8-K: LCNB Corp. Reports Second Quarter 2024 Results, Highlights Strategic Growth and Acquisition Integration

LCNB Corp. released its second quarter 2024 results, showcasing growth in assets and loans, while managing the integration of recent acquisitions.

Summary

• LCNB Corp. reported its second quarter 2024 results, highlighting a record $2.37 billion in total assets.
• Loans, net increased by 20.9% year-over-year to $1.73 billion, driven by organic growth and recent acquisitions.
• The company completed the acquisition of Cincinnati Bancorp on November 1, 2023, and Eagle Financial Bancorp on April 12, 2024.
• Nonperforming assets to total assets increased to 0.13% from 0.04% year-over-year, primarily due to one commercial real estate relationship.
• Earnings per share (EPS) were $0.07 on a GAAP basis and $0.29 adjusted, showing sequential improvement.
• LCNB's noninterest income has grown by 70% over the past 10 years, with 46% of it derived from fiduciary income in 2023.
• The company has repurchased 2,036,356 shares from 2020 to 2023 and has 315,047 shares remaining under its repurchase program.
• LCNB's regular cash dividend has increased at a CAGR of 5.2% from 2020 to 2023, with a 4.8% increase in the second quarter of 2024.
• Total deposits increased 21.7% year-over-year to $1.94 billion, with noninterest-bearing deposits at 23.1% of total deposits.
• The company's loan-to-deposit ratio is in the 65th percentile compared to its peer group.
• Net charge-offs were $18,000 or 0.00% of average loans for the three months ended June 30, 2024.
• LCNB's tangible book value per share was $10.08 as of June 30, 2024, impacted by acquisition costs and increased share count.

Sentiment

Score: 6

Explanation: The document presents a mixed picture. While there is strong asset and loan growth, the company is experiencing some challenges with profitability and book value due to acquisition costs. The sentiment is cautiously optimistic, with a focus on future growth.

Positives

• LCNB has demonstrated strong asset growth, reaching a record $2.37 billion.
• The company has successfully integrated two acquisitions, expanding its market presence.
• LCNB has a strong track record of dividend increases, with a 5.2% CAGR from 2020 to 2023.
• The company's wealth management business is growing, with assets reaching $1.32 billion.
• LCNB has a low net charge-off rate, indicating strong asset quality.
• The company has a diverse range of financial services, including personal, business, and wealth management.
• LCNB has a strong digital strategy, with increased digital transactions and paperless accounts.
• The company has a seasoned management team with an average of 30 years of experience in the banking sector.
• LCNB has a history of strong financial performance, with a 7.3% CAGR in adjusted net income from 2013 to 2023.

Negatives

• Nonperforming assets increased to 0.13% of total assets, primarily due to one CRE relationship.
• One-time merger-related expenses have impacted LCNB's profitability.
• The company's tangible book value per share has decreased due to acquisition costs and increased share count.
• The dividend payout ratio was 314.29% in Q2 2024, which is unusually high.
• Net income for the quarter was $925,000, down from $4,694,000 in the same quarter last year.

Risks

• Changes in competitive and market factors could affect LCNB's results of operations.
• Changes in laws and regulations, including capital requirements, could impact the company.
• The company's ability to execute its strategy could be hindered by unanticipated events.
• Economic conditions and events could impact LCNB and its customers.
• Changes in the financial performance of borrowers could affect LCNB.
• The integration of acquisitions may be more difficult, time-consuming, or costly than expected.
• There is a risk of customer fraud.
• Changes in accounting policies and practices could affect the company.
• Volatility in the credit and equity markets could impact the general economy and LCNB.

Future Outlook

Management believes the company is well-positioned for earnings growth to reaccelerate in the fourth quarter of 2024, as the benefits of recent acquisitions begin to contribute to LCNB's financial model.

Management Comments

• Management believes the Company is well positioned for earnings growth to reaccelerate in the fourth quarter of 2024.
• The banking relationship is important for us. We need a flexible, responsible partner, and LCNB has proven to be exactly that.
• When you get a commitment from bankers and they dont ask any questions, thats a red flag. You dont want to partner with a bank that doesnt understand the risk. LCNB goes the extra mile to do their due diligence.

Industry Context

LCNB is operating in a competitive community banking environment, focusing on growth through acquisitions and expanding its wealth management services. The company is leveraging its local presence and digital capabilities to compete with larger banks and other community banks that may not offer the same level of customer service or independent wealth management capabilities.

Comparison to Industry Standards

• LCNB is the 27th largest bank in Ohio according to the June 2023 FDIC Market Share Report.
• LCNB is the 8th largest bank based on deposits in the Cincinnati MSA.
• LCNB's loan-to-deposit ratio is in the 65th percentile compared to its peer group.
• LCNB's core deposits as a percentage of total assets is in the top third of its $1 to $3 billion bank peer group.
• LCNB's cost of total interest-bearing deposits was 2.57%, which is better than its peer group.
• LCNB's net charge-offs to average loans have consistently remained below OH, KY and IN peers over the last 10 years.
• LCNB's net charge-offs peaked at 0.44% of average loans in 2010 during the great financial crisis, which was well below peer levels.

Management Changes

Stakeholder Impact

• Shareholders will see a decrease in tangible book value per share due to acquisition costs.
• Shareholders will benefit from the company's dividend policy and share repurchase program.
• Customers will have access to a wider range of financial products and services due to the acquisitions.
• Employees will have opportunities for career growth and development.
• Communities will benefit from LCNB's commitment to local support and donations.

Next Steps

• LCNB will continue to focus on integrating the recent acquisitions.
• The company will work to reaccelerate earnings growth in the fourth quarter of 2024.
• LCNB will continue to invest in its digital platforms and wealth management services.
• The company will continue to focus on its strategic plan to drive long-term shareholder value.

Key Dates

Keywords

community banking, acquisitions, financial performance, wealth management, digital banking, asset quality, loan growth, deposits, dividends, share repurchase