UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2003
Commission File Number 000-26121
LCNB Corp.
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(Exact name of registrant as specified in its charter)
OHIO 31-1626393
- ------------------------------- -------------------------------
(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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(Registrant's telephone number, including area code)
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 whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes X No
The number of shares outstanding of the issuer's common stock, without par
value, as of November 3, 2003, was 1,688,012 shares.
LCNB Corp.
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets -
September 30, 2003, and December 31, 2002 . . . . . . . . . . 1
Consolidated Statements of Income -
Three and nine months Ended September 30, 2003 and 2002 . . . 2
Consolidated Statements of Comprehensive Income -
Three and nine months Ended September 30, 2003 and 2002 . . . 3
Consolidated Statements of Shareholders' Equity -
Nine Months Ended September 30, 2003 and 2002 . . . . . . . . 4
Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 2003 and 2002 . . . . . . . . 5
Notes to Consolidated Financial Statements . . . . . . . . .6-10
Independent Accountants' Review Report . . . . . . . . . . . .11
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . 12-24
Item 3. Quantitative and Qualitative Disclosures
about Market Risks . . . . . . . . . . . . . . . . . . . . . . . .25
Item 4. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . .25
Part II. Other Information
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . .26
Item 2. Changes in Securities and Use of Proceeds . . . . . . . . . .26
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . .26
Item 4. Submission of Matters to a Vote of Security Holders . . . . .26
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . .26
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . .27
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
Part I - Financial Information
Item 1. Financial Statements
LCNB Corp. and Subsidiaries
Consolidated Balance Sheets
(thousands)
September 30, December 31,
2003 2002
(unaudited) (a)
ASSETS:
Cash and due from banks $ 20,119 13,679
Federal funds sold 16,750 11,925
------- -------
Total cash and cash equivalents 36,869 25,604
------- -------
Securities available for sale, at
market value 146,914 136,178
Federal Reserve Bank stock and
Federal Home Loan Bank stock, at cost 2,938 2,871
Loans 317,860 324,832
Less-allowance for loan losses 2,075 2,000
------- -------
Net loans 315,785 322,832
------- -------
Premises and equipment, net 11,807 11,688
Intangible assets 2,996 3,121
Other assets 4,473 4,457
------- -------
TOTAL ASSETS $521,782 506,751
======= =======
LIABILITIES:
Deposits-
Noninterest-bearing $ 64,831 58,921
Interest-bearing 395,548 383,299
------- -------
Total deposits 460,379 442,220
Long-term debt 6,211 6,253
Accrued interest and other liabilities 3,460 6,348
------- -------
TOTAL LIABILITIES 470,050 454,821
------- -------
SHAREHOLDERS' EQUITY:
Common stock-no par value,
authorized 4,000,000 shares; issued
and outstanding 1,775,942 shares 10,560 10,560
Surplus 10,553 10,553
Retained earnings 32,893 30,768
Treasury shares, at cost,
86,730 and 54,917 shares at September 30,
2003 and December 31, 2002, respectively (4,214) (2,193)
Accumulated other comprehensive
income, net of taxes 1,940 2,242
------- -------
TOTAL SHAREHOLDERS' EQUITY 51,732 51,930
------- -------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $521,782 506,751
======= =======
(a) Financial information as of December 31, 2002, has been derived from
the audited, consolidated financial statements of the Registrant.
The accompanying notes to the consolidated financial statements are an
integral part of these statements.
-1-
LCNB Corp. and Subsidiaries
Consolidated Statements of Income
(In thousands except per share data)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ----------------
2003 2002 2003 2002
INTEREST INCOME:
Interest and fees on loans $5,325 6,286 16,633 18,713
Dividends on Federal Reserve Bank
and Federal Home Loan Bank stock 23 26 87 94
Interest on investment securities-
Taxable 741 879 2,245 2,294
Non-taxable 532 476 1,595 1,314
Other short-term investments 40 70 132 258
----- ----- ------ ------
TOTAL INTEREST INCOME 6,661 7,737 20,692 22,673
----- ----- ------ ------
INTEREST EXPENSE:
Interest on deposits 1,978 2,584 6,489 7,643
Interest on short-term borrowings 2 3 5 10
Interest on long-term borrowings 72 144 211 503
----- ----- ------ ------
TOTAL INTEREST EXPENSE 2,052 2,731 6,705 8,156
----- ----- ------ ------
NET INTEREST INCOME 4,609 5,006 13,987 14,517
PROVISION FOR LOAN LOSSES 204 122 421 247
------ ----- ------ ------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 4,405 4,884 13,566 14,270
----- ----- ------ ------
NON-INTEREST INCOME:
Trust income 268 255 757 786
Service charges and fees 827 602 2,166 1,781
Net gain on sale of securities 3 408 3 429
Insurance agency income 307 308 1,067 832
Gains from sales of mortgage loans 233 62 735 96
Other operating income 38 31 103 97
----- ----- ------ ------
TOTAL NON-INTEREST INCOME 1,676 1,666 4,831 4,021
----- ----- ------ ------
NON-INTEREST EXPENSE:
Salaries and wages 1,744 1,684 5,155 4,923
Pension and other employee benefits 418 390 1,314 1,275
Equipment expenses 262 286 748 601
Occupancy expense, net 281 261 830 774
State franchise tax 133 128 396 400
Marketing 124 107 284 307
Intangible amortization 154 154 456 455
ATM expense 76 86 219 300
Other non-interest expenses 845 1,379 2,445 2,861
----- ----- ------ ------
TOTAL NON-INTEREST EXPENSE 4,037 4,475 11,847 11,896
----- ----- ------ ------
INCOME BEFORE INCOME TAXES 2,044 2,075 6,550 6,395
PROVISION FOR INCOME TAXES 518 589 1,720 1,807
----- ----- ------ ------
NET INCOME $1,526 1,486 4,830 4,588
===== ===== ====== ======
Dividends declared per common share $0.525 0.50 1.575 1.50
Earnings per common share:
Basic $ 0.89 0.86 2.82 2.66
Diluted $ 0.89 0.86 2.82 2.66
Average shares outstanding (000's):
Basic 1,708 1,721 1,716 1,725
Diluted 1,708 1,721 1,716 1,725
The accompanying notes to the consolidated financial statements are an
integral part of these statements.
-2-
LCNB Corp. and Subsidiaries
Consolidated Statements of Comprehensive Income
(In thousands)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ----------------
2003 2002 2003 2002
Net income $1,526 1,486 4,830 4,588
Other comprehensive income:
Net unrealized gain (loss) on
available-for-sale securities
(net of taxes of $(804), $196,
$(155), and $690 for the
respective periods) (1,561) 381 (300) 1,340
Reclassification adjustment for
net realized gain on sale of
available-for-sale securities
included in net income (net of
taxes of $1, $139, $1, and
$146 for the respective periods) (2) (269) (2) (283)
----- ----- ----- -----
Total comprehensive income $ (37) 1,598 4,528 5,645
===== ===== ===== =====
-3-
LCNB Corp. and Subsidiaries
Consolidated Statements of Shareholders' Equity
(thousands)
(unaudited)
Accumulated
Other Total
Common Retained Treasury Comprehensive Shareholders'
Shares Surplus Earnings Shares Income Equity
Balance January 1,2002 $10,560 10,553 27,714 (516) 1,196 49,507
Net income 4,588 4,588
Change in estimated fair value
of securities available-for-
sale, net of tax and
reclassification adjustment 1,057 1,057
Treasury shares purchased (1,677) (1,677)
Cash dividends declared -
$1.00 per share (2,582) (2,582)
------ ------ ------ ------ ------ ------
Balance September 30, 2002 $10,560 10,553 29,720 (2,193) 2,253 50,893
====== ====== ====== ====== ====== ======
Balance January 1,2003 $10,560 10,553 30,768 (2,193) 2,242 51,930
Net income 4,830 4,830
Change in estimated fair value
of securities available-for-
sale, net of tax and
reclassification adjustment (302) (302)
Treasury shares purchased (2,021) (2,021)
Cash dividends declared -
$1.575 per share (2,705) (2,705)
------ ------ ------ ------ ------ ------
Balance September 30, 2003 $10,560 10,553 32,893 (4,214) 1,940 51,732
====== ====== ====== ====== ====== ======
The accompanying notes to the consolidated financial statements are an
integral part of these statements.
-4-
LCNB Corp. and Subsidiaries
Consolidated Statements of Cash Flows
(thousands)
(unaudited)
Nine Months Ended
September 30,
------------------
2003 2002
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,830 4,588
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, amortization, and accretion 2,370 1,796
Provision for loan losses 421 247
Deferred income taxes (benefit) 207 (117)
Realized gain on sales of securities
available for sale (3) (429)
Origination of mortgage loans for sale (33,900) (6,654)
Proceeds from sales of mortgage loans 34,276 6,750
(Increase) decrease in income receivable (60) (147)
(Increase) decrease in other assets (749) (193)
Increase (decrease) in other liabilities (302) (491)
------ ------
NET CASH PROVIDED BY OPERATING ACTIVITIES 7,090 5,350
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of securities available for sale 1,775 25,739
Proceeds from maturities of securities available
for sale 36,054 16,580
Purchases of securities available for sale (50,004) (68,253)
Net decrease (increase) in loans 6,493 (6,864)
Purchases of premises and equipment (897) (834)
------ ------
NET CASH USED IN INVESTING ACTIVITIES (6,579) (33,632)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in deposits 18,159 30,900
Net change in short-term borrowings (2,637) 2,148
Principal payments on long-term debt (42) (6,039)
Cash dividends paid (2,705) (2,582)
Purchases of treasury shares (2,021) (1,677)
------ ------
NET CASH PROVIDED BY FINANCING ACTIVITIES 10,754 22,750
------ ------
NET CHANGE IN CASH AND CASH EQUIVALENTS 11,265 (5,532)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 25,604 34,236
------ ------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $36,869 28,704
====== ======
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 6,858 8,417
Income taxes paid 1,720 1,876
The accompanying notes to the consolidated financial statements are an
integral part of these statements.
-5-
LCNB Corp. and Subsidiaries
Notes to the Consolidated Financial Statements
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
Substantially all of the assets, liabilities and operations of LCNB Corp.
("LCNB") are attributable to its wholly owned subsidiaries, Lebanon Citizens
National Bank ("Lebanon Citizens") and Dakin Insurance Agency, Inc. ("Dakin").
The accompanying unaudited consolidated financial statements include the
accounts of LCNB, Lebanon Citizens, and Dakin.
The statements have been prepared in accordance with U.S. generally accepted
accounting principles for interim financial information and the instructions
to Form 10-Q. Accordingly, they do not include all of the information and
footnotes required by U.S. generally accepted accounting principles for
complete financial statements. In the opinion of management, the unaudited
consolidated financial statements include all adjustments (consisting of
normal, recurring accruals) considered necessary for a fair presentation of
financial position, results of operations and cash flows for the interim
periods.
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Results of operations for the three and nine months ended September 30, 2003
are not necessarily indicative of the results to be expected for the full year
ending December 31, 2003. These unaudited consolidated financial statements
should be read in conjunction with the consolidated financial statements,
accounting policies and financial notes thereto included in LCNB's 2002
Form 10-K filed with the Securities and Exchange Commission.
The financial information presented on pages one through ten of this
Form 10-Q has been subject to a review by J.D. Cloud & Co., L.L.P., LCNB's
independent certified public accountants, as described in their report on
page 11.
NOTE 2 - EARNINGS PER SHARE
Basic earnings per share is calculated by dividing net income by the weighted
average number of common shares outstanding during the period. Diluted
earnings per share is adjusted for the dilutive effects of stock options.
The diluted average number of common shares outstanding has been increased
for the assumed exercise of stock options with proceeds used to purchase
treasury shares at the average market price for the period.
-6-
LCNB Corp. and Subsidiaries
Notes to the Consolidated Financial Statements
(Unaudited)
(Continued)
NOTE 3 - INVESTMENT SECURITIES
Available-for-sale investment securities, recorded at estimated market value,
consist of the following (thousands):
September 30, December 31,
2003 2002
-------- -----------
U.S. Treasury notes $ 2,171 1,019
U.S. Agency notes 55,259 47,089
U.S. Agency mortgage-backed securities 20,860 19,052
Municipal securities:
Non-taxable 56,536 56,856
Taxable 12,088 12,162
------- -------
$146,914 136,178
======= =======
NOTE 4 - LOANS
Major classifications of loans at September 30, 2003 and December 31, 2002 are
as follows (thousands):
September 30, December 31,
2003 2002
-------- -----------
Commercial and industrial $ 32,031 35,198
Commercial, secured by real estate 96,016 80,882
Residential real estate 136,928 151,502
Consumer, excluding credit card 47,096 51,184
Agricultural 1,751 1,314
Credit card 2,681 2,689
Other loans 137 57
Lease financing 612 1,256
------- -------
317,252 324,082
Deferred net origination costs 608 750
------- -------
317,860 324,832
Allowance for loan losses (2,075) (2,000)
------- -------
Loans - net $315,785 322,832
======= =======
-7-
LCNB Corp. and Subsidiaries
Notes to the Consolidated Financial Statements
(Unaudited)
(Continued)
NOTE 4 - LOANS (continued)
Mortgage loans sold to and serviced for the Federal Home Loan Mortgage
Corporation ("FHLMC") are not included in the accompanying balance sheets.
The unpaid principal balances of those loans at September 30, 2003 and
December 31, 2002 were $55,636,000 and $36,592,000, respectively. Loans sold
to the FHLMC during the three and nine months ended September 30, 2003 totaled
$11,785,000 and $33,900,000, respectively, and $3,849,000 and $6,654,000
during the three and nine months ended September 30, 2002, respectively.
Mortgage servicing rights on originated mortgage loans that have been sold
are capitalized by allocating the total cost of the loans between mortgage
servicing rights and the loans based on their relative fair values.
Approximately $139,000 and $359,000 in mortgage servicing rights were
capitalized during the three and nine months ended September 30, 2003,
respectively, and are being amortized to loan servicing income in proportion
to and over the period of estimated servicing income.
Changes in the allowance for loan losses were as follows (thousands):
For the Nine Months Ended
September 30,
2003 2002
--------- ---------
Balance - beginning of year $2,000 2,000
Provision for loan losses 421 247
Charge-offs (385) (275)
Recoveries 39 28
----- -----
Balance - end of period $2,075 2,000
===== =====
Charge-offs for the nine months ended September 30, 2003 and 2002, consisted
of consumer and credit card loans. There were no charge-offs on residential
real estate or commercial loans for either period.
There were four nonaccrual loans to two borrowers totaling $721,000 at
September 30, 2003. Two were commercial loans to the same borrower totaling
$614,000 and the other two were real estate mortgage loans on the same
property totaling $107,000. Lebanon Citizens is currently negotiating with
the borrower to re-write the commercial loans and obtain additional security.
Foreclosure proceedings have been initiated on the mortgage loans. There were
no nonaccrual loans at December 31, 2002. At September 30, 2003 and December
31, 2002, loans past due 90 days or more and still accruing were $645,000 and
$232,000, respectively.
NOTE 5 - OTHER BORROWINGS
At September 30, 2003 and December 31, 2002, accrued interest and other
liabilities included U.S. Treasury demand note borrowings of approximately
$385,000 and $3,022,000, respectively.
-8-
LCNB Corp. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
(Continued)
NOTE 6 - COMMITMENTS AND CONTINGENT LIABILITIES
LCNB is a party to financial instruments with off-balance-sheet risk in the
normal course of business to meet the financing needs of its customers. These
financial instruments included commitments to extend credit. They involve, to
varying degrees, elements of credit and interest rate risk in excess of the
amount recognized in the balance sheets. Exposure to credit loss in the event
of nonperformance by the other parties to financial instruments for
commitments to extend credit is represented by the contract amount of those
instruments.
LCNB uses the same credit policies in making commitments and conditional
obligations as it does for on-balance-sheet instruments. Financial
instruments containing contract amounts that represent off-balance-sheet
credit risk at September 30, 2003 and December 31, 2002 were as follows
(thousands):
September 30, December 31,
2003 2002
--------- ---------
Commitments to extend credit $78,096 69,521
Standby letters of credit 6,700 6,938
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses. Standby letters of credit are conditional commitments issued to
guarantee the performance of a customer to a third party. At September 30,
2003 and December 31, 2002, outstanding guarantees of $1,810,000 and
$2,048,000, respectively, were issued to developers and contractors. These
guarantees generally expire within one year and are fully secured by funds
placed on deposit with Lebanon Citizens. In addition, LCNB has an
approximate $5 million participation at September 30, 2003 and December 31,
2002 in a letter of credit securing payment of principal and interest on a
bond issue. This letter of credit will expire July 15, 2006, and is secured
by an assignment of rents and the underlying real property.
LCNB evaluates each customer's credit worthiness on a case-by-case basis.
The amount of collateral obtained, if deemed necessary, is based on
management's credit evaluation of the borrower. Collateral held varies, but
may include accounts receivable; inventory; property, plant and equipment;
residential realty; and income-producing commercial properties.
LCNB and its subsidiaries are parties to various claims and proceedings
arising in the normal course of business. Management, after consultation
with legal counsel, believes that the liabilities, if any, arising from such
proceedings and claims will not be material to the consolidated financial
position or results of operations.
-9-
LCNB Corp. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
(Continued)
NOTE 7 - STOCK OPTIONS
LCNB established an Ownership Incentive Plan (the "Plan") during 2002 that
allows for stock-based awards to eligible employees. The awards may be in
the form of stock options, share awards, and/or appreciation rights. The
Plan provides for the issuance of up to 50,000 shares. No awards were
granted during 2002. Stock options for 2,764 shares were granted to key
executive officers of LCNB during the first quarter, 2003.
LCNB accounts for the Plan under the recognition and measurement principles
of Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock
Issued to Employees, and Related Interpretations. No stock-based employee
compensation cost is reflected in net income, as all options granted had an
exercise price equal to the market value of the underlying common stock on
the date of grant. The pro-forma effect on net income and earnings per share
if LCNB had applied the fair value recognition provisions of Statement of
Financial Accounting Standards ("SFAS") No. 123, Accounting for Stock-Based
Compensation, to stock-based employee compensation was not material. Because
this is the first year stock options were outstanding, this year's pro-
forma effect is not indicative of the pro-forma effect on future quarters and
years.
NOTE 8 - ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards ("SFAS") No. 149, Amendment of
Statement 133 on Derivative Instruments and Hedging Activities, was issued in
April, 2003. It amends and clarifies financial accounting and reporting for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities accounted for under SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. LCNB does not
currently hold any security investments of the types covered by this SFAS and
is therefore not affected by its provisions.
SFAS No. 150, Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity, was issued in May, 2003, and
establishes new accounting standards for classification and measurement of
certain financial instruments with characteristics of both assets and
liabilities. Many of the instruments covered by the scope of SFAS No. 150
were previously classified as equity; SFAS No. 150 requires that they be
classified as liabilities or, in certain circumstances, as assets. LCNB does
not currently hold any security investments with such characteristics and
SFAS No. 150 therefore has no effect on LCNB Corp.'s financial statements.
-10-
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
To the Board of Directors and Shareholders
LCNB Corp. and subsidiaries
Lebanon, Ohio
We have reviewed the accompanying consolidated balance sheet of LCNB Corp.
and subsidiaries as of September 30, 2003, and the related consolidated
statements of income and comprehensive income for each of the three-month and
nine-month periods ended September 30, 2003 and 2002, and the related
consolidated statements of cash flows and shareholders' equity for each of
the nine-month periods ended September 30, 2003 and 2002. These financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with U.S. generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying consolidated interim financial statements
for them to be in conformity with U.S. generally accepted accounting
principles.
We previously audited, in accordance with U.S. generally accepted auditing
standards, the consolidated balance sheet of LCNB Corp. and subsidiaries as of
December 31, 2002 (presented herein), and the related consolidated statements
of income, shareholders' equity, and cash flows for the year then ended (not
presented herein), and in our report dated January 24, 2003, we expressed an
unqualified opinion on those consolidated financial statements. In our
opinion, the information set forth in the accompanying consolidated balance
sheet as of December 31, 2002, is fairly stated in all material respects.
/s/ J.D. Cloud & Co. L.L.P.
Cincinnati, Ohio
October 21, 2003
-11-
LCNB Corp. and Subsidiaries
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
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.
RESULTS OF OPERATIONS
LCNB earned $1,526,000 for the three months ended September 30, 2003 compared
to $1,486,000 for the three months ended September 30, 2002. Basic earnings
per share was $0.89 and $0.86 for the three months ended September 30, 2003
and 2002, respectively. The return on average assets (ROAA) was 1.17% and the
return on average equity (ROAE) was 11.33% for the third quarter of 2003,
compared with an ROAA of 1.17% and an ROAE of 11.73% for the third quarter of
2002.
LCNB earned $4,830,000, or $2.82 basic earnings per share, during the first
nine months of 2003 compared to $4,588,000, or $2.66 basic earnings per share,
for the first nine months of 2002. The ROAA and ROAE for the first nine
months of 2003 were 1.25% and 12.12%, respectively. The comparable ratios for
the first nine months of 2002 were 1.25% and 12.30%, respectively.
NET INTEREST INCOME
LCNB's primary source of earnings is net interest income, which is the
difference between earnings from loans and other investments and interest paid
on deposits and other liabilities. The following table presents, for the
three and nine months ended September 30, 2003 and 2002, average balances for
interest-earning assets and interest-bearing liabilities, the income or
expense related to each item, and the resultant average yields earned or rates
paid.
-12-
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ----------------
2003 2002 2003 2002
(Dollars in thousands)
Interest-earning Assets:
Average balance (1) $488,362 472,993 483,819 460,475
Interest income (2) 6,939 7,990 21,527 23,373
Average rate 5.64% 6.70% 5.95% 6.79%
Interest-bearing Liabilities:
Average balance 397,404 390,743 395,046 381,104
Interest expense 2,052 2,731 6,705 8,156
Average rate 2.05% 2.77% 2.27% 2.86%
Net interest income 4,887 5,259 14,822 15,217
Net interest margin on a
taxable-equivalent basis (3) 3.97% 4.41% 4.10% 4.42%
(1) Includes nonaccrual loans, if any.
(2) Income from tax-exempt securities and loans is included in interest
income on a taxable basis. Interest income has been divided by a
factor comprised of the complement of the incremental tax rate of 34%.
(3) The net interest margin is the taxable-equivalent net interest income
divided by average interest-earning assets.
THREE MONTHS ENDED SEPTEMBER 30, 2003 VS. 2002. The following table presents
the changes in taxable-equivalent basis 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 three
months ended September 30, 2003 as compared to the comparable period in 2002.
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.
-13-
Three Months Ended
September 30,
2003 vs 2002
--------------------------
Increase (decrease) due to:
Volume Rate Total
(In thousands)
Interest-earning Assets
Loans $(262) (703) (965)
Federal funds sold (1) (29) (30)
Federal Reserve Bank stock - - -
Federal Home Loan Bank stock 1 (4) (3)
Investment securities
Taxable 225 (363) (138)
Nontaxable 116 (31) 85
--- ----- -----
Total interest income 79 (1,130) (1,051)
Interest-bearing Liabilities
Deposits 63 (669) (606)
Short-term borrowings (1) - (1)
Long-term debt (35) (37) (72)
--- ----- -----
Total interest expense 27 (706) (679)
--- ----- -----
Net interest income $ 52 (424) (372)
=== ===== =====
Net interest income on a fully taxable-equivalent basis for the three months
ended September 30, 2003 totaled $4,887,000, a decrease of $372,000 from the
comparable period in 2002. The decrease was primarily due to continued
tightening in the net interest margin, from 4.41% for the third quarter, 2002
to 3.97% for the third quarter, 2003, caused by historically low market
interest rates. The net interest margin (net interest income divided by
average total earning assets) is a measure of the revenue generated by a
financial institution's earning assets, after deducting interest expense.
The net interest margin and net interest income decreased due to rates paid
for deposits and other borrowings decreasing less rapidly than rates earned
on loans and other investments.
-14-
Total taxable-equivalent interest income decreased $1,051,000 from 2002 to
2003 primarily due to a 106 basis point reduction in the average rate earned
on earning assets, from 6.70% for the third quarter of 2002 to 5.64% for the
third quarter of 2003. This decrease was partially offset by a $15.4 million
increase in average total earning assets. Average investment securities
increased $29.7 million, partially offset by a $14.3 million decrease in
average loans. Average loans decreased primarily because of payoffs from loan
refinances and sales of new fixed-rate residential loans to the Federal Home
Loan Mortgage Corporation.
The decrease in total interest income was partially offset by a $679,000
decrease in total interest expense. This decrease was due to a 72 basis point
decrease in the average rate paid, slightly offset by a $6.7 million increase
in average interest-bearing liabilities. Average interest-bearing deposits
increased $9.5 million, while average long-term debt decreased $2.5 million.
The deposit increase was primarily in regular savings and NOW account
products, which increased $24.9 million on an average basis. IRAs and
certificates of deposit decreased $15.4 million on an average basis when
comparing the same periods. Management believes this is reflective of
customer preference for highly liquid, short-term investment products during
the current rate cycle. The decrease in long-term debt is due to the
maturation of a $2.0 million Federal Home Loan Bank advance in June, 2002,
and the early payoff of two other advances totaling $4.0 million during
August, 2002.
NINE MONTHS ENDED SEPTEMBER 30, 2003 VS. 2002. The following table presents
the changes in taxable-equivalent basis 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 nine
months ended September 30, 2003 as compared to the comparable period in 2002.
Nine Months Ended
September 30,
2003 vs 2002
--------------------------
Increase (decrease) due to:
Volume Rate Total
(In thousands)
Interest-earning Assets
Loans $(346) (1,744) (2,090)
Federal funds sold (51) (75) (126)
Federal Home Loan Bank stock 3 (10) (7)
Investment securities
Taxable 640 (689) (49)
Nontaxable 560 (134) 426
--- ----- -----
Total interest income 806 (2,652) (1,846)
Interest-bearing Liabilities
Deposits 374 (1,528) (1,154)
Short-term borrowings (2) (3) (5)
Long-term debt (179) (113) (292)
---- ----- -----
Total interest expense 193 (1,644) (1,451)
---- ----- -----
Net interest income $ 613 (1,008) (395)
==== ===== =====
-15-
Net interest income on a fully taxable-equivalent basis for the first nine
months of 2003 totaled $14,822,000, a decrease of $395,000 from the first nine
months of 2002. The net interest margin for the nine months ended September
30, 2003 was 4.10% compared to 4.42% for the same period in 2002.
Total interest income decreased $1,846,000 from 2002 to 2003 primarily due to
an 84 basis point decrease in the average rate earned on earning assets, from
6.79% for the nine months ended September 30, 2002 to 5.95% for the same
period in 2003. This decrease was partially offset by a $23.3 million
increase in average total earning assets. Average investment securities
increased $34.3 million, partially offset by a $6.1 million decrease in
average loans and a $4.9 million decrease in average federal funds sold.
Average loans decreased for the same reasons discussed previously in the
"THREE MONTHS ENDED SEPTEMBER 30, 2003 VS. 2002" section.
The decrease in total interest income was partially offset by $1,451,000
decrease in total interest expense. The decrease in total interest expense
was due to a 59 basis point decrease in the average rate paid, slightly offset
by a $13.9 million increase in average interest-bearing liabilities. Average
interest-bearing deposits increased $18.8 million and average long-term debt
decreased $4.6 million for substantially the same reasons discussed in the
previous section.
PROVISION 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. Factors taken into consideration to determine the adequacy
of the allowance include historic loan loss experience; the nature, volume,
and consistency of the loan portfolio; overall portfolio quality; a review of
specific problem loans; and current economic conditions that may affect
borrowers ability to pay. The total loan loss provision and the other changes
in the allowance for loan losses are shown below.
Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
(In thousands)
Balance, beginning of period $2,003 2,000 2,000 2,000
----- ----- ----- -----
Charge-offs 137 129 385 275
Recoveries 5 7 39 28
----- ----- ----- -----
Net charge-offs 132 122 346 247
----- ----- ----- -----
Provision for loan losses 204 122 421 247
----- ----- ----- -----
Balance, end of period $2,075 2,000 2,075 2,000
===== ===== ===== =====
-16-
The increase in the balance of the allowance for loan losses reflects
increased consumer delinquencies and charge-offs and a portfolio with a
heavier weighting of commercial loans, which are generally riskier than
residential mortgage loans.
Management endeavors to use the best information available in determining the
adequacy of the allowance for loan losses and believes the allowance is
adequate for the dates shown above. Actual results and economic conditions,
however, may differ substantially from the assumptions used above, requiring
future adjustments to the allowance.
Charge-offs for the first nine months of 2003 and 2002 are attributable to:
Three Months Ended Nine months ended
September 30, September 30,
2003 2002 2003 2002
(In thousands)
Commercial & industrial $ - 25 - 25
Residential real estate - 26 - 26
Consumer 132 66 366 189
Credit card 5 12 19 35
---- --- --- ---
Totals $137 129 385 275
==== === === ===
The following table sets forth information regarding the past due, non-accrual
and renegotiated loans of the Bank at the dates indicated:
September 30, December 31,
2003 2002
-------- -----------
(In thousands)
Loan accounted for on
non-accrual basis $ 721 -
Accruing loans which are
past due 90 days or more 645 232
Renegotiated loans - -
----- ---
Total $1,366 232
===== ===
The non-accrual loans at September 30, 2003 consist of two commercial loans to
the same borrower totaling $614,000 and two real estate mortgage loans secured
by the same property totaling $107,000. Lebanon Citizens is currently
negotiating with the borrower of the commercial loans to re-write the loans
and obtain additional security and has initiated foreclosure proceedings on
the mortgage loans.
-17-
Most of the increase in accruing loans which are past due 90 days or more
consists of real estate mortgage loans, commercial loans, and a loan secured
by agricultural land.
INVESTMENT SECURITIES AND LONG-TERM DEBT RESTRUCTURING
During August, 2002, LCNB paid in full $4.0 million in Federal Home Loan Bank
(FHLB) notes with an average interest rate of 7.72%, which otherwise would
have been due in June, 2004 and June, 2005. The prepayment fees on the early
payoffs totaled approximately $425,000, which is included in other non-
interest expenses in the consolidated statements of income.
To negate the financial impact of the prepayment fees, LCNB sold $17.7 million
of U.S. Agency securities bearing an average coupon rate of 5.24% during the
same month and recorded a gain of $408,000 from the sales. At approximately
the same time as the sales, LCNB purchased securities totaling $19.9 million
and bearing an average taxable-equivalent coupon rate (some of the securities
purchased were tax-exempt municipals) of 4.94%.
The transactions described were consummated to improve projected net interest
margin.
NON-INTEREST INCOME
THREE MONTHS ENDED SEPTEMBER 30, 2003 VS. 2002. Not including the $408,000
gain on sale of securities recognized in August, 2002 and discussed above,
non-interest income for the third quarter of 2003 was $418,000 or 33.2%
greater than the third quarter of 2002. The increase was primarily due to
increased activity in the real estate mortgage loan secondary market and
increased service charges and fees. Gains from sales of mortgage loans
increased $171,000 due to an increase in the volume of loans sold during the
third quarter, 2003 as compared to the third quarter, 2002. Service charges
and fees increased $225,000 primarily due to the introduction of a new
overdraft protection program and an increase in rates charged on non-
sufficient funds.
NINE MONTHS ENDED SEPTEMBER 30, 2003 VS. 2002. Not including the $408,000
gain on sale of securities discussed above, non-interest income for the first
nine months of 2003 was $1,218,000 or 33.7% greater than for the 2002 period.
The increase was primarily due to a $639,000 increase in gains from sales of
mortgage loans, a $385,000 increase in service charges and fees, and a
$235,000 increase in insurance agency commissions. Gains from sales of
mortgage loans and service charges and fees increased for substantially the
same reason mentioned above. In addition to commissions received on new and
renewing policies, the increase in insurance agency income for the nine-month
period includes a $55,000 increase in contingency commissions recognized
during the first quarter. 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 premiums. As such, the amount received each year can vary
significantly depending on loss experience.
-18-
NON-INTEREST EXPENSE
THREE MONTHS ENDED SEPTEMBER 30, 2003 VS. 2002. Other non-interest expenses
for the third quarter, 2002 included the $425,000 prepayment fee on Federal
Home Loan Bank notes previously discussed and $169,000 in training and
conversion expenses for LCNB's conversion to a new data processing system,
completed in September, 2002. Not including these two items, total non-
interest expense for the third quarter, 2003 was $156,000 or 4.0% greater than
for the third quarter, 2002. The increase was primarily due to increases in
salaries and wages and other non-interest expenses. Salaries and wages
increased $60,000 or 3.6% primarily due to routine salary and wage increases.
Other non-interest expenses increased $60,000 due primarily to legal and other
professional expenses.
NINE MONTHS ENDED SEPTEMBER 30, 2003 VS. 2002. Other non-interest expenses
for the nine months ended September 30, 2002 included the $425,000 prepayment
fee on Federal Home Loan Bank notes and $184,000 in training and conversion
expenses for LCNB's data processing system conversion. Not including these
two items, total non-interest expense increased $560,000 or 5.0% during the
first nine months of 2003 compared with the same period in 2002. The increase
was primarily due to a $232,000 or 4.7% increase in salaries and wages, a
$147,000 increase in equipment expenses, and a $193,000 increase in other non-
interest expenses. These increases were partially offset by an $81,000
decrease in ATM expense. Salaries and wages increased primarily due to
routine salary and wage increases. Equipment expenses increased primarily
due to rental costs for a new phone system installed during 2002 and to
depreciation charges on new furniture, computer hardware, and computer
software purchased during the last quarter of 2002 and the first nine months
of 2003. Other non-interest expenses increased primarily due to legal and
other professional expenses. ATM expense decreased primarily due to a change
in the ATM transaction processor.
-19-
FINANCIAL CONDITION
The following table highlights the changes in the balance sheet. The analysis
uses quarterly averages to give a better indication of balance sheet trends.
CONDENSED QUARTERLY AVERAGE BALANCE SHEETS
------------------------------------------
September 30, June 30, March 31,
2003 2003 2003
(In thousands)
ASSETS
Interest-earning:
Federal funds sold $ 17,016 18,415 14,246
Investment securities 152,989 147,450 137,834
Loans 318,357 320,357 324,666
------- ------- -------
Total interest-earning assets 488,362 486,222 476,746
Noninterest-earning:
Cash and due from banks 14,019 13,441 14,065
All other assets 19,210 19,233 19,058
Allowance for credit losses (2,031) (2,004) (2,005)
------- ------- -------
Total assets $519,560 516,892 507,864
======= ======= =======
LIABILITIES
Interest-bearing:
Interest-bearing deposits $390,455 389,951 383,986
Short-term borrowings 731 623 624
Long-term debt 6,218 6,233 6,246
------- ------- -------
Total interest-bearing liabilities 397,404 396,807 390,856
Noninterest-bearing:
Noninterest-bearing deposits 65,147 63,004 61,194
All other liabilities 3,560 3,397 3,141
------- ------- -------
Total liabilities 466,111 463,208 455,191
SHAREHOLDERS' EQUITY 53,449 53,684 52,673
------- ------- -------
Total liabilities and shareholders'
equity $519,560 516,892 507,864
======= ======= =======
-20-
Average total interest-earning assets increased approximately $2.1 million or
0.4% during the third quarter, 2003 compared to the second quarter, 2003. The
growth was in investment securities, which increased $5.5 million or 3.8% on
an average basis. Partially offsetting this increase were decreases in
average loans and average federal funds sold of $2.0 million and $1.4 million,
respectively. The decrease in average loans was primarily due to the real
estate loan portfolio, which decreased $4.9 million on an average basis. The
decrease was due to payoffs on loans refinanced combined with an historically
high volume of loans originated and sold. Partially offsetting the real
estate loan decrease was a $3.9 million increase in average commercial loans.
With limited opportunities to invest deposit growth in the loan portfolio,
management purchased additional investment securities available for sale,
which can readily be sold if the funds should be needed for future loan
growth.
Total average interest-bearing liabilities for the third quarter, 2003, were
$597,000 or 0.2% greater than for the second quarter, 2003. The growth was
primarily in interest-bearing deposits, which increased $504,000 on an average
basis. Highly liquid savings and NOW account products increased $625,000 and
club accounts increased $215,000, partially offset by a decrease of $336,000
in certificate of deposit and IRA accounts. Management believes the growth in
the liquid products reflects investor preference for short-term, highly liquid
investments during the current economic cycle. This means much of the recent
savings deposit growth 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.
-21-
CAPITAL
Lebanon Citizens and LCNB are required by regulators to meet certain
minimum levels of capital adequacy. These are expressed in the form of certain
ratios. Capital is separated into Tier 1 capital (essentially shareholders'
equity less goodwill and other intangibles) and Tier 2 capital (essentially
the allowance for loan losses limited to 1.25% of risk-weighted assets). The
first two ratios, which are based on the degree of credit risk in LCNB's
assets, provide for weighting assets based on assigned risk factors and
include off-balance sheet items such as loan commitments and stand-by letters
of credit.
The ratio of Tier 1 capital to risk-weighted assets must be at least 4.0%
and the ratio of Total capital (Tier 1 capital plus Tier 2 capital) to risk-
weighted assets must be at least 8.0%. The capital leverage ratio supplements
the risk-based capital guidelines. Banks are required to maintain a minimum
ratio of Tier 1 capital to adjusted quarterly average total assets of 3.0%.
For various regulatory purposes, financial institutions are classified into
categories based upon capital adequacy. The highest "well-capitalized"
category requires capital ratios of at least 10% for total risk-based, 6% for
Tier 1 risk-based, and 5% for leverage. As of the most recent notification
from their regulators, Lebanon Citizens and LCNB were categorized as "well-
capitalized" under the regulatory framework for prompt corrective action.
Management believes that no conditions or events have occurred since the last
notification that would change Lebanon Citizens' or LCNB's category.
A summary of the regulatory capital and capital ratios of LCNB follows:
At At
September 30, December 31,
2003 2002
(Dollars in thousands)
Regulatory Capital:
Shareholders' equity $51,732 51,930
Goodwill and other intangibles (2,698) (3,121)
Net unrealized securities gains (1,940) (2,242)
------ ------
Tier 1 risk-based capital 47,094 46,567
Eligible allowance for loan losses 2,075 2,000
------ ------
Total risk-based capital $49,169 48,567
====== ======
Capital Ratios:
Total risk-based 15.16% 15.36%
Tier 1 risk-based 14.52% 14.73%
Leverage 9.18% 9.21%
Minimum Required Capital Ratios:
Total risk-based 8.00% 8.00%
Tier 1 risk-based 4.00% 4.00%
Tier 1 leverage 3.00% 3.00%
-22-
On April 17, 2001, LCNB's Board of Directors authorized three separate stock
repurchase programs, two phases of which continue. The shares purchased will
be held for future corporate purposes.
Under the "Market Repurchase Program" LCNB will purchase up to 50,000 shares
of its stock through market transactions with a selected stockbroker. Through
September 30, 2003, 14,053 shares had been purchased under this program.
The "Private Sale Repurchase Program" is available to shareholders who wish to
sell large blocks of stock at one time. Because LCNB's 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 by LCNB will be
considered on a case-by-case basis and will be made at prevailing market
prices. A total of 72,222 shares had been purchased under this program at
September 30, 2003.
LIQUIDITY
LCNB depends on dividends from its subsidiaries for the majority of its liquid
assets, including the cash needed to pay dividends to its shareholders.
National banking law limits the amount of dividends Lebanon Citizens may pay
to the sum of retained net income, as defined, for the current year plus
retained net income for the previous two years. Prior approval from the
Office of the Comptroller of the Currency, Lebanon Citizens' primary
regulator, would be necessary for Lebanon Citizens to pay dividends in excess
of this amount. In addition, dividend payments may not reduce capital levels
below minimum regulatory guidelines. Management believes Lebanon Citizens
will be able to pay anticipated dividends to LCNB without needing to request
approval.
Liquidity is the ability to have funds available at all times to meet the
commitments of LCNB. Asset liquidity is provided by cash and assets which are
readily marketable or pledgeable or which will mature in the near future.
Liquid assets include cash, federal funds sold and securities available for
sale. At September 30, 2003, LCNB liquid assets amounted to $183.8 million or
35.2% of total gross assets, an increase from $161.8 million or 31.9% at
December 31, 2002.
Liquidity is also provided by access to core funding sources, primarily core
depositors in the bank's trade area. Approximately 88.9% of total deposits at
September 30, 2003 were "core" deposits. Core deposits, for this purpose, are
defined as total deposits less public funds and certificates of deposit
greater than $100,000.
Secondary sources of liquidity include LCNB's ability to sell loan
participations, borrow funds from the Federal Home Loan Bank, and purchase
federal funds. Management closely monitors the level of liquid assets
available to meet ongoing funding needs. 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 as
a result of the current liquidity levels.
-23-
RECENT ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards ("SFAS") No. 149, Amendment of
Statement 133 on Derivative Instruments and Hedging Activities, was issued in
April, 2003. It amends and clarifies financial accounting and reporting for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities accounted for under SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. LCNB does not
currently hold any security investments of the types covered by this SFAS and
is therefore not affected by its provisions.
SFAS No. 150, Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity, was issued in May, 2003, and
establishes new accounting standards for classification and measurement of
certain financial instruments with characteristics of both assets and
liabilities. Many of the instruments covered by the scope of SFAS No. 150
were previously classified as equity; SFAS No. 150 requires that they be
classified as liabilities or, in certain circumstances, as assets. LCNB does
not currently hold any security investments with such characteristics and
SFAS No. 150 therefore has no effect on LCNB Corp.'s financial statements.
-24-
Item 3. Quantitative and Qualitative Disclosures about Market Risks
For a discussion of LCNB's asset and liability management policies and gap
analysis for the year ended December 31, 2002 see Item 7A, Quantitative and
Qualitative Disclosures about Market Risks, in the Form 10-K for the year
ended December 31, 2002. There have been no material changes in LCNB's
market risks, which for LCNB is primarily interest rate risk.
Item 4. Controls and Procedures
a) Disclosure controls and procedures. The Chief Executive Officer and the
Chief Financial Officer have carried out an evaluation of the effectiveness of
LCNB's disclosure controls and procedures that ensure that information
relating to LCNB required to be disclosed by LCNB in the reports that it files
or submits under the Securities Exchange Act of 1934, as amended, is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission's rules and forms. Based upon this
evaluation, these officers have concluded, that as of September 30, 2003,
LCNB's disclosure controls and procedures were adequate.
b) Changes in internal control over financial reporting. During the period
covered by this report, there were no changes in LCNB's internal control over
financial reporting that have materially affected, or are reasonably likely to
materially affect, LCNB's internal control over financial reporting.
-25-
PART II. OTHER INFORMATION
LCNB Corp. and Subsidiaries
Item 1. Legal Proceedings - Not Applicable
Item 2. Changes in Securities and Use of Proceeds - Not Applicable
Item 3. Defaults Upon Senior Securities - Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders - Not Applicable
Item 5. Other Information - Not Applicable
-26-
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Title
11 Computation of consolidated earnings per
common share.
15 Letter regarding unaudited interim financial
information.
31.1 Certification of Chief Executive Officer
under Section 302 of the Sarbanes-Oxley Act
of 2002.
31.2 Certification of Chief Financial Officer
under Section 302 of the Sarbanes-Oxley Act
of 2002.
32 Certification of Chief Executive Officer and
Chief Financial Officer under Section 906 of
the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K
Form 8-K dated July 15, 2003, reporting under Item 9 the issuance of
a press release announcing earnings of LCNB for the six months ended
June 30, 2003.
-27-
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 /s/Steve P. Foster
- ------------------------- -------------------------
Stephen P. Wilson Steve P. Foster
President, CEO & Chairman Executive Vice President
of the Board of Directors and Chief Financial Officer
November 3, 2003 November 3, 2003
-28-