UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
( X ) Annual Report Pursuant to Section 13 or 15(d) of the Securities
and Exchange Act of 1934 for the fiscal year ended December 31, 2001
or
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
and Exchange Act of 1934 for the Transition period from to
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Commission file number 000-26121
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LCNB Corp.
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(Exact name of registrant as specified in its charter)
OHIO 31-1626393
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(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
2 North Broadway, Lebanon, Ohio 45036
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(Address of principal executive offices) (Zip Code)
(513) 932-1414
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(Issuers telephone number, including area code)
Securities registered under Section 12(b) of the Exchange Act:
Name of each exchange
Title of each class on which registered
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None None
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Securities registered pursuant to 12(g) of the Exchange Act:
Common stock, No Par Value
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(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes ( X ) No ( )
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (section 229.405) of this chapter is not contained
herein, and will not be contained, to the best of the registrants knowledge,
in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. ( )
The issuers common shares are not traded on any securities exchange and are
not quoted by a national quotation service. Management is aware of a sale of
the issuers shares for $42.00 per share on February 7, 2002. Based upon
such price, the aggregate market value of the issuers shares held by
nonaffiliates was $59,905,356.
As of February 8, 2002, 1,775,942 common shares were issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement included in the Notice of Annual Meeting of
Shareholders to be held April 16, 2002, dated March 16, 2002, are
incorporated by reference into Part III.
LCNB Corp.
For the year ended December 31, 2001
TABLE OF CONTENTS
Page
PART I.
Item 1. Business . . . . . . . . . . . . . . . . . . . . . .3-14
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . .15
Item 3. Legal proceedings. . . . . . . . . . . . . . . . . . .16
Item 4. Submission of matters to a vote of security holders. .16
Part II.
Item 5. Market for registrants common equity and
related stockholder matters . . . . . . . . . . . 17-18
Item 6. Selected financial data. . . . . . . . . . . . . . 18-19
Item 7. Managements discussion and analysis . . . . . . . 19-35
Item 7A. Quantitative and qualitative disclosures about
market risk . . . . . . . . . . . . . . . . . . . 35-38
Item 8. Financial statements and supplementary data. . . . . .39
Item 9. Changes in and disagreements with accountants
and accounting and financial disclosures. . . . . . .39
Part III.
Item 10. Directors and executive officers of the registrant . .40
Item 11. Executive compensation. . . . . . . . . . . . . . . . 40
Item 12. Security ownership of certain beneficial owners
and management. . . . . . . . . . . . . . . . . . . .40
Item 13. Certain relationships and related transactions . . . .40
PART IV.
Item 14. Exhibits, financial statements and Reports on 8-K . . 41
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
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Item 1. Business
FORWARD LOOKING STATEMENTS
Certain matters disclosed herein may be deemed to be forward-looking
statements that involve risks and uncertainties, including regulatory policy
changes, interest rate fluctuations, loan demand, loan delinquencies and
losses, and other risks. Actual strategies and results in future time
periods may differ materially from those currently expected. Such forward-
looking statements represent management's judgment as of the current date.
LCNB Corp. disclaims, however, any intent or obligation to update such
forward-looking statements.
ORGANIZATION ACTIVITIES AND ACQUISTION
On May 18, 1999, Lebanon Citizens National Bank ("Lebanon Citizens") held a
special shareholders meeting for the purpose of approving the reorganization
of Lebanon Citizens into a one-bank holding company structure. The
reorganization was approved and consummated immediately following the special
meeting.
The reorganization was effected through the merger of Lebanon Citizens with
and into LC Interim National Bank, a wholly owned subsidiary of the new bank
holding company, LCNB Corp. (LCNB). Concurrent with the merger, LC Interim
National Bank changed its name to "Lebanon Citizens National Bank" and is now
operated as the wholly owned bank subsidiary of LCNB. The consideration for
the merger was ten shares of LCNB common stock for each share of Lebanon
Citizens National Bank common stock held by the shareholders. Following the
merger, all shareholders of Lebanon Citizens maintained the same stock
ownership percentage in the holding company as they had in Lebanon Citizens.
Following the merger, Lebanon Citizens' business continued unchanged with the
same management and employees.
As part of the reorganization of Lebanon Citizens into a bank holding company
structure, it was necessary to file a registration statement with the
Securities and Exchange Commission. This registration statement also served
the purpose of registering LCNB as a Securities Exchange Act of 1934 ("1934
Act") reporting company. Lebanon Citizens at the end of calendar year
1998, had over 500 shareholders and by law was required to register as a 1934
Act company. By virtue of the reorganization, LCNB became the registering
company and is now a public company obligated to comply with the reporting
requirements of the 1934 Act.
The Gramm-Leach-Bliley Act (the "Gramm-Leach Act"), known commonly as the
"Financial Services Modernization Act", was signed into law on November 12,
1999 and became effective March 11, 2000. This new act, among other changes,
effectively allows the creation of a new financial services holding company
that can offer a full range of financial products and engage in expanded
approved activities such as insurance and securities services. Pursuant to
the Gramm-Leach Act, LCNB converted from a bank holding company to a
financial holding company, effective as of April 11, 2000.
-3-
On April 11, 2000 LCNB acquired Dakin Insurance Agency, Inc. In order to
facilitate the acquisition of Dakin Insurance Agency, Inc., LCNB formed Dakin
Acquisition Corporation in November 1999, under the laws of the state of
Ohio, as a wholly owned subsidiary of LCNB. On the acquisition date, Dakin
Acquisition Corporation merged with and into Dakin Insurance Agency, Inc. and
Dakin Insurance Agency, Inc. became the surviving corporation (hereinafter
the surviving company is referred to herein as Dakin). The Articles of
Incorporation and Regulations of Dakin Acquisition Corporation became the
governing documents of Dakin. At the consummation of the merger, the
individual shareholders of Dakin exchanged all of their outstanding shares
for 15,942 shares of LCNB common stock. Following the merger, Dakin became a
wholly owned subsidiary of LCNB.
DESCRIPTION OF LCNB CORP'S BUSINESS
General Description
LCNB is a locally owned financial holding company headquartered in Lebanon,
Ohio. Through its subsidiaries, LCNB is engaged in the commercial banking
and insurance agency businesses.
The predecessor of LCNB, Lebanon Citizens National Bank, was formed as a
national banking association in 1877. On May 18, 1999, Lebanon Citizens
became a wholly owned subsidiary of LCNB. Lebanon Citizens main office is
located in Warren County, Ohio and 18 branch offices are located in Warren,
Butler, Clinton, Clermont, and Hamilton Counties, Ohio. In addition, Lebanon
Citizens operates 28 automated teller machines (ATMs) in its market area.
Lebanon Citizens is a full service bank offering a wide range of commercial
and personal banking services including commercial loans, real estate loans,
construction loans, consumer loans, Small Business Administration loans,
Visa and MasterCard credit cards, and commercial leases. Other services
offered include safe deposit boxes, night depositories, U.S. savings bonds,
travelers' checks, money orders, cashiers checks, bank-by-mail, automatic
teller machines (ATMs), cash and transaction services, debit cards, wire
transfers, electronic funds transfer, utility bill collections, notary public
service, personal computer based cash management services, 24 hour telephone
banking, PC Internet banking, and other services tailored for both
individuals and businesses.
Lebanon Citizens' residential mortgage lending activities consist primarily
of loans for purchasing personal residences, home equity loans, or loans for
commercial or consumer purposes secured by residential mortgages. Consumer
lending activities consist of traditional forms of financing for automobile
and personal loans plus indirect automobile loans.
Lebanon Citizens' range of deposit services include checking accounts, NOW
accounts, savings accounts, Christmas and vacation savings, money market
accounts, Classic 50 accounts (a Senior Citizen program), individual
retirement accounts, certificates of deposit, and overdraft protection.
Deposits of Lebanon Citizens are insured up to applicable limits by the Bank
Insurance Fund, which is administered by the Federal Deposit Insurance
Corporation.
-4-
The Trust and Investment Management Division of Lebanon Citizens performs
complete trust administrative functions and offers agency and trust services,
retirement savings products, and mutual fund investment products to
individuals, partnerships, corporations, institutions and municipalities.
Lebanon Citizens is not dependent upon any one significant customer or
specific industry. Business is not seasonal to any material degree.
The address of the main office of Lebanon Citizens is 2 North Broadway,
Lebanon, Ohio 45036; telephone (513) 932-1414. Its primary market area
encompasses portions of Warren, Butler, Clinton, Clermont and Hamilton
Counties.
Dakin is a corporation organized under the laws of Ohio and has been an
independent insurance agency in Lebanon, Ohio since 1876. Its primary office
is at 24 East Mulberry Street, Lebanon, Ohio 45036; telephone (513) 932-4010.
Since the acquisition date, Dakin has opened additional offices in Lebanon
Citizens Columbus Avenue, Waynesville, Springboro, Maineville, and Goshen
offices. Dakin also opened an office at Lebanon Citizens Wilmington Office
during January, 2002. Dakin is engaged in selling and servicing personal and
commercial insurance products and annuity products and is regulated by the
Ohio Department of Insurance.
Competition
Lebanon Citizens faces strong competition both in making loans and attracting
deposits. The deregulation of the banking industry and the wide spread
enactment of state laws that permit multi-bank holding companies as well as
the availability of nationwide interstate banking has created a highly
competitive environment for financial services providers. Lebanon Citizens
competes with other national and state banks, savings and loan associations,
credit unions, finance companies, mutual funds, insurance companies,
brokerage and investment banking companies and other financial intermediaries
operating in its market and elsewhere, many of whom have substantially larger
financial and managerial resources.
Lebanon Citizens seeks to minimize the competitive effect of other financial
corporations through a community banking approach that emphasizes direct
customer access to Lebanon Citizens' president and other officers in an
environment conducive to friendly, informed and courteous personal services.
Management believes that Lebanon Citizens is well positioned to compete
successfully in its primary market area. Competition among financial
institutions is based upon interest rates offered on deposit accounts,
interest rates charged on loans and other credit and service charges, the
quality and scope of the services rendered, the convenience of the banking
facilities and, in the case of loans to commercial borrowers, relative
lending limits.
-5-
Management believes the commitment of Lebanon Citizens to personal service,
innovation, and involvement in the communities and primary market areas it
serves, as well as their commitment to quality community banking service, are
factors that contribute to its competitive advantage.
Dakin competes with numerous other independent and exclusive insurance
agencies (an exclusive agent sells for only one insurance company) and with
insurance companies that sell direct to individuals and businesses without
using agents. Dakin competes by representing high quality insurance
companies, providing personalized and responsive service to its clients, and
providing convenient office locations.
Supervision and Regulation
LCNB, as a financial holding company, is regulated under the Bank Holding
Company Act of 1956, as amended (the "Act"), and is subject to the
supervision and examination of the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board"). The Act requires the prior approval of
the Federal Reserve Board for a bank or financial holding company to acquire
or hold more than a 5% voting interest in any bank and restricts interstate
banking activities.
On September 29, 1994, the Act was amended by the Interstate Banking and
Branch Efficiency Act of 1994, which authorizes interstate bank acquisitions
anywhere in the country, effective one year after the date of enactment, and
interstate branching by acquisition and consolidation, effective June 1,
1997, in those states that have not opted out by that date.
The Gramm-Leach Act, which amended the Bank Holding Company Act of 1956 and
other banking related laws, was signed into law on November 12, 1999. The
Gramm-Leach Act repealed certain sections of the Glass-Steagall Act and
substantially eliminated the barriers separating the banking, insurance, and
securities industries. Effective March 11, 2000, qualifying bank holding
companies could elect to become financial holding companies. Financial
holding companies have expanded investment powers, including affiliating with
securities and insurance firms and engaging in other activities that are
financial in nature or incidental to such financial activity or
complementary to a financial activity. The Gramm-Leach Act defines
financial in nature to include:
a. securities underwriting, dealing, and market making;
b. sponsoring mutual funds and investment companies;
c. insurance underwriting and agency;
d. merchant banking activities; and
e. other activities that the Federal Reserve Board, in consultation
with and subject to the approval of the Treasury Department,
determines are financial in nature.
Financial holding companies may commence the activities listed above or
acquire a company engaged in any of those activities without additional
approval from the Federal Reserve. Notice of the commencement or acquisition
must be provided the Federal Reserve within thirty days of the start of the
activity. Sixty days advance notice is required before the start of any
activity that is complementary to a financial activity.
-6-
LCNB and Lebanon Citizens are subject to an extensive array of banking
laws and regulations that are intended primarily for the protection of the
customers and depositors of LCNB's subsidiaries rather than holders of
LCNB's securities. These laws and regulations govern such areas as
permissible activities, loans and investments, rates of interest that can be
charged on loans and reserves. LCNB and Lebanon Citizens also are
subject to general U.S. federal laws and regulations and to the laws and
regulations of the State of Ohio. Set forth below are brief descriptions of
selected laws and regulations applicable to LCNB and Lebanon Citizens.
Lebanon Citizens is subject to the provisions of the National Bank Act.
Lebanon Citizens is subject to primary supervision, regulation and
examination by the Office of the Comptroller of the Currency (OCC). Lebanon
Citizens is also subject to the rules and regulations of the Board of
Governors of the Federal Reserve System and the Federal Deposit Insurance
Corporation (FDIC). Under the Bank Holding Company Act of 1956, as amended,
and under Regulations of the Federal Reserve Board pursuant thereto, a bank
or financial holding company and its subsidiaries are prohibited from
engaging in certain tie-in arrangements in connection with the extension of
credit.
LCNB and Lebanon Citizens are also subject to the state banking laws of
Ohio. Ohio adopted nationwide reciprocal interstate banking effective
October, 1988. However, banking laws of other states may restrict branching
of banks to other counties within the state and acquisitions or mergers
involving banks and bank holding companies located in other states.
Additionally, Dakin Insurance Agency, Inc. is subject to State of Ohio
insurance regulations and rules and its activities are regulated by The State
of Ohio Department of Insurance.
The Financial Reform, Recovery and Enforcement Act of 1989 (FIRREA) provides
that a holding company and its controlled insured depository institutions are
liable for any loss incurred by the Federal Deposit Insurance Corporation in
connection with the default of any FDIC assisted transaction involving an
affiliated insured bank or savings association.
The Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA)
covers an expanse of banking regulatory issues. FDICIA deals with the
recapitalization of the Savings Association Insurance Fund, with deposit
insurance reform including requiring the FDIC to establish a risk-based
premium assessment system with a number of other regulatory and supervisory
matters. Lebanon Citizens will be required to make payments for the
servicing of obligations of the Financing Corporation ("FICO") issued in
connection with the resolution of savings and loan associations, so long as
such obligations remain outstanding.
Noncompliance to laws and regulations by bank holding companies and banks can
lead to monetary penalties and/or an increased level of supervision or a
combination of these two items. Management is not aware of any current
instances of noncompliance to laws and regulations and does not anticipate
any problems maintaining compliance on a prospective basis. Recent
regulatory inspections and examinations of LCNB Corp and Lebanon Citizens
have not disclosed any significant instances of noncompliance. The minor
instances of noncompliance detected during these inspections and examinations
were promptly corrected by Management and no action was taken by regulators
against LCNB or Lebanon Citizens.
-7-
The earnings and growth of LCNB are affected not only by general economic
conditions, but also by the fiscal and monetary policies of the federal
government and its agencies, particularly the Federal Reserve Board. Its
policies influence the amount of bank loans and deposits and the interest
rates charged and paid thereon and thus have an effect on earnings. The
nature of future monetary policies and the effect of such policies on the
future business and earnings of LCNB and Lebanon Citizens cannot be
predicted.
A substantial portion of LCNB's cash revenues is derived from dividends
paid by Lebanon Citizens. These dividends are subject to various legal and
regulatory restrictions.
Employees
As of December 31, 2001, LCNB, Lebanon Citizens, and Dakin employed 254
employees. LCNB is not a party to any collective bargaining agreement.
Management considers its relationship with its employees to be very good.
Employee benefits programs are considered by Management to be competitive
with benefits programs provided by other financial institutions and major
employers within Lebanon Citizens' market area.
Availability of Financial Information
LCNB files unaudited quarterly financial reports under Form 10-Q and annual
financial reports under Form 10-K with the Securities and Exchange Commission
(SEC). Copies of these reports may be obtained in the shareholder
information section of Lebanon Citizens web site, www.lcnb.com, or by
writing to:
Steve P. Foster
Executive Vice President, CFO
LCNB Corp.
2 N. Broadway
P.O. Box 59
Lebanon, Ohio 45036
Financial reports and other materials filed by LCNB with the SEC may also be
read and copied at the SECs Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Information on the operation of the Public Reference
Room may be obtained from the SEC by calling 1-800-SEC-0330. The SEC also
maintains an internet site (www.sec.gov) that contains reports, proxy and
information statements, and other information regarding registrants that file
reports electronically, as LCNB does.
FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT
SALES
LCNB and its subsidiaries do not have any offices located in foreign
countries and have no foreign assets, liabilities or related income and
expense for the years presented.
-8-
STATISTICAL INFORMATION
The following tables and certain tables appearing in Item 7, Managements
Discussion and Analysis, present additional statistical information about
LCNB Corp. and its operations and financial condition. They should be read
in conjunction with the consolidated financial statements and related notes
and the discussion included in Item 7, Managements Discussion and Analysis,
and Item 7A, Quantitative and Qualitative Disclosures about Market Risk.
Distribution of Assets, Liabilities and Shareholders' Equity; Interest Rates
and Interest Differential
The table presenting an average balance sheet, interest income and expense,
and the resultant average yield for average interest-earning assets and
average interest-bearing liabilities is included in Item 7, Managements
Discussion and Analysis.
The table analyzing changes in interest income and expense by volume and rate
is included in Item 7, Managements Discussion and Analysis.
Investment Portfolio
The following table presents the carrying values of securities for the years
indicated:
At December 31,
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2001 2000 1999
(Dollars in thousands)
Securities available for sale:
U.S. Treasury notes $ 2,044 3,018 6,482
U.S. Agency notes 36,328 20,046 29,927
U.S. Agency mortgage-back
Securities 9,570 12,164 15,069
Corporate notes - 8,479 17,058
Municipal securities 50,668 38,799 36,375
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Total securities available
for sale 98,610 82,506 104,911
Federal Reserve Bank Stock 647 647 647
Federal Home Loan Bank Stock 2,125 1,741 -
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Total securities $101,382 84,894 105,558
======= ====== =======
-9-
Contractual maturities of debt securities at December 31, 2001, were as
follows. Actual maturities may differ from contractual maturities when
borrowers have the right to call or prepay obligations.
Amortized Market
Cost Value Yield
--------- ------ -----
(Dollars in thousands)
U.S. Treasury notes:
Within one year $ 1,000 1,005 5.41%
One to five years 996 1,039 5.82%
Five to ten years - - -%
After ten years - - -%
------ ------ -----
Total U.S Treasury notes $ 1,996 2,044 5.62%
------ ------ -----
U.S. Agency notes:
Within one year $ 3,009 3,073 5.73%
One to five years 27,149 27,335 4.87%
Five to ten years 5,875 5,920 6.11%
After ten years - - -%
------ ------ -----
Total U.S. Agency notes $36,033 36,328 4.34%
------ ------ -----
Municipal securities (1):
Within one year $ 7,342 7,386 6.61%
One to five years 23,328 23,822 9.06%
Five to ten years 10,192 10,449 11.13%
After ten years 8,476 9,011 12.71%
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Total Municipal securities $49,338 50,668 9.75%
------ ------ -----
U.S. Agency mortgage-backed
securities $ 9,432 9,570 5.86%
------ ------ -----
$96,799 98,610 7.27%
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(1) Yields on tax-exempt obligations are computed on a tax equivalent
basis based upon a 34% statutory Federal income tax rate.
Excluding holdings in U.S. Treasury securities and U.S. Government Agencies,
there were no investments in securities of any one issuer that exceeded 10%
of LCNBs consolidated shareholders equity at December 31, 2001.
-10-
Loan Portfolio
The following table summarizes the distribution of the loan portfolio for
the years indicated:
At December 31,
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2001 2000 1999 1998 1997
(Dollars in thousands)
Commercial and industrial $ 40,486 36,449 26,347 20,640 13,905
Commercial, secured by
real estate 72,477 59,043 56,671 53,907 51,088
Residential real estate 165,710 185,013 162,087 154,111 165,908
Consumer, excluding
credit card 41,006 40,860 36,402 32,302 35,167
Agricultural 2,020 2,238 2,343 2,370 1,645
Credit card 2,658 3,049 2,764 2,574 2,461
Other 112 863 285 966 332
Lease Financing 2,088 2,219 183 - -
------- ------- ------- ------- -------
Total loans 326,557 329,734 287,082 266,870 270,506
Deferred costs (fees), net 608 705 526 187 (12)
------- ------- ------- ------- -------
327,165 330,439 287,608 267,057 270,494
Allowance for loan losses (2,000) (2,000) (2,000) (2,000) (2,200)
------- ------- ------- ------- -------
Loans, net $325,165 328,439 285,608 265,057 268,294
======= ======= ======= ======= =======
The following tables summarize the commercial and agricultural loan
maturities and sensitivities to interest rate changes at December 31, 2001:
(Dollars in thousands)
----------------------
Maturing in one year or less $ 45,845
Maturing after one year, but within five years 30,784
Maturing beyond five years 38,354
-------
Total commercial and agricultural loans $114,983
=======
Loans repricing beyond one year:
Fixed rate $ 41,000
Variable rate 28,138
-------
Total $ 69,138
=======
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Risk Elements
The accrual of interest on impaired loans is discontinued when there is a
clear indication that the borrower's cash flow may not be sufficient to meet
payments as they become due. Subsequent cash receipts on non-accrual loans
are recorded as a reduction of principal, and interest income is recorded
once principal recovery is reasonably assured. The current year's accrued
interest on loans placed on non-accrual status is charged against earnings.
Previous years' accrued interest is charged against the allowance for loan
losses.
A summary of accruing loans past due 90 days or more at December 31, follows:
Accrued loans past due 90 days
------------------------------
(Dollars in thousands)
2001 $146
2000 111
1999 68
1998 374
1997 29
There were no nonaccrual or restructured loans at December 31, for each of
the years ended 1997 through 2001. Interest income that would have been
recorded in each of the years 1997 through 2001 if loans on nonaccrual status
at various times during the respective years had been current and in
accordance with their original terms was not material. For each of the years
ended December 31, 1997 through 2001, the recorded investments in loans for
which impairment has been recognized in accordance with SFAS Statement No.
114 was not material. LCNB is not committed to lend additional funds to
debtors whose loans have been modified to provide a reduction or deferral of
principal or interest because of deterioration in the financial position of
the borrower.
-12-
Summary of Loan Loss Experience
The table summarizing the activity relating to the allowance for loan losses
is included in Item 7, Management's Discussion and Analysis.
The following table presents the allocation of the allowance for loan loss.
At December 31,
---------------------------------------------
2001 2000 1999 1998 1997
(Dollars in thousands)
Commercial $ 647 381 304 286 622
Residential real estate - - - - -
Consumer 774 714 514 345 370
Credit card 82 40 38 48 26
Unallocated 497 865 1,144 1,321 1,182
----- ----- ----- ----- -----
Total $2,000 2,000 2,000 2,000 2,200
===== ===== ===== ===== =====
This allocation is made for analytical purposes. The total allowance is
available to absorb losses from any category of the portfolio. The allowance
allocated to the commercial and consumer categories has increased over the
five year period due to the increase in outstandings in these loan categories
which, by nature, have greater risk elements.
The following table presents the categories of loans as a percent of total
loans.
At December 31,
----------------------------------------------------
2001 2000 1999 1998 1997
Commercial and
industrial 12.40% 11.05% 9.17% 7.73% 5.14%
Commercial, secured
by real estate 22.19 17.91 19.74 20.21 18.89
Residential real
estate 50.75 56.11 56.45 57.75 61.33
Consumer 12.56 12.39 12.70 12.10 13.00
Credit card 0.81 0.93 0.96 0.96 0.91
Other 1.29 1.61 0.98 1.25 0.73
------ ------ ------ ------ ------
Total 100.00% 100.00% 100.00% 100.00% 100.00%
====== ====== ====== ====== ======
-13-
Deposits
The statistical information regarding average amounts and average rates paid
for the deposit categories is included in the "Distribution of Assets,
Liabilities and Shareholders' Equity" table included in Item 7, Managements
Discussion and Analysis.
The following table presents the contractual maturity of time deposits of
$100,000 or more at December 31, 2001:
(Dollars in thousands)
----------------------
Maturity within 3 months $11,809
After 3 but within 6 months 4,963
After 6 but within 12 months 7,625
After 12 months 14,729
------
$39,126
======
Return of Equity and Assets
The statistical information regarding the return on assets, return on equity,
dividend payout ratio and equity to assets ratio is presented in Item 6,
Selected Financial Data.
-14-
Item 2. Properties
Lebanon Citizens conducts its business from the following offices:
Name of Office Address
-------------- -------
1. Main Office 2 North Broadway
Lebanon, Ohio 45036 Owned (1)
2. Auto Bank 26 North Broadway
Lebanon, Ohio 45036 Owned
3. Columbus Avenue Office 730 Columbus Avenue
Lebanon, Ohio 45036 Owned
4. Goshen Office 6726 Dick Flynn Blvd.
Goshen, Ohio 45122 Owned
5. Hamilton Office 794 NW Washington Blvd.
Hamilton, Ohio 45013 Owned
6. Hunter Office 3878 State Route 122
Franklin, Ohio 45005 Owned
7. Loveland Office 615 West Loveland Avenue
Loveland, Ohio 45140 Owned
8. Maineville Office 7795 South State Route 48
Maineville, Ohio 45039 Owned
9. Mason/West Chester Office 1050 Reading Road
Mason, Ohio 45040 Owned
10. Middletown Office 4441 Marie Drive
Middletown, Ohio 45044 Owned
11. Okeana Office 6225 Cincinnati-Brookville Road
Okeana, Ohio 45053 Owned
12. Otterbein Office State Route 741
Lebanon, Ohio 45036 Leased
13. Oxford Office 30 West Park Place
Oxford, Ohio 45056 (1) (2)
14. Rochester/Morrow Office Route 22-3 at 123
Morrow, Ohio 45152 Owned
15. South Lebanon Office 209 East Forrest Street
South Lebanon, Ohio 45065 Leased
16. Springboro/Franklin Office 525 West Central Avenue
Springboro, Ohio 45066 Owned
17. Waynesville Office 9 North Main Street
Waynesville, Ohio 45068 Owned
18. Wilmington Office 1243 Rombach Avenue
Wilmington, Ohio 45177 Owned
(1) Excess space in this office is leased to third parties.
(2) Lebanon Citizens owns the Oxford Office building and leases the land.
Dakin owns its main office at 20 & 24 East Mulberry Street, Lebanon, Ohio 45036.
Excess space in this office is leased to third parties. Dakins six other
offices are located in Lebanon Citizens branch offices.
-15-
Item 3. Legal Proceedings
Except for routine litigation incident to their businesses, LCNB and its
subsidiaries are not a party to any material pending legal proceedings and
none of their property is the subject of any such proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
None
-16-
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
LCNB had approximately 592 registered holders of its common stock as
of December 31, 2001. The number of shareholders includes banks and brokers
who act as nominees, each of whom may represent more than one shareholder.
LCNB common stock is not traded in an established public market. Several
market-makers facilitate trading of shares. Trade prices for shares of LCNB
stock, reported through registered securities dealers, are set forth below.
Trades have occurred during the period without the knowledge of LCNB. The
trades of which LCNB is aware from the market makers in the stock are those
outlined. The prices given are interdealer without retail markups, markdown
or commissions.
2001 High Low
---- ---- ---
First Quarter $38.875 $32.50
Second Quarter 42.00 33.00
Third Quarter 41.00 38.00
Fourth Quarter 42.50 39.55
2000
----
First Quarter $70.00 $40.00
Second Quarter 45.00 40.00
Third Quarter 42.00 37.00
Fourth Quarter 40.00 34.00
The following table presents cash dividends per share declared and paid in the periods shown:
2001 2000
First Quarter $0.45 0.30
Second Quarter 0.45 0.30
Third Quarter 0.45 0.30
Fourth Quarter 0.50 0.90
----- ----
Total $1.85 1.80
===== ====
-17-
It is expected that LCNB will continue to pay dividends on a similar
schedule, to the extent permitted by business and other factors beyond
management's control.
Item 6. Selected Financial Data
The following represents selected consolidated financial data of LCNB
for the years ended December 31, 1997 through 2001 and are derived from LCNB
Corp's consolidated financial statements and Lebanon Citizens' unaudited
financial statements and call reports. This data should be read in
conjunction with the consolidated financial statements and the notes thereto
included in Item 8 of this Form 10-K and Management's Discussion and Analysis
and Quantitative and Qualitative Disclosures about Market Risk included in
Items 7 and 7A, respectively, of this Form 10-K, and are qualified in their
entirety thereby and by other detailed information elsewhere in this
Form 10-K.
For the Years Ended December 31,
--------------------------------
2001 2000 1999 1998 1997
(Dollars in thousands,
except ratios and data per share)
Income Statement
Interest Income $ 32,294 $ 32,151 $ 29,691 $ 29,599 $ 27,777
Interest Expense 14,372 15,954 13,305 14,080 14,344
------- ------- ------- ------- -------
Net Interest Income 17,922 16,197 16,386 15,519 13,433
Loan Loss Provision 237 197 208 191 291
------- ------- ------- ------- -------
Net Interest Income
after Provision 17,685 16,000 16,178 15,328 13,142
Other Operating Income 4,712 4,400 4,370 4,213 3,694
Operating Expenses 13,890 13,069 12,650 11,655 9,626
------- ------- ------- ------- -------
Income before
Income Taxes 8,507 7,331 7,898 7,886 7,210
Provision for
Income Taxes 2,440 2,091 2,323 2,426 2,178
------- ------- ------- ------- -------
Net Income $ 6,067 $ 5,240 $ 5,575 $ 5,460 $ 5,032
======= ======= ======= ======= =======
Balance Sheet
Securities $101,382 $ 84,894 $105,558 $123,687 $101,188
Loans net 325,165 328,439 285,608 265,057 268,294
Total Assets 480,435 451,000 439,238 432,364 421,250
Total Deposits 414,772 394,786 391,569 387,006 377,386
Long-Term Debt 12,306 6,356 403 - -
Total Shareholders
Equity 49,507 46,310 42,687 42,335 38,780
-18-
For the Years Ended December 31,
--------------------------------
2001 2000 1999 1998 1997
Selected Financial Ratios
and Other Data
Return on average
assets 1.30% 1.17% 1.29% 1.30% 1.30%
Return on average
equity 12.50% 11.84% 13.01% 13.57% 13.58%
Equity-to-assets
ratio 0.10 0.10 0.10 0.10 0.09
Dividend payout
ratio 0.54 0.61 0.51 0.46 0.42
Earnings per
share(1) 3.43 2.95 3.14 3.07 2.83
Dividends declared
per share(1) 1.85 1.80 1.60 1.40 1.20
(1) All per share data have been adjusted to reflect the ten-for-one stock
exchange in 1999 and the pooling of interests accounting method for
the Dakin acquisition in 2000.
Item 7. Management's Discussion and Analysis
Introduction
The following is management's discussion and analysis of the financial
condition and results of operations of LCNB. It is intended to amplify
certain financial information regarding LCNB and should be read in
conjunction with the Consolidated Financial Statements and related Notes
and the Financial Highlights contained in the 2001 Annual Report to
Shareholders.
Comparative Financial Information
Effective May 18, 1999, Lebanon Citizens was reorganized into a one-bank
holding company structure. Prior to that date, the financial information
presented represents the assets, liabilities and operations of Lebanon
Citizens. Comparative earnings per share information is presented on pro
forma basis.
-19-
On April 11, 2000 LCNB issued 15,942 shares of common stock in exchange
for all outstanding shares of Dakin Insurance Agency, Inc. (Dakin). On that
date, Dakin merged with and into an interim subsidiary of LCNB. As a
result of the merger, Dakin became a wholly owned subsidiary of LCNB.
The merger was accounted for as a pooling-of-interests and, accordingly, all
financial statements presented herein have been restated to include the
financial position and results of operations of Dakin.
Forward Looking Statements
Certain matters disclosed herein may be deemed to be forward-looking
statements that involve risks and uncertainties, including regulatory policy
changes, interest rate fluctuations, loan demand, loan delinquencies and
losses, and other risks. Actual strategies and results in future time
periods may differ materially from those currently expected. Such forward-
looking statements represent management's judgment as of the current date.
LCNB disclaims, however, any intent or obligation to update such forward-
looking statements.
Net Income
LCNB earned $6,067,000 in 2001 compared to $5,240,000 in 2000. Earnings per
share were $3.43, a 16.27% or $0.48 per share increase from 2000.
Performance ratios for 2001 included a return on average assets of 1.30% and
a return on average equity of 12.50% compared to ratios of 1.17% and 11.84%,
respectively, for 2000.
LCNB earned $5,240,000 in 2000 compared to $5,575,000 in 1999. Earnings per
share were $2.95, a 6.05% or $0.19 per share decline from 1999. Performance
ratios for 2000 included a return on average assets of 1.17% and a return on
average equity of 11.84% compared to ratios of 1.29% and 13.01%,
respectively, for 1999.
Net Interest Income
The amount of net interest income earned by LCNB is influenced by the dollar
amount (volume) and mix of interest earning assets and interest bearing
liabilities and the rates earned or paid on each. The following table presents,
for the years indicated, the distribution of average assets,
liabilities and shareholders' equity, as well as the total dollar amounts of
interest income from average interest earning assets and the resultant yields
on a fully taxable equivalent basis, and the dollar amounts of interest
expense and average interest-bearing liabilities and the resultant rates
paid.
-20-
Years ended December 31,
------------------------
2001 2000 1999
---- ---- ----
Average Average Interest Average Average Interest Average Average Interest
Outstanding Yield/ Earned/ Outstanding Yield/ Earned/ Outstanding Yield/ Earned/
Balance Rate Paid Balance Rate Paid Balance Rate Paid
(Dollars in thousands)
Loans(1) $332,634 8.25% $27,439 $309,658 8.48% $26,264 $273,273 8.32% $22,743
Federal funds sold 19,080 3.50 667 7,258 6.32 459 9,251 5.00 463
Deposits in banks - - - 4,149 5.81 241 5,486 5.12 281
Federal Reserve
Bank stock 647 6.03 39 647 6.03 39 647 6.03 39
Federal Home Loan
Bank stock 1,957 6.75 132 418 7.42 31 - - -
Investment securities:
Taxable 47,394 5.49 2,601 67,100 5.28 3,542 83,592 5.88 4,914
Non-taxable(2) 33,592 6.58 2,211 26,233 9.27 2,433 29,995 6.32 1,895
------- ------ ------- ------ ------- ------
Total earning assets 435,304 7.60 33,089 415,463 7.95 33,009 402,244 7.54 30,335
Non-earning assets 33,705 33,707 32,528
Allowance for
loan losses (2,002) (2,002) (2,004)
------- ------- -------
Total assets $467,007 $447,168 $432,768
======= ======= =======
Savings deposits $ 96,440 2.62 2,529 $ 84,156 3.82 3,217 79,555 2.99 2,382
NOW and money fund 81,204 2.37 1,925 81,215 2.84 2,303 79,548 2.40 1,912
IRA and time
certificates 175,098 5.32 9,315 178,842 5.64 10,081 178,541 5.01 8,944
Short-term debt 964 3.42 33 1,250 6.64 83 934 4.60 43
Long-term debt 8,062 7.07 570 3,855 7.00 270 432 5.56 24
------- ------ ------- ------ ------- ------
Total interest-bearing
liabilities 361,768 3.97 14,372 349,318 4.57 15,954 339,010 3.92 13,305
------ ------ ------
-21-
Demand deposits 53,959 52,059 49,076
Other liabilities 2,723 1,527 1,718
Capital 48,557 44,264 42,964
------- ------- -------
Total liabilities
and capital $467,007 $447,168 $432,768
======= ======= =======
Net interest rate
spread(3) 3.63 3.38 3.62
Net interest margin on
a taxable equivalent
basis(4) 4.30 $18,717 4.11 $17,055 4.23 $17,030
====== ====== ======
Ratio of interest-earning
assets to interest-bearing
liabilities 120.33% 118.94% 118.65%
(1) Includes nonaccrual loans if any. Income from tax-exempt loans is included in interest income on a taxable
equivalent basis, using an incremental rate of 34%.
(2) Income from tax-exempt securities is included in interest income on a taxable equivalent basis.
Interest income has been divided by a factor comprised of the complement of the incremental tax
rate of 34%.
(3) The net interest spread is the difference between the average rate on total interest-earning
assets and interest-bearing liabilities.
(4) The net interest margin is the taxable-equivalent net interest income divided by average
interest-earning assets.
-22-
The following table presents the changes in interest income and expense for
each major category of interest-earning assets and interest-bearing
liabilities and the amount of change attributable to volume and rate changes
for the years indicated. Changes not solely attributable to rate or volume
have been allocated to volume and rate changes in proportion to the
relationship of absolute dollar amounts of the changes in each.
For the years ended December 31,
--------------------------------
2001 vs. 2000 2000 vs. 1999
------------- -------------
Increase (decrease) due to Increase (decrease) due to
-------------------------- --------------------------
Volume Rate Total Volume Rate Total
(Dollars in thousands)
Interest income
attributable to:
Loans (1) $1,910 (735) 1,175 3,079 442 3,521
Federal funds sold 485 (277) 208 18 (22) (4)
Deposits in banks (241) - (241) (89) 49 (40)
Federal Reserve
Bank stock - - - - - -
Federal Home Loan
Bank stock 104 (3) 101 31 - 31
Investment securities:
Taxable (1,077) 136 (941) (904) (468) (1,372)
Non-taxable(2) 585 (807) (222) (197) 735 538
----- ----- ----- ----- --- -----
Total interest income 1,766 (1,686) 80 1,938 736 2,674
Interest expense
attributable to:
Savings deposits 423 (1,111) (688) 144 691 835
NOW and money fund - (378) (378) 41 350 391
IRA and time
certificates (208) (558) (766) 15 1,122 1,137
Short-term borrowings (16) (34) (50) 17 23 40
Long-term debt 297 3 300 232 14 246
----- ----- ----- ----- ----- -----
Total interest expense 496 (2,078) (1,582) 449 2,200 2,649
----- ----- ----- ----- ----- -----
Net interest income $1,270 392 1,662 1,489 (1,464) 25
===== ===== ===== ===== ===== =====
(1) Nonaccrual loans, if any, are included in average loan balances and
recognized loan fees (costs) of $(95,000) and $(74,000) for 2001 and
2000, respectively, are included in interest income.
(2) Change in interest income from non-taxable loans and investment
securities is computed based on interest income determined on a
taxable equivalent yield basis. Interest income has been divided by
a factor comprised of the complement of the incremental tax rate of
34%.
-23-
2001 vs. 2000. Tax equivalent interest income increased $80,000 due to an
increase of $19.8 million in average interest-earning assets, largely offset
by a 35 basis point (a basis point equals 0.01%) decline in the average rate
earned. Most of the increase in average interest-earning assets was in the
loan portfolio, which grew $23.0 million on an average basis even though the
consolidated balance sheet shows total loans at December 31, 2001 were $3.3
million less than at December 31, 2000. A significant influence on the
average loan balance for 2001 was a $42.8 million increase in loans during
2000. See the Assets section of this Discussion for more information on
the loan portfolio. The average rate earned decreased primarily because of a
general market wide decrease in interest rates.
Interest expense decreased $1,582,000 because of a 60 basis point decrease in
the average rate paid for deposits and borrowings, partially offset by a
$12.5 million increase in average interest-bearing liabilities. The decrease
in average rates paid was also due to a general decline in market rates
during 2001. Most of the increase in average interest-bearing liabilities
was in average savings deposits, which increased $12.3 million, and in
average long term debt, which increased $4.2 million. Management believes
that, due to the current declining rate economic environment, investors are
reducing long-term investments and placing the funds in highly liquid, short-
term instruments. This means much of the recent growth in savings deposits
could be quickly withdrawn if interest rates increase. Management is
attempting to lock-in a portion of these funds by offering special rates and
terms on selected certificate of deposit products. Management also borrowed
$6.0 million from the Federal Home Loan Bank during 2001 in an attempt to
lock-in some long-term funding at current, historically low, market rates.
The net interest margin increased from 4.11% during 2000 to 4.30% during 2001
because of the 60 basis point decrease in average rates for interest bearing
liabilities, partially offset by the 35 basis point decrease in average rates
for interest earning assets.
2000 vs. 1999. Tax equivalent net interest income increased $25,000, or
0.15%, from 1999 to 2000. The net interest margin on a fully taxable
equivalent basis (FTE) decreased from 4.23% in 1999 to 4.11% in 2000. This
12 basis point decrease was due in part to a 65 basis point increase in the
cost of average interest-bearing liabilities, partially offset by a 41 basis
point increase in the yield on average interest-earning assets. The increase
in the cost of average interest-bearing liabilities resulted from a general
increase in market rates and a $6 million borrowing from the Federal Home
Loan Bank. The increase in the yield on average interest-earning assets is
due to the same increase in market rates and to a shift of funds from
investment securities to the higher earning loan portfolio. The loan-to-
deposit ratio at December 31, 2000 and 1999 was 83.70% and 73.45%,
respectively. An increase in average interest-earning assets of $13.2 million
to $415.5 million in 2000 also contributed to the increase in net interest
income. The increase was primarily attributable to increases in average
commercial and residential real estate loans.
-24-
Provisions and Allowance for Loan Losses
The total provision for loan losses is determined based upon Management's
evaluation as to the amount needed to maintain the allowance for credit
losses at a level considered appropriate in relation to the risk of losses
inherent in the portfolio. In addition to historic charge-off percentages,
factors taken into consideration to determine the adequacy of the allowance
for credit losses include the nature, volume and consistency of the loan
portfolio, overall portfolio quality, review of specific problem loans and
current economic conditions that may affect borrowers ability to pay. The
following table presents the total loan provision and the other changes in
the allowance for loan losses for the years 1997 through 2001.
2001 2000 1999 1998 1997
---- ---- ---- ---- ----
(Dollars in thousands)
Balance - Beginning of year $2,000 2,000 2,000 2,200 2,000
Loans charged off:
Commercial and industrial - - - 227 -
Commercial, secured by real estate - - - - -
Residential real estate - - - 3 -
Consumer, excluding credit card 237 222 252 153 93
Agricultural - - - - -
Credit Card 40 33 20 36 29
Other - - - - -
----- ----- ----- ----- -----
Total loans charged off 277 255 272 419 122
----- ----- ----- ----- -----
Recoveries:
Commercial and industrial - - - - -
Commercial, secured by real estate - - - - -
Residential real estate - - - - -
Consumer, excluding credit card 38 55 62 26 25
Agricultural - - - - -
Credit Card 2 3 2 2 6
Other - - - - -
----- ----- ----- ----- -----
Total recoveries 40 58 64 28 31
----- ----- ----- ----- -----
Net charge-offs 237 197 208 391 91
Provision charged to operations 237 197 208 191 291
----- ----- ----- ----- -----
Balance - End of year $2,000 2,000 2,000 2,000 2,200
===== ===== ===== ===== =====
Ratio of net charge-offs during the
period to average loans outstanding .07% .06% .08% .14% .04%
=== === === === ===
-25-
The allowance for loan losses of $2.0 million is 0.61% of total loans at
December 31, 2001, compared to $2.0 million or 0.61% of total loans at
December 31, 2000, and $2.0 million or 0.70% of total loans at December 31,
1999. The $63,000 increase in consumer loans charged off, net of
recoveries, in 1999 over 1998 is attributable, in part, to the adoption of a
new uniform charge-off policy in 1999 for consumer, credit card, and home
mortgage loans as mandated by the Federal Financial Institution's Examination
Council for all banks and thrifts. It includes a requirement to charge off
open-end credit at 180 days delinquency and closed-end credit at 120 days
delinquency.
Non-Interest Income
2001 vs. 2000. Non-interest income increased $312,000, or 7.09%, to
$4,712,000 in 2001 from $4,400,000 in 2000. The increase was primarily due
to a $240,000 increase in service charges and fees and a $297,000 increase
in insurance agency income, partially offset by a $250,000 decrease in trust
income.
The increase in service charges and fees from 2000 to 2001 was due to
increases in return check fees and check card income. Lebanon Citizens
increased the returned check fee from $20 to $25 in December, 2000. Check
card fees increased primarily because a greater number of cards were
outstanding during 2001 than during 2000.
The increase in insurance agency income is primarily due to contingency
commissions received during the first quarter, 2001. Contingency commissions
are profit-sharing arrangements on property and casualty policies between the
originating agency and the underwriter and are generally based on
underwriting results and written premium. As such, the amount received each
year can vary significantly depending on loss experience. Contingency
commissions received during the first quarter, 2001 totaled $189,000, but
only $6,000 during the first quarter, 2000. The balance of the increase in
2001 was generated from commissions received on new and renewing policies.
Management believes that claims filed by Dakin clients with underwriters
during 2001 will reduce the contingency commissions received during 2002 to
a minimal level.
Trust fee income decreased in 2001 due to a decrease in the market value of
assets under management, on which fees are based. The decline in asset
market value was primarily the result of general market conditions.
2000 vs. 1999. Non-interest income increased $30,000, or 0.69%, to
$4,400,000 in 2000 from $4,370,000 in 1999. The increase was primarily due
to a $205,000 increase in trust income, partially offset by a $50,000
decrease in service charges and fees and a $128,000 decrease in insurance
agency income.
The trust fee income increased in 2000 due to an increase in estate fee
income, partially offset by a decrease in the market value of assets under
management, on which fees are based.
-26-
The decrease in service charges and fees from 1999 to 2000 was due to a
$215,000 reduction in merchant credit card processing fees resulting from the
exiting of the business in the fourth quarter of 1999. Lebanon Citizens
outsourced these services in 1999 due to declining margins and now functions
as a referral conduit for merchant credit card business. This decrease was
partially offset by:
a. a $65,000 increase in VISA check card fee income resulting from
continued growth in both the usage and number of cardholders, and
b. increases in deposit account related fees.
The decrease in insurance agency income is primarily due to a large
contingency commission Dakin recognized during the first quarter of 1999,
which did not recur during 2000.
Non-Interest Expense
2001 vs. 2000. Non-interest expense increased $821,000, or 6.28%, during
2001 as compared to 2000. This increase was primarily due to:
a. a $433,000, or 7.83%, increase in salaries and wages,
b. a $162,000, or 11.45%, increase in pension and other employee benefits,
c. a $102,000, or 25.06% increase in state franchise taxes, and
d. a $105,000, or 3.45%, increase in other non-interest expense.
Salaries and wages increased as a result of normal salary and wage increases,
an increase in the number of employees, and increased commissions paid
Dakins agents because of the increase in the volume of policies written. In
addition, a portion of the pay received by LCNB officers and employees is
based on corporate earnings. Since earnings during 2001 were greater than
during 2000, a higher amount of incentive pay was paid to employees.
Pension and other employee benefits increased primarily because of an
increase in pension expense recognized. Other benefits, including social
security and medicare matching and health care costs, also increased.
A banks state franchise taxes are based on net worth, so the increase in
state franchise taxes reflects growth in shareholders equity.
The increase in other non-interest expense was due in part to:
a. a $145,000 increase in ATM expenses resulting from continued expansion
in the number of ATMs and an increase in the number of ATM transactions
processed,
b. a $67,000 increase in office supplies expense, and
c. a $36,000 increase in personal computer banking expense primarily due
to increased usage of LCNB On-Line, the computer banking feature
available in Lebanon Citizens website (www.lcnb.com).
-27-
These increases were partially offset by:
a. a $60,000 decrease in credit card expense primarily due to a change in
the processing firm,
b. a $77,000 decrease in legal and other professional fees caused
primarily by the absence of fees paid during 2000 for services relating
to the acquisition of Dakin, and
c. the absence of computer consulting fees totaling $34,000.
Depreciation on furniture and equipment, which is included in equipment
expense, increased $56,000 and depreciation on bank premises, which is
included in occupancy expense, increased $46,000. These increases were due
to the recent construction of new offices and facilities. During 2000 LCNB
constructed new offices in Goshen and Oxford and extensively remodeled the
Columbus Avenue office in Lebanon. An electronic branch (a drive-up, stand-
alone ATM) was also constructed on Peck Boulevard in Hamilton. During 2001
a new office was constructed on Washington Boulevard in Hamilton and an
electronic branch was constructed in Harveysburg.
On June 29, 2001, LCNB signed a contract with Jack Henry & Associates for
replacement of LCNBs core processing system, including computer hardware and
software. Conversion from the current system to the new system is
tentatively scheduled for late 2002 through early 2003. Management believes
the new system will allow LCNB to enhance operating efficiencies and improve
customer service. Anticipated software and hardware costs total
approximately $1,086,000, which will be capitalized and charged to
depreciation expense over the estimated lives of the assets, primarily seven
years. Costs of converting data files from the current to the new system and
costs of training employees on the new system are expected to total $129,000
during 2002 and $31,000 during 2003 and will be expensed as incurred.
2000 vs. 1999. Non-interest expense increased $419,000, or 3.31%, in 2000
from 1999. This increase was primarily due to:
a. a $237,000, or 3.53%, increase in labor costs including pension and
other employee benefits,
b. a $95,000, or 17.79%, increase in equipment expenses,
c. a $90,000, or 9.43%, increase in occupancy expenses, and
d. a $222,000, or 7.87%, increase in other non-interest expense.
Labor costs increased as a result of normal increases in salaries and wages
and increases in pension and health insurance costs.
The increase in equipment expense is primarily due to depreciation recognized on
new furniture and equipment purchased for new and remodeled offices. The
increase in occupancy expense reflects increased costs due to new and remodeled
offices and an increase in rent expense for the leased offices.
-28-
The increase in other non-interest expense was due in part to:
a. a $64,000 increase in ATM expenses resulting from an expansion in
the number of ATMs and an increase in the number of ATM transactions
processed,
b. attorney fees of $46,000 relating to the acquisition of Dakin
Insurance Agency,
c. a rate increase totaling $35,000 in Federal Deposit Insurance
Corporation premiums,
d. a $75,000 increase in telephone expense primarily due to a
telephone system upgrade installed during 2000 and to an increased
number of telephone lines needed to serve new ATMs, and
e. consulting fees totaling $34,000 relating to the selection of a new
computer system.
These increases were partially offset by a $152,000 decline in merchant
credit card related processing and interchange expenses due to Lebanon
Citizens exiting of the merchant credit card business in late-1999 and by
certain printing and supply expense control initiatives established during
2000.
Income Taxes
LCNB's effective tax rates for the years ended December 31, 2001, 2000,
and 1999 were 28.68%, 28.52%, and 29.41%, respectively. The difference
between the statutory rate of 34.00% and the effective tax rate is primarily
due to tax-exempt interest income.
Assets
2001 vs. 2000. Total assets increased $29.4 million, or 6.53%, from
December 31, 2000 to December 31, 2001. This increase was primarily due to a
$20.0 million increase in federal funds sold and a $16.1 million increase in
securities available for sale, partially offset by a $4.0 million decrease in
cash and due from banks and a $3.3 million decrease in loans.
The decrease in loans during 2001 can be attributed to:
a. refinancing activity on residential mortgage loans because of the
general decline in interest rates, combined with
b. the sale of a large majority of the fixed rate residential loans
originated during 2001 to the Federal Home Loan Mortgage Corporation
(FHLMC).
Approximately $13.4 million of residential real estate loans were sold to FHLMC
during 2001, while no loans were sold during 2000. The sales and refinancing
payoffs contributed to a $19.3 million decline in residential real estate loans.
Management began selling the loans after determining that current, historically
low market rates for residential loans were not profitable in the long run.
Offsetting the decline in residential loans was a $17.5 million increase in the
commercial loan portfolio.
-29-
Since management was not able to invest deposit growth and borrowing
increases in loan growth during 2001, the funds were invested in federal
funds sold, which is a short-term investment and readily available, and in
the securities portfolio. All of LCNBs investment securities are classified
available for sale and can be readily sold if the funds are needed to
support loan growth in the future.
Premises and equipment increased $1.1 million, net of $898,000 in
depreciation expense, from December 31, 2000 to December 31, 2001.
Expenditures for 2001 included approximately $1.2 million for costs
associated with the new Hamilton office and the electronic branch in
Harveysburg.
At December 31, 2001 Lebanon Citizens owned all but two of its branches. The
Otterbein and South Lebanon branches were leased under multi-year operating
leases. The current Otterbein lease expires in July, 2005, and the South
Lebanon lease expires in July, 2006. Both leases contain renewal options.
The Oxford office is built on leased land. This lease expires in July, 2059
and does not include renewal options. Lebanon Citizens has a right of first
refusal if the land is sold during the term of the lease.
2000 vs. 1999. Total assets increased $11.8 million, or 2.68%, from December
31, 1999 to December 31, 2000. This increase was primarily due to a $42.8
million, or 15.00%, increase in loans, partially offset by a $22.4 million,
or 21.36%, decrease in securities available for sale.
The loan increase from December 31, 1999 to December 31, 2000 resulted
primarily from a $10.1 million increase in commercial and industrial loans,
a $22.9 million increase in residential real estate loans, and a $4.5
million increase in consumer loans. The growth in residential real
estate and commercial loans resulted from competitively priced products and
focused officer-calling efforts in the Hamilton and Oxford markets as well as
the Warren County offices. All residential real estate loans originated
during 2000 were kept in Lebanon Citizens portfolio. This compares to $2.4
million and $11.6 million in loans originated and sold to the Federal Home
Loan Mortgage Corporation (Freddie Mac) during 1999 and 1998, respectively.
Consumer loans increased primarily through concentrated efforts to originate
indirect auto and other loans through dealers.
Securities decreased due to a shifting of assets from the securities
portfolio to the higher yielding loan portfolio. Approximately $5.8 million
of securities were sold in 2000, resulting in a $12,000 realized gain.
Proceeds were primarily used to fund the continued loan growth.
Premises and equipment increased $2.3 million, net of $796,000 in
depreciation expense, from December 31, 1999 to December 31, 2000.
Expenditures for 2000 included approximately $2.4 million for costs
associated with new offices in Goshen and Oxford, extensive remodeling of the
Columbus Avenue office in Lebanon, and a new drive-up ATM located in
Hamilton.
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Deposits
2001 vs. 2000. Total deposits of $414.8 million at December 31, 2001,
increased $20.0 million, or 5.06%, from December 31, 2000. Much of the
growth was in the savings category, which increased $14.5 million during the
year. Management believes this reflects investor preference for short-term,
highly liquid investments during the current economic cycle. Demand deposits
increased $7.4 million from $51.7 million at December 31, 2000 to $59.1
million at December 31, 2001. The balance at December 31, 2001 was unusually
high and by mid-January, 2002, this balance had returned to a more typical
average balance of approximately $55.6 million.
The only deposit category that did not increase during 2001 was money fund
deposits, which decreased $12.9 million during the year. The decrease was
intentional and relates to a corporate sweep checking account product offered
by Lebanon Citizens. Excess funds in the checking accounts are automatically
swept into the customers choice of several different non-bank owned mutual
funds or, alternatively, a Lebanon Citizens savings product that is grouped
with the money fund deposits category. After considering the declining rates
LCNB was able to earn on its overnight federal fund investments and LCNBs
increasing liquidity, management decided to decrease the rate offered on its
sweep alternative and allow the funds to be transferred to the mutual fund
alternatives.
2000 vs. 1999. Total deposits of $394.8 million at December 31, 2000
increased $3.2 million, or 0.82%, from December 31, 1999. Demand and NOW
deposits decreased $6.2 million from December 31, 1999 to December 31, 2000,
money fund deposits increased $19.4 million, and savings deposits increased
$6.0 million. The increase in money fund deposits relates to the corporate
sweep checking account product described above. The Lebanon Citizens savings
product alternative was first introduced during the third quarter, 2000.
Several large account holders chose the new deposit product, which accounted
for most of the increase in the money fund deposits category. IRA deposits
remained relatively constant from December 31, 1999 to December 31, 2000.
Certificates greater than $100,000 decreased by $9.1 million due to
managements decision not to bid on public fund deposits that matured during
the final quarter of 2000. In making this decision, management considered
Lebanon Citizens liquidity position and the rates that would be required to
maintain the deposits. Other time certificates declined by $7.0 million as
Lebanon Citizens continued to allow its higher cost retail deposit products
to run-off.
Liquidity
Liquidity is the ability to have funds available at all times to meet the
commitments of LCNB. These commitments may include paying dividends to
shareholders, funding new loans for borrowers, funding withdrawals by
depositors, paying general and administrative expenses, and funding capital
expenditures. Sources of liquidity include growth in deposits, principal
payments received on loans, proceeds from the sale of loans, the sale or
maturation of investment securities, cash generated by operating activities,
and the ability to borrow funds. Management closely monitors the level of
liquid assets available to meet ongoing funding requirements. It is
Management's intent to maintain adequate liquidity so that sufficient funds
are readily available at a reasonable cost. LCNB experienced no liquidity or
operational problems during the past year as a result of current liquidity
levels.
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Commitments to extend credit at December 31, 2001, totaled $56.7 million and
standby letters of credit totaled $6.4 million and are more fully described
in Note 10 to LCNBs Financial Statements. Since many commitments to extend
credit may expire without being drawn upon, the total commitment amounts do
not necessarily represent future cash requirements.
A contract with Jack Henry & Associates for replacement of LCNBs core
processing system, including computer hardware and software, is tentatively
expected to cost $1,086,000. The cost of converting data files from the
current to the new system and of training employees on the new system are
expected to total an additional $129,000 during 2002 and $31,000 during 2003.
LCNB also plans to remodel several back-office areas of the main office
during the first quarter, 2002; preliminary cost estimates for this project
total approximately $195,000. As of December 31, 2001, LCNB had no other
material commitments for capital expenditures.
Total deposits grew $20.0 million or 5.06% during 2001. The liquidity of
LCNB is enhanced by the fact that 88.40% of total deposits at December 31,
2001, were "core" deposits. Core deposits, for this purpose, are defined as
total deposits less public funds and certificates of deposit greater than
$100,000. An additional source of funding is borrowings from the Federal
Home Loan Bank (FHLB). Total borrowings from the FHLB at December 31, 2001
were $12.0 million. The total remaining borrowing capacity from the FHLB at
that date was approximately $81 million.
Liquid assets include cash, federal funds sold and securities available for
sale. Except for investments in the stock of the Federal Reserve Bank and
FHLB, all of LCNBs investment portfolio is classified as available-for-
sale and can be readily sold to meet liquidity needs. At December 31, 2001,
LCNBs liquid assets amounted to $132.8 million or 27.65% of total gross
assets, up from $100.8 million or 22.34% of total gross assets at December
31, 2000. The primary reasons for the increase were increases in the amount
of federal funds sold and securities available for sale.
Capital Resources
LCNB and Lebanon Citizens are required by banking regulators to meet
certain minimum levels of capital adequacy. These are expressed in the form
of certain ratios. Capital is separated into Tier I capital (essentially
shareholders' equity less goodwill and other intangibles) and Tier II 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 Lebanon Citizens' 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 4.00% and the ratio of Total capital (Tier 1 capital
plus Tier 2 capital) to risk-weighted assets must be at least 8.00%. 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 3.00%. A summary of the regulatory capital
of LCNB and Lebanon Citizens at December 31 follows:
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2001 2000
---------------- ----------------
LCNB Lebanon LCNB Lebanon
Corp. Citizens Corp. Citizens
(Dollars in thousands)
Regulatory Capital:
Shareholders' equity $49,507 42,165 46,310 41,245
Goodwill and other
intangibles (3,729) (3,585) (4,210) (4,157)
Net unrealized securities
losses (gains) (1,196) (1,071) (281) (219)
------ ------ ------ ------
Tier 1 risk-based capital 44,582 37,509 41,819 36,869
Eligible allowance for
loan losses 2,000 2,000 2,000 2,000
------ ------ ------ ------
Total risk-based capital $46,582 $39,509 $43,819 $38,869
====== ====== ====== ======
Capital Ratios:
Total risk-based 15.40% 13.24% 14.88% 13.30%
Tier 1 risk-based 14.74% 12.57% 14.20% 12.62%
Tier 1 leverage 9.46% 8.06% 9.22% 8.21%
Minimum Required Capital Ratios:
Total risk-based 8.00% 8.00% 8.00% 8.00%
Tier 1 risk-based 4.00% 4.00% 4.00% 4.00%
Tier 1 leverage 3.00% 3.00% 3.00% 3.00%
The FDIC, the insurer of deposits in financial institutions, has adopted a
risk-based insurance premium system based in part on an institution's capital
adequacy. Under this system, a depository institution is required to pay
successively higher premiums depending on its capital levels and its
supervisory rating by its primary regulator. It is management's intention to
maintain sufficient capital to permit Lebanon Citizens to maintain a "well
capitalized" designation (the FDIC's highest rating).
On April 17, 2001, LCNBs Board of Directors authorized three separate stock
repurchase programs, to be run consecutively and commence immediately. The
shares purchased will be held for future corporate purposes.
The first stock repurchase program is an Odd Lot Repurchase Program. Under
the terms of this program, LCNB offered to purchase all the shares of any
shareholder who owns 100 or fewer shares of LCNB. Letters were mailed to
eligible shareholders on April 20, 2001, and the offer expired on June 4,
2001. The purchase price was $40 per share, which was the fair market value
per share on April 12, 2001, plus an additional $5.50 premium. All expenses
for this program were paid by LCNB. A total of 455 shares were purchased
from eight shareholders under this program.
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The second repurchase program is a Market Repurchase Program. LCNB will
purchase up to 50,000 shares of its stock through market transactions with a
selected stockbroker. Through December 31, 2001, 7,565 shares had been
purchased under this program.
The third program is a Private Sale Repurchase Program. This program is
available to shareholders who wish to sell large blocks of stock at one time.
Because LCNBs stock is not widely traded, a shareholder releasing large
blocks may not be able to readily sell all shares through normal procedures.
Purchases of blocks will be considered on a case-by-case basis and will be
made at prevailing market prices. A total of 4,977 shares had been purchased
under this program at December 31, 2001. An additional 41,920 shares were
purchased in January, 2002.
Recent Accounting Pronouncements
The Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 141, Business Combinations, and SFAS No.
142, Goodwill and Other Intangible Assets, on July 20, 2001.
SFAS No. 141 provides that all business combinations shall be accounted for
using the purchase method of accounting; the use of the pooling-of-interests
method will be prohibited. The provisions of SFAS No. 141 will apply to all
business combinations initiated after June 30, 2001 or all business
combinations accounted for by the purchase method that are completed after
June 30, 2001. LCNB has not been involved in any recent business combination
discussions.
SFAS No. 142 provides that goodwill shall not be amortized but should be
tested for impairment on an annual basis, using criteria prescribed in this
statement. If the carrying amount of goodwill exceeds its implied fair
value, as recalculated, an impairment loss equal to the excess shall be
recognized. Recognized intangible assets other than goodwill should be
amortized over their useful lives and reviewed for impairment in accordance
with SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of(superceded by SFAS No. 144, see
discussion which follows). SFAS No. 142 will be effective for fiscal years
beginning after December 15, 2001.
LCNBs intangible assets at December 31, 2001 are classified as intangible
assets other than goodwill. Approximately $3.6 million of the intangibles
recorded on the consolidated balance sheet at December 31, 2001 represents
the remaining unamortized intangible related to LCNBs 1997 acquisition of
three branch offices from another bank. The intangible is being amortized
over ten years in accordance with SFAS No. 72, Accounting for Certain
Acquisitions of Banking or Thrift Institutions, which was not superseded by
SFAS No. 142. During December, 2001, the FASB announced it will undertake a
limited-scope project to reconsider part of the guidance in SFAS No. 72.
Issuance of a final statement is not expected until the fourth quarter of
2002.
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SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of, was issued by the FASB on
October 3, 2001 and is effective for fiscal years beginning after December
15, 2001. This statement effectively supersedes SFAS No. 121 and Accounting
Principles Board (APB) Opinion No. 30 and requires that long-lived assets,
including discontinued operations, that are to be disposed of by sale be
measured at the lower of carrying amount or fair value less cost to sell.
The statement also resolves certain implementation issues regarding SFAS No.
121. This statement is not expected to have a material impact on LCNBs
statements of financial condition or results of operations.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market risk for LCNB is primarily interest rate risk. LCNB attempts to
mitigate this risk through asset/liability management strategies designed to
decrease the vulnerability of its earnings to material and prolonged changes
in interest rates. LCNB does not use derivatives such as interest rate
swaps, caps or floors to hedge this risk. LCNB has not entered into any
market risk instruments for trading purposes. Lebanon Citizens' Asset and
Liability Management Committee ("ALCO") primarily uses Interest Rate
Sensitivity Gap Analysis, also known as repricing mismatch analysis, for
measuring and managing interest rate risk.
Interest Rate Sensitivity Gap Analysis
A traditional gap analysis provides a point-in-time measurement of the
relationship between the amounts of interest rate sensitive assets and
liabilities in a given time period. An asset or liability is interest rate
sensitive within a specific time period if it will mature or reprice within
that time period. If liabilities mature or reprice more quickly or to a
greater extent than assets, net interest income would tend to decrease during
periods of rising interest rates but increase during periods of falling
interest rates. Conversely, if liabilities mature or reprice more slowly or
to a lesser extent than assets, net interest income would tend to increase
during periods of rising interest rates but decrease during periods of
falling interest rates. ALCO strives to maintain a range for the
relationship of rate sensitive assets to rate sensitive liabilities for gap
analysis purposes of from 75 to 125 percent for the one-year and two- to
four-year periods.
The following table reflects LCNBs gap analysis at December 31, 2001.
The amounts reported in the table are the principal cash flows of rate
sensitive assets and liabilities by expected maturity or repricing timeframe.
Also presented is the related weighted average interest rate. Fixed rate
real estate mortgage loans and mortgage-backed securities are allocated to
the various maturity/repricing periods based on contractual maturities
adjusted for expected prepayments under the current market interest rate
environment. Deposit liabilities without contractual maturities such as NOW
and savings accounts are allocated to the various repricing periods based on
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an analysis of forecasted account run-off that takes into consideration the
relatively stable nature of these core deposits. The gap analysis indicates
that LCNBs earnings are sensitive to the repricing of liabilities in
the first year, sensitive to repricing of assets in the second through the
fourth year, and asset sensitive thereafter. The aggregate ratio of rate
sensitive assets to rate sensitive liabilities is 85.94% for the first year
and 152.87% for years two through four. With the current relatively low
market interest rate environment, management believes the ratios for the one
year and two to four year time frames do not expose LCNBs net interest
income to significant risk.
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Expected Maturity/Repricing
---------------------------
2002 2003 2004 2005 2006 Thereafter Total Fair Value
(Dollars in thousands)
ASSETS
Loans: (1)
Fixed rate $ 33,421 23,527 23,138 19,802 16,073 87,454 203,415 206,381
Average interest rate 8.97% 8.82% 8.63% 8.45% 8.24% 8.18%
Variable rate 66,049 12,119 31,380 5,696 1,688 6,210 123,142 123,142
Average interest rate 5.95% 7.93% 7.23% 8.09% 9.31% 7.85%
Securities available
for sale (2) 12,036 13,767 15,492 11,293 11,344 32,867 96,799 98,610
Average interest rate (3) 4.86% 5.09% 5.50% 5.60% 5.45% 7.17%
Federal funds sold 19,950 - - - - - 19,950 19,950
Average interest rate 3.50% - - - - -
Total earning assets 131,456 49,413 70,010 36,791 29,105 126,531 443,306 448,083
Average interest rate 6.24% 7.57% 7.31% 7.52% 7.21% 7.90%
LIABILTIES
NOW and money fund 11,195 4,964 4,964 4,964 4,964 44,913 75,964 75,964
Average interest rate 1.24% 1.13% 1.13% 1.13% 1.13% 1.16%
Savings 38,670 3,107 3,107 3,107 3,107 50,596 101,694 101,694
Average interest rate 1.46% 1.46% 1.46% 1.46% 1.46% 1.46%
IRAs
Fixed rate 8,906 3,170 3,248 4,954 1,697 985 22,960 23,757
Average interest
rate 5.41% 4.87% 4.94% 6.12% 5.14% 6.62%
Variable rate 6,667 3,109 - - - - 9,776 9,776
Average interest
rate 2.70% 2.57% - - - -
CDs over $100,000 24,397 4,019 6,050 3,250 1,410 - 39,126 39,349
Average interest rate 4.85% 4.97% 4.28% 4.68% 5.02% -
CDs under $100,000 61,076 17,446 13,926 10,622 2,756 289 106,115 109,023
Average interest rate 4.52% 4.53% 4.54% 5.05% 5.07% 6.36%
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Long term debt 2,053 2,056 4,060 2,064 2,067 6 12,306 12,693
Average interest rate 7.55% 3.68% 6.06% 7.67% 5.55% 6.00%
Total interest-bearing
liabilities 152,964 37,871 35,355 28,961 16,001 96,789 367,941 372,254
Average interest rate 3.57% 3.70% 3.96% 4.32% 3.21% 1.39%
Period gap $(21,508) 11,542 34,655 7,830 13,104 29,742
Cumulative gap $(21,508) (9,966) 24,689 32,519 45,623 75,365
Ratio of rate sensitive assets to rate sensitive liabilities:
First twelve months 85.94%
Years two through four 152.87%
Thereafter 130.73%
(1) Excludes adjustments for deferred net origination costs and allowance for loan losses.
(2) At amortized cost.
(3) Rates for tax-exempt securities are adjusted to a taxable equivalent rate.
-38-
Item 8. Financial Statements and Supplementary Data
The Financial Statements required by this item are incorporated herein by
reference to pages 15 through 24 of the Registrants 2001 LCNB Corp. Annual
Report attached to this filing as Exhibit 13.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures. - None
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PART III
Portions of the Proxy Statement included in the Notice of Annual Meeting
of Shareholders to be held April 16, 2002, dated March 16, 2002, are
incorporated by reference into Part III.
Item 10. Directors and Executive Officers of the Registrant
The information contained in the Notice of Annual Meeting of Shareholders
and Proxy Statement (dated March 16, 2002), relating to Directors and
Executive Officers of the Registrant, is incorporated herein by reference.
Item 11. Executive Compensation
The information contained in the Notice of Annual Meeting of Shareholders
and Proxy Statement (dated March 16, 2002), relating to Compensation of
Directors and Executive Officers, is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information contained in the Notice of Annual Meeting of Shareholders
and Proxy Statement (dated March 16, 2002), relating to Section 16(a)
Beneficial Ownership Reporting Compliance is incorporated herein by
reference.
Item 13. Certain Relationships and Related Transactions
The information contained in the Notice of Annual Meeting of Shareholders
and Proxy Statement (dated March 16, 2002), relating to Certain
Relationships and Related Transactions, is incorporated herein by
Reference.
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PART IV
Item 14. Exhibits, Financial Statements and Reports on 8-K
1. Financial Statements
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Shareholders Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
2. Financial Statement Schedules
None
3. Exhibits required by Item 601 Regulation S-K.
(a)Exhibit No. Exhibit Description
---------- -------------------
3.1 Articles of Incorporation of LCNB Corp.(1)
3.2 Code of Regulations of LCNB Corp.(2)
13 Portions of LCNB Corp. 2001 Annual Report (pages 2-3
and 15-24)
21 LCNB Corp. Subsidiaries
(1) Incorporated by reference to Registrants 1999 Form 10-K,
Exhibit 3.1.
(2) Incorporated by reference to Registrants Registration
Statement on Form S-4, Exhibit 3.2, Registration
No. 333-70913.
(b)Reports on Form 8-K
There were no Form 8-Ks filed with the SEC in the fourth quarter
of 2001.
-41-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
LCNB Corp.
(Registrant)
/s/Stephen P. Wilson
----------------------------
President and Chairman of
the Board of Directors
February 11, 2002
Pursuant to the requirements of the Securities Act of 1934, this report
has been signed below by the following persons in the capacities and on
the dates indicated:
/s/Steve P. Foster /s/James B. Miller
- --------------------- ---------------------
Steve P. Foster James B. Miller
Executive Vice President Director
And Chief Financial Officer February 11, 2002
February 11, 2002
/s/David S. Beckett /s/Corwin M. Nixon
- --------------------- ---------------------
David S. Beckett Corwin M. Nixon
Director Director
February 11, 2002 February 11, 2002
/s/Robert C. Cropper /s/Kathleen Porter Stolle
- --------------------- -------------------------
Robert C. Cropper Kathleen Porter Stolle
Director Director
February 11, 2002 February 11, 2002
/s/William H. Kaufman /s/Howard E. Wilson
- --------------------- ----------------------
William H. Kaufman Howard E. Wilson
Director Director
February 11, 2002 February 11, 2002
/s/George L. Leasure /s/Marvin E. Young
- --------------------- ----------------------
George L. Leasure Marvin E. Young
Director Director
February 11, 2002 February 11, 2002
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