Regulatory Capital

3 Months Ended

Mar. 31, 2014

Banking and Thrift [Abstract]

Regulatory Capital

Regulatory Capital

The Bank and LCNB are required by regulators to meet certain minimum levels of capital adequacy. These are expressed in the form of certain ratios. Capital is separated into Tier 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 LCNB'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 leverage ratio supplements the risk-based capital guidelines.

For various regulatory purposes, financial institutions are classified into categories based upon capital adequacy.

	Minimum Requirement		To Be Considered Well-Capitalized
Ratio of tier 1 capital to risk-weighted assets	4.0	%	6.0	%
Ratio of total capital (tier 1 capital plus tier 2 capital) to risk-weighted assets	8.0	%	10.0	%
Leverage ratio (tier 1 capital to adjusted quarterly average total assets)	3.0	%	5.0	%

As of the most recent notification from their regulators, the Bank and LCNB 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 or LCNB's category.

A summary of the regulatory capital and capital ratios of LCNB follows (dollars in thousands):

	March 31, 2014			December 31, 2013
Regulatory Capital:
Shareholders' equity	$	119,761		118,873
Goodwill and other intangibles	(32,129		)	(16,532	)
Accumulated other comprehensive (income) loss	761			1,722
Tier 1 risk-based capital	88,393			104,063
Eligible allowance for loan losses	3,370			3,588
Total risk-based capital	$	91,763		107,651
Capital ratios:
Total risk-based	13.08		%	18.65	%
Tier 1 risk-based	12.60		%	18.03	%
Leverage	8.49		%	11.10	%

Capital ratios at March 31, 2014 are less than the ratios at December 31, 2013 due to additional assets obtained through the merger with ENB.