COMMITMENTS AND CONTINGENT LIABILITIES

12 Months Ended

Dec. 31, 2013

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENT LIABILITIES

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 offers the Bounce Protection product, a customer deposit overdraft program, which is offered as a service and does not constitute a contract between the customer and LCNB.

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 (in thousands):

	2013		2012
Commitments to extend credit:
Commercial loans	$	9,316	13,625
Other loans:
Fixed rate	852		4,602
Adjustable rate	1,653		1,238
Unused lines of credit:
Fixed rate	3,404		3,368
Adjustable rate	60,236		45,199
Unused overdraft protection amounts on demand and NOW accounts	9,494		9,665
Standby letters of credit	365		5,109
	$	85,320	82,806

Standby letters of credit at December 31, 2012 include a letter of credit in the amount of $80,000 to a company of which a member of LCNB’s Board of Directors is a partner. This standby letter of credit was not outstanding at December 31, 2013.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract or agreement.  Unused lines of credit include amounts not drawn on line of credit loans.  Commitments to extend credit and unused lines of credit generally have fixed expiration dates or other termination clauses.

Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party.  At December 31, 2013 and 2012, outstanding guarantees of approximately $365,000 and $346,000, respectively, were issued to various types of businesses.  These guarantees generally are fully secured and have varying maturities.  In addition, the Company had a $4.8 million participation in four letters of credit securing payment of principal and interest on a bond issue at December 31, 2012.  These letters of credit were not outstanding at December 31, 2013.

The Company evaluates each customer’s credit worthiness on a case-by-case basis.  The amount of collateral obtained, if deemed necessary by the Company, is based on management’s credit evaluation of the borrower.  Collateral held varies, but may include accounts receivable; inventory; property, plant and equipment; residential realty; and income-producing commercial properties.

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.