COMMITMENTS AND CONTINGENT LIABILITIES

12 Months Ended

Dec. 31, 2016

Commitments and Contingencies Disclosure [Abstract]

LCNB is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit. They involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheets. The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contract amount of those instruments.

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

LCNB uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.

Financial instruments whose contract amounts represent off-balance-sheet credit risk at December 31 were as follows (in thousands):



	2016		2015
Commitments to extend credit:
Commercial loans	$	10,350	8,160
Other loans:
Fixed rate	4,425		2,293
Adjustable rate	1,044		1,362
Unused lines of credit:
Fixed rate	9,731		6,378
Adjustable rate	80,222		90,153
Unused overdraft protection amounts on demand and NOW accounts	17,123		10,057
Standby letters of credit	657		457
	$	123,552	118,860

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

Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. These guarantees generally are fully secured and have varying maturities.

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

Capital expenditures include the construction or acquisition of new office buildings, improvements to LCNB's offices,

purchases of furniture and equipment, and additions or improvements to LCNB's information technology system.

Commitments outstanding for capital expenditures as of December 31, 2016 totaled approximately $4,750,000, which includes estimated remaining costs for a new operations center being built in Lebanon, Ohio.

The Company and its subsidiary 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.