Regulatory Capital

3 Months Ended

Mar. 31, 2012

Regulatory Capital [Abstract]

Regulatory Capital

Note 8 - 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 ratio of Tier 1 capital to risk-weighted assets must be at least 4.0% and the ratio of Total capital (Tier 1 capital plus Tier 2 capital) to risk-weighted assets must be at least 8.0%.  The capital leverage ratio supplements the risk-based capital guidelines. Banks are required to maintain a minimum ratio of Tier 1 capital to adjusted quarterly average total assets of 3.0%.

For various regulatory purposes, financial 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 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):

	At		At
	March 31,		December 31,
		2012		2011
Regulatory Capital:
Shareholders' equity	$	78,513		77,960
Goodwill and other intangibles		(6,057)		(6,071)
Accumulated other comprehensive income		(4,279)		(5,028)
Tier 1 risk-based capital		68,177		66,861
Eligible allowance for loan losses		2,890		2,931
Total risk-based capital	$	71,067		69,792
Capital ratios:
Total risk-based (8% required)		14.93%		14.54%
Tier 1 risk-based (4% required)		14.33%		13.93%
Leverage (3% required)		8.72%		8.51%