of general economic improvements in late 2003.

- 15 -

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 following table presents the contractual maturity of time deposits of $100,000 or more at December 31, 2004:

	(Dollars in thousands)
Maturity within 3 months	$	13,280
After 3 but within 6 months		2,175
After 6 but within 12 months		10,627
After 12 months		29,022
	$	55,104

Return on Equity and Assets

The statistical information regarding the return on assets, return on equity, dividend payout ratio, and equity to assets ratio is presented in Item 6, Selected Financial Data.

- 16 -

Item 2.  Properties

The Bank conducts its business from the following offices:

	Name of Office	Address
1.	Main Office	2 North Broadway Lebanon, Ohio  45036	Owned
2.	Auto Bank	36 North Broadway Lebanon, Ohio  45036	Owned
3.	Columbus Avenue Office	730 Columbus Avenue Lebanon, Ohio  45036	Owned	(2)
4.	Fairfield Office	765 Nilles Road Fairfield, Ohio  45014	Leased
5.	Goshen Office	6726 Dick Flynn Blvd. Goshen, Ohio  45122	Owned
6.	Hamilton Office	794 NW Washington Blvd. Hamilton, Ohio  45013	Owned
7.	Hunter Office	3878 State Route 122 Franklin, Ohio  45005	Owned
8.	Loveland Office	615 West Loveland Avenue Loveland, Ohio  45140	Owned
9.	Maineville Office	7795 South State Route 48 Maineville, Ohio  45039	Owned	(2)
10.	Mason/West Chester Office	1050 Reading Road Mason, Ohio  45040	Owned	(2)
11.	Middletown Office	4441 Marie Drive Middletown, Ohio  45044	Owned
12.	Okeana Office	6225 Cincinnati-Brookville Road Okeana, Ohio  45053	Owned
13.	Otterbein Office	State Route 741 Lebanon, Ohio  45036	Leased
14.	Oxford Office	30 West Park Place Oxford, Ohio  45056           - 17 -	(1) (3)
	Name of Office	Address
15.	Rochester/Morrow Office	Route 22-3 at 123 Morrow, Ohio  45152	Owned
16.	South Lebanon Office	209 East Forest Street South Lebanon, Ohio  45065	Leased
17.	Springboro/Franklin Office	525 West Central Avenue Springboro, Ohio  45066	Owned
18.	Warrior Office	Lebanon High School 1916 Drake Road Lebanon, Ohio  45036	Leased
19.	Waynesville Office	9 North Main Street Waynesville, Ohio  45068	Owned
20.	Wilmington Office	1243 Rombach Avenue Wilmington, Ohio  45177	Owned

(1)

Excess space in this office is leased to third parties.

(2)

A Dakin office is located in this office.

(3)

The Bank owns the Oxford office building and leases the land.

Dakin owns its main office at 20 & 24 East Mulberry Street, Lebanon, Ohio  45036.  Excess space in this office is leased to third parties.  Dakin's three other offices are located in the Bank's branch offices.

Item 3.  Legal Proceedings

Except for routine litigation incident to their businesses, LCNB and its subsidiaries are not a party to any material pending legal proceedings and none of their property is the subject of any such proceedings.

Item 4.  Submission of Matters to a Vote of Security Holders

None

- 18 -

PART II

Item 5.  Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities.

LCNB had approximately 655 registered holders of its Common Stock as of December 31, 2004.  The number of shareholders includes banks and brokers who act as nominees, each of whom may represent more than one shareholder.  The Common Stock is currently traded on the Nasdaq Over-The-Counter Bulletin Board service under the symbol "LCNB".  Several market-makers facilitate the trading of the shares of Common Stock.  Trade prices for shares of LCNB Common Stock, reported through registered securities dealers, are set forth below.  Trades have occurred during the periods indicated without the knowledge of LCNB.  The trade prices shown below are interdealer without retail markups, markdowns or commissions.  Prices have been restated to reflect a 100% stock dividend, which was accounted for as a stock split, paid on April 30, 2004.

		High		Low
2004
First Quarter	$	36.25	$	34.525
Second Quarter		40.00		35.250
Third Quarter		40.00		36.000
Fourth Quarter		38.90		37.000
2003
First Quarter	$	27.50	$	24.750
Second Quarter		29.25		26.000
Third Quarter		42.50		29.000
Fourth Quarter		38.00		32.625

The following table presents cash dividends per share declared and paid in the periods shown.  Amounts have been restated to reflect the 100% stock dividend referred to above.

		2004	2003
First Quarter	$	0.275	0.2625
Second Quarter		0.280	0.2625
Third Quarter		0.280	0.2625
Fourth Quarter		0.280	0.2750
Total	$	1.115	1.0625

It is expected that LCNB will continue to pay dividends on a similar schedule, to the extent permitted by business and other factors beyond management's control. LCNB depends on dividends from its subsidiaries 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 net income retained for the previous two 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. In addition, dividend payments may not reduce capital levels below minimum regulatory guidelines. Management believes the Bank will be able to pay anticipated dividends to LCNB without needing to request approval.

- 19 -

On April 17, 2001, LCNB's Board of Directors authorized three separate stock repurchase programs, two phases of which continue.  The shares purchased will be held for future corporate purposes.

Under the "Market Repurchase Program" LCNB will purchase up to 100,000 shares of its stock through market transactions with a selected stockbroker.  Through December 31, 2004, 62,531 shares had been purchased under this program.  The following table shows information relating to the repurchase of shares under the Market Repurchase Program during the twelve months ended December 31, 2004:

					Total Number of		Maximum
					Shares		Number of
					Purchased as		Shares that May
	Total				Part of Publicly		Yet Be
	Number of		Average		Announced		Purchased
	Shares		Price Paid		Plans or		Under the Plans
	Purchased		Per Share		Programs		or Programs
January		-	$	-		-		67,846
February		1,948		36.08		1,948		65,898
March		-		-		-		65,898
April		-		-		-		65,898
May		7,122		37.32		7,122		58,776
June		-		-		-		58,776
July		3,300		37.00		3,300		55,476
August		15,007		37.50		15,007		40,469
September		-		-		-		40,469
October		-		-		-		-
November		3,000		37.50		3,000		37,469
December		-		-		-		37,469
Total		30,377	$	37.31		30,377		37,469

The "Private Sale Repurchase Program" is available to shareholders who wish to sell large blocks of stock at one time.  Because LCNB's stock is not widely traded, a shareholder releasing large blocks may not be able to readily sell all shares through normal procedures.  Purchases of blocks will be considered on a case-by-case basis and will be made at prevailing market prices.  There is no limit to the number of shares that may be purchased under this program.  A total of 160,144 shares have been purchased under this program since its inception.  The following table shows information relating to private sale repurchases during the twelve months ended December 31, 2004:

- 20 -

					Total Number of		Maximum
					Shares		Number of
					Purchased as		Shares that May
	Total				Part of Publicly		Yet Be
	Number of		Average		Announced		Purchased
	Shares		Price Paid		Plans or		Under the Plans
	Purchased		Per Share		Programs		or Programs
January		-	$	-		-	Not applicable
February		-		-		-
March		-		-		-
April		-		-		-
May		4,000		37.50		4,000
June		11,700		37.50		11,700
July		-		-		-
August		-		-		-
September		-		-		-
October		-		-		-
November		-		-		-
December		-		-		-
Total		15,700	$	37.50		15,700

- 21 -

Item 6.  Selected Financial Data

The following represents selected consolidated financial data of LCNB for the years ended December 31, 2000 through 2004 and are derived from LCNB's consolidated financial statements.  This data should be read in conjunction with the consolidated financial statements and the notes thereto included in Item 8 of this Form 10-K and Management's Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosures about Market Risk included in Items 7 and 7A, respectively, of this Form 10-K, and are qualified in their entirety thereby and by other detailed information elsewhere in this Form 10-K.

		For the Years Ended December 31,
		2004	2003	2002	2001	2000
		(Dollars in thousands, except ratios and per share data)
Income Statement
Interest income	$	25,648	27,437	30,163	32,164	32,151
Interest Expense		7,368	8,680	10,670	14,340	15,922
Net Interest Income		18,280	18,757	19,493	17,824	16,229
Provision for Loan Losses		489	658	348	237	197
Net Interest Income         after Provision		17,791	18,099	19,145	17,587	16,032
Non-Interest Income		7,659	6,797	5,623	4,842	4,400
Non-Interest Expenses		16,404	15,725	15,705	13,922	13,101
Income before Income      Taxes		9,046	9,171	9,063	8,507	7,331
Provision for Income      Taxes		2,450	2,434	2,523	2,440	2,091
Net Income	$	6,596	6,737	6,540	6,067	5,240
Balance Sheet
Securities	$	116,495	153,901	139,049	101,382	84,894
Loans – net		334,440	315,683	322,832	325,165	328,439
Total Assets		522,251	523,608	506,751	480,435	451,000
Total Deposits		463,900	463,033	442,220	414,772	394,786
Long-Term Debt		2,137	4,197	6,253	12,306	6,356
Total Shareholders' Equity		52,296	52,448	51,930	49,507	46,310

- 22 -

		For the Years Ended December 31,
		2004	2003	2002	2001	2000
		(Dollars in thousands, except ratios and per share data)
Selected Financial Ratios   and Other Data
Return on average assets		1.29%	1.31%	1.32%	1.30%	1.17%
Return on average equity		12.56%	12.64%	13.00%	12.50%	11.84%
Equity-to-assets ratio		10.01%	10.02%	10.25%	10.30%	10.27%
Dividend payout ratio		56.60%	53.93%	53.43%	53.94%	61.02%
Basic and diluted earnings      per share(1)	$	1.97	1.97	1.90	1.71	1.48
Dividends declared per      share(1)	$	1.115	1.0625	1.0125	0.925	0.90

(1)

All per share data have been adjusted to reflect a 100% stock dividend accounted for as a stock split in 2004.

- 23 -

Item 7.  Management's Discussion and Analysis of Financial Condition and Results of Operations

Introduction

The following is management's discussion and analysis of the consolidated financial condition and consolidated results of operations of LCNB Corp. ("LCNB").  It is intended to amplify certain financial information regarding LCNB and should be read in conjunction with the Consolidated Financial Statements and related Notes and the Financial Highlights contained in the 2004 Annual Report to Shareholders.

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.  LCNB disclaims, however, any intent or obligation to update such forward-looking statements.

Overview

LCNB earned $6,596,000 in 2004, compared to $6,737,000 in 2003 and $6,540,000 in 2002.  Basic and diluted earnings per share for 2004, 2003, and 2002 were $1.97, $1.97, and $1.90, respectively.  Performance ratios for 2004, 2003, and 2002 included:

	2004	2003	2002
Return on average assets	1.29%	1.31%	1.32%
Return on average equity	12.56%	12.64%	13.00%

Net interest income for 2004, 2003, and 2002 was $18,280,000, $18,757,000, and $19,493,000, respectively.  A primary factor in the decline in net interest income during these years was continued, historically low market interest rates, as indicated in LCNB’s net interest margin for these years.  The net interest margin, which is calculated by dividing taxable-equivalent net interest income by average interest-earning assets, was 4.02%, 4.09%, and 4.39% for 2004, 2003, and 2002, respectively.

Total non-interest income grew from $5,623,000 for 2002 to $6,797,000 for 2003 and $7,659,000 for 2004.  Two primary drivers of this upward trend were trust income, primarily from growth in trust assets managed, and increases in service charges and fees, primarily due to the introduction of a new overdraft protection program in August, 2003 and an increase in non-sufficient fund check fees initiated in November, 2002.

- 24 -

Total non-interest expense also increased, but not as much as the increase in non-interest income.  Total non-interest expense for 2002 was $15,705,000, compared to $15,725,000 in 2003 and $16,404,000 in 2004.  Normal salary and wage increases and increased employee benefit costs comprised a significant portion of this increase.  LCNB’s continual investments in facilities improvements and data processing system upgrades also was responsible for expense increases, primarily through increased depreciation and computer maintenance and supply costs.

Net Interest Income

The amount of net interest income earned by LCNB is influenced by the dollar amount ("volume") and mix of interest earning assets and interest bearing liabilities and the rates earned or paid on each.  The following table presents, for the years indicated, the distribution of average assets, liabilities and shareholders' equity, as well as the total dollar amounts of interest income from average interest earning assets and the resultant yields on a fully taxable equivalent basis, and the dollar amounts of interest expense and average interest-bearing liabilities and the resultant rates paid.

- 25 -

	Years ended December 31,
	2004					2003					2002
	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)	$	327,276	$	20,524	6.27%	$	319,771	$	22,007	6.88%	$	327,561	$	24,821	7.58%
Federal funds sold		16,856		249	1.48		17,089		177	1.04		21,551		339	1.57
Federal Reserve    Bank Stock		647		39	6.03		647		39	6.03		647		39	6.03
Federal Home Loan    Bank Stock		2,350		97	4.13		2,258		90	3.99		2,165		100	4.62
Investment securities:
Taxable		80,781		2,792	3.46		87,273		3,040	3.48		66,577		3,068	4.61
Non-taxable(2)		52,364		2,961	5.65		57,886		3,182	5.50		47,107		2,765	5.87
Total earning assets		480,274		26,662	5.55		484,924		28,535	5.88		465,608		31,132	6.69
Non-earning assets		33,780					33,265					33,247
Allowance for loan   Losses		(2,158)					(2,037)					(2,002)
Total assets	$	511,896				$	516,152				$	496,853
Savings deposits	$	122,893		912	0.74	$	119,838		1,458	1.22	$	108,768		1,708	1.57
NOW and money fund		85,479		477	0.56		95,234		702	0.74		84,562		918	1.09
IRA and time   Certificates		169,996		5,768	3.39		172,963		6,235	3.60		180,990		7,476	4.13
Short-term debt		556		6	1.08		681		6	0.88		957		13	1.36
Long-term debt		4,063		205	5.05		6,115		279	4.56		9,699		555	5.72
Total interest-       bearing-liabilities		382,987		7,368	1.92		394,831		8,680	2.20		384,976		10,670	2.77
Demand deposits		73,619					64,686					58,620
Other liabilities		2,768					3,315					2,950
Capital		52,522					53,320					50,307
Total liabilities and        Capital	$	511,896				$	516,152				$	496,853
Net interest rate   spread(3)					3.63					3.68					3.92
Net interest margin on   a tax equivalent   basis(4)			$	19,294	4.02			$	19,855	4.09			$	20,462	4.39
Ratio of interest-   earning assets to   interest-bearing   liabilities		125.40%				122.82%					120.94%

(1)

Includes non-accrual loans if any.  Income from tax-exempt loans is included in interest income on a taxable equivalent basis, using an incremental rate of 34%.

(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 34%.

(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.

- 26 -

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,
		2004 vs. 2003			2003 vs. 2002
		Increase (decrease) due to			Increase (decrease) due to
		Volume	Rate	Total	Volume	Rate	Total
		(In thousands)
Interest income   attributable to:
Loans(1)	$	507	(1,990)	(1,483)	(579)	(2,235)	(2,814)
Federal funds sold		(2)	74	72	(61)	(101)	(162)
Federal Home Loan     Bank stock		4	3	7	4	(14)	(10)
Investment securities:
Taxable		(225)	(23)	(248)	823	(851)	(28)
Non-taxable(2)		(310)	89	(221)	602	(185)	417
Total interest income		(26)	(1,847)	(1,873)	789	(3,386)	(2,597)
Interest expense   attributable to:
Savings deposits		36	(582)	(546)	162	(412)	(250)
NOW and money fund		(67)	(158)	(225)	106	(322)	(216)
IRA and time certificates		(106)	(361)	(467)	(321)	(920)	(1,241)
Short-term borrowings		(1)	1	0	(3)	(4)	(7)
Long-term debt		(101)	27	(74)	(178)	(98)	(276)
Total interest expense		(239)	(1,073)	(1,312)	(234)	(1,756)	(1,990)
Net interest income	$	213	(774)	(561)	1,023	(1,630)	(607)

(1)

Non-accrual loans, if any, are included in average loan balances.

(2)

Change in interest income from non-taxable loans and 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 34%.

- 27 -

2004 vs. 2003.  Tax equivalent interest income decreased $1,873,000 primarily due to a 33 basis point (a basis point equals 0.01%) decline in the average rate earned on average interest-earning assets.  The average rate earned decreased primarily because of continued historically low market rates.

Interest expense decreased $1,312,000 primarily due to a 28 basis point decrease in the average rate paid for deposits and borrowings and secondarily due to an $11.8 million decrease in average interest-bearing liabilities.  The decrease in average rates paid was also due to general market rates.  The decrease in average interest-bearing liabilities was due to a $9.8 million decrease in average NOW and money fund deposits, a $3.0 million decrease in average IRA and time certificates, and a $2.1 million decrease in average long-term borrowings.  Comparing the same periods, average savings deposits increased approximately $3.1 million.  The decrease in NOW and money fund deposits is primarily due to a new trust account that was obtained near year end, 2003.  Approximately $15.5 million of the trust funds were temporarily deposited in a liquid account at LCNB until the trust department could invest them in other instruments during early 2004.  Management believes that, in the current economic rate environment, investors are showing a preference for highly liquid short-term instruments.  This means much of the growth in savings deposits during the past several years could be quickly withdrawn  if interest rates increase.  Management is attempting to lock-in a portion of these funds by offering special rates and terms on selected certificate of deposit products.

Average long-term borrowings decreased primarily due to the maturation and payment in December, 2003 of a $2.0 million Federal Home Loan Bank ("FHLB") note bearing an interest rate of 3.61%.  An additional $2.0 million FHLB note bearing a 4.40% rate matured in December, 2004.

The net interest margin decreased from 4.09% during 2003 to 4.02% during 2004 primarily because of the 33 basis point decrease in average rates earned from interest- earning assets, partially offset by the 28 basis point decrease in average rates for interest bearing liabilities.

2003 vs. 2002.  Tax equivalent interest income decreased $2,597,000 primarily due to an 81 basis point decline in the average rate earned on average interest-earning assets, partially offset by a $19.3 million increase in average interest-earning assets.  The increase in average interest-earning assets was due to increases in the investment securities portfolio, which grew $31.5 million on an average basis.  The average rate earned decreased primarily because of continued general market wide decreases in interest rates.

Interest expense decreased $1,990,000 because of a 57 basis point decrease in the average rate paid for deposits and borrowings, partially offset by a $9.9 million increase in average interest-bearing liabilities.  The decrease in average rates paid was also due to the general decline in market rates discussed above.  The increase in average interest-bearing liabilities was in average savings deposits, which increased $11.1 million, and in average NOW and money fund deposits, which increased $10.7 million.  IRA and time certificates decreased $8.0 million and long term borrowings decreased $3.6 million.

Average long-term borrowings decreased primarily due to the early payoff in August, 2002 of $4.0 million in FHLB notes with an average interest rate of 7.72%, which otherwise would have been due in June, 2004 and June, 2005.  The prepayment fees on the early payoffs totaled approximately $425,000, which is included in other non-interest expenses in the 2002 consolidated statements of income.

- 28 -

To negate the financial impact of the prepayment fees, LCNB sold $17.7 million of U.S. Agency securities bearing an average coupon rate of 5.24% during August, 2002 and recorded a gain of $408,000 from the sales.  At approximately the same time as the sales, LCNB purchased securities totaling $19.9 million and bearing an average tax-equivalent coupon rate (some of the securities purchased were tax-exempt municipals) of 4.94%.  The transactions described were consummated to minimize the anticipated decline in net interest margin.  

The net interest margin decreased from 4.39% during 2002 to 4.09% during 2003 primarily because of the 81 basis point decrease in average rates earned from interest- earning assets, partially offset by the 57 basis point decrease in average rates for interest bearing liabilities.

Provisions and Allowance for Loan Losses

The provision for loan losses is determined by management based upon it's evaluation of the amount needed to maintain the allowance for loan 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 loan losses include the nature, volume and consistency of the loan portfolio, overall portfolio quality, a review of specific problem loans, and current economic conditions that may affect borrowers’ ability to pay.  The following table presents the total loan provision and the other changes in the allowance for loan losses for the years 2000 through 2004.

- 29 -

		2004	2003	2002	2001	2000
		(Dollars in thousands)
Balance – Beginning of year	$	2,150	2,000	2,000	2,000	2,000
Loans charged off:
Commercial and industrial		126	-	36	-	-
Commercial, secured by     real estate		-	-	-	-	-
Residential real estate		32	25	26	-	-
Consumer, excluding credit card		446	504	273	237	222
Agricultural		-	-	-	-	-
Credit Card		10	31	55	40	33
Other		-	-	-	-	-
Total loans charged off		614	560	390	277	255
Recoveries:
Commercial and industrial		-	-	8	-	-
Commercial, secured by     real estate		-	-	-	-	-
Residential real estate		-	-	-	-	-
Consumer, excluding credit card		124	46	31	38	55
Agricultural		-	-	-	-	-
Credit Card		1	6	3	2	3
Other		-	-	-	-	-
Total recoveries		125	52	42	40	58
Net charge offs		489	508	348	237	197
Provision charged to operations		489	658	348	237	197
Balance - End of year	$	2,150	2,150	2,000	2,000	2,000
Ratio of net charge-offs during   the period to average loans   outstanding		0.15%	0.16%	0.11%	0.07%	0.06%
Ratio of allowance for loan losses   to total loans at year-end		0.64%	0.68%	0.62%	0.61%	0.61%

The commercial and industrial loan charge-off of $126,000 during 2004 is due to one company that had filed bankruptcy.  Consumer loan charge-offs included $41,000 during 2004 and and $25,000 during 2003 that were due to a yacht that was subsequently repossessed and sold in 2004.  The balance of increased consumer loan charge-offs during 2004 and 2003 are due to a greater number of troubled loans.  

- 30 -

Non-Interest Income

2004 vs. 2003.  Total non-interest income for 2004 was $862,000 or 12.7% more than for 2003.  The increase was primarily due to gains from the sales of investment securities and LCNB’s credit card portfolio and increases in trust income and service charges and fees.  These increases were partially offset by decreases in insurance agency income and gains from sales of mortgage loans.

Trust income increased $236,000 primarily due to an increase in the market value of assets under management, on which fees are based, and secondarily to fees received for brokerage services, a new service first offered in April, 2002.   The market value of trust assets under management grew $14.6 million or 8.8% during 2004, partially due to increased market values and partially due to new clients.  During the same period, brokerage accounts managed grew $11.2 million or 82.4%.

Service charges and fees increased $710,000 primarily due to the introduction of a new overdraft protection program in August, 2003.

The net gain on sales of securities increased $297,000.  LCNB sold $36.0 million in securities available for sale during 2004 as compared with $1.8 million in sales during 2003.  The proceeds from the 2004 sales were primarily used to purchase securities with slightly longer maturities and higher average interest rates than the ones sold and to fund loan growth.

Insurance agency income decreased $105,000 primarily due to a decrease in contingency commissions recognized by Dakin during 2004 as compared to 2003.  Contingency commissions are profit-sharing arrangements on property and casualty policies between the originating agency and the underwriter and are generally based on underwriting results and written premium.  As such, the amount received each year can vary significantly depending on loss experience.  The decrease in contingency commissions was partially offset by an increase in sales commissions, primarily due to the placement of new policies.  Total written premium produced by Dakin for 2004 totaled $8,806,000, which was $296,000 or 3.5% greater than for 2003.

Gains from sales of mortgage loans decreased $706,000 due to decreased activity in the real estate mortgage loan secondary market during 2004 as compared to 2003.  Loans sold during 2004 totaled $2.2 million, compared with $35.1 million for 2003.  Historically low residential mortgage rates during 2002 and 2003 created a surge in refinancing activity.  During this period, LCNB sold most fixed-rate residential mortgage loans originated to the Federal Home Loan Mortgage Corporation.  Market rates for real estate mortgage loans began increasing during the fourth quarter, 2003 and the volume of refinance activity decreased.  Along with the decrease in refinancing activity, LCNB added most loans that were originated during 2004 to its loan portfolio, resulting in minimal loan sales.

During 2004, LCNB exited the credit card market and sold its receivables to MBNA America Bank, N.A. (“MBNA”), recognizing a $403,000 gain from the sale.  LCNB management decided to exit the credit card market because of the high administrative costs of servicing a small portfolio.  LCNB will continue to offer credit card products under a marketing agreement with MBNA.  

- 31 -

2003 vs. 2002.  Total non-interest income for 2003 was $1,174,000 or 20.9% more than for 2002.  Trust income increased $163,000 due to an increase in the market value of assets under management, on which fees are based, and to fees received for brokerage services.   The market value of trust assets under management grew $46.2 million or 38.8% during 2003, partially due to increased market values and partially due to new clients.  During the same period, brokerage accounts managed grew $10.0 million or 274.06%.  

Service charges and fees increased $605,000 primarily due to the introduction of a new overdraft protection program in August, 2003 and to an increase in non-sufficient fund check fees initiated in November, 2002.

Insurance agency income increased $300,000 primarily due to an increase in the volume of policies written and secondarily to an $83,000 increase in contingency commissions recognized.  The increase in policies written was partially due to the purchase on September 1, 2002, of substantially all of the insurance renewal rights and client list of an insurance agency located in Dayton, Ohio.  As part of the purchase, Dakin will receive all commission income received after September 1, 2002, and assignments of agency agreements that the agency has with insurers with whom Dakin does not already have an agreement.  In consideration for the assets purchased, Dakin will pay to the seller certain percentages of the commissions received from the agency's customer base over a four-year period.

Historically low interest rates during 2003 created an increase in residential mortgage loan refinancing activity, providing LCNB with the opportunity to sell approximately $35.1 million of residential fixed-rate mortgage loans in the secondary market.  Gains booked on these sales totaled $758,000.  During 2002 LCNB sold $20.9 million in loans and recognized $235,000 in gains from the sales.

Offsetting the increases described above was a $420,000 decrease in net gain on sales of securities.  Most of the decrease relates to a $408,000 gain recognized in August, 2002 and more fully described in a previous section of this document titled "Net Interest Income, 2003 vs. 2002."

Non-Interest Expense

2004 vs. 2003.  Total non-interest expense increased $679,000 or 4.3% during 2004 compared with 2003.  Contributing to the increase were a $147,000 or 2.2% increase in salaries and wages, a $138,000 or 7.9% increase in pension and other employee benefits, and a $197,000 or 6.9% increase in other non-interest expense.   

Salaries and wages increased due to normal pay increases.  Pension and other employee benefits increased primarily due to increased pension expense and an increase in payroll-related taxes and other employee benefits.  Items contributing to the increase in other non-interest expenses included increased outside services, increased professional expenses, and increased telephone expenses.

2003 vs. 2002.  Total non-interest expense increased $20,000 or 0.1% during 2003 compared with 2002.  Contributing to the increase were a $277,000 or 4.2% increase in salaries and wages, a $144,000 or 16.4% increase in equipment expenses, an $86,000 or 8.4% increase in occupancy expense, and a $124,000 or 51.7% increase in computer costs.  Offsetting the increases were a $120,000 or 29.1% decrease in ATM expense and a $541,000 or 16.0% decrease in other non-interest expenses.   

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Salaries and wages increased due to normal pay increases.  Equipment expenses increased primarily due to rental costs for a new phone system installed during 2002 and to depreciation charges on new furniture purchased during 2003 and computer hardware and software purchased as part of the conversion to a new data processing system that occurred during September, 2002.  Contributing to the increase in computer costs were the increased number and cost of maintenance contracts required by the new data processing system.

ATM expense decreased primarily due to a change in the ATM transaction processor.  The decrease in other non-interest expenses was primarily due to the absence during 2003 of a $425,000 prepayment fee on Federal Home Loan Bank notes recognized during 2002 and previously discussed in the section titled "Net Interest Income, 2003 vs. 2002" and the absence during 2003 of a $263,000 charge for training and conversion expenses related to Lebanon Citizen's conversion to a new data processing system in September, 2002.

Income Taxes

LCNB's effective tax rates for the years ended December 31, 2004, 2003, and 2002 were 27.08%, 26.54%, and 27.84%, respectively.  The difference between the statutory rate of 34.00% and the effective tax rate is primarily due to tax-exempt interest income.

Assets

Securities available for sale decreased approximately $37.5 million or 24.8%, which supported an increase in the loan portfolio of $18.8 million or 5.9% and a $9.8 million or 43.2% increase in federal funds sold.  In addition, $10.0 million was used to purchase bank owned life insurance in December, 2004, which is included in other assets in the consolidated balance sheet.   

Most of the growth in the loan portfolio was in the residential real estate loan category, which increased $20.0 million.  During 2004, sales of residential real estate loans in the secondary market were minimal and most loans originated were added to the portfolio.  Commercial and industrial loans grew $2.4 million and commercial loans secured by real estate grew $7.7 million.  Partially offsetting the growth in residential and commercial loans were an $8.6 million decrease in consumer loans and a $2.7 million decrease in credit card loans due to the sale of the credit card portfolio during 2004.

Net premises and equipment increased due to additions during 2004 totaling $1,306,000.  This increase was partially offset by depreciation expense of $1,080,000.  The additions were primarily due to a major renovation of the Main Office’s second and third floors and the purchase of new furniture for the renovated areas.  

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Deposits

Total deposits grew $867,000 during 2004, with noninterest-bearing deposits growing $7,258,000 and interest-bearing deposits declining $6,391,000.  Savings deposits grew $1,696,000 and IRA and time certificates grew $8,475,000, while NOW and money fund deposits declined $16,562,000.  The decrease in NOW and money fund deposits is primarily due to a new trust account that was obtained near year end, 2003.  Approximately $15.5 million of the trust funds were temporarily deposited in a liquid account at LCNB  until the trust department could invest them in other instruments during early 2004.

Liquidity

Liquidity is the ability to have funds available at all times to meet the commitments of LCNB.  These commitments may include paying dividends to shareholders, funding new loans for borrowers, funding withdrawals by depositors, paying general and administrative expenses, and funding capital expenditures.  Sources of liquidity include growth in deposits, principal payments received on loans, proceeds from the sale of loans, the sale or maturation of investment securities, cash generated by operating activities, and the ability to borrow funds.  Management closely monitors the level of liquid assets available to meet ongoing funding requirements. 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 during the past year as a result of current liquidity levels.

Commitments to extend credit at December 31, 2004, totaled $68.2 million and standby letters of credit totaled $6.2 million and are more fully described in Note 10 to LCNB's Financial Statements.  Since many commitments to extend credit may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

Capital expenditures may include the construction or acquisition of new office buildings, improvements to LCNB's twenty offices, purchases of furniture and equipment, and additions or improvements to LCNB’s information technology system.  Material commitments for capital expenditures outstanding as of December 31, 2004 totaled approximately $835,000.

The liquidity of LCNB is enhanced by the fact that 86.4% of total deposits at December 31, 2004, were "core" deposits. Core deposits, for this purpose, are defined as total deposits less public funds and certificates of deposit greater than $100,000.  

An additional source of funding is borrowings from the Federal Home Loan Bank ("FHLB").  Total borrowings from the FHLB at December 31, 2004 were $2.0 million.  The total remaining borrowing capacity from the FHLB at that date was approximately $79 million.

Liquid assets include cash, federal funds sold and securities available for sale.  Except for investments in the stock of the Federal Reserve Bank and FHLB, all of LCNB's investment portfolio is classified as "available for sale" and can be readily sold to meet liquidity needs.  At December 31, 2004, LCNB's liquid assets amounted to $156.6 million or 30.0% of total gross assets, down from $185.3 million or 35.4% of total gross assets at December 31, 2003.  The primary reason for the decrease was a reduction in securities available for sale.

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The following table provides information concerning LCNB's contractual obligations at December 31, 2004:

			Payments due by period
			1 year	2-3	4-5	More than
		Total	or less	years	years	5 years
		(In thousands)
Long-term debt obligations	$	2,137	64	2,073	-		-
Operating lease obligations		2,189	296	430	60		1,403
Purchase obligations		835	835	-	-		-
Certificates of deposit:
$100,000 and over		55,104	26,082	14,249	930		13,843
Other time certificates		129,257	53,507	50,905	11,380		13,465
Total	$	189,522	80,784	67,657	12,370		28,711

The following table provides information concerning LCNB's commercial commitments at December 31, 2004:

			Amount of Commitment Expiration Per Period
		Total
	Amounts			1 year		2-3	4-5	More than
	Committed			or less		years	years	5 years
		(In thousands)
Lines of credit	$	28,031		28,031	-		-		-
Standby letters of credit		6,186		1,401	10		-		4,775
Total	$	34,217		29,432	10		-		4,775

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Capital Resources

LCNB and Lebanon Citizens National Bank (the “Bank”) are required by banking regulators to meet certain minimum levels of capital adequacy. Failure to meet minimum capital requirements can initiate certain mandatory and possibly 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 loan losses limited to 1.25% of risk-weighted assets). The first two 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. The ratio of Tier 1 capi tal to risk-weighted assets must be at least 4.00% and the ratio of Total capital (Tier 1 capital plus Tier 2 capital) to risk-weighted assets must be at least 8.00%. 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 3.00%.  A table summarizing the regulatory capital of LCNB and the Bank at December 31, 2004 and 2003, is included in Note 13, "Regulatory Matters", of the 2004 Annual Report to Shareholders.

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 (the FDIC's highest rating).

On April 17, 2001, LCNB's Board of Directors authorized three separate stock repurchase programs, two phases of which continue.  The shares purchased will be held for future corporate purposes.

Under the "Market Repurchase Program" LCNB will purchase up to 100,000 shares of its stock through market transactions with a selected stockbroker.  Through December 31, 2004, 62,531 shares had been purchased under this program.

The "Private Sale Repurchase Program" is available to shareholders who wish to sell large blocks of stock at one time.  Because LCNB's stock is not widely traded, a shareholder releasing large blocks may not be able to readily sell all shares through normal procedures.  Purchases of blocks will be considered on a case-by-case basis and will be made at prevailing market prices.  A total of 160,144 shares had been purchased under this program at December 31, 2004.

LCNB established an Ownership Incentive Plan during 2002 that allows for stock-based awards to eligible employees.  The awards may be in the form of stock options, share awards, and/or appreciation rights.  The plan provides for the issuance of up to 100,000 shares.  No awards were granted during 2002.  Stock options for 4,054 and 5,528 shares were granted to key executive officers of LCNB during the first quarters of 2004 and 2003, respectively.

The exercise price for stock options granted shall not be less than the fair market value of the stock on the date of grant.  Options vest ratably over a five-year period and the maximum term for each grant will be specified by the Board of Directors, but cannot be greater than ten years from the date of grant.  In the event of an optionee's death, incapacity, or retirement, all outstanding options held by that optionee shall immediately vest and be exercisable.

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Critical Accounting Policies

Allowance for Loan Losses.  The allowance for loan losses is established through a provision for loan losses charged to expense.  Loans are charged against the allowance for loan losses when management believes that the collectibility of the principal is unlikely.  The allowance is an amount that management believes will be adequate to absorb possible losses on loans that may become uncollectible, based on evaluations of the collectibility 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 economic conditions that may affect the borrowers' ability to pay.  

The allowance consists of specific, general, and unallocated components.  The specific component relates to loans that are classified as either doubtful, substandard, or special mention.  For such loans that are also classified as impaired, an allowance is established when the discounted cash flows or collateral value or observable market price of the impaired loan is lower than the carrying value of that loan.  The general component covers non-classified loans and is based on historical loss experience adjusted for qualitative factors.  An unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses.  The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.

Loans are considered impaired when management believes, based on current information and events, it is probable that the Bank will be unable to collect all amounts due according to the contractual terms of the loan agreement.  Impaired loans are measured by the present value of expected future cash flows using the loan's effective interest rate.  Impaired collateral-dependent loans may be measured based on collateral value.  Smaller-balance homogenous loans, including residential mortgage and consumer installment loans, are collectively evaluated for impairment.

Based on its evaluations, management believes that the allowance for loan losses will be able to absorb estimated losses inherent in the current loan portfolio.

Accounting for Intangibles.  Approximately $1.9 million of LCNB's intangible assets at December 31, 2004, represent the unamortized intangible related to LCNB's 1997 acquisition of three branch offices from another bank.  Management does not believe this acquisition meets the definition of a business combination, as described in SFAS No. 147, Acquisitions of Certain Financial Institutions, and is amortizing the intangible over ten years, subject to periodic review for impairment in accordance with SFAS No. 144, Accounting for Impairment or Disposal of Long-Lived Assets.

Another $260,000 of LCNB's intangible assets at December 31, 2004 is comprised of mortgage servicing rights recorded from sales of mortgage loans to the Federal Home Loan Mortgage Corporation ("FHLMC").  The rights are amortized to loan servicing income in proportion to and over the period of estimated servicing income, subject to periodic review for impairment.    

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Recent Accounting Pronouncements

SFAS No. 153, Exchanges of Nonmonetary Assets – an amendment of APB Opinion No. 29, was issued in December, 2004.  It amends the guidance in Accounting Principles Board Opinion No. 29, Accounting for Nonmonetary Transactions, to eliminate an exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance.  Under SFAS No. 153, a nonmonetary exchange will have commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange.  This statement is not expected to have a material impact on LCNB’s financial statements.

SFAS No. 123 (revised 2004), Share-Based Payment, was issued in December, 2004 and replaces SFAS No. 123, Accounting for Stock-Based Compensation, and supersedes APB No. 25, Accounting for Stock Issued to Employees.  SFAS No. 123 (revised) focuses primarily on accounting for transactions where employees receive share-based compensation, but also covers transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of equity instruments.  SFAS No. 123 (revised) generally requires an entity to recognize expense for the grant-date fair value of share-based compensation, where the original SFAS No. 123 encouraged but did not require an entity to recognize expense for such transactions.  The estimated cost of share-based compensation is to be recognized over the period during which an employee is required to provide service in exchange for the award, usually the vesting period.  SFAS No. 123 (revised) is effective for the first interim or annual reporting period that begins after June 15, 2005.  LCNB will be required to adopt SFAS No. 123 (revised) no later than July 1, 2005.  LCNB intends to adopt the provisions of SFAS No. 123 (revised) in the first quarter of 2005 using the modified prospective approach as allowed by SFAS No. 148, Accounting for Stock-Based Compensation—Transition and Disclosure—an amendment of FASB Statement No. 123.  Adoption of SFAS No. 123 (revised) is not expected to have a material short-term impact on LCNB’s financial statements because of its relatively limited use of options.

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LCNB CORP. AND SUBSIDIARIES
QUARTERLY FINANCIAL DATA (UNAUDITED)
(Dollars in thousands, except per share data)
	Three Months Ended
		March 31	June 30	Sep. 30	Dec. 31
2004
Interest income	$	6,358	6,280	6,458	6,552
Interest expense		1,862	1,748	1,826	1,932
Net interest income		4,496	4,532	4,632	4,620
Provision for loan losses		90	210	130	59
Net interest income after provision		4,406	4,322	4,502	4,561
Net gain on sales of securities		127	-	9	170
Other non-interest income		2,051	1,776	1,713	1,813
Total non-interest expenses		4,280	3,997	4,052	4,075
Income before income taxes		2,304	2,101	2,172	2,469
Provision for income taxes		642	545	590	673
Net income	$	1,662	1,556	1,582	1,796
Earnings per common share:
Basic	$	0.49	0.46	0.47	0.55
Diluted		0.49	0.46	0.47	0.55
2003
Interest income	$	7,117	6,914	6,661	6,745
Interest expense		2,324	2,329	2,052	1,975
Net interest income		4,793	4,585	4,609	4,770
Provision for loan losses		118	99	204	237
Net interest income after provision		4,675	4,486	4,405	4,533
Net gain on sales of securities		-	-	3	6
Other non-interest income		1,515	1,640	1,673	1,960
Total non-interest expenses		3,935	3,875	4,037	3,878
Income before income taxes		2,255	2,251	2,044	2,621
Provision for income taxes		649	553	518	714
Net income	$	1,606	1,698	1,526	1,907
Earnings per common share:
Basic	$	0.47	0.49	0.45	0.56
Diluted		0.47	0.49	0.45	0.56

Other non-interest income for the three months ended March 31, 2004 includes the $403,000 gain from the sale of LCNB’s credit card portfolio.

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Other non-interest income declined in the three months ended December 31, 2004 as compared to the three months ended December 31, 2003 primarily due to a decline in trust income  and insurance agency contingency commissions.    Contingency commissions are received from insurance underwriters on an annual basis, and the amount received can vary significantly depending on many general insurance industry related performance factors.    No contingency commissions were awarded in the fourth quarter of 2004, compared with approximately $98,000 in the fourth quarter of 2003.

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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.  

Interest Rate Sensitivity Gap Analysis

A traditional gap analysis provides a point-in-time measurement of the relationship between the amounts of interest rate sensitive assets and liabilities in a given time period.  An asset or liability is interest rate sensitive within a specific time period if it will mature or reprice within that time period. If liabilities mature or reprice more quickly or to a greater extent than assets, net interest income would tend to decrease during periods of rising interest rates but increase during periods of falling interest rates.  Conversely, if liabilities mature or reprice more slowly or to a lesser extent than assets, net interest income would tend to increase during periods of rising interest rates but decrease during periods of falling interest rates.  

The following table reflects LCNB's gap analysis at December 31, 2004.  The amounts reported in the table are the principal cash flows of rate sensitive assets and liabilities by expected maturity or repricing timeframe.  Also presented is the related weighted average interest rate.  Fixed rate real estate mortgage loans and mortgage-backed securities are allocated to the various maturity/repricing periods based on contractual maturities adjusted for expected prepayments under the current market interest rate environment.  Deposit liabilities without contractual maturities such as NOW and savings accounts are allocated to the various repricing periods based on an analysis of forecasted account run-off that takes into consideration the relatively stable nature of these core deposits.  The gap analysis indicates that LCNB's earnings are sensitive to the repricing of assets in the first year and the sec ond through the fifth years.  

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		Expected Maturity/Repricing
		2005	2006	2007		2008	2009	Thereafter		Total	Fair Value
		(Dollars in thousands)
ASSETS
Loans: (1)
Fixed rate	$	75,462	27,621	18,645	13,460		7,470		21,542	164,200	165,356
Average interest rate		6.38%	6.97%	6.83%	6.36%		6.43%		6.58%
Variable rate		56,822	12,472	21,703	20,814		13,546		47,033	172,390	171,555
Average interest rate		5.78%	6.23%	6.15%	5.80%		5.79%		6.84%
Securities available for    sale (2)		28,402	19,934	22,583	13,421		6,802		22,295	113,437	113,437
Average interest rate (3)		3.39%	3.36%	3.44%	3.11%		3.54%		4.37%
Federal funds sold		32,400	-	-	-		-		-	32,400	32,400
Average interest rate		2.13%	-	-	-		-		-
Total earning assets		193,086	60,027	62,931	47,695		27,818		90,870	482,427	482,748
Average interest rate		5.05%	5.62%	5.38%	5.20%		5.41%		6.17%
LIABILITIES
NOW and money fund		18,310	6,789	6,048	5,389		4,806		42,089	83,431	83,431
Average interest rate		0.53%	0.59%	0.59%	0.60%		0.60%		0.68%
Savings		30,553	13,000	11,166	9,591		8,238		50,143	122,691	122,691
Average interest rate		0.75%	0.75%	0.75%	0.75%		0.75%		0.75%
IRAs:
Fixed rate		7,840	5,399	10,653	2,840		625		11,808	39,165	39,245
Average interest rate		4.57%	3.83%	4.67%	3.29%		3.82%		4.89%
Variable rate		3,279	1,309	-	-		-		-	4,588	4,587
Average interest rate		1.87%	1.87%	-	-		-		-
CD's over $100,000		24,197	7,185	3,370	406		309		9,528	44,995	45,002
Average interest rate		2.46%	3.66%	4.54%	3.29%		3.92%		4.26%
CD's under $100,000		44,288	21,772	15,466	5,839		2,277		5,971	95,613	95,458
Average interest rate		2.51%	3.26%	4.20%	3.07%		3.64%		4.58%
Long term debt		64	2,067	6	-		-		-	2,137	2,189
Average interest rate		6.00%	5.55%	6.00%	-		-		-
Total interest-bearing  Liabilities		128,531	57,521	46,709	24,065		16,255		119,539	392,620	392,603
Average interest rate		1.91%	2.53%	3.04%	1.62%		1.29%		1.60%
Period gap	$	64,555	2,506	16,222	23,630		11,563		(28,669)
Cumulative gap	$	64,555	67,061	83,283	106,913		118,476		89,807

Ratio of rate sensitive assets to rate sensitive liabilities:

First twelve months	150.23%
Years two through five	137.30%
Thereafter	76.02%

(1)

Exclude adjustments for allowance for loan losses.

(2)

At amortized cost.

(3)

Rates for tax-exempt securities are adjusted to a taxable equivalent rate.

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Interest Rate Sensitivity and Economic Value of Equity Analyses

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, 2004 IRSA indicates that an increase in interest rates would have a positive effect on net interest income, and a decrease in rates would have a negative effect on net interest income. The changes in net interest income for the up and down 100 and 200 rate assumptions are within LCNB’s acceptable ranges.  The changes in net interest income for up and down 300 basis points ar e slightly outside LCNB’s policy range of a 10% change, but management has determined the changes are acceptable in the current economic environment.

Rate Shock Scenario in Basis Points		Amount	$ Change in IRSA	% Change in IRSA
Up 300	$	20,319	1,902	10.33%
Up 200		19,700	1,283	6.97%
Up 100		19,097	680	3.69%
Base		18,417	-	-%
Down 100		17,660	(757)	-4.11%
Down 200		17,005	(1,412)	-7.67%
Down 300		16,467	(1,950)	-10.59%

IRSA shows the affect 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.  The EVE analysis at December 31, 2004 is shown below.  The changes in the economic value of equity for these rate assumptions are within LCNB’s acceptable ranges.

Rate Shock Scenario in Basis Points		Amount	$ Change in EVE	% Change in EVE
Up 300	$	74,232	(2,332)	-3.05%
Up 200		76,321	(243)	-0.32%
Up 100		77,658	1,094	1.43%
Base		76,564	-	-%
Down 100		73,064	(3,500)	-4.57%
Down 200		67,347	(9,217)	-12.04%
Down300		64,728	(11,836)	-15.46%

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.  

- 43 -

Item 8.  Financial Statements and Supplementary Data

The Financial Statements and Supplementary Data required by this item are incorporated herein by reference to pages 4 through 31 of the Registrants 2004 LCNB Corp. Annual Report attached to this filing as Exhibit 13.

Item 9.  Disagreements with Accountants on Accounting and Financial Disclosures

None

- 44 -

Item 9A.  Controls and Procedures

REPORT ON MANAGEMENT’S ASSESSMENT OF

INTERNAL CONTROL OVER FINANCIAL REPORTING

LCNB Corp. ("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 Rule 13a-15(f).  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 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, 2004, in relation to criteria for effective internal control over financial reporting described in “Internal Control – Integrated Framework” issued by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission. Based on this assessment, management believes that, as of December 31, 2004, LCNB’s internal control over financial reporting met the criteria.

J.D. Cloud & Co. L.L. P., an independent registered public accounting firm, has issued an attestation report on management’s assessment of the effectiveness of LCNB’s internal control over financial reporting as of December 31, 2004.

Submitted by:

LCNB Corp.

/s/ Stephen P. Wilson __________

/s/ Steve P. Foster_____________

Stephen P. Wilson,

Steve P. Foster,

President/CEO

Chief Financial Officer

February 14, 2005

- 45 -

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders

LCNB Corp. and subsidiaries

Lebanon, Ohio

We have audited management’s assessment, included in the accompanying  Report on Management Assessment of Internal Control over Financial Reporting, that  LCNB Corp. and subsidiaries (“LCNB”) maintained effective internal control over financial reporting as of December 31, 2004, based on criteria established in “Internal Control—Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  LCNB’s management is responsible 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 management’s assessment and an opinion on the effectiveness of the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

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 pre vention 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.

- 46 -

In our opinion, management’s assessment that LCNB maintained effective internal control over financial reporting as of  December 31, 2004, is fairly stated, in all material respects, based on criteria established in “Internal Control—Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Also in our opinion,  the Company  maintained, in all material respects, effective internal control over financial reporting as of December 31, 2004, based on criteria established in “Internal Control—Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets and the related consolidated statements of income, shareholders’ equity and cash flows of LCNB Corp. and subsidiaries, and our report dated February 14, 2005 expressed an unqualified opinion.

/s/ J.D. Cloud & Co. L.L.P.

Certified Public Accountant

Cincinnati, Ohio

February 14, 2005

Item 9B.  Other Information

None

- 47 -

PART III

Portions of the Proxy Statement included in the Notice of Annual Meeting of Shareholders to be held April 12, 2005, dated March 10, 2005, are incorporated by reference into Part III.

Item 10. Directors and Executive Officers of the Registrant

The information contained in the Notice of Annual Meeting of Shareholders and Proxy Statement (dated March 10, 2005), relating to "Directors and Executive Officers of the Registrant", is incorporated herein by reference.

Item 11. Executive Compensation

The information contained in the Notice of Annual Meeting of Shareholders and Proxy Statement (dated March 10, 2005), relating to "Compensation of Directors and Executive Officers", is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management

The information contained in the Notice of Annual Meeting of Shareholders and Proxy Statement (dated March 10, 2005), relating to "Section 16(a) Beneficial Ownership Reporting Compliance" is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions

The information contained in the Notice of Annual Meeting of Shareholders and Proxy Statement (dated March 10, 2005), relating to "Certain Relationships and Related Transactions", is incorporated herein by reference.

Item 14.  Principal Accounting Fees and Services

The information contained in the Notice of Annual Meeting of Shareholders and Proxy Statement (dated March 10, 2005), relating to "Principal Accounting Fees and Services", is incorporated herein by reference.

- 48 -

PART IV

Item 15.  Exhibits, Financial Statement Schedules

(a) 1.	Financial Statements
	INDEPENDENT AUDITOR'S REPORT
	FINANCIAL STATEMEMTS
	Consolidated Balance Sheets
	Consolidated Statements of Income
	Consolidated Statements of Shareholders' Equity
	Consolidated Statements of Cash Flows
	Notes to Consolidated Financial Statements
2.	Financial Statement Schedules – None
3.	Exhibits required by Item 601 Regulation S-K.
	(a) Exhibit No.	Exhibit Description
	3.1	Articles of Incorporation of LCNB Corp. (1)
	3.2	Code of Regulations of LCNB Corp. (2)
	10.	Material Contracts:
		LCNB Corp. Ownership Incentive Plan (3)
	13.	Portions of LCNB Corp. 2004 Annual Report (pages 2-3   and 14-24)
	14.1	LCNB Corp. Code of Business Conduct and Ethics (4)
	14.2	LCNB Corp. Code of Ethics for Senior Financial Officers (5)
	21.	LCNB Corp. Subsidiaries
	23.	Consent of Independent Accountants
	31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive   Officer
	31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial   Officer
	32.	Section 1350 Certifications

(1)

Incorporated by reference to Registrant's 1999 Form 10-K, Exhibit 3.1.

(2)

Incorporated by reference to Registrant's Registration Statement on Form S-4, Exhibit 3.2, Registration No. 333-70913

(3)

Incorporated by reference to Registrant's Form DEF 14A Proxy Statement pursuant to Section 14(a), dated March 15, 2002, Exhibit A.

(4)

Incorporated by reference to Registrant’s 2003 Form 10-K, Exhibit 14.1.

(5)

Incorporated by reference to Registrant’s 2003 Form 10-K, Exhibit 14.2

- 49 -

SIGNATURES

Pursuant to the requirements of the Securities and 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/Stephen P. Wilson

President and Chairman of Board

 of Directors

February 28, 2005

Pursuant to the requirements of the Securities Act of 1934, this report has been signed below by the following persons in the capacities and on the dates indicated:

/s/Stephen P. Wilson	/s/George L. Leasure
Stephen P. Wilson President and Chairman (Principal Executive Officer) February 28, 2005	George L. Leasure Director February 28, 2005
/s/Steve P. Foster	/s/James B. Miller
Stephen P. Foster Executive Vice President and Chief Financial Officer (Principal Financial and   Accounting Officer) February 28, 2005	James B. Miller Director February 28, 2005
/s/David S. Beckett	/s/Joseph W. Schwarz
David S. Beckett Director February 28, 2005	Joseph W. Schwarz Director February 28, 2005
/s/Rick L. Blossom	/s/Kathleen Porter Stolle
Rick L. Blossom Director February 28, 2005	Kathleen Porter Stolle Director February 28, 2005
/s/Robert C. Cropper	/s/Howard E. Wilson
Robert C. Cropper Director February 28, 2005	Howard E. Wilson Director February 28, 2005
/s/William H. Kaufman	/s/Marvin E. Young
William H. Kaufman Director February 28, 2005	Marvin E. Young Director February 28, 2005

- 50 -

EX-13

EXHIBIT 13

LCNB Corp. 2004 Annual Report

President's Letter to Shareholders (pages 2 - 3 of Annual Report):

Dear Shareholders,

The theme of this year’s Annual Report is “Preparing for our Future – Everyday.” While our corporate culture has always been based on integrity, conservative business models, service and confidentiality, within this foundation has also been the willingness to evolve and change. The ability to change without compromising principles has always been essential to both longevity and prosperity.

Preparing for our future encompasses facilities, systems, products, delivery channels and, most important of all, people. We work every day to improve in every aspect of our business because we believe that is the best way to serve the interest of our shareholders and our customers.

The success we experienced in 2004 is the direct result of the hard work and dedication of our 256 LCNB and Dakin employees. Their willingness to embrace change and to “prepare for our future – every day” is what sets us apart and ensures our tomorrow.

Financially, 2004 was a challenging year as low interest rates and a declining interest rate margin resulted in a decrease in tax-equivalent interest income of $1,873,000. Fortunately, we were able to reduce our interest expense, increase our non-interest income faster than our non-interest expense, take gains on investments, and as a result, post exactly the same earnings per share in 2004 that we enjoyed in 2003.

Net income for 2004 was $6.6 million, representing a 1.29% return on average assets and a 12.56% return on average shareholders equity. Earnings per share were $1.97 matching the earnings per share in 2003 of $1.97. Total assets at year-end totaled $522.3 million, which was flat when compared to the $523.6 million in total assets at the end of 2003. Total capital, or shareholders equity, at December 31, 2004 was $52.3 million as compared to $52.4 million at December 31, 2003. Our capital position remains strong and it is management’s intention to maintain the FDIC “Well Capitalized” designation.

For the 19th consecutive year your Board of Directors increased the dividend paid to shareholders. The total dividend paid in 2004 was $1.115 per share compared with $1.0625 in 2003 for a 4.94% increase. The 2004 dividend added to the appreciation in the value of a share of LCNB Corp. stock resulted in a total annual return of 14.61%.

Loan growth proved to be an important component of our success in 2004. Our loan portfolio grew by $18.8 million or 5.90%. This growth was achieved in spite of the fact that during 2004 LCNB exited the credit card market because of the high administrative cost of servicing a small portfolio. LCNB will continue to offer credit card products under a marketing agreement with MBNA. Our overall asset quality remained high with a low delinquency rate of .23%.

- 1 -

Total deposits grew $867,000 during 2004, with non-interest bearing deposits growing $7.3 million and interest bearing deposits declining $6.4 million. Due to our extremely liquid position and declining interest rate margin we chose not to be aggressive in seeking interest bearing deposits. We look forward to changes in the future that will allow us to be more aggressive in this area.

Another key factor in our success was the growth we experienced in non-interest income. The push to grow our line of products and our delivery channels paid off in 2004. Along with our commercial bank, the Trust Department, brokerage unit and insurance subsidiary all contributed to non-interest income. With the decline in interest income, noted earlier, the non-interest income became essential to our continued success.

The following financial highlight shows total assets under management as of December 31, 2004 and 2003 and the percent change for each category.

Assets Under Management ($000’s)	2004	2003	% Change
LCNB Corp. total assets	$522,251	523,608	-0.26%
Trust and investments*	180,122	165,499	8.84%
Mortgage loans serviced	46,345	54,802	-15.43%
Business cash management	26,554	20,985	26.54%
Brokerage accounts*	24,826	13,612	82.38%
Total assets managed	$800,098	778,506	2.77%
*at fair market value

In addition to this illustration of assets under management, our Dakin Insurance subsidiary has also experienced continued growth. The measurement for growth in the insurance industry is not assets under management, but premiums written. In less than the five years that Dakin has been part of LCNB Corp. (they became a wholly-owned subsidiary on April 11, 2000), premiums written have grown from $4.5 million to $8.8 million.

Non-interest income from all sources within the LCNB Corp. family of products, including gains from sales of the credit card portfolio and securities, grew 12.68% in 2004.

Additional statistical data and information on our financial performance for 2004 are available in the Management Discussion and Analysis (MD&A) document. The MD&A document is enclosed with the initial mailing of this Annual Report to shareholders and is also available in the LCNB Corp. Annual Report on Form 10-K. This report is filed annually with the Securities and Exchange Commission and is available upon request or from the Shareholder information section of our website, www.LCNB.com.

Preparing for our future involved extraordinary efforts by all of our employees throughout the 366 days of 2004. The renovation of our main office was the most significant of our tasks. Through this project we positioned our bank, from a facilities standpoint, to grow to a billion dollars in total assets. We now have corporate, financial reporting, training and data processing on the third floor. All loan functions and item processing occupy the second floor. The first floor houses all of our deposit services, our call center, human resources, accounting, trust, insurance, and our main office branch operation. The main office is now configured to provide the very best in support to our branch offices and most importantly, to our customers. These new facilities join our state-of-the-art computer, phone and network systems to provide the backbone of our financial service delivery.

- 2 -

During 2004 we received permission from the Office of the Comptroller of the Currency to open our 19th and 20th offices. Fairfield opened in November and the new Lebanon High School branch office will open during the first quarter of 2005. Fairfield is our fifth office in Butler County. We see Butler County as a major contributor to our future growth. The Lebanon High School office will not only provide full-service banking to our future customers, but is designed to train future bankers and help provide much needed financial literacy training to the entire school. On the systems front, we made a move to migrate all of our internal access points to Microsoft Windows XP. We completed our conversion to a new platform automation system, continued to prepare for Check 21 and installed several upgrades to our existing computer programs.

Our strategic initiatives revolved around our strong capital position and our need to employ that capital for the benefit of our shareholders. We moved forward with five programs in this area. The first was the continuation of our stock buyback programs to increase shareholder value. The second was to continue an aggressive dividend payout program. The third was to spend capital to position our bank for continued organic or internal growth. The fourth is to be more aggressive in acquiring facilities, deposits and loans, or entire bank partners. The fifth and final method is our willingness to invest more capital in our insurance operation for growth through acquisition.

To properly position us for future acquisition opportunities, you will see proposals presented at our Annual Meeting to authorize additional shares of common stock and to authorize a new preferred class of stock. Both of these proposals will place in reserve shares of stock that could be used in the future for acquisition opportunities.

2004 also saw a continuation of LCNB Corp.’s commitment to the communities we serve. In addition to over $100,000 in various corporate donations and other corporate support, our directors, officers and employees provide personal support to over 96 organizations that work to improve the quality of life in our region.

The Annual Meeting for LCNB Corp. will be April 12, 2005 at 10:00am EST at our Main Office located at 2 North Broadway in Lebanon, Ohio. Proxy material is included with this mailing. You will notice a significant event in the history of Lebanon Citizens National Bank and LCNB Corp. when you review the Proxy material. Howard E. Wilson and James B. Miller are not standing for re-election to the Board of Directors. These two individuals represent a combined 62 years of service to our bank and our community. Jim Miller joined the bank Board in 1980 and has always demonstrated the highest standards as he represented the shareholders and worked to provide the very best in services for our customers. Howard Wilson joined the bank in 1968 and led our bank from a small 16 million dollar hometown bank to the full-service financial corporation we know today. Always embracing community bank standards, Howard Wilson provided leadership t hat included vision, integrity, compassion and a drive for excellence. The lessons we learned as young officers through his leadership will guide your bank and us for many years to come.

Please review, sign and return the Proxy in the envelope provided. We would be pleased to have you attend our Annual Meeting in person. Thank you for your continued support.

Stephen P. Wilson

President/Chief Executive Officer

- 3 -

Financial Statements and Supplementary Data (pages 14 - 24 of Annual Report):

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders

LCNB Corp. and subsidiaries

Lebanon, Ohio

We have audited the accompanying consolidated balance sheets of LCNB Corp. and subsidiaries as of December 31, 2004 and 2003, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2004.  These financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of LCNB Corp. and subsidiaries as of December 31, 2004 and 2003, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2004, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of LCNB Corp. and subsidiaries’ internal control over financial reporting as of December 31, 2004, based on criteria established in “Internal Control – Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 14, 2005 expressed an unqualified opinion on management’s assessment of internal control over financial reporting and an unqualified opinion on the effectiveness of internal control over financial reporting.

	/s/ J.D. Cloud & Co. L.L.P.
	Certified Public Accountants
Cincinnati, Ohio
February 14, 2005

- 4 -

LCNB CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
At December 31,
(Dollars in thousands)
		2004	2003
ASSETS:
Cash and due from banks	$	10,715	11,784
Federal funds sold		32,400	22,625
Total cash and cash equivalents		43,115	34,409
Securities available for sale, at market value		113,437	150,939
Federal Reserve Bank and Federal Home Loan      Bank stock, at cost		3,058	2,962
Loans, net		334,440	315,683
Premises and equipment, net		12,233	12,009
Intangibles, net		2,173	2,832
Other assets		13,795	4,774
TOTAL ASSETS	$	522,251	523,608
LIABILITIES:
Deposits -
Noninterest-bearing	$	73,417	66,159
Interest-bearing		390,483	396,874
Total deposits		463,900	463,033
Long-term debt		2,137	4,197
Accrued interest and other liabilities		3,918	3,930
TOTAL LIABILITIES		469,955	471,160
SHAREHOLDERS' EQUITY:
Common stock-no par value, authorized 4,000,000      shares; 3,551,884 shares issued		10,560	10,560
Surplus		10,553	10,553
Retained earnings		36,735	33,872
Treasury shares at cost, 223,585 and 177,508 shares      at December 31, 2004 and 2003, respectively		(6,078)	(4,356)
Accumulated other comprehensive income,      net of taxes		526	1,819
TOTAL SHAREHOLDERS' EQUITY		52,296	52,448
TOTAL LIABILITES AND                SHAREHOLDERS' EQUITY	$	522,251	523,608
The accompanying notes to consolidated financial statements are an integral part of these statements.
- 5 -

LCNB CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the years ended December 31,
(Dollars in thousands, except per share data)
		2004	2003	2002
INTEREST INCOME:
Interest and fees on loans	$	20,517	21,991	24,792
Dividends on Federal Reserve Bank      and Federal Home Loan Bank stock		136	129	139
Interest on investment securities-
Taxable		2,792	3,040	3,068
Non-taxable		1,954	2,100	1,825
Other short-term investments		249	177	339
TOTAL INTEREST INCOME		25,648	27,437	30,163
INTEREST EXPENSE:
Interest on deposits		7,157	8,395	10,102
Interest on short-term borrowings		6	6	13
Interest on long-term debt		205	279	555
TOTAL INTEREST EXPENSE		7,368	8,680	10,670
NET INTEREST INCOME		18,280	18,757	19,493
PROVISION FOR LOAN LOSSES		489	658	348
NET INTEREST INCOME AFTER           PROVISION FOR LOAN LOSSES		17,791	18,099	19,145
NON-INTEREST INCOME:
Trust income		1,544	1,308	1,145
Service charges and fees		3,836	3,126	2,521
Net gain on sales of securities		306	9	429
Insurance agency income		1,359	1,464	1,164
Gains from sales of mortgage loans		52	758	235
Gain from sale of credit card portfolio		403	-	-
Other operating income		159	132	129
TOTAL NON-INTEREST INCOME		7,659	6,797	5,623
NON-INTEREST EXPENSE:
Salaries and wages		6,955	6,808	6,531
Pension and other employee benefits		1,875	1,737	1,702
Equipment expenses		1,030	1,021	877
Occupancy expense – net		1,178	1,115	1,029
State franchise tax		581	552	529
Marketing		436	385	394
Intangible amortization		598	609	608
ATM expense		310	292	412
Computer maintenance and supplies		402	364	240
Other non-interest expense		3,039	2,842	3,383
TOTAL NON-INTEREST EXPENSE		16,404	15,725	15,705
INCOME BEFORE INCOME TAXES		9,046	9,171	9,063
PROVISION FOR INCOME TAXES		2,450	2,434	2,523
NET INCOME	$	6,596	6,737	6,540
Earnings per common share:
Basic	$	1.97	1.97	1.90
Diluted		1.97	1.97	1.90
Weighted average shares outstanding:
Basic		3,351,146	3,417,254	3,447,548
Diluted		3,352,297	3,417,652	3,447,548
The accompanying notes to consolidated financial statements are an integral part of these statements.
- 6 -

LCNB CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the years ended December 31,
(Dollars in thousands, except per share amounts)
						Accumulated
						Other			Total
		Common		Retained	Treasury	Comprehensive		Shareholders'			Comprehensive
		Shares	Surplus	Earnings	Shares	Income			Equity			Income
Balance January 1, 2002	$	10,560	10,553	27,714	(516)		1,196			49,507
Net income				6,540						6,540		6,540
Net unrealized gain on available-   for-sale securities (net of taxes   of $685)							1,329			1,329		1,329
Reclassification adjustment for net   realized gain on sale of available-   for-sale securities included in net   income (net of taxes of $146)							(283)			(283)		(283)
Total comprehensive income												7,586
Treasury shares purchased					(1,677)					(1,677)
Cash dividends declared,   $1.0125 per share				(3,486)						(3,486)
Balance, December 31, 2002		10,560	10,553	30,768	(2,193)		2,242			51,930
Net income				6,737						6,737		6,737
Net unrealized loss on available-   for-sale securities (net of tax   benefit of $215)							(417)			(417)		(417)
Reclassification adjustment for net   realized gain on sale of available-   for-sale securities included in net   income (net of taxes of $3)							(6)			(6)		(6)
Total comprehensive income												6,314
Treasury shares purchased					(2,163)					(2,163)
Cash dividends declared,   $1.0625 per share				(3,633)						(3,633)
Balance, December 31, 2003		10,560	10,553	33,872	(4,356)		1,819			52,448
Net income				6,596						6,596		6,596
Net unrealized loss on available-   for-sale securities (net of tax   benefit of $562)							(1,091)			(1,091)		(1,091)
Reclassification adjustment for net   realized gain on sale of available-   for-sale securities included in net   income (net of taxes of $104)							(202)			(202)		(202)
Total comprehensive income												5,303
Treasury shares purchased					(1,722)					(1,722)
Cash dividends declared,   $1.115 per share				(3,733)						(3,733)
Balance, December 31, 2004	$	10,560	10,553	36,735	(6,078)		526			52,296
The accompanying notes to consolidated financial statements are an integral part of these statements.
- 7 -

LCNB CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31,
(Dollars in thousands)
		2004	2003	2002
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	6,596	6,737	6,540
Adjustments to reconcile net income to net cash     provided by operating activities-
Depreciation, amortization and accretion		2,974	3,209	2,548
Provision for loan losses		489	658	348
Deferred income tax provision (benefit)		(14)	83	(63)
Federal Home Loan Bank stock dividends		(96)	(91)	(99)
Realized gains on sales of securities available for sale		(306)	(9)	(429)
Realized gain on sale of credit card portfolio		(403)	-	-
Origination of mortgage loans for sale		(2,237)	(35,060)	(20,852)
Realized gains from sales of mortgage loans		(52)	(758)	(235)
Proceeds from sales of mortgage loans		2,264	35,448	21,087
(Increase) decrease in income receivable		642	(72)	98
(Increase) decrease in other assets		337	(238)	(261)
Increase (decrease) in other liabilities		32	106	(308)
TOTAL ADJUSTMENTS		3,630	3,276	1,834
NET CASH FLOWS FROM OPERATING              ACTIVITIES		10,226	10,013	8,374
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of securities available for sale		36,315	1,775	25,739
Proceeds from maturities of securities available for sale		36,620	46,959	29,093
Purchases of securities available for sale		(38,007)	(65,429)	(91,171)
Purchases of bank-owned life insurance		(10,000)	-	-
Proceeds from sale of credit card portfolio		2,927	-	-
Net decrease (increase) in loans		(22,059)	6,283	1,829
Purchases of premises and equipment		(1,306)	(1,394)	(1,061)
Proceeds from sales of premises and equipment		2	26	3
NET CASH FLOWS FROM INVESTING               ACTIVITIES		4,492	(11,780)	(35,568)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in deposits		867	20,813	27,449
Net change in short-term borrowings		636	(2,389)	2,329
Principal payments on long-term debt		(2,060)	(2,056)	(6,053)
Cash dividends paid		(3,733)	(3,633)	(3,486)
Purchases of treasury shares		(1,722)	(2,163)	(1,677)
NET CASH FLOWS FROM FINANCING               ACTIVITIES		(6,012)	10,572	18,562

NET CHANGE IN CASH AND CASH                EQUIVALENTS		8,706	8,805	(8,632)
CASH AND CASH EQUIVALENTS AT BEGINNING    OF YEAR		34,409	25,604	34,236
CASH AND CASH EQUIVALENTS AT END OF    YEAR	$	43,115	34,409	25,604
SUPPLEMENTAL CASH FLOW INFORMATION:
CASH PAID DURING THE YEAR FOR:
Interest	$	7,388	8,778	10,968
Income taxes		2,416	2,245	2,540
The accompanying notes to consolidated financial statements are an integral part of these statements.
- 8 -

LCNB CORP. AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

December 31, 2004

NOTE 1 -

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

LCNB Corp. (the "Company"), an Ohio corporation formed in December 1998, is a financial holding company whose principal assets are the ownership of Lebanon Citizens National Bank (the "Bank") and Dakin Insurance Agency, Inc. ("Dakin").  The Bank was founded in 1877 and provides full banking services, including trust and brokerage services, to customers primarily in the southwestern Ohio area of Warren, Hamilton, Clermont, Clinton and Butler counties. Dakin is an independent insurance agency founded in 1876 and offers a wide range of insurance products for businesses and individuals in the Bank's primary market area.

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 (“GAAP”) and with general practices in the banking industry.  

USE OF ESTIMATES-

The preparation of 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 financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

STOCK DIVIDEND-

The Board of Directors of the Company at the regular meeting of April 13, 2004 declared a stock dividend of one share for each share owned by shareholders of record on April 20, 2004.  The stock dividend was paid on April 30, 2004 and was accounted for as a stock split.  All share and per share information for all periods presented have been retroactively restated to reflect the stock dividend.

- 9 -

NOTE 1 -

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (Continued)

INVESTMENT SECURITIES-

All of the Company's debt securities are classified as available for sale and are reported at fair value with unrealized holding gains and losses reported net of income taxes as Accumulated 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 computed using the specific identification method.  Declines in the fair value of available-for-sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses.  In estimating other than temporary impairment losses, management considers the length of time and the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, and the i ntent and ability of the Company to retain its investment in the issuer for period of time sufficient to allow for any anticipated recovery in fair value.  Currently, the Company and its subsidiaries do not hold any derivatives or conduct hedging activities.

Federal Home Loan Bank ("FHLB") stock is an equity interest in the Federal Home Loan Bank 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 Board 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.

LOANS AND ALLOWANCE FOR LOAN LOSSES-

Loans are stated at the principal amount outstanding, net of unearned income, deferred origination fees and costs, and the allowance for loan losses.  Interest income is accrued on the unpaid principal balance.  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 meet 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 loan losses.

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.

- 10 -

NOTE 1 -

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (Continued)

The allowance for loan losses is established through a provision for loan losses charged to expense.  Loans are charged against the allowance for loan losses when management believes that the collectibility of the principal is unlikely.  The allowance is an amount that management believes will be adequate to absorb possible losses on loans that may become uncollectible, based on evaluations of the collectibility 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 economic conditions that may affect the borrowers' ability to pay.  

The allowance consists of specific, general, and unallocated components.  The specific component relates to loans that are classified as either doubtful, substandard, or special mention.  For such loans that are also classified as impaired, an allowance is established when the discounted cash flows or collateral value or observable market price of the impaired loan is lower than the carrying value of that loan.  The general component covers non-classified loans and is based on historical loss experience adjusted for qualitative factors.  An unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses.  The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.

Loans are considered impaired when management believes, based on current information and events, it is probable that the Bank will be unable to collect all amounts due according to the contractual terms of the loan agreement.  Impaired loans are measured by the present value of expected future cash flows using the loan's effective interest rate.  Impaired collateral-dependent loans may be measured based on collateral value.  Smaller-balance homogenous loans, including residential mortgage and consumer installment loans, are collectively evaluated for impairment.

PREMISES AND EQUIPMENT-

Premises and equipment are stated at cost less accumulated depreciation.  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.  Costs incurred for maintenance and repairs are expensed currently.

REAL ESTATE ACQUIRED THROUGH FORECLOSURE-

Real estate acquired through foreclosure is recorded at the lower of cost or fair value, less estimated selling costs.  The allowance for loan losses is charged for any write down of the loan’s carrying value to fair value at the date of acquisition.  Any subsequent reductions in fair value are recorded to other non-interest expense.  Expenses incurred from holding foreclosed real estate are charged to other non-interest expense as incurred.  

- 11 -

NOTE 1 -

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (Continued)

INTANGIBLE ASSETS-

The Company's intangible assets at December 31, 2004 primarily represent the unamortized intangible related to the Company's 1997 acquisition of three branch offices from another bank.  Management determined its 1997 branch office acquisition did not meet the definition of a business combination and continues to amortize the intangible over ten years, subject to periodic review for impairment in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144.  At December 31, 2004, the carrying amount of this intangible was $1.9 million, net of accumulated amortization of $4.2 million.

Mortgage servicing rights on originated mortgage loans that have been sold are capitalized by allocating the total cost of the loans between mortgage servicing rights and the loans based on their relative estimated fair values.  Capitalized mortgage servicing rights are amortized to loan servicing income in proportion to and over the period of estimated servicing income.  Such assets are periodically evaluated as to the recoverability of their carrying value.

Annual estimates of intangible amortization expense, including amortization of the mortgage servicing rights asset, for the years 2005 through 2009 are $650,000, $650,000, $580,000, $252,000, and $24,000, respectively.

BANK OWNED LIFE INSURANCE-

The Company has purchased life insurance policies on certain officers of the Company.  Bank owned life insurance is recorded at its estimated cash surrender value and is included in other assets in the consolidated balance sheet.  Income on the policies, based on the increase in cash surrender value, is included in other non-interest income in the consolidated statements of income.

MARKETING EXPENSE-

Marketing costs are expensed as incurred.

EMPLOYEE BENEFITS-

The Company has a noncontributory pension plan covering full-time employees. The retirement plan cost is made up of several components that reflect different aspects of the Company's financial arrangements as well as the cost of benefits earned by employees. These components are determined using the projected unit credit actuarial cost method and are based on certain actuarial assumptions.

- 12 -

NOTE 1 -

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (Continued)

STOCK OPTIONS-

The Company established an Ownership Incentive Plan (the "Plan") during 2002 that is more fully described in Note 7.  The Company accounts for the Plan under the recognition and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations.  No stock-based employee compensation cost is reflected in net income, as all options granted under the Plan have an exercise price equal to the market value of the underlying common stock on the date of grant.  The following table illustrates the effect on net income and earnings per share for the years ended December 31, 2004 and 2003 if the Company had applied the fair value recognition provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation (000's):

		2004	2003
Net income, as reported	$	6,596	6,737
Deduct total stock-based employee compensation    expense estimated using Black-Scholes model,    net of tax		6	3
Pro-forma net income	$	6,590	6,734

The pro-forma affect of the above adjustment on basic and diluted earnings per share was not material.

INCOME TAXES-

Deferred income taxes are determined using the 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 bases of the various balance sheet assets and liabilities and gives current recognition to changes in tax rates and laws.

STATEMENTS OF CASH FLOWS-

For purposes of reporting cash flows, cash and cash equivalents include cash, balances due from banks, and federal funds sold, all highly liquid investments with original maturities of three months or less.

- 13 -

NOTE 1 -

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (Continued)

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.  Diluted earnings per share is adjusted for the dilutive effects of stock options.  The diluted average number of common shares outstanding has been increased for the assumed exercise of stock options with proceeds used to purchase treasury shares at the average market price for the period.

Earnings per share for the years ended December 31, 2004, 2003, and 2002 were calculated as follows ($000’s except per share data):

		2004	2003	2002
Net income (loss)	$	6,596	6,737	6,540
Weighted average number of shares   outstanding used in the calculation of   basic earnings per common share		3,351,146	3,417,254	3,447,548
Add - Dilutive effect of stock options (a)		1,151	398	-
Adjusted weighted average number of   shares outstanding used in the   calculation of diluted earnings per   common share		3,352,297	3,417,652	3,447,548
Basic earnings per common share	$	1.97	1.97	1.90
Diluted earnings per common share		1.97	1.97	1.90

(a)  Stock options were not outstanding during the year ended December 31, 2002.

RECLASSIFICATIONS-

Certain prior period data presented in the financial statements has been reclassified to conform with the current year presentation.

- 14 -

NOTE 1 -

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (Continued)

RECENT ACCOUNTING PRONOUNCEMENTS-

SFAS No. 153, Exchanges of Nonmonetary Assets – an amendment of APB Opinion No. 29, was issued in December, 2004.  It amends the guidance in Accounting Principles Board Opinion No. 29, Accounting for Nonmonetary Transactions, to eliminate an exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance.  Under SFAS No. 153, a nonmonetary exchange will have commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange.  This statement is not expected to have a material impact on the Company’s financial statements.

SFAS No. 123 (revised 2004), Share-Based Payment, was issued in December, 2004 and replaces SFAS No. 123, Accounting for Stock-Based Compensation, and supersedes APB No. 25, Accounting for Stock Issued to Employees.  SFAS No. 123 (revised) focuses primarily on accounting for transactions where employees receive share-based compensation, but also covers transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of equity instruments.  SFAS No. 123 (revised) generally requires an entity to recognize expense for the grant-date fair value of share-based compensation, where the original SFAS No. 123 encouraged but did not require an entity to recognize expense for such transactions.  The estimated cost of share-based compensation is to be recognized over the period during which an employee is required to provide service in exchange for the award, usually the vesting period.  SFAS No. 123 (revised) is effective for the first interim or annual reporting period that begins after June 15, 2005.  The Company will be required to adopt SFAS No. 123 (revised) no later than July 1, 2005.  The Company intends to adopt the provisions of SFAS No. 123 (revised) in the first quarter of 2005 using the modified prospective approach as allowed by SFAS No. 148, Accounting for Stock-Based Compensation—Transition and Disclosure—an amendment of FASB Statement No. 123.  Adoption of SFAS No. 123 (revised) is not expected to have a material short-term impact on the Company’s financial statements because of its relatively limited use of options.

- 15 -

NOTE 2 -

INVESTMENT SECURITIES

The amortized cost and estimated market value of available-for-sale investment securities at December 31 are summarized as follows (000’s):

	2004
	Amortized		Unrealized		Unrealized		Market
		Cost		Gains	Losses		Value
U.S. Treasury notes	$	1,193		1		-	1,194
U.S. Agency notes		23,940		45		196	23,789
U.S. Agency mortgage-    backed securities		28,659		98		254	28,503
Municipal securities:
Non-taxable		51,149		1,197		74	52,272
Taxable		7,699		55		75	7,679
	$	112,640		1,396		599	113,437

	2003
	Amortized		Unrealized		Unrealized		Market
		Cost		Gains	Losses		Value
U.S. Treasury notes	$	2,137		12		-	2,149
U.S. Agency notes		61,397		608		183	61,822
U.S. Agency mortgage-    backed securities		20,951		158		121	20,988
Municipal securities:
Non-taxable		52,441		2,002		34	54,409
Taxable		11,258		357		44	11,571
	$	148,184		3,137		382	150,939

Contractual maturities of debt securities at December 31, 2004 were as follows (000’s).  Actual maturities may differ from contractual maturities when issuers have the right to call or prepay obligations.

	Amortized		Market
		Cost	Value
Due within one year	$	15,754	15,829
Due from one to five years		47,118	47,445
Due from five to ten years		12,152	12,427
Due after ten years		8,957	9,233
		83,981	84,934
U.S. Agency mortgage-backed securities		28,659	28,503
	$	112,640	113,437

- 16 -

NOTE 2 -

INVESTMENT SECURITIES (Continued)

Information concerning securities with gross unrealized losses at December 31, 2004, aggregated by length of time that individual securities have been in a continuous loss position, is as follows (000’s):

		Less than Twelve Months			More than Twelve Months
		Fair	Unrealized		Fair	Unrealized
		Value	Losses		Value	Losses
U.S. Treasury notes	$	-		-	-		-
U.S. Agency notes		11,085		87	5,095		109
U.S. Agency mortgage   backed securities		18,492		229	1,351		25
Municipal securities:
Non-taxable		5,937		64	384		10
Taxable		4,196		58	308		17
	$	39,710		438	7,138		161

The decline in the fair values is primarily due to increases in market interest rates.  Because the Company has the ability and intent to hold these securities for a period of time sufficient to allow for any anticipated recovery in fair values, no individual declines are deemed to be other than temporary.

For the years ended December 31, 2004, 2003, and 2002, proceeds from sales of securities available for sale amounted to $36,315,000, $1,775,000, and $25,739,000, respectively.  Gross gains realized on sales were $306,000, $18,000, and $446,000 for 2004, 2003 and 2002, respectively.  Gross realized losses during 2004, 2003 and 2002 amounted to $0, $9,000 and $17,000, respectively.  The tax provision applicable to these net realized gains amounted to $104,000, $3,000, and $146,000, respectively.  

Investment securities with a market value of $56,733,000 and $74,130,000 at December 31, 2004 and 2003, respectively, were pledged to secure public deposits and for other purposes required or permitted by law.

- 17 -

NOTE 3 -

LOANS

Major classifications of loans at December 31 are as follows (000's):

		2004	2003
Commercial and industrial	$	32,931	30,519
Commercial, secured by real estate		107,138	99,461
Residential real estate		159,286	139,305
Consumer, excluding credit card		34,672	43,283
Agricultural		1,653	1,192
Credit card		-	2,707
Other loans		167	212
Lease financing		253	588
		336,100	317,267
Deferred net origination costs		490	566
		336,590	317,833
Allowance for loan losses		(2,150)	(2,150)
Loans-net	$	334,440	315,683

Changes in the allowance for loan losses were as follows (000's):

		2004	2003	2002
BALANCE - BEGINNING OF YEAR	$	2,150	2,000	2,000
Provision for loan losses		489	658	348
Charge-offs		(614)	(560)	(390)
Recoveries		125	52	42
BALANCE - END OF YEAR	$	2,150	2,150	2,000

Non-accrual, past-due, and restructured loans at December 31, 2004 and 2003 were as follows (000’s)

		2004	2003
Non-accrual loans	$	-	794
Past-due 90 days or more and still accruing		165	2,442
Restructured loans		1,817	-
Total	$	1,982	3,236

Non-accrual loans at December 31, 2003 included a commercial loan in the amount of $564,000, which was paid in full during the second quarter, 2004; a consumer loan in the amount of $146,000; and residential real estate mortgage loans in the amount of $84,000.  Interest income that would have been recorded during 2003 if loans on a non-accrual status at December 31, 2003 had been current and in accordance with their original terms was approximately $72,000.

- 18 -

NOTE 3 -

LOANS (Continued)

The restructured loan at December 31, 2004 consists of a commercial loan whose predecessor loans were classified as loans past due 90 days or more and still accruing at December 31, 2003, at which time they had a total balance of $2,030,000.  Information received during the first quarter, 2004, raised uncertainties concerning the collectibility of certain collateral and management transferred the loans to the non-accrual classification, where they remained until they were re-written in October, 2004.  The $213,000 difference in the loan balances at December 31, 2004 and 2003 is due to principal payments received.  All related interest due on the predecessor loans was paid during October, 2004, and the loans were re-written at that time.  Such interest has been recorded on a cash basis as received.  The restructured loan is secured by a combination of mortgages and other collatera l.

The following is a summary of information pertaining to loans considered to be impaired in accordance with SFAS No. 114 at December 31 (000’s):

		2004	2003
Impaired loans without a valuation allowance	$	71	84
Impaired loans with a valuation allowance		2,049	2,740
Total impaired loans		2,120	2,824
Valuation allowance related to impaired loans	$	540	674

The average balance of impaired loans during 2004 and 2003 was $2,629,000 and $2,857,000, respectively.  During 2004 the Company received and recognized $164,000 of interest income on impaired loans.  During 2003 the Company accrued interest income totaling $183,000 on impaired loans classified as past due 90 days or more and still accruing because they were considered well secured and in the process of collection.  This accrued interest was received during the first quarter, 2004.  

The Company is not committed to lend additional funds to debtors whose loans have been modified to provide a reduction or deferral of principal or interest because of deterioration in the financial position of the borrower.

Mortgage loans sold to and serviced for the Federal Home Loan Mortgage Corporation are not included in the accompanying balance sheets.  The unpaid principal balances of those loans at December 31, 2004, 2003 and 2002 were $46,345,000, $54,802,000, and $36,592,000 respectively.  

Approximately $25,000 and $370,000 in mortgage servicing rights were capitalized and $86,000 and $49,000 was amortized to loan servicing income during the years ended  December 31, 2004 and 2003, respectively.

- 19 -

NOTE 4 -

PREMISES AND EQUIPMENT

Premises and equipment at December 31 are summarized as follows (000's):

		2004	2003
Land	$	2,244	2,244
Buildings		10,592	9,843
Equipment		8,888	8,442
Construction in progress		81	408
Total		21,805	20,937
Less - Accumulated depreciation		9,572	8,928
Premises and equipment – net	$	12,233	12,009

Depreciation charged to income was $1,080,000 in 2004, $1,040,000 in 2003 and $999,000 in 2002.

Some of the Bank's branches, telephone equipment, and other equipment are leased under agreements expiring at various dates through 2050.  These leases are accounted for as operating leases.  At December 31, 2004, required minimum annual rentals due in the future on non-cancelable leases having terms in excess of one year aggregated $2,189,000.  Minimum annual rentals for each of the years 2005 through 2009 are as follows (000's):

2005	$	296
2006		275
2007		155
2008		30
2009		30

Rental expense for all leased branches and equipment amounted to $321,000 in 2004, $309,000 in 2003 and $305,000 in 2002.

NOTE 5 -

DEPOSIT LIABILITIES

Contractual maturities of time deposits at December 31, 2004 were as follows (000’s):

	Certificates		All other
	over $100,000		Certificates		Total
2005	$	26,082		53,507	79,589
2006		8,182		27,483	35,665
2007		6,067		23,422	29,489
2008		621		8,464	9,085
2009		309		2,916	3,225
Thereafter		13,843		13,465	27,308
	$	55,104		129,257	184,361

- 20 -

NOTE 6 -

EMPLOYEE BENEFITS

The Company's noncontributory defined benefit retirement plan covers all regular full-time employees.  The benefits are based on years of service and the employee's highest average compensation during five consecutive years.  Pension costs are funded based on the Plan's actuarial cost method.  All plan assets are invested in time and other deposits with the Bank.

The Company used a December 31 measurement date for its retirement plan starting in 2004 and a September 30 measurement date for previous years.

The components of net periodic pension cost are summarized as follows (000's):

		2004	2003	2002
Service cost	$	624	624	629
Interest cost		296	298	262
Expected return on plan assets		(325)	(233)	(248)
Amortization of unrecognized transition    obligation		-	-	10
Recognized net actuarial loss (gain)		2	(46)	5
Net periodic pension cost	$	597	643	658

A summary of the Plan's prepaid benefit cost, included in other assets on the consolidated balance sheets, and the Plan's funded status at December 31 follows (000's):

		2004	2003
Change in projected benefit obligations
Projected benefit obligation at beginning of year	$	5,732	5,733
Service cost		624	624
Interest cost		296	298
Actuarial gain		(181)	(336)
Benefits paid		(394)	(587)
Projected benefit obligation at end of year		6,077	5,732
Change in plan assets
Fair value of plan assets at beginning of year		5,942	5,678
Actual return on plan assets		114	233
Employer contribution		626	618
Benefits paid		(394)	(587)
Fair value of plan assets at end of year		6,288	5,942
Funded status		211	210
Unrecognized net actuarial loss		654	626
Prepaid benefit cost	$	865	836

- 21 -

NOTE 6 -

EMPLOYEE BENEFITS  (Continued)

Significant actuarial assumptions used for 2004 and 2003 included a discount rate, an expected long-term rate of return on Plan assets, and a future compensation rate increase of 5.50%, 5.50%, and 4.00%, respectively.  The expected long-term rate of return on Plan assets was estimated using historic returns on investments, adjusted for expected long-term interest rates.

The accumulated benefit obligation at December 31, 2004 and 2003 was $5,478,000 and $4,901,000, respectively.

The Company expects to contribute approximately $650,000 to its retirement plan in 2005.

The following estimated future benefit payments, which reflect expected future service, as appropriate, are expected to be paid (000's):

2005	$	7
2006		7
2007		35
2008		76
2009		153
2010 through 2014		1,796

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, 2004 and 2003 was $797,000 and $663,000, respectively.

The Bank also has a supplemental income plan which provides a covered employee an amount based on a percentage of average compensation, payable annually for ten years upon retirement. The projected benefit obligation included in other liabilities for this supplemental income plan at December 31, 2004 and 2003 is $192,000 and $159,000, respectively. The discount rate used to determine the present value of the obligation was 5.5% in 2004 and 6.5% in 2003. The service cost associated with this plan was $24,000 for 2004 and approximately $16,000 for each year in 2003 and 2002.  Interest costs were approximately $10,000, $9,000, and $8,000 for 2004, 2003, and 2002, respectively.  Both of these plans are nonqualified and unfunded.  Participation in each plan is limited to a select group of management.

- 22 -

NOTE 7 -

STOCK OPTIONS AND AWARDS

The Company established an Ownership Incentive Plan (the "Plan") during 2002 that allows for stock-based awards to eligible employees, as determined by the Board of Directors.  The awards may be in the form of stock options, share awards, and/or appreciation rights.  The Plan provides for the issuance of up to 100,000 shares.  No awards were granted during 2002.  Stock options for 4,054 and 5,528 shares with an exercise price of $35.32 and $26.19 per share were granted to key executive officers of the Company during the first quarter, 2004 and 2003, respectively.  Such options vest ratably over a five year period and expire in 2013.  No options have been exercised through December 31, 2004.

The estimated weighted-average fair value of the options granted in 2004 and 2003 were $5.57 and $3.77 per option, respectively.  The fair value was estimated at the date of grant using the Black-Scholes option-pricing model and the following assumptions:

	2004	2003
Risk-free interest rate	2.76%	2.72%
Average dividend yield	3.50%	4.65%
Volatility factor of the expected market
price of the Company's common stock	24.54%	25.79%
Average life	4 years	4 years

NOTE 8 -     LONG-TERM DEBT AND OTHER BORROWINGS

Long-term debt consists of the following at December 31 (000’s):

		2004	2003
Federal  Home Loan Bank note	$	2,000	4,000
Note payable to former shareholder of Dakin		137	197
Total	$	2,137	4,197

Maturities of long-term debt in the years ending December 31 are as follows (000's):

2005	$	64
2006		2,067
2007		6

In August 2002, the Company retired $4.0 million in Federal Home Loan Bank notes bearing a weighted average interest rate of 7.72%.  These notes were scheduled to mature in 2004 and 2005.  In connection with this transaction, the Company recorded an expense of $425,000 in other non-interest expense in the 2002 consolidated statement of income, which was the required prepayment penalty.

- 23 -

NOTE 8 -     LONG-TERM DEBT AND OTHER BORROWINGS (continued)

A $2.0 million Federal Home Loan Bank note bearing an interest rate of 4.40% matured and was paid by the Company during December, 2004.  At December 31, 2004, the Federal Home Loan Bank borrowing consists of a note with a  five-year maturity and an interest rate of 5.54%.  Interest on the note is fixed and payable monthly.  The note is secured by $2.5 million of 1-4 family residential mortgage loans.  Additionally, the Company is required to hold minimum levels of FHLB stock, based on the outstanding borrowings.  The Company’s addition borrowing capacity at December 31, 2004 is approximately $79 million.

The note payable to a former shareholder of Dakin matures in 2007.  Payments are due monthly at a nominal interest rate of 6%.

At December 31, 2004 and 2003, accrued interest and other liabilities include U.S. Treasury demand note borrowings of approximately $1,269,000 and $633,000, respectively.  The interest rate on these borrowings was 1.87% and 0.73% at December 31, 2004 and 2003, respectively.

NOTE 9 -

INCOME TAXES

The provision for federal income taxes consists of (000's):

		2004	2003	2002
Income taxes currently payable	$	2,464	2,351	2,586
Deferred income tax provision (benefit)		(14)	83	(63)
Provision for income taxes	$	2,450	2,434	2,523

A reconciliation between the statutory income tax and the Company's effective tax rate follows:

	2004	2003	2002
Statutory tax rate	34.0%	34.0%	34.0%
Increase (decrease) resulting from -
Tax exempt interest	(6.9)	(7.2)	(6.1)
Other – net	-	(0.2)	(0.1)
Effective tax rate	27.1%	26.6%	27.8%

- 24 -

NOTE 9 -

INCOME TAXES (continued)

Deferred tax assets and liabilities at December 31 consist of the following (000's):

		2004	2003
Deferred tax assets:
Allowance for loan losses	$	627	591
Amortization of intangibles		340	263
Pension and deferred compensation		47	-
		1,014	854
Deferred tax liabilities:
Depreciation of premises and equipment		(590)	(439)
Unrealized gains on securities available for sale		(271)	(937)
Deferred loan fees		(27)	(37)
Pension and deferred compensation		-	(28)
FHLB stock dividends		(153)	(120)
		(1,041)	(1,561)
Net deferred tax asset (liability)	$	(27)	(707)

NOTE 10 -

COMMITMENTS AND CONTINGENT LIABILITIES

The Company 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 Company 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 (000's):

		2004	2003
Commitments to extend credit	$	68,235	74,828
Standby letters of credit		6,186	6,770

- 25 -

NOTE 10 -

COMMITMENTS AND CONTINGENT LIABILITIES (continued)

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.  Commitments generally have fixed expiration dates or other termination clauses.  Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. At December 31, 2004 and 2003, outstanding guarantees of $1,983,000 and  $1,880,000, respectively, were issued to developers and contractors. These guarantees generally are fully secured and have varying maturities.  In addition, the Company has a participation in a letter of credit securing payment of principal and interest on a bond issue.  The participation amount at December 31, 2004 and 2003 was approximately $4.2 million and $4.9 million, respectively.  The letter of credit will expire on July 15, 2009.  It is secured by an assignment of rents and the underlying real property.

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 deposit accounts, accounts receivable, inventory, property, plant and equipment, residential realty, and income-producing commercial properties.

At December 31, 2004, the Company is committed under various contracts to expend approximately $835,000 to complete certain building acquisition and renovation projects.

The Company and its subsidiaries 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 the consolidated financial position or results of operations.

- 26 -

NOTE 11 -

RELATED PARTY TRANSACTIONS

The Company has entered into related party transactions with various directors and executive officers.  Such transactions originate in the normal course of the Bank's operations as a depository and lending institution and were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unrelated customers.  Management believes these transactions do not involve more than a normal risk of collectibility or present other unfavorable features.   At December 31, 2004 and 2003, executive officers, directors and related interests of such persons were indebted to the Bank directly or as guarantors in the aggregate amount of $2,792,000 and $3,340,000, respectively.  Loan activity for these officers and directors was as follows (000's):

		2004	2003
Beginning balances	$	3,340	3,961
Additions		812	3,658
Reductions		1,360	4,279
Ending Balance	$	2,792	3,340

Deposits from executive officers, directors and related interests of such persons held by the Company at December 31, 2004 and 2003 amounted to $7,023,000 and $9,624,000, respectively.

NOTE 12 -

FAIR VALUE OF FINANCIAL INSTRUMENTS

Carrying amounts and estimated fair values of financial instruments as of December 31, were as follows (000’s):

		2004				2003
	Carrying		Fair		Carrying		Fair
		Amount		Value	Amount		Value
FINANCIAL ASSETS:
Cash and cash equivalents	$	43,115		43,115		34,409	34,409
Securities available for sale		113,437		113,437		150,939	150,939
Federal Reserve Bank and     Federal Home Loan Bank     stock		3,058		3,058		2,962	2,962
Loans, net		334,440		334,761		315,683	323,754
FINANCIAL LIABILITIES:
Deposits		463,900		463,831		463,033	466,522
Short-term borrowings		1,269		1,269		633	633
Long-term debt		2,137		2,189		4,197	4,481

-. 27 -

NOTE 12 -

FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

The fair value of off-balance-sheet financial instruments at December 31, 2004 and 2003 was not material.

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 the Bank.  The following methods and assumptions were used to estimate the fair value of certain financial instruments:

Cash and cash equivalents

The carrying amounts presented are deemed to approximate fair value.

Investment Securities

Fair values are based on quoted market prices, if available.  If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities.

Loans

Fair value is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.

Deposits

The fair value of demand deposits, savings accounts, and certain money market deposits is the amount payable on demand at the reporting date.  The fair value of fixed-maturity certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities.

Borrowings

The carrying amounts of federal funds purchased and U.S. Treasury notes are deemed to approximate fair value of short-term borrowings.  For long-term debt, fair values are estimated based on the discounted value of expected net cash flows using current interest rates.

- 28 -

NOTE 13 -

REGULATORY MATTERS

The Federal Reserve Act requires depository institutions to maintain cash reserves with the Federal Reserve Bank.  In 2004 and 2003, the Bank was required to maintain average reserve balances of $1,924,000 and $1,911,000, respectively.

The Company (consolidated) and 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 minimum regulatory capital ratios are 8% for total risk-based, 4% for Tier 1 risk-based, and 4% for leverage.  The Company’s and Bank’s capital amounts and classification are also subject to qualitative judgments by regulators about components, risk weightings, and other factors.

For various regulatory purposes, institutions are classified into categories based upon capital adequacy.  The highest "well-capitalized" category requires capital ratios of at least 10% for total risk-based, 6% for Tier 1 risk-based, and 5% for leverage.  As of the most recent notification from their regulators, the Company and Bank were 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.  A summary of the regulatory capital of the Consolidated Company and Bank at December 31 follows ($000's):

		2004			2003
	Consolidated			Consolidated
	Company		Bank	Company		Bank
Regulatory Capital:
Shareholders' equity	$	52,296	46,511		52,448	46,320
Intangible assets		(1,939)	(1,888)		(2,550)	(2,475)
Net unrealized securities     losses (gains)		(526)	(526)		(1,819)	(1,752)
Tier 1 risk-based capital		49,831	44,097		48,079	42,093
Eligible allowance for loan   losses		2,150	2,150		2,150	2,150
Total risk-based capital	$	51,981	46,247		50,229	44,243
Capital Ratios:
Total risk-based		15.49%	13.85%		15.58%	13.79%
Tier 1 risk-based		14.85%	13.20%		14.91%	13.12%
Leverage		9.58%	8.57%		9.34%	8.29%

- 29 -

NOTE 13 -

REGULATORY MATTERS (continued)

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 2005, the restrictions generally limit dividends to the aggregate of net income for the year 2005 plus the net earnings retained for 2004 and 2003.  In addition, dividend payments may not reduce capital levels below minimum regulatory guidelines. Accordingly, future dividends may require the prior approval of the Comptroller of the Currency.

NOTE 14 -

PARENT COMPANY FINANCIAL INFORMATION

Condensed financial information for the LCNB Corp., parent company only, follows (000’s):

Condensed Balance Sheets:
December 31,
		2004	2003
Assets:
Cash on deposit with subsidiary	$	139	74
Corporate and municipal debt securities		5,159	5,757
Investment in subsidiaries		46,955	46,628
Other assets		43	40
Total assets	$	52,296	52,499
Liabilities	$	-	51
Shareholders' equity		52,296	52,448
Total liabilities and shareholders' equity	$	52,296	52,499

Condensed Statements of Income
Year ended December 31,		2004	2003	2002
Income:
Dividends from subsidiary	$	4,895	3,746	5,485
Interest		168	216	243
Gain on sale of investment securities		-	3	9
Total income		5,063	3,965	5,737
Total expenses		31	40	40
Income before income tax benefit and   equity in undistributed income of   subsidiaries		5,032	3,925	5,697
Income tax (expense) benefit		10	(17)	(80)
Equity in undistributed income of   subsidiaries		1,554	2,829	923
Net income	$	6,596	6,737	6,540

- 30 -

Condensed Statements of Cash Flows
Year ended December 31,		2004	2003	2002
Cash flows from operating activities:
Net income	$	6,596	6,737	6,540
Adjustments for non-cash items -
Equity in (undistributed income)/
excess dividends of subsidiaries		(1,554)	(2,829)	(923)
Other, net		57	114	105
Net cash flows from operating activities		5,099	4,022	5,722
Cash flows from investing activities:
Purchases of securities available for sale		(879)	(2,985)	(4,224)
Proceeds from sales of securities
available for sale		-	1,775	3,992
Proceeds from maturities of securities
available for sale		1,300	1,565	1,075
Net cash flows from investing activities		421	355	843
Cash flows from financing activities:
Treasury shares purchased		(1,722)	(2,163)	(1,677)
Cash dividends paid		(3,733)	(3,633)	(3,486)
Net cash flows from financing activities		(5,455)	(5,796)	(5,163)
Net change in cash		65	(1,419)	1,402
Cash at beginning of year		74	1,493	91
Cash at end of year	$	139	74	1,493

- 31 -

EX-21

Exhibit 21

LCNB CORP. SUBSIDIARIES

Lebanon Citizens National Bank, a national banking association headquartered in Lebanon, Ohio.

Dakin Insurance Agency, Inc., an independent insurance agency headquartered in Lebanon, Ohio.

EX-23

Exhibit 23

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in the registration statement on Form S-8 of LCNB Corp., filed on March 13, 2003 of our report dated February 14, 2005 relating to the consolidated balance sheets for LCNB Corp. and subsidiaries as of December 31, 2004 and 2003, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2004, which report appears in this Annual Report on Form 10-K of LCNB Corp. for the year ended December 31, 2004.

/s/ J.D. Cloud & Co. L.L.P.

Certified Public Accountants

Cincinnati, Ohio

February 28, 2005

EX-31

Exhibit 31.1

CERTIFICATIONS

In connection with the Annual Report of LCNB Corp. on Form 10-K for the period ending December 31, 2004, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Stephen P. Wilson, President and 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 controls 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;

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/ Stephen P. Wilson

Stephen P. Wilson

President and Chief Executive Officer

February 28, 2005

EX-31

Exhibit 31.2

CERTIFICATIONS

In connection with the Annual Report of LCNB Corp. on Form 10-K for the period ending December 31, 2004, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Steve P. Foster, Executive Vice President and 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 controls 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;

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

1)

2)

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/ Steve P. Foster

Steve P. Foster

Executive Vice President and Chief

 Financial Officer

February 28, 2005

EX-32

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, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), we, Stephen P. Wilson, Chief Executive Officer, and Steve P. Foster, 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/Stephen P. Wilson	/s/Steve P. Foster
Stephen P. Wilson Chief Executive Officer	Steve P. Foster Chief Financial Officer

Date: February 28, 2005