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Note 2 - Business Combinations

12 Months Ended

Dec. 31, 2024

Business Combination Disclosure [Text Block]

NOTE 2 - BUSINESS COMBINATIONS

Cincinnati Bancorp, Inc.

On November 1, 2023, LCNB acquired Cincinnati Bancorp, Inc. ("CNNB"), the holding company for Cincinnati Federal a federally chartered stock savings and loan association. Under the terms of the definitive merger agreement, CNNB merged with and into LCNB Corp., immediately followed by the merger of Cincinnati Federal with and into LCNB National Bank. CNNB operated four full-service offices in Cincinnati, Ohio and one full-service office in Florence, Kentucky, which became offices of LCNB after the merger. The merger significantly increased LCNB’s existing presence in the Cincinnati market and expanded LCNB’s community banking franchise across the Ohio River into the Northern Kentucky market. During the quarter ended September 30, 2024, LCNB consolidated one of the full-service branches acquired from Cincinnati Federal with a full-service branch acquired from EAGLE.Bank resulting in the closure of one branch office in Cincinnati, Ohio. The Florence, Kentucky office closed at the end of the business day on February 27, 2025.

CNNB results of operations were included in LCNB's results beginning November 1, 2023.

Under the terms of the merger agreement, CNNB shareholders had the opportunity to elect to receive either 0.9274 shares of LCNB stock or $17.21 in cash for each share of CNNB common stock owned, subject to the limitation that 80% of the consideration be in the form of LCNB common stock and 20% of the consideration be in the form of cash. The fair value of the common stock issued as part of the consideration was determined on the basis of the closing price of LCNB's common stock on the acquisition date.

The following table summarizes the fair value of the total consideration transferred as a part of the CNNB acquisition and the fair value of identifiable assets acquired and liabilities assumed as originally reported at December 31, 2023 and as adjusted at December 31, 2024 (in thousands):

	December 31, 2023		Adjustments			December 31, 2024
Consideration:
Cash consideration	$	9,475		—			9,475
Common stock (2,042,598 shares issued at $13.99 per share)		28,576		—			28,576
Fair value of total consideration transferred		38,051		—			38,051

Identifiable Assets Acquired:
Cash and cash equivalents		11,368		—			11,368
Debt securities, available-for-sale		5,210		—			5,210
Federal Home Loan Bank stock		7,508		—			7,508
Loans, net		236,692		(732	)		235,960
Premises and equipment		2,767		—			2,767
Operating lease right-of-use assets		64		—			64
Core deposit and other intangibles		8,391		—			8,391
Bank owned life insurance		4,413		—			4,413
Deferred income taxes		4,451		82			4,533
Other assets		12,950		122			13,072
Total identifiable assets acquired		293,814		(528	)		293,286

Liabilities Assumed:
Deposits		210,532		—			210,532
Short-term borrowings		55,999		—			55,999
Long-term debt		5,963		—			5,963
Operating lease liabilities		68		(4	)		64
Other liabilities		3,489		—			3,489
Total liabilities assumed		276,051		(4	)		276,047

Total Identifiable Net Assets Acquired		17,763		(524	)		17,239

Goodwill Resulting From Merger	$	20,288		524			20,812

The fair value and gross contractual amounts of non-PCD loans as of the acquisition date was $231.9 million and $258.6 million, respectively. LCNB recorded a provision for credit losses on these loans of $1,722,000.

Effective October 31, 2024, management finalized the fair values of the acquired assets and assumed liabilities within the 12 month post-acquisition date, as allowed by GAAP. The loan adjustment in the table above was due to a fair value adjustment to deferred fees and costs on loans acquired. The other assets, operating lease liabilities and resulting deferred tax adjustments in the table above were related to the updated fair value adjustments.

The amount of goodwill recorded reflects LCNB's expansion in the Cincinnati market and related synergies that are expected to result from the acquisition and represents the excess purchase price over the estimated fair value of the net assets acquired. The goodwill will not be amortizable on LCNB's financial records and will not be deductible for tax purposes. Total goodwill will be subject to an annual test for impairment and the amount impaired, if any, will be charged to expense at the time of impairment.

Direct expenses related to the CNNB acquisition totaled $333,000 and $4,514,000 during the years ended December 31, 2024 and 2023, respectfully, and were expensed as incurred and are recorded as Merger-related expenses in the Consolidated Statements of Income.

Eagle Financial Bancorp, Inc.

On April 12, 2024, LCNB acquired Eagle Financial Bancorp, Inc. (“EFBI”), the holding company for EAGLE.bank, an Ohio state-chartered bank. Under the terms of the definitive merger agreement, EFBI merged with and into LCNB Corp., immediately followed by the merger of EAGLE.bank with and into LCNB National Bank. EAGLE.bank operated three full-service banking offices in Cincinnati, Ohio, which became offices of LCNB after the merger. This transaction increased LCNB’s presence in the Cincinnati market.

Subject to the terms of the merger agreement, EFBI shareholders had the opportunity to elect to receive either 1.1401 shares of LCNB Corp. stock, $19.10 per share in cash for each share of EFBI common stock owned, or a combination thereof subject to at least 60%, but not more than 70%, of the shares of EFBI being exchanged for LCNB common stock. The fair value of the common stock issued as part of the consideration was determined on the basis of the closing price of LCNB's common stock on the acquisition date.

The following table summarizes the fair value of the total consideration transferred as a part of the EFBI acquisition and the fair value of identifiable assets acquired and liabilities assumed as originally reported at June 30, 2024 and as adjusted at December 31, 2024 (in thousands):

	June 30, 2024		Adjustments			December 31, 2024
Consideration:
Cash consideration	$	10,256		(83	)		10,173
Common stock (868,001 shares issued at $14.04 per share)		12,891		(704	)		12,187
Fair value of total consideration transferred		23,147		(787	)		22,360

Identifiable Assets Acquired:
Cash and cash equivalents		8,029		—			8,029
Debt securities, available-for-sale		698		—			698
Federal Home Loan Bank stock		4,334		—			4,334
Loans, net		127,700		—			127,700
Premises and equipment		3,427		—			3,427
Operating lease right-of-use assets		48		—			48
Core deposit and other intangibles		3,760		—			3,760
Bank owned life insurance		3,004		—			3,004
Deferred income taxes		1,813		2,453			4,266
Other assets		2,590		482			3,072
Total identifiable assets acquired		155,403		2,935			158,338

Liabilities Assumed:
Deposits		132,435		—			132,435
Short-term borrowings		13,000		—			13,000
Operating lease liabilities		48		—			48
Other liabilities		773		(1	)		772
Total liabilities assumed		146,256		(1	)		146,255

Total Identifiable Net Assets Acquired		9,147		2,936			12,083

Goodwill Resulting From Merger	$	14,000		(3,723	)		10,277

The fair value and gross contractual amounts of non-PCD loans as of the acquisition date was $101.7 million and $112.5 million, respectively. LCNB recorded a provision for credit losses on these loans of $763,000.

As permitted by ASC No. 805-10-25, Business Combinations, the above estimated amounts may be adjusted up to one year after the closing date of the transaction to reflect any new information obtained about facts and circumstances existing at the acquisition date. While the Company believes that the information available on the merger date provided a reasonable basis for estimating fair value, additional information and evidence may be provided which will be utilized to finalize all valuations and record final adjustments during the one-year subsequent measurement period. These adjustments may include: (i) changes in deferred tax assets or liabilities related to fair value estimates and changes in the expected realization of items considered to be net operating loss carryforwards due to tax calculations still in process, and (ii) changes in goodwill as a result of the net effect of any adjustments. As such, any changes in the estimated fair value of assets will be recognized in the period the adjustment is identified.

The consideration adjustments are associated with the unearned portion of EAGLE.bank's employee stock ownership plan. The other assets, other liabilities and resulting deferred tax adjustments in the table above were related to the updated fair value adjustments.

Direct expenses related to the EFBI acquisition totaled $3,109,000 and $142,000 during the years ended December 31, 2024 and 2023, respectfully, and were expensed as incurred and are recorded as Merger-related expenses in the Consolidated Statements of Income.