10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.   20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2013

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period fromto

Commission File Number 000-26121

LCNB Corp.

(Exact name of registrant as specified in its charter)

Ohio	31-1626393
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

2 North Broadway, Lebanon, Ohio 45036

(Address of principal executive offices, including Zip Code)

(513) 932-1414

(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.

x Yes         ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

x Yes         ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Accelerated filer x
Non-accelerated filer o (Do not check if a smaller reporting company)	Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

¨ Yes         x No

The number of shares outstanding of the issuer's common stock, without par value, as of November 7, 2013 was 9,283,186 shares.

LCNB CORP. AND SUBSIDIARIES

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION	2
Item 1.  Financial Statements	2
CONSOLIDATED BALANCE SHEETS	2
CONSOLIDATED STATEMENTS OF INCOME	3
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME	4
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY	5
CONSOLIDATED STATEMENTS OF CASH FLOWS	6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	7
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	34
Item 2. Management's Discussion and Analysis of Financial Condition and Results of  Operations	35
Item 3.  Quantitative and Qualitative Disclosures about Market Risks	42
Item 4.  Controls and Procedures	43
PART II.  OTHER INFORMATION	44
Item 1.   Legal Proceedings	44
Item 1A.  Risk Factors	44
Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds	44
Item 3.   Defaults Upon Senior Securities	44
Item 4.   Mine Safety Disclosures	44
Item 5.   Other Information	44
Item 6.   Exhibits	45
SIGNATURES	46

1

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

LCNB CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

	September 30, 2013			December 31, 2012
	(Unaudited)
ASSETS:
Cash and due from banks	$	14,563		11,260
Interest-bearing demand deposits	124			2,215
Total cash and cash equivalents	14,687			13,475
Investment securities:
Available-for-sale, at fair value	271,304			258,506
Held-to-maturity, at cost	21,058			15,424
Federal Reserve Bank stock, at cost	1,603			949
Federal Home Loan Bank stock, at cost	2,854			2,091
Loans, net	562,686			450,346
Premises and equipment, net	20,058			16,564
Goodwill	13,971			5,915
Bank owned life insurance	21,115			16,915
Other assets	13,013			8,452
TOTAL ASSETS	$	942,349		788,637
LIABILITIES:
Deposits:
Noninterest-bearing	$	159,453		133,848
Interest-bearing	648,882			537,623
Total deposits	808,335			671,471
Short-term borrowings	22,811			13,756
Long-term debt	12,446			13,705
Accrued interest and other liabilities	6,542			7,699
TOTAL LIABILITIES	850,134			706,631
SHAREHOLDERS' EQUITY:
Preferred shares – no par value, authorized 1,000,000 shares, none outstanding	—			—
Common shares – no par value, authorized 12,000,000 shares, issued 8,393,790 and 7,485,527 shares at September 30, 2013 and December 31, 2012, respectively	39,774			27,107
Retained earnings	64,614			61,843
Treasury shares at cost, 753,627 shares at September 30, 2013 and December 31, 2012	(11,665		)	(11,665	)
Accumulated other comprehensive income (loss), net of taxes	(508		)	4,721
TOTAL SHAREHOLDERS' EQUITY	92,215			82,006
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	942,349		788,637

The accompanying notes to consolidated financial statements are an integral part of these statements.

2

LCNB CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except per share data)

(Unaudited)

	Three Months Ended   September 30,			Nine Months Ended   September 30,
	2013		2012	2013	2012
INTEREST INCOME:
Interest and fees on loans	$	6,902	5,822	20,298	17,950
Interest on investment securities –
Taxable	862		941	2,556	2,810
Non-taxable	654		615	1,932	1,831
Other short-term investments	32		26	145	115
TOTAL INTEREST INCOME	8,450		7,404	24,931	22,706
INTEREST EXPENSE:
Interest on deposits	875		1,050	2,789	3,332
Interest on short-term borrowings	11		4	18	12
Interest on long-term debt	109		136	331	440
TOTAL INTEREST EXPENSE	995		1,190	3,138	3,784
NET INTEREST INCOME	7,455		6,214	21,793	18,922
PROVISION FOR LOAN LOSSES	178		436	369	742
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	7,277		5,778	21,424	18,180
NON-INTEREST INCOME:
Trust income	626		530	1,810	1,769
Service charges and fees on deposit accounts	1,062		911	3,114	2,698
Net gain on sales of securities	58		427	753	886
Bank owned life insurance income	168		145	512	432
Gains from sales of mortgage loans	57		151	305	360
Other operating income	76		41	238	151
TOTAL NON-INTEREST INCOME	2,047		2,205	6,732	6,296
NON-INTEREST EXPENSE:
Salaries and employee benefits	3,247		3,059	9,783	9,004
Equipment expenses	318		263	908	789
Occupancy expense, net	505		445	1,529	1,242
State franchise tax	208		193	635	595
Marketing	145		129	446	409
FDIC insurance premiums	128		83	375	298
Other non-interest expense	1,612		1,392	5,902	4,005
TOTAL NON-INTEREST EXPENSE	6,163		5,564	19,578	16,342
INCOME BEFORE INCOME TAXES	3,161		2,419	8,578	8,134
PROVISION FOR INCOME TAXES	804		572	2,145	2,023
NET INCOME	$	2,357	1,847	6,433	6,111
Dividends declared per common share	$	0.16	0.16	0.48	0.48
Earnings per common share:
Basic	$	0.31	0.27	0.85	0.91
Diluted	0.30		0.27	0.83	0.90
Weighted average common shares outstanding:
Basic	7,636,098		6,721,699	7,592,818	6,713,959
Diluted	7,787,098		6,797,675	7,722,686	6,787,000

The accompanying notes to consolidated financial statements are an integral part of these statements.

3

LCNB CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

	Three Months Ended   September 30,					Nine Months Ended   September 30,
	2013			2012		2013		2012
Net income	$	2,357		1,847		6,433		6,111
Other comprehensive income:
Net unrealized gain (loss) on available-for-sale securities (net of taxes of $391 and $556 for the three months ended September 30, 2013 and 2012, respectively, and $2,452 and $787 for the nine months ended September 30, 2013 and 2012, respectively)	760			1,080		(4,758	)	1,529
Reclassification adjustment for net realized gain on sale of available-for-sale securities included in net income (net of taxes of $20 and $145 for the three months ended September 30, 2013 and 2012, respectively, and $256 and $300 for the nine months ended September 30, 2013 and 2012, respectively)	(38		)	(282	)	(497	)	(586	)
Change in nonqualified pension plan unrecognized net loss and unrecognized prior service cost (net of taxes of $5 and $4 for the three months ended September 30, 2013 and 2012, respectively, and $14 and $12 for the nine months ended September 30, 2013 and 2012, respectively)	8			9		26		25
TOTAL COMPREHENSIVE INCOME	$	3,087		2,654		1,204		7,079

The accompanying notes to consolidated financial statements are an integral part of these statements.

4

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(Dollars in thousands, except per share amounts)

(Unaudited)

	Common Shares Outstanding	Common Stock		Retained Earnings		Treasury Shares		Accumulated Other Comprehensive Income (Loss)		Total Shareholders' Equity
Balance at December 31, 2011	6,704,723	$	26,753	57,877		(11,698	)	5,028		77,960
Net income				6,111						6,111
Net unrealized gain on available-for-sale securities, net of taxes								1,529		1,529
Reclassification adjustment for net realized gain on sales of available-for-sale securities included in net income, net of taxes								(586	)	(586	)
Change in nonqualified pension plan unrecognized net loss and unrecognized prior service cost, net of taxes								25		25
Dividend Reinvestment and Stock Purchase Plan	19,640	257								257
Exercise of stock options	2,144			(5	)	33				28
Compensation expense relating to stock options		30								30
Common stock dividends, $0.48 per share				(3,223	)					(3,223	)
Balance at September 30, 2012	6,726,507	$	27,040	60,760		(11,665	)	5,996		82,131
Balance at December 31, 2012	6,731,900	$	27,107	61,843		(11,665	)	4,721		82,006
Net income				6,433						6,433
Net unrealized gain (loss) on available-for-sale securities, net of taxes								(4,758	)	(4,758	)
Reclassification adjustment for net realized gain on sales of available-for-sale securities included in net income, net of taxes								(497	)	(497	)
Change in nonqualified pension plan unrecognized net loss and unrecognized prior service cost, net of taxes								26		26
Dividend Reinvestment and Stock Purchase Plan	13,832	248								248
Exercise of stock options	5,620	70								70
Acquisition of First Capital Bancshares, Inc.	888,811	12,321								12,321
Compensation expense relating to stock options		28								28
Common stock dividends, $0.48 per share				(3,662	)					(3,662	)
Balance at September 30, 2013	7,640,163	$	39,774	64,614		(11,665	)	(508	)	92,215

The accompanying notes to consolidated financial statements are an integral part of these statements.

5

LCNB CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(unaudited

	Nine Months Ended   September 30,
	2013			2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	6,433		6,111
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation, amortization, and accretion	1,886			2,339
Provision for loan losses	369			742
Increase in cash surrender value of bank owned life insurance	(512		)	(432	)
Realized (gain) loss from sales of securities available-for-sale	(753		)	(886	)
Realized (gain) loss from sales of premises and equipment	(1		)	(10	)
Realized (gain) loss from sales and write-downs of other real estate owned and repossessed assets	(175		)	80
Origination of mortgage loans for sale	(16,831		)	(19,328	)
Realized gains from sales of mortgage loans	(305		)	(360	)
Proceeds from sales of mortgage loans	16,970			19,492
Compensation expense related to stock options	28			30
Changes in:
Accrued income receivable	(802		)	(650	)
Other assets	745			358
Other liabilities	(239		)	314
TOTAL ADJUSTMENTS	380			1,689
NET CASH FLOWS FROM OPERATING ACTIVITIES	6,813			7,800
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of investment securities available-for-sale	41,888			64,002
Proceeds from maturities and calls of investment securities:
Available-for-sale	15,724			22,759
Held-to-maturity	4,437			1,563
Purchases of investment securities:
Available-for-sale	(57,106		)	(97,344	)
Held-to-maturity	(9,687		)	(3,332	)
Purchase of Federal Reserve Bank stock	(497		)	(8	)
Net (increase) decrease in loans	(13,446		)	2,248
Purchase of bank owned life insurance	—			(1,500	)
Proceeds from sale of other real estate owned and repossessed assets	1,062			20
Additions to other real estate owned	—			(16	)
Purchases of premises and equipment	(614		)	(403	)
Proceeds from sale of premises and equipment	1			13
Net cash acquired from acquisition	9,771			—
NET CASH FLOWS FROM INVESTING ACTIVITIES	(8,467		)	(11,998	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits	206			37,518
Net increase (decrease) in short-term borrowings	9,055			(9,520	)
Principal payments on long-term debt	(3,051		)	(7,324	)
Proceeds from issuance of common stock	32			41
Proceeds from exercise of stock options	70			28
Cash dividends paid on common stock	(3,446		)	(3,006	)
NET CASH FLOWS FROM FINANCING ACTIVITIES	2,866			17,737
NET CHANGE IN CASH AND CASH EQUIVALENTS	1,212			13,539
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	13,475			19,535
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	14,687		33,074
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid	$	3,150		3,857
Income taxes paid	2,715			1,735
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES:
Transfer from loans to other real estate owned and repossessed assets	133			755

The accompanying notes to consolidated financial statements are an integral part of these statements.

6

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 - Basis of Presentation

Substantially all of the assets, liabilities and operations of LCNB Corp. ("LCNB" or the "Company") are attributable to its wholly-owned subsidiary, LCNB National Bank (the "Bank").  The accompanying unaudited consolidated financial statements include the accounts of LCNB and the Bank.

The unaudited interim consolidated financial statements, which have been reviewed by J.D. Cloud & Co. L.L.P., LCNB's independent registered public accounting firm, in accordance with standards established by the Public Company Accounting Oversight Board, as indicated by their report included herein and which does not express an opinion on those statements, have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and the rules and regulations of the Securities and Exchange Commission (the "SEC").  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 interim 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, as required by Regulation S-X, Rule 10-01.

Certain prior period data presented in the financial statements have been reclassified to conform with the current year presentation.

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, 2013 are not necessarily indicative of the results to be expected for the full year ending December 31, 2013.  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 2012 Annual Report on Form 10-K filed with the SEC.

Note 2 – Acquisition

On October 9, 2012, LCNB and First Capital Bancshares, Inc. ("First Capital") entered into an Agreement and Plan of Merger ("Merger Agreement") pursuant to which First Capital was merged into LCNB on January 11, 2013 in a stock and cash transaction valued at approximately $20.2 million.  Immediately following the merger of First Capital into LCNB, Citizens National Bank of Chillicothe ("Citizens"), a wholly-owned subsidiary of First Capital, was merged into LCNB National Bank. Citizens operated six full–service branches with a main office and two other facilities in Chillicothe, Ohio and one branch in each of Frankfort, Ohio, Clarksburg, Ohio, and Washington Court House, Ohio.  These offices became branches of the Bank after the merger.

Under the terms of the Merger Agreement, each shareholder of First Capital common stock was entitled to elect to receive, for each share of First Capital Common Stock, (i) $30.76 in cash, (ii) 2.329 common shares of LCNB (subject to an adjustment based upon the average closing price of LCNB common shares for the 25 trading days prior to the effective date of the merger), or (iii) a combination of cash and LCNB common stock.  A First Capital shareholder's election to receive cash or stock was subject to allocation procedures that ensured that no more than 50% and no less than 40% of the outstanding First Capital shares were exchanged for cash and that no more than 60% and no less than 50% of the outstanding First Capital shares were exchanged for LCNB common shares.

7

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Continued)

Note 2 – Acquisition (continued)

The merger with First Capital was accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed, and consideration paid were recorded at their estimated fair values as of the merger date, as summarized in the following table (in thousands):

Consideration Paid:
Common shares issued (888,811)	$	12,354
Cash paid to shareholders	7,828
Total value of consideration paid	20,182
Identifiable Assets Acquired:
Cash and cash equivalents	17,632
Investment securities:
Available-for-sale	21,606
Held-to-maturity	384
Federal Reserve Bank stock	157
Federal Home Loan Bank stock	763
Loans	98,906
Premises and equipment	3,949
Bank owned life insurance	3,687
Core deposit intangible	2,574
Other real estate owned	127
Deferred income taxes	409
Other assets	1,369
Total identifiable assets acquired	151,563
Liabilities Assumed:
Deposits	136,823
Long-term debt	1,792
Other liabilities	822
Total liabilities assumed	139,437
Total Identifiable Net Assets Acquired	12,126
Goodwill resulting from merger	$	8,056

The amount of goodwill recorded reflects LCNB's entrance into a new market and related synergies that are expected to result from the acquisition and represents the excess purchase price over the estimated fair value of the net assets acquired.  The goodwill will not be amortizable and is not deductible for tax purposes.  The core deposit intangible will be amortized over nine years using the straight-line method.

8

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Continued)

Note 2 – Acquisition (continued)

The following table details the changes in fair value of net assets acquired and liabilities assumed from the amounts reported in the Form 10-Q for the period ending June 30, 2013 (in thousands):

Goodwill at June 30, 2013	$	8,258
Effect of adjustments to:
Deferred income taxes	18
Other assets	(220		)
Goodwill at September 30, 2013	$	8,056

Management believes that acquisition method adjustments are substantially complete at September 30, 2013.

Direct costs related to the acquisition were expensed as incurred and are recorded in other non-interest expense in the consolidated statements of income.  During the first nine months of 2013, LCNB incurred $1,326,000 in merger and acquisition integration expenses related to the transaction, including $603,000 in merger related costs and $723,000 for converting Citizens data processing system to LCNB's system.

The results of operations are included in the consolidated statement of income from the date of the merger.  The estimated amount of Citizens revenue (net interest income plus non-interest income) and net income, excluding merger and data conversion costs, included in LCNB's consolidated statement of income for the three and nine months ended September 30, 2013 were as follows (in thousands):

	Three Months		Nine Months
Total revenue	$	1,676	4,561
Net income	750		1,898

The following table presents unaudited pro forma information as if the merger with First Capital had occurred on January 1, 2012 (in thousands).  This pro forma information gives effect to certain adjustments, including purchase accounting fair value adjustments, amortization of the core deposit intangible, and related income tax effects.  It does not include merger and data conversion costs.  The pro forma information does not necessarily reflect the results of operations that would have occurred had the merger with First Capital occurred in 2012.  In particular, expected operational cost savings are not reflected in the pro forma amounts.

	Three Months Ended September 30,			Nine Months Ended September 30,
	2013		2012	2013	2012
Total revenue	$	9,502	10,067	28,728	30,446
Net income	2,358		2,097	7,000	7,027
Basic earnings per common share	0.31		0.27	0.92	0.92
Diluted earnings per common share	0.30		0.27	0.90	0.91

9

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Continued)

Note 3 - Investment Securities

The amortized cost and estimated fair value of available-for-sale investment securities at September 30, 2013 and December 31, 2012 are summarized as follows (in thousands):

	September 30, 2013
	Amortized Cost		Unrealized Gains	Unrealized Losses	Fair Value
U.S. Treasury notes	$	8,904	—	197	8,707
U.S. Agency notes	113,475		340	3,036	110,779
U.S. Agency mortgage-backed securities	45,723		721	868	45,576
Certificates of deposit with other banks	1,492		9	—	1,501
Municipal securities:
Non-taxable	78,822		2,480	793	80,509
Taxable	19,157		668	140	19,685
Mutual funds	2,408		—	23	2,385
Trust preferred securities	149		3	5	147
Equity securities	1,751		317	53	2,015
	$	271,881	4,538	5,115	271,304

	December 31, 2012
	Amortized Cost		Unrealized Gains	Unrealized Losses	Fair Value
U.S. Treasury notes	$	18,462	224	—	18,686
U.S. Agency notes	89,372		1,364	130	90,606
U.S. Agency mortgage-backed securities	51,121		1,444	24	52,541
Corporate securities	3,032		35	—	3,067
Municipal securities:
Non-taxable	70,504		3,497	119	73,882
Taxable	14,851		993	3	15,841
Mutual funds	2,138		30	—	2,168
Trust preferred securities	250		2	7	245
Equity securities	1,390		106	26	1,470
	$	251,120	7,695	309	258,506

The fair value of held-to-maturity investment securities, consisting of taxable and non-taxable municipal securities, approximates amortized cost at September 30, 2013 and December 31, 2012.

10

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Continued)

Note 3 - Investment Securities (continued)

Information concerning available-for-sale investment securities with gross unrealized losses at September 30, 2013, aggregated by length of time that individual securities have been in a continuous loss position, is as follows (in thousands):

	Less than Twelve Months			Twelve Months or Greater
	Fair Value		Unrealized Losses	Fair Value	Unrealized Losses
U.S. Treasury notes	$	8,707	197	—	—
U.S. Agency notes	91,919		3,036	—	—
U.S. Agency mortgage-backed securities	23,840		868	—	—
Municipal securities:
Non-taxable	23,864		793	—	—
Taxable	5,633		140	—	—
Mutual funds	1,385		23	—	—
Trust preferred securities	46		4	48	1
Equity securities	311		34	95	19
	$	155,705	5,095	143	20

Management has determined that the unrealized losses at September 30, 2013 are primarily due to fluctuations in market interest rates and do not reflect credit quality deterioration of the securities.   Because LCNB does not have the intent to sell the investments and it is more likely than not that LCNB will not be required to sell the investments before recovery of their amortized cost bases, which may be at maturity, LCNB does not consider these investments to be other-than-temporarily impaired.

Note 4 - Loans

Major classifications of loans at September 30, 2013 and December 31, 2012 are as follows (in thousands):

	September 30, 2013						December 31, 2012
	Acquired Credit Impaired		Other		Total
Commercial and industrial	$	341	30,939		31,280		26,236
Commercial, secured by real estate	4,252		298,059		302,311		238,357
Residential real estate	1,346		214,972		216,318		175,031
Consumer	—		12,928		12,928		10,554
Agricultural	—		3,245		3,245		1,668
Other loans, including deposit overdrafts	—		58		58		1,875
	5,939		560,201		566,140		453,721
Deferred net origination costs (fees)	—		(31	)	(31	)	62
	5,939		560,170		566,109		453,783
Less allowance for loan losses	—		3,423		3,423		3,437
Loans, net	$	5,939	556,747		562,686		450,346

Loans acquired from the merger with First Capital are recorded at fair value with no carryover of the acquired entity's previously established allowance for loan losses.  The excess of expected cash flows over the estimated fair value of acquired loans is recognized as interest income over the remaining contractual lives of the loans using the level yield method.

11

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Continued)

Note 4 – Loans (continued)

 Subsequent decreases in expected cash flows will require additions to the allowance for loan losses.  Subsequent improvements in expected cash flows result in the recognition of additional interest income over the then-remaining contractual lives of the loans.

Impaired loans acquired are accounted for under FASB ASC 310-30.  Factors considered in evaluating whether an acquired loan was impaired include delinquency status and history, updated borrower credit status, collateral information, and updated loan-to-value information.  The difference between contractually required payments at the time of acquisition and the cash flows expected to be collected is referred to as the nonaccretable difference.  The interest component of the cash flows expected to be collected is referred to as the accretable yield and is recognized as interest income over the remaining contractual life of the loan using the level yield method.   Subsequent decreases in expected cash flows will require additions to the allowance for loan losses.  Subsequent improvements in expected cash flows will result in a reclassification from the nonaccretable difference to the accretable yield.

The following table provides certain information at the acquisition date on loans acquired from First Capital, not including loans considered to be impaired (in thousands):

Contractually required principal at acquisition	$	91,614
Less fair value adjustment	(1,908		)
Fair value of acquired loans	$	89,706
Contractual cash flows not expected to be collected	$	2,149

The following table provides details on acquired impaired loans that are accounted for in accordance with FASB ASC 310-30 (in thousands):

Contractually required principal at acquisition	$	11,460
Contractual cash flows not expected to be collected (nonaccretable difference)	(1,260		)
Expected cash flows at acquisition	10,200
Interest component of expected cash flows (accretable discount)	(1,389		)
Fair value of acquired impaired loans	$	8,811

The following table provides the outstanding balance and related carrying amount for acquired impaired loans at the dates indicated (in thousands):

	September 30, 2013		January 11, 2013
Outstanding balance	$	8,155	11,460
Carrying amount	5,939		8,811

Activity during 2013 for the accretable discount related to acquired impaired loans is as follows (in thousands):

Accretable discount at January 11, 2013	$	1,389
Reclass from nonaccretable discount to accretable discount	157
Less transferred to other real estate owned	(23		)
Less accretion	(394		)
Accretable discount at September 30, 2013	$	1,129

12

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Continued)

Note 4 – Loans (continued)

Non-accrual, past-due, and accruing restructured loans as of September 30, 2013 and December 31, 2012 are as follows (in thousands):

	September 30, 2013					December 31, 2012
	Acquired Credit Impaired		Other	Total
Non-accrual loans:
Commercial and industrial	$	—	144	144		264
Commercial, secured by real estate	369		1,120	1,489		788
Residential real estate	143		1,052	1,195		1,231
Total non-accrual loans	512		2,316	2,828		2,283
Past-due 90 days or more and still accruing	—		29	29		128
Total non-accrual and past-due 90 days or more and still accruing	512		2,345	2,857		2,411
Accruing restructured loans	—		14,175	14,175		13,343
Total	$	512	16,520	17,032		15,754
Percentage of total non-accrual loans and loans past-due 90 days or more and still accruing to total loans				0.50	%	0.53	%
Percentage of total non-accrual loans, loans past-due 90 days or more and still accruing, and accruing restructured loans to total loans				3.01	%	3.47	%

Loans sold to and serviced for the Federal Home Loan Mortgage Corporation and other investors are not included in the accompanying consolidated balance sheets.  The unpaid principal balances of those loans at September 30, 2013 and December 31, 2012 are $91,125,000 and $71,568,000, respectively.  Loans sold during the three months ended September 30, 2013 and 2012 totaled $2,434,000 and $7,934,000, respectively, and $16,831,000 and $19,328,000 during the nine months ended September 30, 2013 and 2012, respectively.

13

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Continued)

Note 4 – Loans (continued)

The allowance for loan losses and recorded investment in loans for the nine months ended September 30 are as follows (in thousands):

	Commercial & Industrial			Commercial, Secured by Real Estate		Residential Real Estate		Consumer		Agricultural	Other		Total
2013
Allowance for loan losses:
Balance, beginning of year	$	320		2,296		712		108		—	1		3,437
Provision charged to expenses	(41		)	107		268		14		—	21		369
Losses charged off:
Acquired credit impaired loans	—			—		(5	)	—		—	—		(5	)
Other loans	(120		)	(34	)	(203	)	(148	)	—	(56	)	(561	)
Recoveries	4			26		21		98		—	34		183
Balance, end of period	$	163		2,395		793		72		—	—		3,423
Individually evaluated for impairment	$	1		766		190		1		—	—		958
Collectively evaluated for impairment	162			1,629		603		71		—	—		2,465
Acquired credit impaired loans	—			—		—		—		—	—		—
Balance, end of period	$	163		2,395		793		72		—	—		3,423
Loans:
Individually evaluated for impairment	$	166		14,444		1,543		35		—	—		16,188
Collectively evaluated for impairment	30,739			283,288		213,669		12,983		3,245	58		543,982
Acquired credit impaired loans	341			4,252		1,346		—		—	—		5,939
Balance, end of period	$	31,246		301,984		216,558		13,018		3,245	58		566,109
2012
Allowance for loan losses:
Balance, beginning of year	$	162		1,941		656		166		—	6		2,931
Change in classification	18			(18	)	—		—		—	—		—
Provision charged to expenses	163			(16	)	624		(49	)	—	20		742
Losses charged off	(159		)	(234	)	(479	)	(84	)	—	(64	)	(1,020	)
Recoveries	—			71		7		95		—	40		213
Balance, end of period	$	184		1,744		808		128		—	2		2,866
Individually evaluated for impairment	$	21		49		219		—		—	—		289
Collectively evaluated for impairment	163			1,695		589		128		—	2		2,577
Balance, end of period	$	184		1,744		808		128		—	2		2,866
Loans:
Individually evaluated for impairment	$	264		13,895		1,157		13		—	—		15,329
Collectively evaluated for impairment	25,462			223,898		176,114		11,550		2,061	2,993		442,078
Balance, end of period	$	25,726		237,793		177,271		11,563		2,061	2,993		457,407

14

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Continued)

Note 4 – Loans (continued)

LCNB uses a risk-rating system to quantify loan quality.  A loan is assigned to a risk category based on relevant information about the ability of the borrower to service the debt including, but not limited to, current financial information, historical payment experience, credit documentation, public information, and current economic trends.  The categories used are:

• Pass – loans categorized in this category are higher quality loans that do not fit any of the other categories described below.

• Other Assets Especially Mentioned (OAEM) - loans in this category are currently protected but are potentially weak.  These loans constitute a risk but not to the point of justifying a classification of substandard.  The credit risk may be relatively minor yet constitute an undue risk in light of the circumstances surrounding a specific asset.

• Substandard – loans in this category are inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any.  Assets so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt.  They are characterized by the possibility that LCNB will sustain some loss if the deficiencies are not corrected.

• Doubtful – loans classified in this category have all the weaknesses inherent in loans classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

15

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Continued)

Note 4 – Loans (continued)

A breakdown of the loan portfolio by credit quality indicators at September 30, 2013 and December 31, 2012 is as follows (in thousands):

	Pass		OAEM	Substandard	Doubtful	Total
September 30, 2013
Acquired credit impaired:
Commercial & industrial	$	12	—	329	—	341
Commercial, secured by real estate	—		766	3,486	—	4,252
Residential real estate	—		—	1,346	—	1,346
Total	$	12	766	5,161	—	5,939
Other:
Commercial & industrial	$	27,657	1,815	1,433	—	30,905
Commercial, secured by real estate	285,160		1,957	10,615	—	297,732
Residential real estate	208,654		1,774	4,731	53	215,212
Consumer	12,978		—	40	—	13,018
Agricultural	3,245		—	—	—	3,245
Other	58		—	—	—	58
Total	$	537,752	5,546	16,819	53	560,170
Total:
Commercial & industrial	$	27,669	1,815	1,762	—	31,246
Commercial, secured by real estate	285,160		2,723	14,101	—	301,984
Residential real estate	208,654		1,774	6,077	53	216,558
Consumer	12,978		—	40	—	13,018
Agricultural	3,245		—	—	—	3,245
Other	58		—	—	—	58
Total	$	537,764	6,312	21,980	53	566,109
December 31, 2012
Commercial & industrial	$	22,965	1,804	1,177	264	26,210
Commercial, secured by real estate	222,497		2,653	12,872	107	238,129
Residential real estate	168,338		2,353	4,280	298	175,269
Consumer	10,549		—	62	20	10,631
Agricultural	1,665		—	3	—	1,668
Other	1,876		—	—	—	1,876
Total	$	427,890	6,810	18,394	689	453,783

16

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Continued)

Note 4 – Loans (continued)

A loan portfolio aging analysis at September 30, 2013 and December 31, 2012 is as follows (in thousands):

	30-59 Days Past Due		60-89 Days Past Due	Greater Than 90 Days Past Due	Total Past Due	Current	Total Loans Receivable	Total Loans Greater Than 90 Days and Accruing
September 30, 2013
Acquired credit impaired:
Commercial & industrial	$	—	—	—	—	341	341	—
Commercial, secured by real estate	—		54	127	181	4,071	4,252	—
Residential real estate	—		45	80	125	1,221	1,346	—
Total	$	—	99	207	306	5,633	5,939	—
Other:
Commercial & industrial	$	64	99	144	307	30,598	30,905	—
Commercial, secured by real estate	1,362		769	1,120	3,251	294,481	297,732	—
Residential real estate	1,200		492	1,116	2,808	212,404	215,212	29
Consumer	95		16	—	111	12,907	13,018	—
Agricultural	—		—	—	—	3,245	3,245	—
Other	39		—	—	39	19	58	—
Total	$	2,760	1,376	2,380	6,516	553,654	560,170	29
Total:
Commercial & industrial	$	64	99	144	307	30,939	31,246	—
Commercial, secured by real estate	1,362		823	1,247	3,432	298,552	301,984	—
Residential real estate	1,200		537	1,196	2,933	213,625	216,558	29
Consumer	95		16	—	111	12,907	13,018	—
Agricultural	—		—	—	—	3,245	3,245	—
Other	39		—	—	39	19	58	—
Total	$	2,760	1,475	2,587	6,822	559,287	566,109	29
December 31, 2012
Commercial & industrial	$	—	1	264	265	25,945	26,210	—
Commercial, secured by real estate	346		79	788	1,213	236,916	238,129	—
Residential real estate	791		212	1,172	2,175	173,094	175,269	103
Consumer	61		57	25	143	10,488	10,631	25
Agricultural	—		—	—	—	1,668	1,668	—
Other	72		—	—	72	1,804	1,876	—
Total	$	1,270	349	2,249	3,868	449,915	453,783	128

17

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Continued)

Note 4 – Loans (continued)

Impaired loans, excluding acquired credit impaired loans, at September 30, 2013 and December 31, 2012 are as follows (in thousands):

	Recorded Investment		Unpaid Principal Balance	Related Allowance	Average Recorded Investment	Interest Income Recognized
September 30, 2013
With no related allowance recorded:
Commercial & industrial	$	—	—	—	—	—
Commercial, secured by real estate	3,067		3,143	—	3,143	85
Residential real estate	344		344	—	382	6
Consumer	—		—	—	1	—
Total	$	3,411	3,487	—	3,526	91
With an allowance recorded:
Commercial & industrial	$	166	271	1	193	1
Commercial, secured by real estate	11,377		11,431	766	10,710	278
Residential real estate	1,199		1,462	190	1,201	23
Consumer	35		35	1	21	2
Total	$	12,777	13,199	958	12,125	304
Total:
Commercial & industrial	$	166	271	1	193	1
Commercial, secured by real estate	14,444		14,574	766	13,853	363
Residential real estate	1,543		1,806	190	1,583	29
Consumer	35		35	1	22	2
Total	$	16,188	16,686	958	15,651	395
December 31, 2012
With no related allowance recorded:
Commercial & industrial	$	—	—	—	975	43
Commercial, secured by real estate	9,541		9,936	—	9,310	350
Residential real estate	417		417	—	397	5
Consumer	20		20	—	23	2
Total	$	9,978	10,373	—	10,705	400
With an allowance recorded:
Commercial & industrial	$	264	822	159	374	—
Commercial, secured by real estate	4,258		4,360	660	4,765	171
Residential real estate	658		853	85	707	2
Consumer	—		—	—	4	—
Total	$	5,180	6,035	904	5,850	173
Total:
Commercial & industrial	$	264	822	159	1,349	43
Commercial, secured by real estate	13,799		14,296	660	14,075	521
Residential real estate	1,075		1,270	85	1,104	7
Consumer	20		20	—	27	2
Total	$	15,158	16,408	904	16,555	573

18

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Continued)

Note 4 – Loans (continued)

Loan modifications that were classified as troubled debt restructurings during the three and nine months ended September 30, 2013 and 2012 are as follows (dollars in thousands):

	2013			2012
	Number of Loans	Balance at Modification		Number of Loans	Balance at Modification
Three Months Ended September 30,
Commercial and industrial	—	$	—	—	$	—
Commercial, secured by real estate	1	702		—	—
Residential real estate	—	—		1	100
Consumer	—	—		2	20
Total	1	$	702	3	$	120
Nine Months Ended September 30,
Commercial and industrial	1	$	22	—	$	—
Commercial, secured by real estate	1	702		—	—
Residential real estate	2	335		3	273
Consumer	2	27		2	20
Total	6	$	1,086	5	$	293

Each restructured loan is separately negotiated with the borrower and includes terms and conditions that reflect the borrower's ability to pay the debt as modified.  Modifications may include interest only payments for a period of time, temporary or permanent reduction of the loan's interest rate, capitalization of delinquent interest, or extensions of the maturity date.

LCNB is not committed to lend additional funds to borrowers whose loan terms were modified in a troubled debt restructuring.

A restructured automobile loan with a balance of $13,000 was charged off during the first quarter 2013, which was within twelve months of the loan's modification date.  There were no other troubled debt restructurings that subsequently defaulted within twelve months of the restructuring date for the three and nine months ended September 30, 2013 and 2012.

Note 5 – Other Real Estate Owned

Other real estate owned includes property acquired through foreclosure or deed-in-lieu of foreclosure and also includes property deemed to be in-substance foreclosed and are included in "other assets" in the consolidated balance sheets.  Changes in other real estate owned are as follows (in thousands):

	Nine Months Ended September 30,
	2013			2012
Balance, beginning of year	$	2,189		1,619
Additions	126			771
Additions due to merger	127			—
Reductions due to sales	(843		)	—
Reductions due to valuation write downs	(38		)	(76	)
Balance, end of period	$	1,561		2,314

19

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Continued)

Note 5 –Other Real Estate Owned (continued)

Other real estate owned at September 30, 2013 and December 31, 2012 consisted of (dollars in thousands):

	September 30, 2013			December 31, 2012
	Number	Balance		Number	Balance
Commercial real estate	2	$	1,443	2	$	1,875
Residential real estate	5	118		8	314
	7	$	1,561	10	$	2,189

Note 6 – Premises and Equipment

Premises and equipment at September 30, 2013 and December 31, 2012 are summarized as follows (in thousands):

	September 30, 2013		December 31, 2012
Land	$	5,353	4,708
Buildings	18,756		15,616
Equipment	11,952		11,280
Construction in progress	75		—
Total	36,136		31,604
Less accumulated depreciation	16,078		15,040
Premises and equipment, net	$	20,058	16,564

Depreciation charged to expense was $370,000 and $322,000 for the three months ended September 30, 2013 and 2012, respectively, and $1,070,000 and $927,000 for the nine months ended September 30, 2013 and 2012, respectively.

Note 7 – Borrowings

Funds borrowed from the Federal Home Loan Bank of Cincinnati ("FHLB") at September 30, 2013 and December 31, 2012 are as follows (dollars in thousands):

	Interest Rate		September 30, 2013		December 31, 2012
Fixed Rate Advances, due at maturity:
Advance due January 2015	2.00	%	$	5,000	5,000
Advance due March 2017	5.25	%	5,000		5,000
Fixed Rate Advances, with monthly principal and interest payments:
Advance due March 2014	2.45	%	528		1,308
Advance due March 2019	2.82	%	1,918		2,397
			$	12,446	13,705

All advances from the FHLB are secured by a blanket pledge of LCNB's 1-4 family first lien mortgage loans in the amount of approximately $181 million and $142 million at September 30, 2013 and December 31, 2012, respectively.  Additionally, LCNB is required to hold minimum levels of FHLB stock, based on the outstanding borrowings.

20

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Continued)

Note 7 – Borrowings (continued)

Short-term borrowings at September 30, 2013 and December 31, 2012 are as follows (dollars in thousands):

	September 30, 2013				December 31, 2012
	Amount		Rate		Amount		Rate
Line of credit	$	11,946	0.75	%	$	2,661	0.75	%
FHLB short-term advance	—		—	%	—		—	%
Repurchase agreements	10,865		0.10	%	11,095		0.10	%
	$	22,811	0.44	%	$	13,756	0.23	%

Note 8 – Income Taxes

A reconciliation between the statutory income tax and LCNB's effective tax rate on income from continuing operations follows:

	For the three months ended September 30,				For the nine months ended September 30,
	2013		2012		2013		2012
Statutory tax rate	34.0	%	34.0	%	34.0	%	34.0	%
Increase (decrease) resulting from:
Tax exempt interest	(6.8	)%	(8.3	)%	(7.4	)%	(7.3	)%
Tax exempt income on bank owned life insurance	(1.8	)%	(2.0	)%	(2.0	)%	(1.8	)%
Other, net	—	%	(0.1	)%	0.4	%	—	%
Effective tax rate	25.4	%	23.6	%	25.0	%	24.9	%

Note 9 - 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 include 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 offers the Bounce Protection product, a customer deposit overdraft program, which is offered as a service and does not constitute a contract between the customer and LCNB.

21

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Continued)

Note 9 – Commitments and Contingent Liabilities (continued)

LCNB uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.  Financial instruments whose contract amounts represent off-balance-sheet credit risk at September 30, 2013 and December 31, 2012 are as follows (in thousands):

	September 30, 2013		December 31, 2012
Commitments to extend credit:
Commercial loans	$	12,663	13,625
Other loans
Fixed rate	3,824		4,602
Adjustable rate	1,039		1,238
Unused lines of credit:
Fixed rate	4,386		3,368
Adjustable rate	59,636		45,199
Unused overdraft protection amounts on demand and NOW accounts	9,538		9,665
Standby letters of credit	445		5,109
	$	91,531	82,806

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.  Unused lines of credit include amounts not drawn on line of credit loans.  Commitments to extend credit and unused lines of credit 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, 2013 and December 31, 2012, outstanding guarantees of approximately $445,000 and $346,000, respectively, were issued to developers and contractors.  These guarantees generally are fully secured and have varying maturities.  At December 31, 2012, LCNB had a participation in four letters of credit totaling $4.8 million securing payment of principal and interest on a bond issue.  These letters of credit were terminated on July 11, 2013.

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.

Capital expenditures include the construction or acquisition of new office buildings, improvements to LCNB's offices, purchases of furniture and equipment, and additions or improvements to LCNB's information technology system. Commitments outstanding for capital expenditures as of September 30, 2013 totaled approximately $100,000.

Management believes that LCNB has sufficient liquidity to fund its lending and capital expenditure commitments.

LCNB and its subsidiary 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.

Note 10 – Regulatory Capital

The Bank and LCNB are required by regulators to meet certain minimum levels of capital adequacy. These are expressed in the form of certain ratios. Capital is separated into Tier 1 capital (essentially shareholders' equity less goodwill and other intangibles) and Tier 2 capital (essentially the allowance for loan losses limited to 1.25% of risk-weighted assets). The first two ratios, which are based on the degree of credit risk in LCNB's assets, provide for weighting assets based on assigned risk factors and include off-balance sheet items such as loan commitments and stand-by letters of credit.  The leverage ratio supplements the risk-based capital guidelines.

22

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Continued)

Note 10 – Regulatory Capital (continued)

For various regulatory purposes, financial institutions are classified into categories based upon capital adequacy.

	Minimum Requirement		To Be Considered Well-Capitalized
Ratio of tier 1 capital to risk-weighted assets	4.0	%	6.0	%
Ratio of total capital (tier 1 capital plus tier 2 capital) to risk-weighted assets	8.0	%	10.0	%
Leverage ratio (tier 1 capital to adjusted quarterly average total assets)	3.0	%	5.0	%

As of the most recent notification from their regulators, the Bank and LCNB were categorized as "well-capitalized" under the regulatory framework for prompt corrective action.  Management believes that no conditions or events have occurred since the last notification that would change the Bank's or LCNB's category.

A summary of the regulatory capital and capital ratios of LCNB follows (dollars in thousands):

	At September 30, 2013			At December 31, 2012
Regulatory Capital:
Shareholders' equity	$	92,215		82,006
Goodwill and other intangibles	(16,405		)	(6,019	)
Accumulated other comprehensive (income) loss	508			(4,721	)
Tier 1 risk-based capital	76,318			71,266
Eligible allowance for loan losses	3,423			3,437
Total risk-based capital	$	79,741		74,703
Capital ratios:
Tier 1 risk-based	13.26		%	15.13	%
Total risk-based	13.86		%	15.86	%
Leverage	8.19		%	8.98	%

23

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Continued)

Note 11 – Accumulated Other Comprehensive Income

Changes in accumulated other comprehensive income for the nine months ended September 30, 2013 and 2012 are as follows (in thousands):

	Unrealized Gains and Losses on Available-for-Sale Securities			Changes in Pension Plan Assets and Benefit Obligations		Total
2013
Balance at beginning of period	$	4,875		(154	)	4,721
Before reclassifications	(4,758		)	26		(4,732	)
Reclassifications	(497		)	—		(497	)
Balance at end of period	$	(380	)	(128	)	(508	)
2012
Balance at beginning of period	$	5,180		(152	)	5,028
Before reclassifications	1,529			25		1,554
Reclassifications	(586		)	—		(586	)
Balance at end of period	$	6,123		(127	)	5,996

Reclassifications out of accumulated other comprehensive income during the three months and nine months ended September 30, 2013 and 2012 and the affected line items in the consolidated statements of income are as follows (in thousands):

	Three Months Ended September 30,			Nine Months Ended September 30,
	2013		2012	2013	2012
Realized gain on sale of securities	$	58	427	753	886
Less provision for income taxes	20		145	256	300
Reclassification adjustment, net of taxes	$	38	282	497	586

24

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Continued)

Note 12 – Retirement Plans

LCNB participates in a noncontributory defined benefit retirement multi-employer plan that covers substantially all regular full-time employees hired before January 1, 2009.

Employees of LCNB also participate in a defined contribution retirement plan.  Employees hired on or after January 1, 2009 receive a 50% employer match on their contributions into the 401(k) plan, up to a maximum LCNB contribution of 3% of each individual employee's annual compensation.  Employees hired before January 1, 2009 who received a benefit reduction under certain amendments to the defined benefit retirement plan receive an automatic contribution of 5% or 7% of annual compensation, depending on the sum of an employee's age and vesting service, into the 401(k) plan, regardless of the contributions made by the employees.  This contribution is made annually and these employees do not receive any employer matches to their 401(k) contributions.

Funding and administrative costs of the qualified noncontributory defined benefit retirement plan and 401(k) plan charged to pension and other employee benefits in the consolidated statements of income for the three and nine-month periods ended September 30, 2013 and 2012 are as follows (in thousands):

	For the Three Months Ended September 30,			For the Nine Months Ended September 30,
	2013		2012	2013	2012
Qualified noncontributory defined benefit retirement plan	$	31	230	93	521
401(k) plan	75		88	229	198

Certain highly compensated employees participate in a nonqualified defined benefit retirement plan.  The nonqualified plan ensures that participants receive the full amount of benefits to which they would have been entitled under the noncontributory defined benefit retirement plan in the absence of limits on benefit levels imposed by certain sections of the Internal Revenue Code.

The components of net periodic pension cost of the nonqualified defined benefit retirement plan for the three and nine months ended September 30, 2013 and 2012 are summarized as follows (in thousands):

	Three Months Ended September 30,			Nine Months Ended September 30,
	2013		2012	2013	2012
Service cost	$	18	22	54	66
Interest cost	12		11	35	33
Amortization of unrecognized net (gain) loss	6		5	18	15
Amortization of unrecognized prior service cost	7		7	21	21
Net periodic pension cost	$	43	45	128	135

Amounts recognized in accumulated other comprehensive income, net of tax, at September 30, 2013 and December 31, 2012 for the nonqualified defined benefit retirement plan consists of (in thousands):

	September 30, 2013		December 31, 2012
Net actuarial loss	$	113	125
Past service cost	14		29
	$	127	154

Citizens National Bank had a qualified noncontributory defined benefit pension plan which covered employees hired before May 1, 2005.  LCNB assumed this plan at the time of the merger.

25

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Continued)

Note 13 - Stock Based Compensation

LCNB established an Ownership Incentive Plan (the "Plan") during 2002 that allows for stock-based awards to eligible employees, as determined by the Board of Directors.  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 200,000 shares.

Options granted to date vest ratably over a five year period and expire ten years after the date of grant. Stock options outstanding at September 30, 2013 are as follows:

	Outstanding Stock Options				Exercisable Stock Options
Exercise Price Range	Number	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)	Number	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)
$9.00 - $10.99	23,494	$	9.00	5.3	18,419	$	9.00	5.3
$11.00 - $12.99	63,354	12.05		6.8	31,362	12.06		6.1
$17.00 - $18.99	18,118	18.19		2.1	18,118	18.19		2.1
	104,966	12.43		5.6	67,899	12.86		4.8

The following table summarizes stock option activity for the periods indicated:

	2013				2012
	Options		Weighted Average Exercise Price		Options		Weighted Average Exercise Price
Outstanding, January 1	110,586		$	12.42	124,123		$	12.54
Granted	—		—		14,491		12.60
Exercised	(5,620	)	12.32		(2,144	)	13.09
Outstanding, September 30	104,966		12.43		136,470		12.54
Exercisable, September 30	67,899		12.86		81,193		13.25

The aggregate intrinsic value (the amount by which the current market value of the underlying stock exceeds the exercise price of the option) for options outstanding at September 30, 2013 that were "in the money" (market price greater than exercise price) was $708,000.  The aggregate intrinsic value at that date for only the options that were exercisable was $428,000.  The aggregate intrinsic value for options outstanding at September 30, 2012 that were in the money was $233,000 and the aggregate intrinsic value at that date for only the options that were exercisable was $127,000.  The intrinsic value changes based upon fluctuations in the market value of LCNB's stock.

Total expense related to options included in salaries and employee benefits in the consolidated statements of income for the three and nine months ended September 30, 2013 were $9,000 and $28,000, respectively, and $10,000 and $30,000 for the three and nine months ended September 30, 2012, respectively.

26

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Continued)

Note 14 - Earnings per Common Share

Basic earnings per common share is calculated by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period.  Diluted earnings per common share is adjusted for the dilutive effects of stock options, warrant, and restricted stock.  The diluted average number of common shares outstanding has been increased for the assumed exercise of stock options, warrant, and restricted stock with proceeds used to purchase treasury shares at the average market price for the period.  The computations are as follows for the three and nine months ended September 30, 2013 and 2012 (dollars in thousands, except share and per share data):

	For the Three Months Ended September 30,			For the Nine Months Ended September 30,
	2013		2012	2013	2012
Net income	$	2,357	1,847	6,433	6,111
Weighted average number of shares outstanding used in the calculation of basic earnings per common share	7,636,098		6,721,699	7,592,818	6,713,959
Add dilutive effect of:
Stock options	29,601		10,089	23,262	8,898
Stock warrants	121,399		65,887	106,606	64,143
Adjusted weighted average number of shares outstanding used in the calculation of diluted earnings per common share	7,787,098		6,797,675	7,722,686	6,787,000
Earnings per common share:
Basic	$	0.31	0.27	0.85	0.91
Diluted	0.30		0.27	0.83	0.90

Note 15 - Fair Value Measurements

LCNB measures certain assets at fair value using various valuation techniques and assumptions, depending on the nature of the asset.  Fair value is defined as the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date.

The inputs to valuation techniques used to measure fair value are assigned to one of three broad levels:

• Level 1 – quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the reporting date.

• Level 2 – inputs other than quoted prices included within level 1 that are observable for the asset or liability either directly or indirectly.  Level 2 inputs may include quoted prices for similar assets in active markets,  quoted prices for identical assets or liabilities in markets that are not active, inputs other than quoted prices (such as interest rates or yield curves) that are observable for the asset or liability, and inputs that are derived from or corroborated by observable market data.

• Level 3 - inputs that are unobservable for the asset or liability.

The majority of LCNB's financial debt securities are classified as available-for-sale.  The securities are reported at fair value with unrealized holding gains and losses reported net of income taxes in accumulated other comprehensive income.

27

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Continued)

Note 15 - Fair Value Measurements (continued)

LCNB utilizes a pricing service for determining the fair values of most of its investment securities.  Fair value for U.S. Treasury notes and corporate securities are determined based on market quotations (level 1).  Fair value for most of the other investment securities is calculated using the discounted cash flow method for each security.  The discount rates for these cash flows are estimated by the pricing service using rates observed in the market (level 2).  Cash flow streams are dependent on estimated prepayment speeds and the overall structure of the securities given existing market conditions.  In addition, LCNB has invested in two mutual funds that invest in debt securities or loans that qualify for credit under the Community Reinvestment Act.  The investment in one of the mutual funds is considered to have level 1 inputs because it is publicly traded in an active market and it publishes a daily net asset value.  The investment in the other mutual fund is considered to have level 2 inputs because, although its shares are not traded in an active market, an investor can have its interest in the fund redeemed for the balance of its capital account at any quarter-end assuming the fund is given a 60 day notice.  The investment in this fund is carried at cost and approximates fair value.  Additionally, LCNB owns trust preferred securities in various financial institutions, equity securities in various financial and non-financial companies, and a mutual fund that invests primarily in floating rate loans.   Market quotations (level 1) are used to determine fair values for these investments. The investment in the mutual fund is considered to have level 1 inputs because it is publicly traded in an active market and it publishes a daily net asset value.

Assets that may be recorded at fair value on a nonrecurring basis include impaired loans, other real estate owned, and other repossessed assets.  A loan is considered impaired when management believes it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement.  Impaired loans are carried at the present value of estimated future cash flows using the loan's existing rate or the fair value of collateral if the loan is collateral dependent, if this value is less than the loan balance.  When the fair value of the collateral is based on an observable market price or current appraised value, the inputs are considered to be level 2.  When an appraised value is not available and there is not an observable market price, the inputs are considered to be level 3.

Other real estate owned is adjusted to fair value upon transfer of the loan to foreclosed assets, usually based on an appraisal of the property.  Subsequently, foreclosed assets are carried at the lower of carrying value or fair value.  The inputs for a valuation based on current appraised value are considered to be level 2.

28

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Continued)

Note 15 - Fair Value Measurements (continued)

The following table summarizes the valuation of LCNB's assets recorded at fair value by input levels as of September 30, 2013 and December 31, 2012 (in thousands):

			Fair Value Measurements at the End of the Reporting Period Using
	Fair Value Measurements		Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Total Gains (Losses)
September 30, 2013
Recurring fair value measurements:
Investment securities available-for-sale:
U.S. Treasury notes	$	8,707	8,707	—	—
U.S. Agency notes	110,779		—	110,779	—
U.S. Agency mortgage-backed securities	45,576		—	45,576	—
Certificates of deposit with other banks	1,501		—	1,501	—
Municipal securities:
Non-taxable	80,509		—	80,509	—
Taxable	19,685		—	19,685	—
Mutual funds	2,385		1,385	1,000	—
Trust preferred securities	147		147	—	—
Equity securities	2,015		2,015	—	—
Total recurring fair value measurements	$	271,304	12,254	259,050	—
Nonrecurring fair value measurements:
Impaired loans	$	11,819	—	650	11,169	—
Other real estate owned and repossessed assets (a)	1,561		—	1,561	—	175
Total nonrecurring fair value measurements	$	13,380	—	2,211	11,169	175
December 31, 2012
Recurring fair value measurement:
Investment securities available-for-sale:
U.S. Treasury notes	$	18,686	18,686	—	—
U.S. Agency notes	90,606		—	90,606	—
U.S. Agency mortgage-backed securities	52,541		—	52,541	—
Corporate securities	3,067		3,067	—	—
Municipal securities:
Non-taxable	73,882		—	73,882	—
Taxable	15,841		—	15,841	—
Mutual funds	2,168		1,168	1,000	—
Trust preferred securities	245		245	—	—
Equity securities	1,470		1,470	—	—
Total recurring fair value measurements	$	258,506	24,636	233,870	—
Nonrecurring fair value measurements:
Impaired loans	$	4,276	—	161	4,115	—
Other real estate owned and repossessed assets (b)	2,189		—	2,189	—	(295	)
Total nonrecurring fair value measurements	$	6,465	—	2,350	4,115	(295	)

(a) Six other real estate owned properties with a total carrying amount of $277,000 were written down to their combined fair value of $239,000, resulting in an impairment charge of $38,000.  Eight other real estate owned properties with a total carrying amount of $843,000 were sold for a combined total of $1,054,000, resulting in a net gain of $211,000.    A repossessed asset with a carrying value of $6,000 was sold for $8,000, resulting in a net gain of $2,000.  The write-downs, losses, and gains were included in other non-interest expense for the period.

(b) Eight other real estate owned properties with a total carrying amount of $1,809,000 were written down to their combined fair value of $1,525,000, resulting in an impairment charge of $284,000.  Another property was sold at a loss of $8,000.  Repossessed assets with a carrying value of $23,000 were sold for a combined total of $20,000, resulting in a net loss of $3,000.  The write-downs and losses were included in other non-interest expense for the period.

29

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Continued)

Note 15 - Fair Value Measurements (continued)

Carrying amounts and estimated fair values of financial instruments as of September 30, 2013 and December 31, 2012 are as follows (in thousands):

	September 30, 2013			December 31, 2012
	Carrying Amount		Fair Value	Carrying Amount	Fair Value
FINANCIAL ASSETS:
Cash and cash equivalents	$	14,687	14,687	13,475	13,475
Investment securities:
Available-for-sale	271,304		271,304	258,506	258,506
Held-to-maturity	21,058		21,058	15,424	15,424
Federal Reserve Bank stock	1,603		1,603	949	949
Federal Home Loan Bank stock	2,854		2,854	2,091	2,091
Loans, net	562,686		564,402	450,346	453,060
FINANCIAL LIABILITIES:
Deposits	808,335		811,412	671,471	675,964
Short-term borrowings	22,811		22,811	13,756	13,756
Long-term debt	12,446		13,251	13,705	14,724

The fair value of off-balance-sheet financial instruments at September 30, 2013 and December 31, 2012 was not material.

Fair values of financial instruments are based on various assumptions, including the discount rate and estimates of future cash flows.  Therefore, the fair values presented may not represent amounts that could be realized in actual transactions.  In addition, because the required disclosures exclude certain financial instruments and all nonfinancial instruments, any aggregation of the fair value amounts presented would not represent the underlying value of LCNB.  The following methods and assumptions were used to estimate the fair value of certain financial instruments:

Cash and cash equivalents

The carrying amounts presented are deemed to approximate fair value.

Investment securities

Fair values for securities, excluding Federal Home Loan Bank and Federal Reserve Bank stock, are based on quoted market prices, if available.  If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities and/or discounted cash flow analyses or other methods.  The carrying value of Federal Home Loan Bank and Federal Reserve Bank stock approximates fair value based on the respective redemptive provisions.

Loans

Fair value is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities, incorporating assumptions of current and projected prepayment speeds.  These current rates approximate market rates.

Deposits

The fair value of demand deposits, savings accounts, and certain money market deposits is the amount payable on demand at the reporting date.  The fair value of fixed-maturity certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities, which approximates market rates.

Borrowings

The carrying amounts of federal funds purchased, repurchase agreements, and U.S. Treasury demand note borrowings are deemed to approximate fair value of short-term borrowings.  For long-term debt, fair values are estimated based on the discounted value of expected net cash flows using current interest rates.

30

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Continued)

Note 15 - Fair Value Measurements (continued)

The following table summarizes the categorization by input level as of September 30, 2013 and December 31, 2012 of LCNB's financial assets and liabilities not recorded at fair value but for which fair value is disclosed (in thousands):

			Fair Value Measurements at the End of the Reporting Period Using
	Fair Value Measurements		Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
September 30, 2013
Assets:
Loans, net	$	552,583	—	552,583	—
Investment securities, non-taxable, held-to-maturity	21,058		—	—	21,058
Federal Reserve Bank stock	1,603		1,603	—	—
Federal Home Loan Bank stock	2,854		2,854	—	—
Liabilities:
Deposits	811,412		—	811,412	—
Long-term debt	13,251		—	13,251	—
December 31, 2012
Assets:
Loans, net	$	448,784	—	448,784	—
Investment securities, non-taxable, held-to-maturity	15,424		—	—	15,424
Federal Reserve Bank stock	949		949	—	—
Federal Home Loan Bank stock	2,091		2,091	—	—
Liabilities:
Deposits	675,964		—	675,964	—
Long-term debt	14,724		—	14,724	—

31

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Continued)

Note 16 – Subsequent Events

On October 28, 2013, LCNB and Colonial Banc Corp. (“CBC”), the holding company for Eaton National Bank & Trust Co. of Eaton, Ohio (“Eaton National”), signed a definitive stock purchase agreement whereby LCNB will purchase 100% of the outstanding stock of Eaton National from CBC for $24.75 million in cash. The transaction is expected to close in the first quarter of 2014, subject to receipt of CBC shareholder approval, customary regulatory approvals, and the completion of an underwritten public offering of $25 million of LCNB voting common stock. Upon the consummation of the transaction, Eaton National will be merged into LCNB National Bank and its offices will become branches of LCNB National Bank.

Eaton National operates five full-service branches in Preble County, Ohio and has approximately $191 million in assets, $136 million in loans, and $168 million in deposits.

The underwritten public offering referred to above was completed on November 5, 2013, when LCNB issued 1,642,857 shares of its common stock at a price to the public of $17.50 per share. The net proceeds to LCNB after deducting underwriting discounts and commissions and estimated offering expenses was approximately $27.1 million. LCNB intends to use the proceeds to fund the acquisition of Eaton National and the remaining amount will be used for general corporate purposes.

Note 17 – Recent Accounting Pronouncements

Accounting Standards Update ("ASU") No. 2013-01, "Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities"

ASU No. 2013-01 was issued in January 2013 and clarifies that the scope of ASU No. 2011-11, "Balance Sheet (Topic 210):  Disclosures about Offsetting Assets and Liabilities," applies to derivatives accounted for in accordance with Topic 815, Derivatives and Hedging, including bifurcated embedded derivatives, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions that are either offset in accordance with applicable accounting guidance or subject to an enforceable master netting arrangement or similar agreement.  ASU No. 2013-01 is to be applied retrospectively and was effective for fiscal years beginning on or after January 1, 2013, and interim periods within those annual periods.  The adoption of this guidance, which involves disclosure only, will not impact LCNB's results of operations or financial position.  LCNB currently does not net its financial instruments on its balance sheets.

ASU No. 2013-04, "Liabilities (Topic 405):  Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date"

ASU No. 2013-04 was issued in February 2013 and requires an entity to measure obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of the guidance is fixed at the reporting date as the sum of (a) the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors and (b) any additional amount the reporting entity expects to pay on behalf of its co-obligors.  The entity is also required to disclose information about the obligation, including its nature and amount.  ASU No. 2013-04 is effective for public companies for fiscal years, and interim periods within those years, beginning after December 15, 2013.  The ASU is effective for nonpublic companies for fiscal years, and interim periods within those years, beginning after December 15, 2014.  The adoption of this guidance is not anticipated to have a material impact on LCNB's results of operations or financial position.

ASU No. 2013-10, "Derivatives and Hedging (Topic 815):  Inclusion of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate for Hedge Accounting Purposes"

ASU No. 2013-10 was issued in July 2013 and permits the Fed Funds Effective Swap Rate to be used as a U.S. benchmark interest rate for hedge accounting purposes in addition to interest rates on U.S. Treasury obligations and LIBOR.  The update also removes a restriction on using different benchmark rates for similar hedges.  ASU No. 2013-10 is effective prospectively for qualifying new or redesignated hedging relationships entered into on or after July 17, 2013.  The adoption of this guidance will not impact LCNB's results of operations or financial position.  LCNB currently does not use hedged transactions as part of its asset/liability management activities.

32

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Continued)

Note 17 – Recent Accounting Pronouncements (continued)

ASU No. 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists”

ASU No. 2013-11 was issued in July 2013 and requires an entity to present an unrecognized tax benefit, or a portion of an unrecognized tax benefit, as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. No new recurring disclosures are required. ASU No. 2013-11 is effective for public companies for fiscal years, and interim periods within those years, beginning after December 15, 2013 and are to be applied prospectively to all unrecognized tax benefits that exist at the effective date. The adoption of ASU No. 2013-11 is not expected to have a material impact on the LCNB’s results of operations or financial position.

33

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders

LCNB Corp.

Lebanon, Ohio

We have reviewed the accompanying consolidated balance sheet of LCNB Corp. and subsidiaries ("LCNB") as of September 30, 2013, and the related consolidated statements of income and comprehensive income for each of the three-month and nine-month periods ended September 30, 2013 and 2012, and the related consolidated statements of shareholders' equity and cash flows for each of the nine-month periods ended September 30, 2013 and 2012.  These interim financial statements are the responsibility of LCNB's management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States).  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 the standards of the Public Company Accounting Oversight Board (United States), 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 reviews, 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 have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of LCNB as of December 31, 2012 and the related consolidated statements of income, comprehensive income, shareholders' equity, and cash flows for the year then ended (not presented herein), and in our report dated February 25, 2013, 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, 2012, is fairly stated in all material respects, in relation to the consolidated balance sheet from which it has been derived.

	/s/ J.D. Cloud & Co. L.L.P.
Cincinnati, Ohio
November 7, 2013

34

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.  Forward looking statements are statements that include projections, predictions, expectations or beliefs about future events or results or otherwise are not statements of historical fact. Such statements are often characterized by the use of qualifying words and their derivatives such as "expects," "anticipates," "believes," "estimates," "plans," "projects," or other statements concerning opinions or judgments of LCNB and its management about future events.   Factors that could influence the accuracy of such forward looking statements include, but are not limited to, regulatory policy changes, interest rate fluctuations, loan demand, loan delinquencies and losses, general economic conditions and other risks.  Such forward-looking statements represent management's judgment as of the current date.  Actual strategies and results in future time periods may differ materially from those currently expected.  LCNB disclaims, however, any intent or obligation to update such forward-looking statements.  LCNB intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

Results of Operations

Net income for the three and nine months ended September 30, 2013 was $2,357,000 (total basic and diluted earnings per common share of $0.31 and $0.30, respectively) and $6,433,000 (total basic and diluted earnings per common share of $0.85 and $0.83, respectively), respectively.  This compares to net income of $1,847,000 (total basic and diluted earnings per common share of $0.27) and $6,111,000 (total basic and diluted earnings per common share of $0.91 and $0.90) for the same three and nine-month periods in 2012.  Results for 2013 were significantly affected by the completion of a merger with First Capital Bancshares, Inc. and its subsidiary, Citizens National Bank of Chillicothe, on January 11, 2013.

Net interest income for the three and nine months ended September 30, 2013 increased $1,241,000 and $2,871,000, respectively, from the comparative periods in 2012 due primarily to the increased volume of average interest earning assets provided by the merger.

The provision for loan losses for the three and nine months ended September 30, 2013 was $258,000 and $373,000 less than the comparable periods in 2012.  Net loan charge-offs for the first nine months of 2013 and 2012 totaled $383,000 and $807,000, respectively.  Non-accrual loans and loans past due 90 days or more and still accruing interest totaled $2,857,000 or 0.50% of total loans at September 30, 2013, compared to $2,411,000 or 0.53% of total loans at December 31, 2012.  Other real estate owned (which includes property acquired through foreclosure or deed-in-lieu of foreclosure and also includes property deemed to be in-substance foreclosed) and other repossessed assets decreased from $2,189,000 at December 31, 2012 to $1,561,000 at September 30, 2013 primarily due the sale of commercial real estate property during the first quarter 2013.

Non-interest income for the three-month period in 2013 was $158,000 less than the comparable period in 2012 and $436,000 greater for the nine-month period. The three-month period was less primarily due to decreases in gains from sales of investment securities and mortgage loans, partially offset by increases in service charges and fees on deposit accounts. For the nine-month period, decreased gains from sales of investment securities and mortgage loans were more than offset by increases in service charges and fees on deposit accounts. The increases in service charges and fees were primarily due to a greater number of deposit accounts resulting from the merger.   

Non-interest expense for the three and nine months ended September 30, 2013 was $599,000 and $3,236,000 greater than the comparable periods in 2012. Salaries and employee benefits, as well as a variety of other expense items, increased significantly due to the increased number of employees and offices resulting from the merger. The nine-month period ended September 30, 2013 also includes $1,326,000 in costs related to the merger with Citizens National Bank that were recognized during the first and second quarters.  These expense increases during the nine-month period were partially offset by a gain recognized on the sale of other real estate owned property during the first quarter 2013.

35

LCNB CORP. AND SUBSIDIARIES

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

Net Interest Income

Three Months Ended September 30, 2013 vs. 2012.

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 months ended September 30, 2013 and 2012, average balances for interest-earning assets and interest-bearing liabilities, the income or expense related to each item, and the resulting average yields earned or rates paid.

	Three Months Ended September 30,
	2013						2012
	Average Outstanding Balance			Interest Earned/ Paid	Average Yield/ Rate		Average Outstanding Balance			Interest Earned/ Paid	Average Yield/ Rate
					(Dollars in thousands)
Loans (1)	$	561,345		6,902	4.88	%	$	457,138		5,822	5.05	%
Interest-bearing demand deposits	4,724			2	0.17	%	10,175			4	0.16	%
Federal Reserve Bank stock	1,602			—	—	%	949			—	—	%
Federal Home Loan Bank stock	2,854			30	4.17	%	2,091			22	4.17	%
Investment securities:
Taxable	195,711			862	1.75	%	197,971			941	1.89	%
Non-taxable (2)	100,603			991	3.91	%	85,135			932	4.34	%
Total earnings assets	866,839			8,787	4.02	%	753,459			7,721	4.07	%
Non-earning assets	83,069						63,687
Allowance for loan losses	(3,412		)				(2,925		)
Total assets	$	946,496					$	814,221
Interest-bearing deposits	$	652,371		875	0.53	%	$	579,128		1,050	0.72	%
Short-term borrowings	24,622			11	0.18	%	14,544			4	0.11	%
Long-term debt	12,564			109	3.44	%	17,561			136	3.07	%
Total interest-bearing liabilities	689,557			995	0.57	%	611,233			1,190	0.77	%
Demand deposits	161,725						114,053
Other liabilities	4,166						7,369
Capital	91,048						81,566
Total liabilities and capital	$	946,496					$	814,221
Net interest rate spread (3)					3.45	%					3.30	%
Net interest income and net interest margin on a taxable-equivalent basis (4)				7,792	3.57	%				6,531	3.44	%
Ratio of interest-earning assets to interest-bearing liabilities	125.71		%				123.27		%

(1) Includes nonaccrual loans, if any.

(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.

36

LCNB CORP. AND SUBSIDIARIES

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

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, 2013 as compared to the same period in 2012.  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.

	Three Months Ended September 30, 2013 vs. 2012 Increase (decrease) due to:
	Volume			Rate		Total
	(In thousands)
Interest-earning Assets:
Loans	$	1,287		(207	)	1,080
Interest-bearing demand deposits	(2		)	—		(2	)
Federal Reserve Bank stock	—			—		—
Federal Home Loan Bank stock	8			—		8
Investment securities:
Taxable	(11		)	(68	)	(79	)
Non-taxable	158			(99	)	59
Total interest income	1,440			(374	)	1,066
Interest-bearing Liabilities:
Deposits	121			(296	)	(175	)
Short-term borrowings	4			3		7
Long-term debt	(42		)	15		(27	)
Total interest expense	83			(278	)	(195	)
Net interest income	$	1,357		(96	)	1,261

Net interest income on a fully tax-equivalent basis for the three months ended September 30, 2013 totaled $7,792,000, an increase of $1,261,000 over the comparable period in 2012.  Total interest income increased $1,066,000 and total interest expense decreased $195,000.

The increase in total interest income was primarily due to a $113.4 million increase in average total earning assets, partially offset by a 5 basis point (a basis point equals 0.01%) decrease in the average rate earned on earning assets.  The increase in average interest earning assets was primarily due to interest-earning assets acquired through the merger with First Capital.  The decrease in the average rate earned reflects a general decrease in market rates, partially offset by the recognition of accretable income resulting from the payoff of certain acquired credit impaired loans.

The decrease in total interest expense was primarily due to a 20 basis point decrease in the average rate paid on interest-bearing liabilities, partially offset by an $78.3 million increase in average interest-bearing liabilities.  The increase in average interest-bearing liabilities was primarily due to an $73.2 million increase in average interest-bearing deposits primarily due to the merger and a $10.1 million increase in average short-term borrowings, partially offset by a $5.0 million decrease in average long-term debt.  Long-term debt decreased because of the payment in full of a $6.0 million Federal Home Loan Bank advance in August 2012.  The decrease in the average rate paid on deposits also reflects a general decrease in market rates.

Nine Months Ended September 30, 2013 vs. 2012.

The following table presents, for the nine months ended September 30, 2013 and 2012, 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.

37

LCNB CORP. AND SUBSIDIARIES

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

	Nine Months Ended September 30,
	2013						2012
	Average Outstanding Balance			Interest Earned/ Paid	Average Yield/ Rate		Average Outstanding Balance			Interest Earned/ Paid	Average Yield/ Rate
					(Dollars in thousands)
Loans (1)	$	549,597		20,298	4.94	%	$	458,548		17,950	5.23	%
Federal funds sold	1,027			1	0.13	%	—			—	—
Interest-bearing demand deposits	8,663			15	0.23	%	12,002			19	0.21	%
Federal Reserve Bank stock	1,380			38	3.68	%	946			28	3.95	%
Federal Home Loan Bank stock	2,817			91	4.32	%	2,091			68	4.34	%
Investment securities:
Taxable	196,601			2,556	1.74	%	190,845			2,810	1.97	%
Non-taxable (2)	98,783			2,927	3.96	%	82,395			2,774	4.50	%
Total earnings assets	858,868			25,926	4.04	%	746,827			23,649	4.23	%
Non-earning assets	86,032						64,053
Allowance for loan losses	(3,392		)				(2,878		)
Total assets	$	941,508					$	808,002
Interest-bearing deposits	$	654,913		2,789	0.57	%	$	576,636		3,332	0.77	%
Short-term borrowings	16,753			18	0.14	%	12,716			12	0.13	%
Long-term debt	12,952			331	3.42	%	19,695			440	2.98	%
Total interest-bearing liabilities	684,618			3,138	0.61	%	609,047			3,784	0.83	%
Demand deposits	158,059						111,766
Other liabilities	5,698						6,908
Capital	93,133						80,281
Total liabilities and capital	$	941,508					$	808,002
Net interest rate spread (3)					3.43	%					3.40	%
Net interest income and net interest margin on a taxable-equivalent basis (4)				22,788	3.55	%				19,865	3.55	%
Ratio of interest-earning assets to interest-bearing liabilities	125.45		%				122.62		%

(1) Includes nonaccrual loans, if any.  Income from tax-exempt loans is included in interest income on a tax-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.

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, 2013 as compared to the same period in 2012.

38

LCNB CORP. AND SUBSIDIARIES

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

	Nine Months Ended September 30, 2013 vs. 2012 Increase (decrease) due to:
	Volume			Rate		Total
	(In thousands)
Interest-earning Assets:
Loans	$	3,407		(1,059	)	2,348
Federal funds sold	1			—		1
Interest-bearing demand deposits	(6		)	2		(4	)
Federal Reserve Bank stock	12			(2	)	10
Federal Home Loan Bank stock	23			—		23
Investment securities:
Taxable	83			(337	)	(254	)
Non-taxable	510			(357	)	153
Total interest income	4,030			(1,753	)	2,277
Interest-bearing Liabilities:
Deposits	412			(955	)	(543	)
Short-term borrowings	4			2		6
Long-term debt	(166		)	57		(109	)
Total interest expense	250			(896	)	(646	)
Net interest income	$	3,780		(857	)	2,923

Net interest income on a fully tax-equivalent basis for the first nine months of 2013 totaled $22,788,000, a $2,923,000 increase from the same nine-month period of 2012.  Total interest income increased $2,277,000 and total interest expense decreased $646,000.

The increase in total interest income was primarily due to a $112.0 million increase in average total earning assets, partially offset by a 19 basis point decrease in the average rate earned on earning assets.  The increase in average interest earning assets was primarily due to interest-earning assets acquired through the merger with First Capital.  The decrease in the average rate earned reflects a general decrease in market rates, partially offset by the recognition of accretable income resulting from the payoff of certain acquired credit impaired loans.

The decrease in total interest expense was primarily due to a 22 basis point decrease in the average rate paid on interest-bearing liabilities, partially offset by a $75.6 million increase in average interest-bearing liabilities.  The increase in average interest-bearing liabilities was primarily due to an $78.3 million increase in average interest-bearing deposits primarily due to the merger, partially offset by a $6.7 million decrease in average long-term debt.  Long-term debt decreased because of the previously described payment in full of a Federal Home Loan Bank advance in August 2012.  The decrease in the average rate paid on interest-bearing liabilities reflects a general decrease in market rates.

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 loan 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 loan losses include 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 provision for loan losses for the three months ended September 30, 2013 and 2012 was $178,000 and $436,000, respectively, and $369,000 and $742,000 for the nine months ended September 30, 2013 and 2012, respectively.  The decrease in the provision reflects stabilization in the credit quality of the loan portfolio in part due to relatively stable regional market conditions.

39

LCNB CORP. AND SUBSIDIARIES

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

The fair value of loans acquired through the merger was estimated by discounting at current rates the cash flows expected to be received on Citizens' loan portfolio.  Since the estimation of cash flows recognized the probability that LCNB would not be able to collect all contractually required principal and interest payments, Citizens' allowance for loan losses was not carried forward.

Non-Interest Income

Three Months Ended September 30, 2013 vs. 2012.

Total non-interest income for the third quarter 2013 was $158,000 less than for the third quarter 2012 primarily due to a $369,000 decrease in net gains on sales of investment securities and a $94,000 decrease in net gains from sales of mortgage loans. The decreases reflect declines in the volume of investment securities and loans sold.

These decreases were partially offset by a $151,000 increase in service charges and fees on deposit accounts and a $96,000 increase in trust income.  Service charges and fees on deposit accounts increased primarily due to a greater number of deposit accounts resulting from the merger.  Trust income increased primarily due to an increase in the fair value of trust assets and brokerage accounts managed along with fee adjustments that became effective July 1, 2013.

Nine Months Ended September 30, 2013 vs. 2012.

Non-interest income for the first nine months of 2013 was $436,000 greater than the comparable period in 2012.  The increase was largely due to a $416,000 increase in service charges and fees on deposit accounts for substantially the same reasons mentioned above.  Net gain on sales of securities decreased $133,000 and net gains from sales of mortgage loans decreased $55,000 for substantially the same reasons mentioned above.

Non-Interest Expense

Three Months Ended September 30, 2013 vs. 2012.

Non-interest expense for the third quarter 2013 was $599,000 greater than for the third quarter 2012 due primarily to a $188,000 increase in salaries and employee benefits and a $220,000 increase in other non-interest expense.  The increase in salaries and employee benefits primarily reflects the additional staff needed to operate the six additional offices LCNB acquired as a result of the merger.  Equipment expenses and net occupancy expense increased slightly due to increased costs for the additional offices. FDIC insurance premiums increased due to a higher level of deposit accounts. Other non-interest expense increased due to smaller increases in various accounts.

Nine Months Ended September 30, 2013 vs. 2012.

Non-interest expense for the first nine months of 2013 was $3,236,000 greater than for the same period in 2012 due primarily to a $779,000 increase in salaries and employee benefits, a $119,000 increase in equipment expenses, a $287,000 increase in net occupancy expense, and a $1,897,000 increase in other non-interest expense.  Salaries and employee benefits, equipment expenses, and net occupancy expense increased for substantially the same reasons mentioned above.  Other non-interest expense for the nine-month period in 2013 included $1,326,000 in costs related to the merger and data system conversion. Increases in intangible amortization expense of $205,000 and other expenses associated with the operations of the newly acquired branches also contributed to the overall increase in other non-interest expense in 2013.  

Partially offsetting these increased costs was a $265,000 decrease in net costs related to other real estate owned, including a gain recognized in the first quarter 2013 on the sale of commercial real estate property and a decrease in impairment write-downs and other holding costs.

Income Taxes

LCNB's effective tax rates for the nine months ended September 30, 2013 and 2012 were 25.0% and 24.9%, respectively.  The difference between the statutory rate of 34.0% and the effective tax rate is primarily due to tax-exempt interest income from municipal securities and tax-exempt earnings from bank owned life insurance.

40

LCNB CORP. AND SUBSIDIARIES

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

Financial Condition

The carrying values of loans, securities available-for-sale, premises and equipment, and deposits were greatly influenced by the merger.  See Note 2 - Acquisition to the Financial Statements for a description of the merger and a summary of the fair values of First Capital's assets and liabilities added to LCNB's consolidated balance sheet.

In addition to the merger, a $37.1 million increase in public fund deposits by local government entities was a secondary reason for the increase in total deposits.  Public fund deposits can be relatively volatile due to seasonal tax collections and the financial needs of the local entities.

Common stock in the shareholders' equity section of the consolidated balance sheet at September 30, 2013 was $12.7 million greater than the balance shown for December 31, 2012 due primarily to the merger.  LCNB issued 888,811 shares of stock, valued at $12.4 million on the date of the merger, and paid approximately $7.8 million in cash to effect the merger.

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 the Bank may pay to the sum of retained net income for the current year plus retained net income for the previous two years.  Prior approval from the Office of the Comptroller of the Currency, the Bank's primary regulator, is necessary for the Bank to pay dividends in excess of this amount.  In addition, dividend payments may not reduce capital levels below minimum regulatory guidelines.  Management believes the Bank will be able to pay anticipated dividends to LCNB Corp. without needing to request approval.  The Bank is not aware of any reasons why it would not receive such 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 and cash equivalents and securities available for sale.  At September 30, 2013, LCNB's liquid assets amounted to $286.0 million or 30.3% of total assets.  This compares to liquid assets totaling $272.0 million or 34.5% of total assets at December 31, 2012.

Liquidity is also provided by access to core funding sources, primarily core depositors in LCNB's market area.  Approximately 81.1% of total deposits at September 30, 2013 were "core" deposits, compared to 83.6% of deposits at December 31, 2012. Core deposits, for this purpose, are defined as total deposits less public funds and certificates of deposit greater than $100,000. The percentage of core deposits to total deposits decreased because of the growth in public fund deposits discussed above in relation to total growth in deposits.

Secondary sources of liquidity include LCNB's ability to sell loan participations, borrow funds from the Federal Home Loan Bank, purchase federal funds, issue repurchase agreements, or use a line of credit established with another bank.

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.

41

LCNB CORP. AND SUBSIDIARIES

Item 3. Quantitative and Qualitative Disclosures about Market Risks

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.

The Bank's Asset and Liability Management Committee ("ALCO") primarily uses a combination of Interest Rate Sensitivity Analysis ("IRSA") and Economic Value of Equity ("EVE") analysis for measuring and managing interest rate risk.  IRSA is used to estimate the effect on net interest income during a one-year period of instantaneous and sustained movements in interest rates, also called interest rate shocks, of 100, 200, and 300 basis points.  Management considers the results of any significant downward scenarios to not be meaningful in the current interest rate environment.  The base projection uses a current interest rate scenario.  As shown below, the September 30, 2013 IRSA indicates that an increase in interest rates would have a positive effect on net interest income ("NII"). The changes in NII for all rate assumptions are within LCNB's acceptable ranges.

Rate Shock Scenario in Basis Points	Amount		$ Change in NII	% Change in NII
	(Dollars in thousands)
Up 300	$	35,552	2,274	6.83	%
Up 200	34,763		1,485	4.46	%
Up 100	34,002		724	2.18	%
Base	33,278		—	—

IRSA shows the effect on NII during a one-year period only.  A more long-range model is the EVE analysis, which shows the estimated present value of future cash inflows from interest-earning assets less the present value of future cash outflows for interest-bearing liabilities for the same rate shocks.  As shown below, the September 30, 2013 EVE analysis indicates that an increase in interest rates would have a negative effect on the EVE.  The changes in eve for all rate assumptions are within LCNB's acceptable ranges.

Rate Shock Scenario in Basis Points	Amount		$ Change in EVE		% Change in EVE
	(Dollars in thousands)
Up 300	$	83,393	(7,766	)	(8.52	)%
Up 200	85,292		(5,867	)	(6.44	)%
Up 100	87,402		(3,757	)	(4.12	)%
Base	91,159		—		—

The IRSA and EVE simulations discussed above are not projections of future income or equity and should not be relied on as being indicative of future operating results.  Assumptions used, including the nature and timing of interest rate levels, yield curve shape, prepayments on loans and securities, deposit decay rates, pricing decisions on loans and deposits, and reinvestment or replacement of asset and liability cash flows, are inherently uncertain and, as a result, the models cannot precisely measure future net interest income or equity.  Furthermore, the models do not reflect actions that borrowers, depositors, and management may take in response to changing economic conditions and interest rate levels.

42

LCNB CORP. AND SUBSIDIARIES

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 and 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 and that such information is accumulated and communicated to LCNB's management, including its principal executive officer and principal financial officer, as appropriate, in order to allow timely decisions to be made regarding required disclosures.  Based upon this evaluation, these officers have concluded, that as of September 30, 2013, LCNB's disclosure controls and procedures were effective.

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.

43

PART II.  OTHER INFORMATION

LCNB CORP. AND SUBSIDIARIES

Item 1. Legal Proceedings

None

Item 1A. Risk Factors

No material changes

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the period of this report, LCNB did not sell any of its securities that were not registered under the Securities Act.

During the period covered by this report, LCNB did not purchase any shares of its equity securities.

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

None

44

LCNB CORP. AND SUBSIDIARIES

Item 6. Exhibits

Exhibit No.	Exhibit Description
2	Agreement and Plan of Merger dated as of October 9, 2012 by and between LCNB Corp. and First Capital Bancshares, Inc.  – incorporated by reference to the Registrant's Form 8-K filed on October 9, 2012, Exhibit 2.1.
3.1	Amended and Restated Articles of Incorporation of LCNB Corp., as amended – incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2010, Exhibit 3.1.
3.2	Code of Regulations of LCNB Corp. – incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2005, Exhibit 3(ii).
10.1	LCNB Corp. Ownership Incentive Plan – incorporated by reference to Registrant's Form DEF 14A Proxy Statement pursuant to Section 14(a), dated March 15, 2002, Exhibit A (000-26121).
10.2	Form of Option Grant Agreement under the LCNB Corp. Ownership Incentive Plan – incorporated by reference to the Registrant's Form 10-K for the fiscal year ended December 31, 2005, Exhibit 10.2.
10.3	Nonqualified Executive Retirement Plan – incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the period ended June 30, 2009, Exhibit 10.4.
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.
101	The following financial information from LCNB Corp.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 2013 is formatted in Extensible Business Reporting Language:  (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Shareholders' Equity, (v) the Consolidated Statements of Cash Flows, and (vi) the Notes to Consolidated Financial Statements.

45

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.
November 7, 2013	/s/ Stephen P. Wilson
	Stephen P. Wilson, Chief Executive Officer and
	Chairman of the Board of Directors
November 7, 2013	/s/ Robert C. Haines, II
	Robert C. Haines, II, Executive Vice President
	and Chief Financial Officer

46

EX-31.1

Exhibit 31.1

CERTIFICATIONS

In connection with the Quarterly Report of LCNB Corp. on Form 10-Q for the period ending September 30, 2013, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Stephen P. Wilson, Chief Executive Officer and Chairman of the Board of Directors of LCNB Corp., certify that:

1) I have reviewed this quarterly report on Form 10-Q of LCNB Corp.;

2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;

4) The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5) The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

/s/ Stephen P. Wilson

Stephen P. Wilson

Chief Executive Officer and

Chairman of the Board of Directors

November 7, 2013

EX-31.2

Exhibit 31.2

CERTIFICATIONS

In connection with the Quarterly Report of LCNB Corp. on Form 10-Q for the period ending September 30, 2013, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Robert C. Haines, II, Executive Vice President and Chief Financial Officer of LCNB Corp., certify that:

1) I have reviewed this quarterly report on Form 10-Q of LCNB Corp.;

2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;

4) The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5) The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

/s/ Robert C. Haines, II

Robert C. Haines, II

Executive Vice President and

Chief Financial Officer

November 7, 2013

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of LCNB Corp. (the "Company") on Form 10-Q for the period ending September 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), we, Stephen P. Wilson, Chief Executive Officer and Chairman of the Board of Directors, and Robert C. Haines, II, Executive Vice President and Chief Financial Officer, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to the best of our knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Stephen P. Wilson	/s/ Robert C. Haines, II
Stephen P. Wilson Chief Executive Officer and Chairman of the Board of Directors	Robert C. Haines, II Executive Vice President and Chief Financial Officer

Date:  November 7, 2013

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Income Taxes

9 Months Ended

Sep. 30, 2013

Income Tax Disclosure [Abstract]

Income Taxes

Note 8 – Income Taxes

A reconciliation between the statutory income tax and LCNB's effective tax rate on income from continuing operations follows:

	For the three months ended September 30,				For the nine months ended September 30,
	2013		2012		2013		2012
Statutory tax rate	34.0	%	34.0	%	34.0	%	34.0	%
Increase (decrease) resulting from:
Tax exempt interest	(6.8	)%	(8.3	)%	(7.4	)%	(7.3	)%
Tax exempt income on bank owned life insurance	(1.8	)%	(2.0	)%	(2.0	)%	(1.8	)%
Other, net	—	%	(0.1	)%	0.4	%	—	%
Effective tax rate	25.4	%	23.6	%	25.0	%	24.9	%

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Loans, Troubled Debt Restructuring (Details) (USD $)	3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended
	Sep. 30, 2013 Loan	Sep. 30, 2012 Loan	Sep. 30, 2013 Loan	Sep. 30, 2012 Loan	Sep. 30, 2013 Commercial and Industrial [Member] Loan	Sep. 30, 2012 Commercial and Industrial [Member] Loan	Sep. 30, 2013 Commercial and Industrial [Member] Loan	Sep. 30, 2012 Commercial and Industrial [Member] Loan	Sep. 30, 2013 Commercial Secured By Real Estate [Member] Loan	Sep. 30, 2012 Commercial Secured By Real Estate [Member] Loan	Sep. 30, 2013 Commercial Secured By Real Estate [Member] Loan	Sep. 30, 2012 Commercial Secured By Real Estate [Member] Loan	Sep. 30, 2013 Residential Real Estate [Member] Loan	Sep. 30, 2012 Residential Real Estate [Member] Loan	Sep. 30, 2013 Residential Real Estate [Member] Loan	Sep. 30, 2012 Residential Real Estate [Member] Loan	Sep. 30, 2013 Consumer [Member] Loan	Sep. 30, 2012 Consumer [Member] Loan	Sep. 30, 2013 Consumer [Member] Loan	Sep. 30, 2012 Consumer [Member] Loan	Mar. 31, 2013 Consumer Loans Auto Financing Receivable [Member]
Loan modifications classified as troubled debt restructurings [Abstract]
Number of Loans	1	3	6	5	0	0	1	0	1	0	1	0	0	1	2	3	0	2	2	2
Balance at Modification	$ 702,000	$ 120,000	$ 1,086,000	$ 293,000	$ 0	$ 0	$ 22,000	$ 0	$ 702,000	$ 0	$ 702,000	$ 0	$ 0	$ 100,000	$ 335,000	$ 273,000	$ 0	$ 20,000	$ 27,000	$ 20,000
Troubled debt restructurings that subsequently defaulted within 12 months of the restructuring date	$ 0	$ 0	$ 0	$ 0																	$ 13,000

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CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
INTEREST INCOME:
Interest and fees on loans	$ 6,902	$ 5,822	$ 20,298	$ 17,950
Interest on investment securities –
Taxable	862	941	2,556	2,810
Non-taxable	654	615	1,932	1,831
Other short-term investments	32	26	145	115
TOTAL INTEREST INCOME	8,450	7,404	24,931	22,706
INTEREST EXPENSE:
Interest on deposits	875	1,050	2,789	3,332
Interest on short-term borrowings	11	4	18	12
Interest on long-term debt	109	136	331	440
TOTAL INTEREST EXPENSE	995	1,190	3,138	3,784
NET INTEREST INCOME	7,455	6,214	21,793	18,922
PROVISION FOR LOAN LOSSES	178	436	369	742
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	7,277	5,778	21,424	18,180
NON-INTEREST INCOME:
Trust income	626	530	1,810	1,769
Service charges and fees on deposit accounts	1,062	911	3,114	2,698
Net gain on sales of securities	58	427	753	886
Bank owned life insurance income	168	145	512	432
Gains from sales of mortgage loans	57	151	305	360
Other operating income	76	41	238	151
TOTAL NON-INTEREST INCOME	2,047	2,205	6,732	6,296
NON-INTEREST EXPENSE:
Salaries and employee benefits	3,247	3,059	9,783	9,004
Equipment expenses	318	263	908	789
Occupancy expense, net	505	445	1,529	1,242
State franchise tax	208	193	635	595
Marketing	145	129	446	409
FDIC insurance premiums	128	83	375	298
Other non-interest expense	1,612	1,392	5,902	4,005
TOTAL NON-INTEREST EXPENSE	6,163	5,564	19,578	16,342
INCOME BEFORE INCOME TAXES	3,161	2,419	8,578	8,134
PROVISION FOR INCOME TAXES	804	572	2,145	2,023
NET INCOME	$ 2,357	$ 1,847	$ 6,433	$ 6,111
Dividends declared per common share (in dollars per share)	$ 0.16	$ 0.16	$ 0.48	$ 0.48
Earnings per common share:
Basic (in dollars per share)	$ 0.31	$ 0.27	$ 0.85	$ 0.91
Diluted (in dollars per share)	$ 0.30	$ 0.27	$ 0.83	$ 0.90
Weighted average common shares outstanding:
Basic (in shares)	7,636,098	6,721,699	7,592,818	6,713,959
Diluted (in shares)	7,787,098	6,797,675	7,722,686	6,787,000

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Basis of Presentation

9 Months Ended

Sep. 30, 2013

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

Note 1 - Basis of Presentation

Substantially all of the assets, liabilities and operations of LCNB Corp. ("LCNB" or the "Company") are attributable to its wholly-owned subsidiary, LCNB National Bank (the "Bank").  The accompanying unaudited consolidated financial statements include the accounts of LCNB and the Bank.

The unaudited interim consolidated financial statements, which have been reviewed by J.D. Cloud & Co. L.L.P., LCNB's independent registered public accounting firm, in accordance with standards established by the Public Company Accounting Oversight Board, as indicated by their report included herein and which does not express an opinion on those statements, have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and the rules and regulations of the Securities and Exchange Commission (the "SEC").  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 interim 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, as required by Regulation S-X, Rule 10-01.

Certain prior period data presented in the financial statements have been reclassified to conform with the current year presentation.

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, 2013 are not necessarily indicative of the results to be expected for the full year ending December 31, 2013.  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 2012 Annual Report on Form 10-K filed with the SEC.

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Fair Value Measurements

9 Months Ended

Sep. 30, 2013

Fair Value Disclosures [Abstract]

Fair Value Measurements

Note 15 - Fair Value Measurements

LCNB measures certain assets at fair value using various valuation techniques and assumptions, depending on the nature of the asset.  Fair value is defined as the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date.

The inputs to valuation techniques used to measure fair value are assigned to one of three broad levels:

• Level 1 – quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the reporting date.

• Level 2 – inputs other than quoted prices included within level 1 that are observable for the asset or liability either directly or indirectly.  Level 2 inputs may include quoted prices for similar assets in active markets,  quoted prices for identical assets or liabilities in markets that are not active, inputs other than quoted prices (such as interest rates or yield curves) that are observable for the asset or liability, and inputs that are derived from or corroborated by observable market data.

• Level 3 - inputs that are unobservable for the asset or liability.

The majority of LCNB's financial debt securities are classified as available-for-sale.  The securities are reported at fair value with unrealized holding gains and losses reported net of income taxes in accumulated other comprehensive income.

LCNB utilizes a pricing service for determining the fair values of most of its investment securities.  Fair value for U.S. Treasury notes and corporate securities are determined based on market quotations (level 1).  Fair value for most of the other investment securities is calculated using the discounted cash flow method for each security.  The discount rates for these cash flows are estimated by the pricing service using rates observed in the market (level 2).  Cash flow streams are dependent on estimated prepayment speeds and the overall structure of the securities given existing market conditions.  In addition, LCNB has invested in two mutual funds that invest in debt securities or loans that qualify for credit under the Community Reinvestment Act.  The investment in one of the mutual funds is considered to have level 1 inputs because it is publicly traded in an active market and it publishes a daily net asset value.  The investment in the other mutual fund is considered to have level 2 inputs because, although its shares are not traded in an active market, an investor can have its interest in the fund redeemed for the balance of its capital account at any quarter-end assuming the fund is given a 60 day notice.  The investment in this fund is carried at cost and approximates fair value.  Additionally, LCNB owns trust preferred securities in various financial institutions, equity securities in various financial and non-financial companies, and a mutual fund that invests primarily in floating rate loans.   Market quotations (level 1) are used to determine fair values for these investments. The investment in the mutual fund is considered to have level 1 inputs because it is publicly traded in an active market and it publishes a daily net asset value.

Assets that may be recorded at fair value on a nonrecurring basis include impaired loans, other real estate owned, and other repossessed assets.  A loan is considered impaired when management believes it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement.  Impaired loans are carried at the present value of estimated future cash flows using the loan's existing rate or the fair value of collateral if the loan is collateral dependent, if this value is less than the loan balance.  When the fair value of the collateral is based on an observable market price or current appraised value, the inputs are considered to be level 2.  When an appraised value is not available and there is not an observable market price, the inputs are considered to be level 3.

Other real estate owned is adjusted to fair value upon transfer of the loan to foreclosed assets, usually based on an appraisal of the property.  Subsequently, foreclosed assets are carried at the lower of carrying value or fair value.  The inputs for a valuation based on current appraised value are considered to be level 2.

The following table summarizes the valuation of LCNB's assets recorded at fair value by input levels as of September 30, 2013 and December 31, 2012 (in thousands):

			Fair Value Measurements at the End of the Reporting Period Using
	Fair Value Measurements		Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Total Gains (Losses)
September 30, 2013
Recurring fair value measurements:
Investment securities available-for-sale:
U.S. Treasury notes	$	8,707	8,707	—	—
U.S. Agency notes	110,779		—	110,779	—
U.S. Agency mortgage-backed securities	45,576		—	45,576	—
Certificates of deposit with other banks	1,501		—	1,501	—
Municipal securities:
Non-taxable	80,509		—	80,509	—
Taxable	19,685		—	19,685	—
Mutual funds	2,385		1,385	1,000	—
Trust preferred securities	147		147	—	—
Equity securities	2,015		2,015	—	—
Total recurring fair value measurements	$	271,304	12,254	259,050	—
Nonrecurring fair value measurements:
Impaired loans	$	11,819	—	650	11,169	—
Other real estate owned and repossessed assets (a)	1,561		—	1,561	—	175
Total nonrecurring fair value measurements	$	13,380	—	2,211	11,169	175
December 31, 2012
Recurring fair value measurement:
Investment securities available-for-sale:
U.S. Treasury notes	$	18,686	18,686	—	—
U.S. Agency notes	90,606		—	90,606	—
U.S. Agency mortgage-backed securities	52,541		—	52,541	—
Corporate securities	3,067		3,067	—	—
Municipal securities:
Non-taxable	73,882		—	73,882	—
Taxable	15,841		—	15,841	—
Mutual funds	2,168		1,168	1,000	—
Trust preferred securities	245		245	—	—
Equity securities	1,470		1,470	—	—
Total recurring fair value measurements	$	258,506	24,636	233,870	—
Nonrecurring fair value measurements:
Impaired loans	$	4,276	—	161	4,115	—
Other real estate owned and repossessed assets (b)	2,189		—	2,189	—	(295	)
Total nonrecurring fair value measurements	$	6,465	—	2,350	4,115	(295	)

(a) Six other real estate owned properties with a total carrying amount of $277,000 were written down to their combined fair value of $239,000, resulting in an impairment charge of $38,000.  Eight other real estate owned properties with a total carrying amount of $843,000 were sold for a combined total of $1,054,000, resulting in a net gain of $211,000.    A repossessed asset with a carrying value of $6,000 was sold for $8,000, resulting in a net gain of $2,000.  The write-downs, losses, and gains were included in other non-interest expense for the period.

(b) Eight other real estate owned properties with a total carrying amount of $1,809,000 were written down to their combined fair value of $1,525,000, resulting in an impairment charge of $284,000.  Another property was sold at a loss of $8,000.  Repossessed assets with a carrying value of $23,000 were sold for a combined total of $20,000, resulting in a net loss of $3,000.  The write-downs and losses were included in other non-interest expense for the period.

Carrying amounts and estimated fair values of financial instruments as of September 30, 2013 and December 31, 2012 are as follows (in thousands):

	September 30, 2013			December 31, 2012
	Carrying Amount		Fair Value	Carrying Amount	Fair Value
FINANCIAL ASSETS:
Cash and cash equivalents	$	14,687	14,687	13,475	13,475
Investment securities:
Available-for-sale	271,304		271,304	258,506	258,506
Held-to-maturity	21,058		21,058	15,424	15,424
Federal Reserve Bank stock	1,603		1,603	949	949
Federal Home Loan Bank stock	2,854		2,854	2,091	2,091
Loans, net	562,686		564,402	450,346	453,060
FINANCIAL LIABILITIES:
Deposits	808,335		811,412	671,471	675,964
Short-term borrowings	22,811		22,811	13,756	13,756
Long-term debt	12,446		13,251	13,705	14,724

The fair value of off-balance-sheet financial instruments at September 30, 2013 and December 31, 2012 was not material.

Fair values of financial instruments are based on various assumptions, including the discount rate and estimates of future cash flows.  Therefore, the fair values presented may not represent amounts that could be realized in actual transactions.  In addition, because the required disclosures exclude certain financial instruments and all nonfinancial instruments, any aggregation of the fair value amounts presented would not represent the underlying value of LCNB.  The following methods and assumptions were used to estimate the fair value of certain financial instruments:

Cash and cash equivalents

The carrying amounts presented are deemed to approximate fair value.

Investment securities

Fair values for securities, excluding Federal Home Loan Bank and Federal Reserve Bank stock, are based on quoted market prices, if available.  If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities and/or discounted cash flow analyses or other methods.  The carrying value of Federal Home Loan Bank and Federal Reserve Bank stock approximates fair value based on the respective redemptive provisions.

Loans

Fair value is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities, incorporating assumptions of current and projected prepayment speeds.  These current rates approximate market rates.

Deposits

The fair value of demand deposits, savings accounts, and certain money market deposits is the amount payable on demand at the reporting date.  The fair value of fixed-maturity certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities, which approximates market rates.

Borrowings

The carrying amounts of federal funds purchased, repurchase agreements, and U.S. Treasury demand note borrowings are deemed to approximate fair value of short-term borrowings.  For long-term debt, fair values are estimated based on the discounted value of expected net cash flows using current interest rates.

The following table summarizes the categorization by input level as of September 30, 2013 and December 31, 2012 of LCNB's financial assets and liabilities not recorded at fair value but for which fair value is disclosed (in thousands):

			Fair Value Measurements at the End of the Reporting Period Using
	Fair Value Measurements		Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
September 30, 2013
Assets:
Loans, net	$	552,583	—	552,583	—
Investment securities, non-taxable, held-to-maturity	21,058		—	—	21,058
Federal Reserve Bank stock	1,603		1,603	—	—
Federal Home Loan Bank stock	2,854		2,854	—	—
Liabilities:
Deposits	811,412		—	811,412	—
Long-term debt	13,251		—	13,251	—
December 31, 2012
Assets:
Loans, net	$	448,784	—	448,784	—
Investment securities, non-taxable, held-to-maturity	15,424		—	—	15,424
Federal Reserve Bank stock	949		949	—	—
Federal Home Loan Bank stock	2,091		2,091	—	—
Liabilities:
Deposits	675,964		—	675,964	—
Long-term debt	14,724		—	14,724	—

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Subsequent Events (Details) (USD $)			0 Months Ended
	Sep. 30, 2013	Dec. 31, 2012	Nov. 05, 2013 Subsequent Event [Member]	Oct. 28, 2013 Eaton National [Member] Subsequent Event [Member] Branch
Subsequent Event [Line Items]
Business acquisition, percentage of voting interest acquired				100.00%
Purchase price of Eaton National				$ 24,750,000
Potential future public offering of voting common stock				25,000,000
Number of branches				5
Total assets	942,349,000	788,637,000		191,000,000
Loans, net	562,686,000	450,346,000		136,000,000
Deposits	808,335,000	671,471,000		168,000,000
Number of shares issued			1,642,857
Stock issuance price (in dollars per share)			$ 17.50
Value of new stock issued			$ 27,100,000

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Borrowings (Details) (USD $)	Sep. 30, 2013	Dec. 31, 2012
Debt Instrument [Line Items]
Pledged financial instruments for Federal Home Loan Bank	$ 181,000,000	$ 142,000,000
Short-term Debt [Line Items]
Amount	22,811,000	13,756,000
Rate	0.44%	0.23%
Line of Credit [Member]
Short-term Debt [Line Items]
Amount	11,946,000	2,661,000
Rate	0.75%	0.75%
FHLB short-term advance [Member]
Short-term Debt [Line Items]
Amount	0	0
Rate	0.00%	0.00%
Repurchase Agreements [Member]
Short-term Debt [Line Items]
Amount	10,865,000	11,095,000
Rate	0.10%	0.10%
Fixed Rate Advances with Monthly Principal and Interest Payments [Member]
Debt Instrument [Line Items]
Long-term debt	12,446,000	13,705,000
Federal Home Loan Bank Fixed Rate Advance Due January 2015 [Member] | Fixed Rate Advances Due at Maturity [Member]
Debt Instrument [Line Items]
Interest Rate	2.00%	2.00%
Long-term debt	5,000,000	5,000,000
Federal Home Loan Bank Advance Due March 2017 [Member] | Fixed Rate Advances Due at Maturity [Member]
Debt Instrument [Line Items]
Interest Rate	5.25%	5.25%
Long-term debt	5,000,000	5,000,000
Federal Home Loan Bank Advance Due March 2014 [Member] | Fixed Rate Advances with Monthly Principal and Interest Payments [Member]
Debt Instrument [Line Items]
Interest Rate	2.45%	2.45%
Long-term debt	528,000	1,308,000
Federal Home Loan Bank Advance Due March 2019 [Member] | Fixed Rate Advances with Monthly Principal and Interest Payments [Member]
Debt Instrument [Line Items]
Interest Rate	2.82%	2.82%
Long-term debt	$ 1,918,000	$ 2,397,000

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Commitments and Contingent Liabilities

9 Months Ended

Sep. 30, 2013

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingent Liabilities

Note 9 - 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 include 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 offers the Bounce Protection product, a customer deposit overdraft program, which is offered as a service and does not constitute a contract between the customer and LCNB.

LCNB uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.  Financial instruments whose contract amounts represent off-balance-sheet credit risk at September 30, 2013 and December 31, 2012 are as follows (in thousands):

	September 30, 2013		December 31, 2012
Commitments to extend credit:
Commercial loans	$	12,663	13,625
Other loans
Fixed rate	3,824		4,602
Adjustable rate	1,039		1,238
Unused lines of credit:
Fixed rate	4,386		3,368
Adjustable rate	59,636		45,199
Unused overdraft protection amounts on demand and NOW accounts	9,538		9,665
Standby letters of credit	445		5,109
	$	91,531	82,806

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.  Unused lines of credit include amounts not drawn on line of credit loans.  Commitments to extend credit and unused lines of credit 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, 2013 and December 31, 2012, outstanding guarantees of approximately $445,000 and $346,000, respectively, were issued to developers and contractors.  These guarantees generally are fully secured and have varying maturities.  At December 31, 2012, LCNB had a participation in four letters of credit totaling $4.8 million securing payment of principal and interest on a bond issue.  These letters of credit were terminated on July 11, 2013.

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.

Capital expenditures include the construction or acquisition of new office buildings, improvements to LCNB's offices, purchases of furniture and equipment, and additions or improvements to LCNB's information technology system. Commitments outstanding for capital expenditures as of September 30, 2013 totaled approximately $100,000.

Management believes that LCNB has sufficient liquidity to fund its lending and capital expenditure commitments.

LCNB and its subsidiary 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.

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Loans, Past Due And Accruing Restructured (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012
Financing receivables, non accruals, past due, and accruing restructured loans [Line Items]
Non-accrual loans	$ 2,828		$ 2,828		$ 2,283
Past-due 90 days or more and still accruing	29		29		128
Total non-accrual and past-due 90 days or more and still accruing	2,857		2,857		2,411
Accruing restructured loans	14,175		14,175		13,343
Total	17,032		17,032		15,754
Percentage of total non-accrual loans and loans past-due 90 days or more and still accruing to total loans			0.50%		0.53%
Percentage of total non-accrual loans, loans past-due 90 days or more and still accruing, and accruing restructured loans to total loans			3.01%		3.47%
Loans sold to Federal Home Loan Mortgage Corporation Loans serviced for other investors unpaid balance	91,125		91,125		71,568
Total loans sold to Federal Home Loan Mortgage Corporation	2,434	7,934	16,831	19,328
Commercial and Industrial [Member]
Financing receivables, non accruals, past due, and accruing restructured loans [Line Items]
Non-accrual loans	144		144		264
Commercial Secured By Real Estate [Member]
Financing receivables, non accruals, past due, and accruing restructured loans [Line Items]
Non-accrual loans	1,489		1,489		788
Residential Real Estate [Member]
Financing receivables, non accruals, past due, and accruing restructured loans [Line Items]
Non-accrual loans	1,195		1,195		1,231
Financial Receivable Other [Member]
Financing receivables, non accruals, past due, and accruing restructured loans [Line Items]
Non-accrual loans	2,316		2,316
Past-due 90 days or more and still accruing	29		29
Total non-accrual and past-due 90 days or more and still accruing	2,345		2,345
Accruing restructured loans	14,175		14,175
Total	16,520		16,520
Financial Receivable Other [Member] | Commercial and Industrial [Member]
Financing receivables, non accruals, past due, and accruing restructured loans [Line Items]
Non-accrual loans	144		144
Financial Receivable Other [Member] | Commercial Secured By Real Estate [Member]
Financing receivables, non accruals, past due, and accruing restructured loans [Line Items]
Non-accrual loans	1,120		1,120
Financial Receivable Other [Member] | Residential Real Estate [Member]
Financing receivables, non accruals, past due, and accruing restructured loans [Line Items]
Non-accrual loans	1,052		1,052
Financial Receivable Acquired Credit Imparied [Member]
Financing receivables, non accruals, past due, and accruing restructured loans [Line Items]
Non-accrual loans	512		512
Past-due 90 days or more and still accruing	0		0
Total non-accrual and past-due 90 days or more and still accruing	512		512
Accruing restructured loans	0		0
Total	512		512
Financial Receivable Acquired Credit Imparied [Member] | Commercial and Industrial [Member]
Financing receivables, non accruals, past due, and accruing restructured loans [Line Items]
Non-accrual loans	0		0
Financial Receivable Acquired Credit Imparied [Member] | Commercial Secured By Real Estate [Member]
Financing receivables, non accruals, past due, and accruing restructured loans [Line Items]
Non-accrual loans	369		369
Financial Receivable Acquired Credit Imparied [Member] | Residential Real Estate [Member]
Financing receivables, non accruals, past due, and accruing restructured loans [Line Items]
Non-accrual loans	$ 143		$ 143

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Income Taxes (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Income Tax Disclosure [Abstract]
Statutory tax rate	34.00%	34.00%	34.00%	34.00%
Increase (decrease) resulting from:
Tax exempt interest	(6.80%)	(8.30%)	(7.40%)	(7.30%)
Tax exempt income on bank owned life insurance	(1.80%)	(2.00%)	(2.00%)	(1.80%)
Other, net	0.00%	(0.10%)	0.40%	0.00%
Effective tax rate	25.40%	23.60%	25.00%	24.90%

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Stock Based Compensation (Tables)

9 Months Ended

Sep. 30, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Summary of Stock Options Outstanding

Options granted to date vest ratably over a five year period and expire ten years after the date of grant. Stock options outstanding at September 30, 2013 are as follows:

	Outstanding Stock Options				Exercisable Stock Options
Exercise Price Range	Number	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)	Number	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)
$9.00 - $10.99	23,494	$	9.00	5.3	18,419	$	9.00	5.3
$11.00 - $12.99	63,354	12.05		6.8	31,362	12.06		6.1
$17.00 - $18.99	18,118	18.19		2.1	18,118	18.19		2.1
	104,966	12.43		5.6	67,899	12.86		4.8

Summary of Stock Option Activity

The following table summarizes stock option activity for the periods indicated:

	2013				2012
	Options		Weighted Average Exercise Price		Options		Weighted Average Exercise Price
Outstanding, January 1	110,586		$	12.42	124,123		$	12.54
Granted	—		—		14,491		12.60
Exercised	(5,620	)	12.32		(2,144	)	13.09
Outstanding, September 30	104,966		12.43		136,470		12.54
Exercisable, September 30	67,899		12.86		81,193		13.25

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Acquisition (Tables)

9 Months Ended

Sep. 30, 2013

Business Combinations [Abstract]

Fair Values of Assets Acquired, Liabilities Assumed, and Consideration Paid

The merger with First Capital was accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed, and consideration paid were recorded at their estimated fair values as of the merger date, as summarized in the following table (in thousands):

Consideration Paid:
Common shares issued (888,811)	$	12,354
Cash paid to shareholders	7,828
Total value of consideration paid	20,182
Identifiable Assets Acquired:
Cash and cash equivalents	17,632
Investment securities:
Available-for-sale	21,606
Held-to-maturity	384
Federal Reserve Bank stock	157
Federal Home Loan Bank stock	763
Loans	98,906
Premises and equipment	3,949
Bank owned life insurance	3,687
Core deposit intangible	2,574
Other real estate owned	127
Deferred income taxes	409
Other assets	1,369
Total identifiable assets acquired	151,563
Liabilities Assumed:
Deposits	136,823
Long-term debt	1,792
Other liabilities	822
Total liabilities assumed	139,437
Total Identifiable Net Assets Acquired	12,126
Goodwill resulting from merger	$	8,056

Changes in Fair Value of Net Assets Acquired and Liabilities Assumed

The following table details the changes in fair value of net assets acquired and liabilities assumed from the amounts reported in the Form 10-Q for the period ending June 30, 2013 (in thousands):

Goodwill at June 30, 2013	$	8,258
Effect of adjustments to:
Deferred income taxes	18
Other assets	(220		)
Goodwill at September 30, 2013	$	8,056

Results of Operations are Included in Consolidated Statement of Income from the Date of Merger

The results of operations are included in the consolidated statement of income from the date of the merger.  The estimated amount of Citizens revenue (net interest income plus non-interest income) and net income, excluding merger and data conversion costs, included in LCNB's consolidated statement of income for the three and nine months ended September 30, 2013 were as follows (in thousands):

	Three Months		Nine Months
Total revenue	$	1,676	4,561
Net income	750		1,898

Acquired Entity's Estimated Pro Forma Financial Information

The following table presents unaudited pro forma information as if the merger with First Capital had occurred on January 1, 2012 (in thousands).  This pro forma information gives effect to certain adjustments, including purchase accounting fair value adjustments, amortization of the core deposit intangible, and related income tax effects.  It does not include merger and data conversion costs.  The pro forma information does not necessarily reflect the results of operations that would have occurred had the merger with First Capital occurred in 2012.  In particular, expected operational cost savings are not reflected in the pro forma amounts.

	Three Months Ended September 30,			Nine Months Ended September 30,
	2013		2012	2013	2012
Total revenue	$	9,502	10,067	28,728	30,446
Net income	2,358		2,097	7,000	7,027
Basic earnings per common share	0.31		0.27	0.92	0.92
Diluted earnings per common share	0.30		0.27	0.90	0.91

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Recent Accounting Pronouncements

9 Months Ended

Sep. 30, 2013

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

Recent Accounting Pronouncements

Note 17 – Recent Accounting Pronouncements

Accounting Standards Update ("ASU") No. 2013-01, "Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities"

ASU No. 2013-01 was issued in January 2013 and clarifies that the scope of ASU No. 2011-11, "Balance Sheet (Topic 210):  Disclosures about Offsetting Assets and Liabilities," applies to derivatives accounted for in accordance with Topic 815, Derivatives and Hedging, including bifurcated embedded derivatives, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions that are either offset in accordance with applicable accounting guidance or subject to an enforceable master netting arrangement or similar agreement.  ASU No. 2013-01 is to be applied retrospectively and was effective for fiscal years beginning on or after January 1, 2013, and interim periods within those annual periods.  The adoption of this guidance, which involves disclosure only, will not impact LCNB's results of operations or financial position.  LCNB currently does not net its financial instruments on its balance sheets.

ASU No. 2013-04, "Liabilities (Topic 405):  Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date"

ASU No. 2013-04 was issued in February 2013 and requires an entity to measure obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of the guidance is fixed at the reporting date as the sum of (a) the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors and (b) any additional amount the reporting entity expects to pay on behalf of its co-obligors.  The entity is also required to disclose information about the obligation, including its nature and amount.  ASU No. 2013-04 is effective for public companies for fiscal years, and interim periods within those years, beginning after December 15, 2013.  The ASU is effective for nonpublic companies for fiscal years, and interim periods within those years, beginning after December 15, 2014.  The adoption of this guidance is not anticipated to have a material impact on LCNB's results of operations or financial position.

ASU No. 2013-10, "Derivatives and Hedging (Topic 815):  Inclusion of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate for Hedge Accounting Purposes"

ASU No. 2013-10 was issued in July 2013 and permits the Fed Funds Effective Swap Rate to be used as a U.S. benchmark interest rate for hedge accounting purposes in addition to interest rates on U.S. Treasury obligations and LIBOR.  The update also removes a restriction on using different benchmark rates for similar hedges.  ASU No. 2013-10 is effective prospectively for qualifying new or redesignated hedging relationships entered into on or after July 17, 2013.  The adoption of this guidance will not impact LCNB's results of operations or financial position.  LCNB currently does not use hedged transactions as part of its asset/liability management activities.

Note 17 – Recent Accounting Pronouncements (continued)

ASU No. 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists”

ASU No. 2013-11 was issued in July 2013 and requires an entity to present an unrecognized tax benefit, or a portion of an unrecognized tax benefit, as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. No new recurring disclosures are required. ASU No. 2013-11 is effective for public companies for fiscal years, and interim periods within those years, beginning after December 15, 2013 and are to be applied prospectively to all unrecognized tax benefits that exist at the effective date. The adoption of ASU No. 2013-11 is not expected to have a material impact on the LCNB’s results of operations or financial position.

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Loans Loans, Outstanding and Related Carrying Amount for Acquired Impaired Loans (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Jan. 11, 2013
Outstanding and related carrying amount for acquired impaired loans [Abstract]
Outstanding balance	$ 8,155	$ 11,460
Carrying amount	$ 5,939	$ 8,811

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Commitments and Contingent Liabilities (Tables)

9 Months Ended

Sep. 30, 2013

Commitments and Contingencies Disclosure [Abstract]

Financial Instruments Whose Contract Amounts Represent Off-Balance-Sheet Credit Risk

Financial instruments whose contract amounts represent off-balance-sheet credit risk at September 30, 2013 and December 31, 2012 are as follows (in thousands):

	September 30, 2013		December 31, 2012
Commitments to extend credit:
Commercial loans	$	12,663	13,625
Other loans
Fixed rate	3,824		4,602
Adjustable rate	1,039		1,238
Unused lines of credit:
Fixed rate	4,386		3,368
Adjustable rate	59,636		45,199
Unused overdraft protection amounts on demand and NOW accounts	9,538		9,665
Standby letters of credit	445		5,109
	$	91,531	82,806

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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2013

Fair Value Disclosures [Abstract]

Summary of Valuation of LCNB's Assets Recorded at Fair Value by Inputs Level

The following table summarizes the valuation of LCNB's assets recorded at fair value by input levels as of September 30, 2013 and December 31, 2012 (in thousands):

			Fair Value Measurements at the End of the Reporting Period Using
	Fair Value Measurements		Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Total Gains (Losses)
September 30, 2013
Recurring fair value measurements:
Investment securities available-for-sale:
U.S. Treasury notes	$	8,707	8,707	—	—
U.S. Agency notes	110,779		—	110,779	—
U.S. Agency mortgage-backed securities	45,576		—	45,576	—
Certificates of deposit with other banks	1,501		—	1,501	—
Municipal securities:
Non-taxable	80,509		—	80,509	—
Taxable	19,685		—	19,685	—
Mutual funds	2,385		1,385	1,000	—
Trust preferred securities	147		147	—	—
Equity securities	2,015		2,015	—	—
Total recurring fair value measurements	$	271,304	12,254	259,050	—
Nonrecurring fair value measurements:
Impaired loans	$	11,819	—	650	11,169	—
Other real estate owned and repossessed assets (a)	1,561		—	1,561	—	175
Total nonrecurring fair value measurements	$	13,380	—	2,211	11,169	175
December 31, 2012
Recurring fair value measurement:
Investment securities available-for-sale:
U.S. Treasury notes	$	18,686	18,686	—	—
U.S. Agency notes	90,606		—	90,606	—
U.S. Agency mortgage-backed securities	52,541		—	52,541	—
Corporate securities	3,067		3,067	—	—
Municipal securities:
Non-taxable	73,882		—	73,882	—
Taxable	15,841		—	15,841	—
Mutual funds	2,168		1,168	1,000	—
Trust preferred securities	245		245	—	—
Equity securities	1,470		1,470	—	—
Total recurring fair value measurements	$	258,506	24,636	233,870	—
Nonrecurring fair value measurements:
Impaired loans	$	4,276	—	161	4,115	—
Other real estate owned and repossessed assets (b)	2,189		—	2,189	—	(295	)
Total nonrecurring fair value measurements	$	6,465	—	2,350	4,115	(295	)

(a) Six other real estate owned properties with a total carrying amount of $277,000 were written down to their combined fair value of $239,000, resulting in an impairment charge of $38,000.  Eight other real estate owned properties with a total carrying amount of $843,000 were sold for a combined total of $1,054,000, resulting in a net gain of $211,000.    A repossessed asset with a carrying value of $6,000 was sold for $8,000, resulting in a net gain of $2,000.  The write-downs, losses, and gains were included in other non-interest expense for the period.

(b) Eight other real estate owned properties with a total carrying amount of $1,809,000 were written down to their combined fair value of $1,525,000, resulting in an impairment charge of $284,000.  Another property was sold at a loss of $8,000.  Repossessed assets with a carrying value of $23,000 were sold for a combined total of $20,000, resulting in a net loss of $3,000.  The write-downs and losses were included in other non-interest expense for the period.

Carrying Amounts and Estimated Fair Values of Financial Instruments

Carrying amounts and estimated fair values of financial instruments as of September 30, 2013 and December 31, 2012 are as follows (in thousands):

	September 30, 2013			December 31, 2012
	Carrying Amount		Fair Value	Carrying Amount	Fair Value
FINANCIAL ASSETS:
Cash and cash equivalents	$	14,687	14,687	13,475	13,475
Investment securities:
Available-for-sale	271,304		271,304	258,506	258,506
Held-to-maturity	21,058		21,058	15,424	15,424
Federal Reserve Bank stock	1,603		1,603	949	949
Federal Home Loan Bank stock	2,854		2,854	2,091	2,091
Loans, net	562,686		564,402	450,346	453,060
FINANCIAL LIABILITIES:
Deposits	808,335		811,412	671,471	675,964
Short-term borrowings	22,811		22,811	13,756	13,756
Long-term debt	12,446		13,251	13,705	14,724

Summary of Categorization by Inputs Level of LCNB's Financial Assets and Liabilities Not Recorded at Fair Value but for Which Fair Value is Disclosed

The following table summarizes the categorization by input level as of September 30, 2013 and December 31, 2012 of LCNB's financial assets and liabilities not recorded at fair value but for which fair value is disclosed (in thousands):

			Fair Value Measurements at the End of the Reporting Period Using
	Fair Value Measurements		Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
September 30, 2013
Assets:
Loans, net	$	552,583	—	552,583	—
Investment securities, non-taxable, held-to-maturity	21,058		—	—	21,058
Federal Reserve Bank stock	1,603		1,603	—	—
Federal Home Loan Bank stock	2,854		2,854	—	—
Liabilities:
Deposits	811,412		—	811,412	—
Long-term debt	13,251		—	13,251	—
December 31, 2012
Assets:
Loans, net	$	448,784	—	448,784	—
Investment securities, non-taxable, held-to-maturity	15,424		—	—	15,424
Federal Reserve Bank stock	949		949	—	—
Federal Home Loan Bank stock	2,091		2,091	—	—
Liabilities:
Deposits	675,964		—	675,964	—
Long-term debt	14,724		—	14,724	—

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Loans, Allowance for Loan Losses (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012
Allowance for loan losses [Roll Forward]
Balance, beginning of year	$ 3,437	$ 2,931
Change in classification		0
Provision charged to expenses	369	742
Losses Charged Off [Abstract]
Financing Receivables, Impaired, Troubled Debt Restructuring, Write-down	(5)
Acquired credit impaired loans	0
Other loans	(561)	(1,020)
Recoveries	183	213
Balance, end of period	3,423	2,866
Individually evaluated for impairment	958	289
Collectively evaluated for impairment	2,465	2,577
Balance, end of period	3,423	2,866
Loans:
Individually evaluated for impairment	16,188	15,329
Collectively evaluated for impairment	543,982	442,078
Acquired credit impaired loans	5,939
Balance, end of period	566,109	457,407	453,783
Commercial and Industrial [Member]
Allowance for loan losses [Roll Forward]
Balance, beginning of year	320	162
Change in classification		18
Provision charged to expenses	(41)	163
Losses Charged Off [Abstract]
Financing Receivables, Impaired, Troubled Debt Restructuring, Write-down	0
Acquired credit impaired loans	0
Other loans	(120)	(159)
Recoveries	4	0
Balance, end of period	163	184
Individually evaluated for impairment	1	21
Collectively evaluated for impairment	162	163
Balance, end of period	163	184
Loans:
Individually evaluated for impairment	166	264
Collectively evaluated for impairment	30,739	25,462
Acquired credit impaired loans	341
Balance, end of period	31,246	25,726
Commercial Secured By Real Estate [Member]
Allowance for loan losses [Roll Forward]
Balance, beginning of year	2,296	1,941
Change in classification		(18)
Provision charged to expenses	107	(16)
Losses Charged Off [Abstract]
Financing Receivables, Impaired, Troubled Debt Restructuring, Write-down	0
Acquired credit impaired loans	0
Other loans	(34)	(234)
Recoveries	26	71
Balance, end of period	2,395	1,744
Individually evaluated for impairment	766	49
Collectively evaluated for impairment	1,629	1,695
Balance, end of period	2,395	1,744
Loans:
Individually evaluated for impairment	14,444	13,895
Collectively evaluated for impairment	283,288	223,898
Acquired credit impaired loans	4,252
Balance, end of period	301,984	237,793
Residential Real Estate [Member]
Allowance for loan losses [Roll Forward]
Balance, beginning of year	712	656
Change in classification		0
Provision charged to expenses	268	624
Losses Charged Off [Abstract]
Financing Receivables, Impaired, Troubled Debt Restructuring, Write-down	(5)
Acquired credit impaired loans	0
Other loans	(203)	(479)
Recoveries	21	7
Balance, end of period	793	808
Individually evaluated for impairment	190	219
Collectively evaluated for impairment	603	589
Balance, end of period	793	808
Loans:
Individually evaluated for impairment	1,543	1,157
Collectively evaluated for impairment	213,669	176,114
Acquired credit impaired loans	1,346
Balance, end of period	216,558	177,271
Consumer [Member]
Allowance for loan losses [Roll Forward]
Balance, beginning of year	108	166
Change in classification		0
Provision charged to expenses	14	(49)
Losses Charged Off [Abstract]
Financing Receivables, Impaired, Troubled Debt Restructuring, Write-down	0
Acquired credit impaired loans	0
Other loans	(148)	(84)
Recoveries	98	95
Balance, end of period	72	128
Individually evaluated for impairment	1	0
Collectively evaluated for impairment	71	128
Balance, end of period	72	128
Loans:
Individually evaluated for impairment	35	13
Collectively evaluated for impairment	12,983	11,550
Acquired credit impaired loans	0
Balance, end of period	13,018	11,563
Agricultural [Member]
Allowance for loan losses [Roll Forward]
Balance, beginning of year	0	0
Change in classification		0
Provision charged to expenses	0	0
Losses Charged Off [Abstract]
Financing Receivables, Impaired, Troubled Debt Restructuring, Write-down	0
Acquired credit impaired loans	0
Other loans	0	0
Recoveries	0	0
Balance, end of period	0	0
Individually evaluated for impairment	0	0
Collectively evaluated for impairment	0	0
Balance, end of period	0	0
Loans:
Individually evaluated for impairment	0	0
Collectively evaluated for impairment	3,245	2,061
Acquired credit impaired loans	0
Balance, end of period	3,245	2,061
Other [Member]
Allowance for loan losses [Roll Forward]
Balance, beginning of year	1	6
Change in classification		0
Provision charged to expenses	21	20
Losses Charged Off [Abstract]
Financing Receivables, Impaired, Troubled Debt Restructuring, Write-down	0
Acquired credit impaired loans	0
Other loans	(56)	(64)
Recoveries	34	40
Balance, end of period	0	2
Individually evaluated for impairment	0	0
Collectively evaluated for impairment	0	2
Balance, end of period	0	2
Loans:
Individually evaluated for impairment	0	0
Collectively evaluated for impairment	58	2,993
Acquired credit impaired loans	0
Balance, end of period	$ 58	$ 2,993

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Premises and Equipment (Tables)

9 Months Ended

Sep. 30, 2013

Property, Plant and Equipment [Abstract]

Premises and Equipment

Premises and equipment at September 30, 2013 and December 31, 2012 are summarized as follows (in thousands):

	September 30, 2013		December 31, 2012
Land	$	5,353	4,708
Buildings	18,756		15,616
Equipment	11,952		11,280
Construction in progress	75		—
Total	36,136		31,604
Less accumulated depreciation	16,078		15,040
Premises and equipment, net	$	20,058	16,564

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Earnings Per Common Share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Earnings Per Share [Abstract]
Net income	$ 2,357	$ 1,847	$ 6,433	$ 6,111
Weighted average number of shares outstanding used in the calculation of basic earnings per common share	7,636,098	6,721,699	7,592,818	6,713,959
Add dilutive effect of:
Stock options (in shares)	29,601	10,089	23,262	8,898
Stock warrants (in shares)	121,399	65,887	106,606	64,143
Adjusted weighted average number of shares outstanding used in the calculation of diluted earnings per common share	7,787,098	6,797,675	7,722,686	6,787,000
Earnings per common share:
Basic (in dollars per share)	$ 0.31	$ 0.27	$ 0.85	$ 0.91
Diluted (in dollars per share)	$ 0.30	$ 0.27	$ 0.83	$ 0.90

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Stock Based Compensation, Stock Options Outstanding By Exercise Price Range (Details) (USD $)	9 Months Ended
	Sep. 30, 2013
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Outstanding stock options, number (in shares)	104,966
Outstanding stock option, weighted average exercise price (in dollars per share)	$ 12.43
Outstanding stock option, weighted average remaining contractual life	5 years 7 months 6 days
Exercisable stock options, number (in shares)	67,899
Exercisable stock option, weighted average exercise price (in dollars per shares)	$ 12.86
Exercisable stock options, weighted average remaining contractual life	4 years 9 months 18 days
$9.00 - $10.99 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercise price range, lower range limit (in dollars per share)	$ 9.00
Exercise price range, upper range limit (in dollars per share)	$ 10.99
Outstanding stock options, number (in shares)	23,494
Outstanding stock option, weighted average exercise price (in dollars per share)	$ 9.00
Outstanding stock option, weighted average remaining contractual life	5 years 3 months 18 days
Exercisable stock options, number (in shares)	18,419
Exercisable stock option, weighted average exercise price (in dollars per shares)	$ 9.00
Exercisable stock options, weighted average remaining contractual life	5 years 3 months 18 days
$11.00 - $12.99 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercise price range, lower range limit (in dollars per share)	$ 11.00
Exercise price range, upper range limit (in dollars per share)	$ 12.99
Outstanding stock options, number (in shares)	63,354
Outstanding stock option, weighted average exercise price (in dollars per share)	$ 12.05
Outstanding stock option, weighted average remaining contractual life	6 years 9 months 18 days
Exercisable stock options, number (in shares)	31,362
Exercisable stock option, weighted average exercise price (in dollars per shares)	$ 12.06
Exercisable stock options, weighted average remaining contractual life	6 years 1 month 6 days
$17.00 - $18.99 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercise price range, lower range limit (in dollars per share)	$ 17.00
Exercise price range, upper range limit (in dollars per share)	$ 18.99
Outstanding stock options, number (in shares)	18,118
Outstanding stock option, weighted average exercise price (in dollars per share)	$ 18.19
Outstanding stock option, weighted average remaining contractual life	2 years 1 month 6 days
Exercisable stock options, number (in shares)	18,118
Exercisable stock option, weighted average exercise price (in dollars per shares)	$ 18.19
Exercisable stock options, weighted average remaining contractual life	2 years 1 month 6 days

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Loans (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012	Sep. 30, 2012
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, gross	$ 566,140	$ 453,721
Deferred net origination costs (fees)	(31)	62
Balance, end of period	566,109	453,783	457,407
Less allowance for loan losses	3,423	3,437
Loans, net	562,686	450,346
Commercial and Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, gross	31,280	26,236
Balance, end of period	31,246	26,210
Commercial Secured By Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, gross	302,311	238,357
Balance, end of period	301,984	238,129
Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, gross	216,318	175,031
Balance, end of period	216,558	175,269
Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, gross	12,928	10,554
Balance, end of period	13,018	10,631
Agricultural [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, gross	3,245	1,668
Balance, end of period	3,245	1,668
Other Loans Including Deposits Overdraft [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, gross	58	1,875
Financial Receivable Acquired Credit Imparied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, gross	5,939
Deferred net origination costs (fees)	0
Balance, end of period	5,939
Less allowance for loan losses	0
Loans, net	5,939
Financial Receivable Acquired Credit Imparied [Member] | Commercial and Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, gross	341
Balance, end of period	341
Financial Receivable Acquired Credit Imparied [Member] | Commercial Secured By Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, gross	4,252
Balance, end of period	4,252
Financial Receivable Acquired Credit Imparied [Member] | Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, gross	1,346
Balance, end of period	1,346
Financial Receivable Acquired Credit Imparied [Member] | Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, gross	0
Financial Receivable Acquired Credit Imparied [Member] | Agricultural [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, gross	0
Financial Receivable Acquired Credit Imparied [Member] | Other Loans Including Deposits Overdraft [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, gross	0
Financial Receivable Other [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, gross	560,201
Deferred net origination costs (fees)	(31)
Balance, end of period	560,170
Less allowance for loan losses	3,423
Loans, net	556,747
Financial Receivable Other [Member] | Commercial and Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, gross	30,939
Balance, end of period	30,905
Financial Receivable Other [Member] | Commercial Secured By Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, gross	298,059
Balance, end of period	297,732
Financial Receivable Other [Member] | Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, gross	214,972
Balance, end of period	215,212
Financial Receivable Other [Member] | Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, gross	12,928
Balance, end of period	13,018
Financial Receivable Other [Member] | Agricultural [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, gross	3,245
Balance, end of period	3,245
Financial Receivable Other [Member] | Other Loans Including Deposits Overdraft [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, gross	$ 58

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Subsequent Events

9 Months Ended

Sep. 30, 2013

Subsequent Events [Abstract]

Subsequent Events

Note 16 – Subsequent Events

On October 28, 2013, LCNB and Colonial Banc Corp. (“CBC”), the holding company for Eaton National Bank & Trust Co. of Eaton, Ohio (“Eaton National”), signed a definitive stock purchase agreement whereby LCNB will purchase 100% of the outstanding stock of Eaton National from CBC for $24.75 million in cash. The transaction is expected to close in the first quarter of 2014, subject to receipt of CBC shareholder approval, customary regulatory approvals, and the completion of an underwritten public offering of $25 million of LCNB voting common stock. Upon the consummation of the transaction, Eaton National will be merged into LCNB National Bank and its offices will become branches of LCNB National Bank.

Eaton National operates five full-service branches in Preble County, Ohio and has approximately $191 million in assets, $136 million in loans, and $168 million in deposits.

The underwritten public offering referred to above was completed on November 5, 2013, when LCNB issued 1,642,857 shares of its common stock at a price to the public of $17.50 per share. The net proceeds to LCNB after deducting underwriting discounts and commissions and estimated offering expenses was approximately $27.1 million. LCNB intends to use the proceeds to fund the acquisition of Eaton National and the remaining amount will be used for general corporate purposes.

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (Parenthetical) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Other comprehensive income:
Net unrealized gain (loss) on available-for-sale securities, taxes	$ 391	$ 556	$ 2,452	$ 787
Net realized gain on sale of available-for-sale securities included in net income, taxes	20	145	256	300
Change in nonqualified pension plan unrecognized net loss and unrecognized prior service cost, taxes	$ 5	$ 4	$ 14	$ 12

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited) (Parenthetical) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Statement of Stockholders' Equity [Abstract]
Common stock dividends (in dollars per share)	$ 0.16	$ 0.16	$ 0.48	$ 0.48

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Acquisition

9 Months Ended

Sep. 30, 2013

Business Combinations [Abstract]

Acquisition

Note 2 – Acquisition

On October 9, 2012, LCNB and First Capital Bancshares, Inc. ("First Capital") entered into an Agreement and Plan of Merger ("Merger Agreement") pursuant to which First Capital was merged into LCNB on January 11, 2013 in a stock and cash transaction valued at approximately $20.2 million.  Immediately following the merger of First Capital into LCNB, Citizens National Bank of Chillicothe ("Citizens"), a wholly-owned subsidiary of First Capital, was merged into LCNB National Bank. Citizens operated six full–service branches with a main office and two other facilities in Chillicothe, Ohio and one branch in each of Frankfort, Ohio, Clarksburg, Ohio, and Washington Court House, Ohio.  These offices became branches of the Bank after the merger.

Under the terms of the Merger Agreement, each shareholder of First Capital common stock was entitled to elect to receive, for each share of First Capital Common Stock, (i) $30.76 in cash, (ii) 2.329 common shares of LCNB (subject to an adjustment based upon the average closing price of LCNB common shares for the 25 trading days prior to the effective date of the merger), or (iii) a combination of cash and LCNB common stock.  A First Capital shareholder's election to receive cash or stock was subject to allocation procedures that ensured that no more than 50% and no less than 40% of the outstanding First Capital shares were exchanged for cash and that no more than 60% and no less than 50% of the outstanding First Capital shares were exchanged for LCNB common shares.

The merger with First Capital was accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed, and consideration paid were recorded at their estimated fair values as of the merger date, as summarized in the following table (in thousands):

Consideration Paid:
Common shares issued (888,811)	$	12,354
Cash paid to shareholders	7,828
Total value of consideration paid	20,182
Identifiable Assets Acquired:
Cash and cash equivalents	17,632
Investment securities:
Available-for-sale	21,606
Held-to-maturity	384
Federal Reserve Bank stock	157
Federal Home Loan Bank stock	763
Loans	98,906
Premises and equipment	3,949
Bank owned life insurance	3,687
Core deposit intangible	2,574
Other real estate owned	127
Deferred income taxes	409
Other assets	1,369
Total identifiable assets acquired	151,563
Liabilities Assumed:
Deposits	136,823
Long-term debt	1,792
Other liabilities	822
Total liabilities assumed	139,437
Total Identifiable Net Assets Acquired	12,126
Goodwill resulting from merger	$	8,056

The amount of goodwill recorded reflects LCNB's entrance into a new market and related synergies that are expected to result from the acquisition and represents the excess purchase price over the estimated fair value of the net assets acquired.  The goodwill will not be amortizable and is not deductible for tax purposes.  The core deposit intangible will be amortized over nine years using the straight-line method.

The following table details the changes in fair value of net assets acquired and liabilities assumed from the amounts reported in the Form 10-Q for the period ending June 30, 2013 (in thousands):

Goodwill at June 30, 2013	$	8,258
Effect of adjustments to:
Deferred income taxes	18
Other assets	(220		)
Goodwill at September 30, 2013	$	8,056

Management believes that acquisition method adjustments are substantially complete at September 30, 2013.

Direct costs related to the acquisition were expensed as incurred and are recorded in other non-interest expense in the consolidated statements of income.  During the first nine months of 2013, LCNB incurred $1,326,000 in merger and acquisition integration expenses related to the transaction, including $603,000 in merger related costs and $723,000 for converting Citizens data processing system to LCNB's system.

The results of operations are included in the consolidated statement of income from the date of the merger.  The estimated amount of Citizens revenue (net interest income plus non-interest income) and net income, excluding merger and data conversion costs, included in LCNB's consolidated statement of income for the three and nine months ended September 30, 2013 were as follows (in thousands):

	Three Months		Nine Months
Total revenue	$	1,676	4,561
Net income	750		1,898

The following table presents unaudited pro forma information as if the merger with First Capital had occurred on January 1, 2012 (in thousands).  This pro forma information gives effect to certain adjustments, including purchase accounting fair value adjustments, amortization of the core deposit intangible, and related income tax effects.  It does not include merger and data conversion costs.  The pro forma information does not necessarily reflect the results of operations that would have occurred had the merger with First Capital occurred in 2012.  In particular, expected operational cost savings are not reflected in the pro forma amounts.

	Three Months Ended September 30,			Nine Months Ended September 30,
	2013		2012	2013	2012
Total revenue	$	9,502	10,067	28,728	30,446
Net income	2,358		2,097	7,000	7,027
Basic earnings per common share	0.31		0.27	0.92	0.92
Diluted earnings per common share	0.30		0.27	0.90	0.91

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CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 6,433	$ 6,111
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation, amortization, and accretion	1,886	2,339
Provision for loan losses	369	742
Increase in cash surrender value of bank owned life insurance	(512)	(432)
Realized (gain) loss from sales of securities available-for-sale	(753)	(886)
Realized (gain) loss from sales of premises and equipment	(1)	(10)
Realized (gain) loss from sales and write-downs of other real estate owned and repossessed assets	(175)	80
Origination of mortgage loans for sale	(16,831)	(19,328)
Realized gains from sales of mortgage loans	(305)	(360)
Proceeds from sales of mortgage loans	16,970	19,492
Compensation expense related to stock options	28	30
Changes in:
Accrued income receivable	(802)	(650)
Other assets	745	358
Other liabilities	(239)	314
TOTAL ADJUSTMENTS	380	1,689
CASH FLOWS FROM INVESTING ACTIVITIES:	6,813	7,800
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of investment securities available-for-sale	41,888	64,002
Proceeds from maturities and calls of investment securities:
Available-for-sale	15,724	22,759
Held-to-maturity	4,437	1,563
Purchases of investment securities:
Available-for-sale	(57,106)	(97,344)
Held-to-maturity	(9,687)	(3,332)
Purchase of Federal Reserve Bank stock	(497)	(8)
Net (increase) decrease in loans	(13,446)	2,248
Purchase of bank owned life insurance	0	(1,500)
Proceeds from sale of other real estate owned and repossessed assets	1,062	20
Additions to other real estate owned	0	(16)
Purchases of premises and equipment	(614)	(403)
Proceeds from sale of premises and equipment	1	13
Net cash acquired from acquisition	9,771	0
NET CASH FLOWS FROM INVESTING ACTIVITIES	(8,467)	(11,998)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits	206	37,518
Net increase (decrease) in short-term borrowings	9,055	(9,520)
Principal payments on long-term debt	(3,051)	(7,324)
Proceeds from issuance of common stock	32	41
Proceeds from exercise of stock options	70	28
Cash dividends paid on common stock	(3,446)	(3,006)
NET CASH FLOWS FROM FINANCING ACTIVITIES	2,866	17,737
NET CHANGE IN CASH AND CASH EQUIVALENTS	1,212	13,539
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	13,475	19,535
CASH AND CASH EQUIVALENTS AT END OF PERIOD	14,687	33,074
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid	3,150	3,857
Income taxes paid	2,715	1,735
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES:
Transfer from loans to other real estate owned and repossessed assets	$ 133	$ 755

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Acquisition (Details) (USD $)	0 Months Ended		3 Months Ended		9 Months Ended
	Jan. 11, 2013	Oct. 09, 2012	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Business Acquisition, Equity Interests Issued or Issuable [Line Items]
Useful life					9 years
Liabilities Assumed:
Goodwill resulting from merger			$ 8,056,000		$ 8,056,000
Goodwill [Roll Forward]
Goodwill at June 30, 2013			8,258,000
Deferred income taxes			18,000
Other assets			(220,000)
Goodwill at September 30, 2013			8,056,000		8,056,000
Merger and acquisition integration expenses					1,326,000
Merger related costs					603,000
Data conversion costs					723,000
Estimated amount of acquiree's total revenue and net income included in acquirer's income statement [Abstract]
Total revenue			1,676,000		4,561,000
Net income			750,000		1,898,000
First Capital [Member]
Business Acquisition, Equity Interests Issued or Issuable [Line Items]
Date of merger agreement		Oct. 09, 2012
Value of stock and cash transaction	20,200,000
Cash payable for each share of common stock	30.76
Number of shares exchangeable for each share of common stock (in shares)	2.329
Number of trading days considered to calculate average closing price of share	25 days
Consideration Paid:
Common shares issued (888,811)	12,354,000
Cash paid to shareholders	7,828,000
Total value of consideration paid	20,182,000
Common Shares Issued (in shares)	888,811
Identifiable Assets Acquired:
Cash and cash equivalents	17,632,000
Investment securities:
Available-for-sale	21,606,000
Held-to-maturity	384,000
Federal Reserve Bank stock	157,000
Federal Home Loan Bank stock	763,000
Loans	98,906,000
Premises and equipment	3,949,000
Bank owned life insurance	3,687,000
Core deposit intangible	2,574,000
Other real estate owned	127,000
Deferred income taxes	409,000
Other assets	1,369,000
Total identifiable assets acquired	151,563,000
Liabilities Assumed:
Deposits	136,823,000
Long-term debt	1,792,000
Other liabilities	822,000
Total liabilities assumed	139,437,000
Total Identifiable Net Assets Acquired	12,126,000
Goodwill resulting from merger	8,056,000
Goodwill [Roll Forward]
Goodwill at September 30, 2013	8,056,000
Unaudited pro forma information [Abstract]
Total revenue			9,502,000	10,067,000	28,728,000	30,446,000
Net income			$ 2,358,000	$ 2,097,000	$ 7,000,000	$ 7,027,000
Basic earnings per common share (in dollars per share)			$ 0.31	$ 0.27	$ 0.92	$ 0.92
Diluted earnings per common share (in dollars per share)			$ 0.30	$ 0.27	$ 0.90	$ 0.91
First Capital [Member] | Minimum [Member]
Business Acquisition, Equity Interests Issued or Issuable [Line Items]
Specified percentage of outstanding common stock exchangeable for cash (in hundredths)	40.00%
Specified percentage of outstanding common stock exchangeable for shares (in hundredths)	50.00%
First Capital [Member] | Maximum [Member]
Business Acquisition, Equity Interests Issued or Issuable [Line Items]
Specified percentage of outstanding common stock exchangeable for cash (in hundredths)	50.00%
Specified percentage of outstanding common stock exchangeable for shares (in hundredths)	60.00%
Chillicothe, Ohio [Member]
Business Acquisition, Equity Interests Issued or Issuable [Line Items]
Number of branches	2
Frankfort, Ohio [Member]
Business Acquisition, Equity Interests Issued or Issuable [Line Items]
Number of branches	1		1		1
Clarksburg, Ohio [Member]
Business Acquisition, Equity Interests Issued or Issuable [Line Items]
Number of branches			1		1
Washington Court House, Ohio [Member]
Business Acquisition, Equity Interests Issued or Issuable [Line Items]
Number of branches			1		1
Citizens National Bank [Member]
Business Acquisition, Equity Interests Issued or Issuable [Line Items]
Number of branches	6

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Investment Securities (Tables)

9 Months Ended

Sep. 30, 2013

Investments, Debt and Equity Securities [Abstract]

Amortized Cost and Fair Value of Available-for-Sale Investment Securities

The amortized cost and estimated fair value of available-for-sale investment securities at September 30, 2013 and December 31, 2012 are summarized as follows (in thousands):

	September 30, 2013
	Amortized Cost		Unrealized Gains	Unrealized Losses	Fair Value
U.S. Treasury notes	$	8,904	—	197	8,707
U.S. Agency notes	113,475		340	3,036	110,779
U.S. Agency mortgage-backed securities	45,723		721	868	45,576
Certificates of deposit with other banks	1,492		9	—	1,501
Municipal securities:
Non-taxable	78,822		2,480	793	80,509
Taxable	19,157		668	140	19,685
Mutual funds	2,408		—	23	2,385
Trust preferred securities	149		3	5	147
Equity securities	1,751		317	53	2,015
	$	271,881	4,538	5,115	271,304

	December 31, 2012
	Amortized Cost		Unrealized Gains	Unrealized Losses	Fair Value
U.S. Treasury notes	$	18,462	224	—	18,686
U.S. Agency notes	89,372		1,364	130	90,606
U.S. Agency mortgage-backed securities	51,121		1,444	24	52,541
Corporate securities	3,032		35	—	3,067
Municipal securities:
Non-taxable	70,504		3,497	119	73,882
Taxable	14,851		993	3	15,841
Mutual funds	2,138		30	—	2,168
Trust preferred securities	250		2	7	245
Equity securities	1,390		106	26	1,470
	$	251,120	7,695	309	258,506

Securities in a Continuous Loss Position

Information concerning available-for-sale investment securities with gross unrealized losses at September 30, 2013, aggregated by length of time that individual securities have been in a continuous loss position, is as follows (in thousands):

	Less than Twelve Months			Twelve Months or Greater
	Fair Value		Unrealized Losses	Fair Value	Unrealized Losses
U.S. Treasury notes	$	8,707	197	—	—
U.S. Agency notes	91,919		3,036	—	—
U.S. Agency mortgage-backed securities	23,840		868	—	—
Municipal securities:
Non-taxable	23,864		793	—	—
Taxable	5,633		140	—	—
Mutual funds	1,385		23	—	—
Trust preferred securities	46		4	48	1
Equity securities	311		34	95	19
	$	155,705	5,095	143	20

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Borrowings (Tables)

9 Months Ended

Sep. 30, 2013

Debt Disclosure [Abstract]

Summary of Funds Borrowed from Federal Home Loan Bank

Funds borrowed from the Federal Home Loan Bank of Cincinnati ("FHLB") at September 30, 2013 and December 31, 2012 are as follows (dollars in thousands):

	Interest Rate		September 30, 2013		December 31, 2012
Fixed Rate Advances, due at maturity:
Advance due January 2015	2.00	%	$	5,000	5,000
Advance due March 2017	5.25	%	5,000		5,000
Fixed Rate Advances, with monthly principal and interest payments:
Advance due March 2014	2.45	%	528		1,308
Advance due March 2019	2.82	%	1,918		2,397
			$	12,446	13,705

Short-term Borrowings

Short-term borrowings at September 30, 2013 and December 31, 2012 are as follows (dollars in thousands):

	September 30, 2013				December 31, 2012
	Amount		Rate		Amount		Rate
Line of credit	$	11,946	0.75	%	$	2,661	0.75	%
FHLB short-term advance	—		—	%	—		—	%
Repurchase agreements	10,865		0.10	%	11,095		0.10	%
	$	22,811	0.44	%	$	13,756	0.23	%

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Retirement Plans (Tables)

9 Months Ended

Sep. 30, 2013

Compensation and Retirement Disclosure [Abstract]

Summary of Funding and Administrative Cost of Qualified Noncontributory Defined Benefit Retirement Plan and 401(k) Plan Charged to Salaries and Employee Benefits

Funding and administrative costs of the qualified noncontributory defined benefit retirement plan and 401(k) plan charged to pension and other employee benefits in the consolidated statements of income for the three and nine-month periods ended September 30, 2013 and 2012 are as follows (in thousands):

	For the Three Months Ended September 30,			For the Nine Months Ended September 30,
	2013		2012	2013	2012
Qualified noncontributory defined benefit retirement plan	$	31	230	93	521
401(k) plan	75		88	229	198

Components of Net Periodic Pension Cost of Nonqualified Defined Benefit Retirement Plan

The components of net periodic pension cost of the nonqualified defined benefit retirement plan for the three and nine months ended September 30, 2013 and 2012 are summarized as follows (in thousands):

	Three Months Ended September 30,			Nine Months Ended September 30,
	2013		2012	2013	2012
Service cost	$	18	22	54	66
Interest cost	12		11	35	33
Amortization of unrecognized net (gain) loss	6		5	18	15
Amortization of unrecognized prior service cost	7		7	21	21
Net periodic pension cost	$	43	45	128	135

Amount Recognized in Accumulated Other Comprehensive Income, Net of Deferred Federal Income Taxes for Nonqualified Defined Retirement Plan

Amounts recognized in accumulated other comprehensive income, net of tax, at September 30, 2013 and December 31, 2012 for the nonqualified defined benefit retirement plan consists of (in thousands):

	September 30, 2013		December 31, 2012
Net actuarial loss	$	113	125
Past service cost	14		29
	$	127	154

XML

Premises and Equipment (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012
Premises and equipment [Abstract]
Premises and equipment, gross	$ 36,136		$ 36,136		$ 31,604
Less accumulated depreciation	16,078		16,078		15,040
Premises and equipment, net	20,058		20,058		16,564
Depreciation charged	370	322	1,070	927
Land [Member]
Premises and equipment [Abstract]
Premises and equipment, gross	5,353		5,353		4,708
Buildings [Member]
Premises and equipment [Abstract]
Premises and equipment, gross	18,756		18,756		15,616
Equipment [Member]
Premises and equipment [Abstract]
Premises and equipment, gross	11,952		11,952		11,280
Construction in Progress [Member]
Premises and equipment [Abstract]
Premises and equipment, gross	$ 75		$ 75		$ 0

XML

Loans, Loans Portfolio by Credit Quality Indicators (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012	Sep. 30, 2012
Financing Receivable, Recorded Investment [Line Items]
Total	$ 566,109	$ 453,783	$ 457,407
Commercial and Industrial [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	31,246	26,210
Commercial Secured By Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	301,984	238,129
Residential Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	216,558	175,269
Consumer [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	13,018	10,631
Agricultural [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	3,245	1,668
Other [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	58	1,876
Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	537,764	427,890
Pass [Member] | Commercial and Industrial [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	27,669	22,965
Pass [Member] | Commercial Secured By Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	285,160	222,497
Pass [Member] | Residential Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	208,654	168,338
Pass [Member] | Consumer [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	12,978	10,549
Pass [Member] | Agricultural [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	3,245	1,665
Pass [Member] | Other [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	58	1,876
OAEM [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	6,312	6,810
OAEM [Member] | Commercial and Industrial [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	1,815	1,804
OAEM [Member] | Commercial Secured By Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	2,723	2,653
OAEM [Member] | Residential Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	1,774	2,353
OAEM [Member] | Consumer [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	0	0
OAEM [Member] | Agricultural [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	0	0
OAEM [Member] | Other [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	0	0
Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	21,980	18,394
Substandard [Member] | Commercial and Industrial [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	1,762	1,177
Substandard [Member] | Commercial Secured By Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	14,101	12,872
Substandard [Member] | Residential Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	6,077	4,280
Substandard [Member] | Consumer [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	40	62
Substandard [Member] | Agricultural [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	0	3
Substandard [Member] | Other [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	0	0
Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	53	689
Doubtful [Member] | Commercial and Industrial [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	0	264
Doubtful [Member] | Commercial Secured By Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	0	107
Doubtful [Member] | Residential Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	53	298
Doubtful [Member] | Consumer [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	0	20
Doubtful [Member] | Agricultural [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	0	0
Doubtful [Member] | Other [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	0	0
Financial Receivable Acquired Credit Imparied [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	5,939
Financial Receivable Acquired Credit Imparied [Member] | Commercial and Industrial [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	341
Financial Receivable Acquired Credit Imparied [Member] | Commercial Secured By Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	4,252
Financial Receivable Acquired Credit Imparied [Member] | Residential Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	1,346
Financial Receivable Acquired Credit Imparied [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	12
Financial Receivable Acquired Credit Imparied [Member] | Pass [Member] | Commercial and Industrial [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	12
Financial Receivable Acquired Credit Imparied [Member] | Pass [Member] | Commercial Secured By Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	0
Financial Receivable Acquired Credit Imparied [Member] | Pass [Member] | Residential Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	0
Financial Receivable Acquired Credit Imparied [Member] | OAEM [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	766
Financial Receivable Acquired Credit Imparied [Member] | OAEM [Member] | Commercial and Industrial [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	0
Financial Receivable Acquired Credit Imparied [Member] | OAEM [Member] | Commercial Secured By Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	766
Financial Receivable Acquired Credit Imparied [Member] | OAEM [Member] | Residential Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	0
Financial Receivable Acquired Credit Imparied [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	5,161
Financial Receivable Acquired Credit Imparied [Member] | Substandard [Member] | Commercial and Industrial [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	329
Financial Receivable Acquired Credit Imparied [Member] | Substandard [Member] | Commercial Secured By Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	3,486
Financial Receivable Acquired Credit Imparied [Member] | Substandard [Member] | Residential Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	1,346
Financial Receivable Acquired Credit Imparied [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	0
Financial Receivable Acquired Credit Imparied [Member] | Doubtful [Member] | Commercial and Industrial [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	0
Financial Receivable Acquired Credit Imparied [Member] | Doubtful [Member] | Commercial Secured By Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	0
Financial Receivable Acquired Credit Imparied [Member] | Doubtful [Member] | Residential Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	0
Financial Receivable Other [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	560,170
Financial Receivable Other [Member] | Commercial and Industrial [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	30,905
Financial Receivable Other [Member] | Commercial Secured By Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	297,732
Financial Receivable Other [Member] | Residential Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	215,212
Financial Receivable Other [Member] | Consumer [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	13,018
Financial Receivable Other [Member] | Agricultural [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	3,245
Financial Receivable Other [Member] | Other [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	58
Financial Receivable Other [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	537,752
Financial Receivable Other [Member] | Pass [Member] | Commercial and Industrial [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	27,657
Financial Receivable Other [Member] | Pass [Member] | Commercial Secured By Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	285,160
Financial Receivable Other [Member] | Pass [Member] | Residential Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	208,654
Financial Receivable Other [Member] | Pass [Member] | Consumer [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	12,978
Financial Receivable Other [Member] | Pass [Member] | Agricultural [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	3,245
Financial Receivable Other [Member] | Pass [Member] | Other [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	58
Financial Receivable Other [Member] | OAEM [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	5,546
Financial Receivable Other [Member] | OAEM [Member] | Commercial and Industrial [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	1,815
Financial Receivable Other [Member] | OAEM [Member] | Commercial Secured By Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	1,957
Financial Receivable Other [Member] | OAEM [Member] | Residential Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	1,774
Financial Receivable Other [Member] | OAEM [Member] | Consumer [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	0
Financial Receivable Other [Member] | OAEM [Member] | Agricultural [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	0
Financial Receivable Other [Member] | OAEM [Member] | Other [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	0
Financial Receivable Other [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	16,819
Financial Receivable Other [Member] | Substandard [Member] | Commercial and Industrial [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	1,433
Financial Receivable Other [Member] | Substandard [Member] | Commercial Secured By Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	10,615
Financial Receivable Other [Member] | Substandard [Member] | Residential Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	4,731
Financial Receivable Other [Member] | Substandard [Member] | Consumer [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	40
Financial Receivable Other [Member] | Substandard [Member] | Agricultural [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	0
Financial Receivable Other [Member] | Substandard [Member] | Other [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	0
Financial Receivable Other [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	53
Financial Receivable Other [Member] | Doubtful [Member] | Commercial and Industrial [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	0
Financial Receivable Other [Member] | Doubtful [Member] | Commercial Secured By Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	0
Financial Receivable Other [Member] | Doubtful [Member] | Residential Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	53
Financial Receivable Other [Member] | Doubtful [Member] | Consumer [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	0
Financial Receivable Other [Member] | Doubtful [Member] | Agricultural [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	0
Financial Receivable Other [Member] | Doubtful [Member] | Other [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	$ 0

XML

Loans Loans, Acquired Loans Accounted For (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Jan. 11, 2013
Accounts, Notes, Loans and Financing Receivable [Line Items]
Interest component of expected cash flows (accretable discount)	$ 1,129	$ 1,389
First Capital [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Contractually required principal at acquisition		11,460
Contractual cash flows not expected to be collected (nonaccretable difference)		(1,260)
Expected cash flows at acquisition		10,200
Interest component of expected cash flows (accretable discount)		(1,389)
Fair value of acquired impaired loans		$ 8,811

XML

LCNB CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Sep. 30, 2013	Dec. 31, 2012
SHAREHOLDERS' EQUITY:
Preferred shares, par value (in dollars per share)	$ 0	$ 0
Preferred shares, shares authorized	1,000,000	1,000,000
Preferred shares, shares outstanding	0	0
Common shares, par value (in dollars per share)	$ 0	$ 0
Common shares, shares authorized	12,000,000	12,000,000
Common shares, shares issued	8,393,790	7,485,527
Treasury shares	753,627	753,627

XML

Other Real Estate Owned

9 Months Ended

Sep. 30, 2013

Real Estate [Abstract]

Other Real Estate Owned

Note 5 – Other Real Estate Owned

Other real estate owned includes property acquired through foreclosure or deed-in-lieu of foreclosure and also includes property deemed to be in-substance foreclosed and are included in "other assets" in the consolidated balance sheets.  Changes in other real estate owned are as follows (in thousands):

	Nine Months Ended September 30,
	2013			2012
Balance, beginning of year	$	2,189		1,619
Additions	126			771
Additions due to merger	127			—
Reductions due to sales	(843		)	—
Reductions due to valuation write downs	(38		)	(76	)
Balance, end of period	$	1,561		2,314

Other real estate owned at September 30, 2013 and December 31, 2012 consisted of (dollars in thousands):

	September 30, 2013			December 31, 2012
	Number	Balance		Number	Balance
Commercial real estate	2	$	1,443	2	$	1,875
Residential real estate	5	118		8	314
	7	$	1,561	10	$	2,189

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Statement of Other Comprehensive Income [Abstract]
Net income	$ 2,357	$ 1,847	$ 6,433	$ 6,111
Other comprehensive income:
Net unrealized gain (loss) on available-for-sale securities (net of taxes of $391 and $556 for the three months ended September 30, 2013 and 2012, respectively, and $2,452 and $787 for the nine months ended September 30, 2013 and 2012, respectively)	760	1,080	(4,758)	1,529
Reclassification adjustment for net realized gain on sale of available-for-sale securities included in net income (net of taxes of $20 and $145 for the three months ended September 30, 2013 and 2012, respectively, and $256 and $300 for the nine months ended September 30, 2013 and 2012, respectively)	(38)	(282)	(497)	(586)
Change in nonqualified pension plan unrecognized net loss and unrecognized prior service cost (net of taxes of $5 and $4 for the three months ended September 30, 2013 and 2012, respectively, and $14 and $12 for the nine months ended September 30, 2013 and 2012, respectively)	8	9	26	25
TOTAL COMPREHENSIVE INCOME	$ 3,087	$ 2,654	$ 1,204	$ 7,079

XML

Commitments and Contingent Liabilities (Details) (USD $)	0 Months Ended
	Jul. 11, 2013	Sep. 30, 2013	Dec. 31, 2012 Letter_of_Credit
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Off-balance sheet risks, liability		$ 91,531,000	$ 82,806,000
Outstanding guarantees of standby letters of credits issued to developers and contractors		445,000	346,000
Number of standby letters of credit securing payment of principal and interest on bond issue			4
Total participation amounts of standby letters of credit			4,800,000
Guarantee expiration date	Jul. 11, 2013
Commercial Loan [Member]
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Off-balance sheet risks, liability		12,663,000	13,625,000
Other Loans [Member] | Fixed Rate [Member]
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Off-balance sheet risks, liability		3,824,000	4,602,000
Other Loans [Member] | Adjustable Rate [Member]
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Off-balance sheet risks, liability		1,039,000	1,238,000
Unused lines of Credit [Member] | Fixed Rate [Member]
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Off-balance sheet risks, liability		4,386,000	3,368,000
Unused lines of Credit [Member] | Adjustable Rate [Member]
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Off-balance sheet risks, liability		59,636,000	45,199,000
Unused Overdraft Protection Amounts on Demand and NOW Accounts [Member]
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Off-balance sheet risks, liability		9,538,000	9,665,000
Standby Letters of Credit [Member]
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Off-balance sheet risks, liability		445,000	5,109,000
Capital Addition Purchase Commitments [Member]
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Purchase for capital commitments		$ 100,000

XML

CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
ASSETS:
Cash and due from banks	$ 14,563	$ 11,260
Interest-bearing demand deposits	124	2,215
Total cash and cash equivalents	14,687	13,475
Investment securities:
Available-for-sale, at fair value	271,304	258,506
Held-to-maturity, at cost	21,058	15,424
Federal Reserve Bank stock, at cost	1,603	949
Federal Home Loan Bank stock, at cost	2,854	2,091
Loans, net	562,686	450,346
Premises and equipment, net	20,058	16,564
Goodwill	13,971	5,915
Bank owned life insurance	21,115	16,915
Other assets	13,013	8,452
TOTAL ASSETS	942,349	788,637
Deposits:
Noninterest-bearing	159,453	133,848
Interest-bearing	648,882	537,623
Total deposits	808,335	671,471
Short-term borrowings	22,811	13,756
Long-term debt	12,446	13,705
Accrued interest and other liabilities	6,542	7,699
TOTAL LIABILITIES	850,134	706,631
SHAREHOLDERS' EQUITY:
Preferred shares – no par value, authorized 1,000,000 shares, none outstanding	0	0
Common shares – no par value, authorized 12,000,000 shares, issued 8,393,790 and 7,485,527 shares at September 30, 2013 and December 31, 2012, respectively	39,774	27,107
Retained earnings	64,614	61,843
Treasury shares at cost, 753,627 shares at September 30, 2013 and December 31, 2012	(11,665)	(11,665)
Accumulated other comprehensive income, net of taxes	(508)	4,721
TOTAL SHAREHOLDERS' EQUITY	92,215	82,006
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 942,349	$ 788,637

XML

Loans, Loans Portfolio Aging Analysis (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012	Sep. 30, 2012
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	$ 2,760	$ 1,270
60-89 Days Past Due	1,475	349
Greater Than 90 Days Past Due	2,587	2,249
Total Past Due	6,822	3,868
Current	559,287	449,915
Balance, end of period	566,109	453,783	457,407
Total Loans Greater Than 90 Days and Accruing	29	128
Commercial and Industrial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	64	0
60-89 Days Past Due	99	1
Greater Than 90 Days Past Due	144	264
Total Past Due	307	265
Current	30,939	25,945
Balance, end of period	31,246	26,210
Total Loans Greater Than 90 Days and Accruing	0	0
Commercial Secured By Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	1,362	346
60-89 Days Past Due	823	79
Greater Than 90 Days Past Due	1,247	788
Total Past Due	3,432	1,213
Current	298,552	236,916
Balance, end of period	301,984	238,129
Total Loans Greater Than 90 Days and Accruing	0	0
Residential Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	1,200	791
60-89 Days Past Due	537	212
Greater Than 90 Days Past Due	1,196	1,172
Total Past Due	2,933	2,175
Current	213,625	173,094
Balance, end of period	216,558	175,269
Total Loans Greater Than 90 Days and Accruing	29	103
Consumer [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	95	61
60-89 Days Past Due	16	57
Greater Than 90 Days Past Due	0	25
Total Past Due	111	143
Current	12,907	10,488
Balance, end of period	13,018	10,631
Total Loans Greater Than 90 Days and Accruing	0	25
Agricultural [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	0	0
60-89 Days Past Due	0	0
Greater Than 90 Days Past Due	0	0
Total Past Due	0	0
Current	3,245	1,668
Balance, end of period	3,245	1,668
Total Loans Greater Than 90 Days and Accruing	0	0
Other [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	39	72
60-89 Days Past Due	0	0
Greater Than 90 Days Past Due	0	0
Total Past Due	39	72
Current	19	1,804
Balance, end of period	58	1,876
Total Loans Greater Than 90 Days and Accruing	0	0
Financial Receivable Acquired Credit Imparied [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	0
60-89 Days Past Due	99
Greater Than 90 Days Past Due	207
Total Past Due	306
Current	5,633
Balance, end of period	5,939
Total Loans Greater Than 90 Days and Accruing	0
Financial Receivable Acquired Credit Imparied [Member] | Commercial and Industrial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	0
60-89 Days Past Due	0
Greater Than 90 Days Past Due	0
Total Past Due	0
Current	341
Balance, end of period	341
Total Loans Greater Than 90 Days and Accruing	0
Financial Receivable Acquired Credit Imparied [Member] | Commercial Secured By Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	0
60-89 Days Past Due	54
Greater Than 90 Days Past Due	127
Total Past Due	181
Current	4,071
Balance, end of period	4,252
Total Loans Greater Than 90 Days and Accruing	0
Financial Receivable Acquired Credit Imparied [Member] | Residential Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	0
60-89 Days Past Due	45
Greater Than 90 Days Past Due	80
Total Past Due	125
Current	1,221
Balance, end of period	1,346
Total Loans Greater Than 90 Days and Accruing	0
Financial Receivable Other [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	2,760
60-89 Days Past Due	1,376
Greater Than 90 Days Past Due	2,380
Total Past Due	6,516
Current	553,654
Balance, end of period	560,170
Total Loans Greater Than 90 Days and Accruing	29
Financial Receivable Other [Member] | Commercial and Industrial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	64
60-89 Days Past Due	99
Greater Than 90 Days Past Due	144
Total Past Due	307
Current	30,598
Balance, end of period	30,905
Total Loans Greater Than 90 Days and Accruing	0
Financial Receivable Other [Member] | Commercial Secured By Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	1,362
60-89 Days Past Due	769
Greater Than 90 Days Past Due	1,120
Total Past Due	3,251
Current	294,481
Balance, end of period	297,732
Total Loans Greater Than 90 Days and Accruing	0
Financial Receivable Other [Member] | Residential Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	1,200
60-89 Days Past Due	492
Greater Than 90 Days Past Due	1,116
Total Past Due	2,808
Current	212,404
Balance, end of period	215,212
Total Loans Greater Than 90 Days and Accruing	29
Financial Receivable Other [Member] | Consumer [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	95
60-89 Days Past Due	16
Greater Than 90 Days Past Due	0
Total Past Due	111
Current	12,907
Balance, end of period	13,018
Total Loans Greater Than 90 Days and Accruing	0
Financial Receivable Other [Member] | Agricultural [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	0
60-89 Days Past Due	0
Greater Than 90 Days Past Due	0
Total Past Due	0
Current	3,245
Balance, end of period	3,245
Total Loans Greater Than 90 Days and Accruing	0
Financial Receivable Other [Member] | Other [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	39
60-89 Days Past Due	0
Greater Than 90 Days Past Due	0
Total Past Due	39
Current	19
Balance, end of period	58
Total Loans Greater Than 90 Days and Accruing	$ 0

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Loans (Tables)

9 Months Ended

Sep. 30, 2013

Receivables [Abstract]

Major Classifications of Loans

Major classifications of loans at September 30, 2013 and December 31, 2012 are as follows (in thousands):

	September 30, 2013						December 31, 2012
	Acquired Credit Impaired		Other		Total
Commercial and industrial	$	341	30,939		31,280		26,236
Commercial, secured by real estate	4,252		298,059		302,311		238,357
Residential real estate	1,346		214,972		216,318		175,031
Consumer	—		12,928		12,928		10,554
Agricultural	—		3,245		3,245		1,668
Other loans, including deposit overdrafts	—		58		58		1,875
	5,939		560,201		566,140		453,721
Deferred net origination costs (fees)	—		(31	)	(31	)	62
	5,939		560,170		566,109		453,783
Less allowance for loan losses	—		3,423		3,423		3,437
Loans, net	$	5,939	556,747		562,686		450,346

Schedule of Acquired Non Impaired Loans

The following table provides certain information at the acquisition date on loans acquired from First Capital, not including loans considered to be impaired (in thousands):

Contractually required principal at acquisition	$	91,614
Less fair value adjustment	(1,908		)
Fair value of acquired loans	$	89,706
Contractual cash flows not expected to be collected	$	2,149

Acquired Loans Accounted for in Accordance with FASB ASC 310-30

The following table provides details on acquired impaired loans that are accounted for in accordance with FASB ASC 310-30 (in thousands):

Contractually required principal at acquisition	$	11,460
Contractual cash flows not expected to be collected (nonaccretable difference)	(1,260		)
Expected cash flows at acquisition	10,200
Interest component of expected cash flows (accretable discount)	(1,389		)
Fair value of acquired impaired loans	$	8,811

Outstanding and Related Carrying Amount for Acquired Impaired Loans

The following table provides the outstanding balance and related carrying amount for acquired impaired loans at the dates indicated (in thousands):

	September 30, 2013		January 11, 2013
Outstanding balance	$	8,155	11,460
Carrying amount	5,939		8,811

Accretable Discount Related to Acquired Impaired Loans

Activity during 2013 for the accretable discount related to acquired impaired loans is as follows (in thousands):

Accretable discount at January 11, 2013	$	1,389
Reclass from nonaccretable discount to accretable discount	157
Less transferred to other real estate owned	(23		)
Less accretion	(394		)
Accretable discount at September 30, 2013	$	1,129

Non-accrual, Past Due, and Accruing Restructured Loans

Non-accrual, past-due, and accruing restructured loans as of September 30, 2013 and December 31, 2012 are as follows (in thousands):

	September 30, 2013					December 31, 2012
	Acquired Credit Impaired		Other	Total
Non-accrual loans:
Commercial and industrial	$	—	144	144		264
Commercial, secured by real estate	369		1,120	1,489		788
Residential real estate	143		1,052	1,195		1,231
Total non-accrual loans	512		2,316	2,828		2,283
Past-due 90 days or more and still accruing	—		29	29		128
Total non-accrual and past-due 90 days or more and still accruing	512		2,345	2,857		2,411
Accruing restructured loans	—		14,175	14,175		13,343
Total	$	512	16,520	17,032		15,754
Percentage of total non-accrual loans and loans past-due 90 days or more and still accruing to total loans				0.50	%	0.53	%
Percentage of total non-accrual loans, loans past-due 90 days or more and still accruing, and accruing restructured loans to total loans				3.01	%	3.47	%

Allowance for Loan Losses and Recorded Investments in Loans

The allowance for loan losses and recorded investment in loans for the nine months ended September 30 are as follows (in thousands):

	Commercial & Industrial			Commercial, Secured by Real Estate		Residential Real Estate		Consumer		Agricultural	Other		Total
2013
Allowance for loan losses:
Balance, beginning of year	$	320		2,296		712		108		—	1		3,437
Provision charged to expenses	(41		)	107		268		14		—	21		369
Losses charged off:
Acquired credit impaired loans	—			—		(5	)	—		—	—		(5	)
Other loans	(120		)	(34	)	(203	)	(148	)	—	(56	)	(561	)
Recoveries	4			26		21		98		—	34		183
Balance, end of period	$	163		2,395		793		72		—	—		3,423
Individually evaluated for impairment	$	1		766		190		1		—	—		958
Collectively evaluated for impairment	162			1,629		603		71		—	—		2,465
Acquired credit impaired loans	—			—		—		—		—	—		—
Balance, end of period	$	163		2,395		793		72		—	—		3,423
Loans:
Individually evaluated for impairment	$	166		14,444		1,543		35		—	—		16,188
Collectively evaluated for impairment	30,739			283,288		213,669		12,983		3,245	58		543,982
Acquired credit impaired loans	341			4,252		1,346		—		—	—		5,939
Balance, end of period	$	31,246		301,984		216,558		13,018		3,245	58		566,109
2012
Allowance for loan losses:
Balance, beginning of year	$	162		1,941		656		166		—	6		2,931
Change in classification	18			(18	)	—		—		—	—		—
Provision charged to expenses	163			(16	)	624		(49	)	—	20		742
Losses charged off	(159		)	(234	)	(479	)	(84	)	—	(64	)	(1,020	)
Recoveries	—			71		7		95		—	40		213
Balance, end of period	$	184		1,744		808		128		—	2		2,866
Individually evaluated for impairment	$	21		49		219		—		—	—		289
Collectively evaluated for impairment	163			1,695		589		128		—	2		2,577
Balance, end of period	$	184		1,744		808		128		—	2		2,866
Loans:
Individually evaluated for impairment	$	264		13,895		1,157		13		—	—		15,329
Collectively evaluated for impairment	25,462			223,898		176,114		11,550		2,061	2,993		442,078
Balance, end of period	$	25,726		237,793		177,271		11,563		2,061	2,993		457,407

Analysis of the Company's Loan Portfolio by Credit Quality Indicators

A breakdown of the loan portfolio by credit quality indicators at September 30, 2013 and December 31, 2012 is as follows (in thousands):

	Pass		OAEM	Substandard	Doubtful	Total
September 30, 2013
Acquired credit impaired:
Commercial & industrial	$	12	—	329	—	341
Commercial, secured by real estate	—		766	3,486	—	4,252
Residential real estate	—		—	1,346	—	1,346
Total	$	12	766	5,161	—	5,939
Other:
Commercial & industrial	$	27,657	1,815	1,433	—	30,905
Commercial, secured by real estate	285,160		1,957	10,615	—	297,732
Residential real estate	208,654		1,774	4,731	53	215,212
Consumer	12,978		—	40	—	13,018
Agricultural	3,245		—	—	—	3,245
Other	58		—	—	—	58
Total	$	537,752	5,546	16,819	53	560,170
Total:
Commercial & industrial	$	27,669	1,815	1,762	—	31,246
Commercial, secured by real estate	285,160		2,723	14,101	—	301,984
Residential real estate	208,654		1,774	6,077	53	216,558
Consumer	12,978		—	40	—	13,018
Agricultural	3,245		—	—	—	3,245
Other	58		—	—	—	58
Total	$	537,764	6,312	21,980	53	566,109
December 31, 2012
Commercial & industrial	$	22,965	1,804	1,177	264	26,210
Commercial, secured by real estate	222,497		2,653	12,872	107	238,129
Residential real estate	168,338		2,353	4,280	298	175,269
Consumer	10,549		—	62	20	10,631
Agricultural	1,665		—	3	—	1,668
Other	1,876		—	—	—	1,876
Total	$	427,890	6,810	18,394	689	453,783

Loan Portfolio Aging Analysis

A loan portfolio aging analysis at September 30, 2013 and December 31, 2012 is as follows (in thousands):

	30-59 Days Past Due		60-89 Days Past Due	Greater Than 90 Days Past Due	Total Past Due	Current	Total Loans Receivable	Total Loans Greater Than 90 Days and Accruing
September 30, 2013
Acquired credit impaired:
Commercial & industrial	$	—	—	—	—	341	341	—
Commercial, secured by real estate	—		54	127	181	4,071	4,252	—
Residential real estate	—		45	80	125	1,221	1,346	—
Total	$	—	99	207	306	5,633	5,939	—
Other:
Commercial & industrial	$	64	99	144	307	30,598	30,905	—
Commercial, secured by real estate	1,362		769	1,120	3,251	294,481	297,732	—
Residential real estate	1,200		492	1,116	2,808	212,404	215,212	29
Consumer	95		16	—	111	12,907	13,018	—
Agricultural	—		—	—	—	3,245	3,245	—
Other	39		—	—	39	19	58	—
Total	$	2,760	1,376	2,380	6,516	553,654	560,170	29
Total:
Commercial & industrial	$	64	99	144	307	30,939	31,246	—
Commercial, secured by real estate	1,362		823	1,247	3,432	298,552	301,984	—
Residential real estate	1,200		537	1,196	2,933	213,625	216,558	29
Consumer	95		16	—	111	12,907	13,018	—
Agricultural	—		—	—	—	3,245	3,245	—
Other	39		—	—	39	19	58	—
Total	$	2,760	1,475	2,587	6,822	559,287	566,109	29
December 31, 2012
Commercial & industrial	$	—	1	264	265	25,945	26,210	—
Commercial, secured by real estate	346		79	788	1,213	236,916	238,129	—
Residential real estate	791		212	1,172	2,175	173,094	175,269	103
Consumer	61		57	25	143	10,488	10,631	25
Agricultural	—		—	—	—	1,668	1,668	—
Other	72		—	—	72	1,804	1,876	—
Total	$	1,270	349	2,249	3,868	449,915	453,783	128

Impaired Loans

Impaired loans, excluding acquired credit impaired loans, at September 30, 2013 and December 31, 2012 are as follows (in thousands):

	Recorded Investment		Unpaid Principal Balance	Related Allowance	Average Recorded Investment	Interest Income Recognized
September 30, 2013
With no related allowance recorded:
Commercial & industrial	$	—	—	—	—	—
Commercial, secured by real estate	3,067		3,143	—	3,143	85
Residential real estate	344		344	—	382	6
Consumer	—		—	—	1	—
Total	$	3,411	3,487	—	3,526	91
With an allowance recorded:
Commercial & industrial	$	166	271	1	193	1
Commercial, secured by real estate	11,377		11,431	766	10,710	278
Residential real estate	1,199		1,462	190	1,201	23
Consumer	35		35	1	21	2
Total	$	12,777	13,199	958	12,125	304
Total:
Commercial & industrial	$	166	271	1	193	1
Commercial, secured by real estate	14,444		14,574	766	13,853	363
Residential real estate	1,543		1,806	190	1,583	29
Consumer	35		35	1	22	2
Total	$	16,188	16,686	958	15,651	395
December 31, 2012
With no related allowance recorded:
Commercial & industrial	$	—	—	—	975	43
Commercial, secured by real estate	9,541		9,936	—	9,310	350
Residential real estate	417		417	—	397	5
Consumer	20		20	—	23	2
Total	$	9,978	10,373	—	10,705	400
With an allowance recorded:
Commercial & industrial	$	264	822	159	374	—
Commercial, secured by real estate	4,258		4,360	660	4,765	171
Residential real estate	658		853	85	707	2
Consumer	—		—	—	4	—
Total	$	5,180	6,035	904	5,850	173
Total:
Commercial & industrial	$	264	822	159	1,349	43
Commercial, secured by real estate	13,799		14,296	660	14,075	521
Residential real estate	1,075		1,270	85	1,104	7
Consumer	20		20	—	27	2
Total	$	15,158	16,408	904	16,555	573

Troubled Debt Restructurings

Loan modifications that were classified as troubled debt restructurings during the three and nine months ended September 30, 2013 and 2012 are as follows (dollars in thousands):

	2013			2012
	Number of Loans	Balance at Modification		Number of Loans	Balance at Modification
Three Months Ended September 30,
Commercial and industrial	—	$	—	—	$	—
Commercial, secured by real estate	1	702		—	—
Residential real estate	—	—		1	100
Consumer	—	—		2	20
Total	1	$	702	3	$	120
Nine Months Ended September 30,
Commercial and industrial	1	$	22	—	$	—
Commercial, secured by real estate	1	702		—	—
Residential real estate	2	335		3	273
Consumer	2	27		2	20
Total	6	$	1,086	5	$	293

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Earnings Per Common Share

9 Months Ended

Sep. 30, 2013

Earnings Per Share [Abstract]

Earnings Per Common Share

Note 14 - Earnings per Common Share

Basic earnings per common share is calculated by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period.  Diluted earnings per common share is adjusted for the dilutive effects of stock options, warrant, and restricted stock.  The diluted average number of common shares outstanding has been increased for the assumed exercise of stock options, warrant, and restricted stock with proceeds used to purchase treasury shares at the average market price for the period.  The computations are as follows for the three and nine months ended September 30, 2013 and 2012 (dollars in thousands, except share and per share data):

	For the Three Months Ended September 30,			For the Nine Months Ended September 30,
	2013		2012	2013	2012
Net income	$	2,357	1,847	6,433	6,111
Weighted average number of shares outstanding used in the calculation of basic earnings per common share	7,636,098		6,721,699	7,592,818	6,713,959
Add dilutive effect of:
Stock options	29,601		10,089	23,262	8,898
Stock warrants	121,399		65,887	106,606	64,143
Adjusted weighted average number of shares outstanding used in the calculation of diluted earnings per common share	7,787,098		6,797,675	7,722,686	6,787,000
Earnings per common share:
Basic	$	0.31	0.27	0.85	0.91
Diluted	0.30		0.27	0.83	0.90

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Loans Loans, Acquired Loans not Imparied and not Accounted For (Details) (USD $) In Thousands, unless otherwise specified	Jan. 11, 2013
Acquired loans that are accounted for in accordance with FASB ASC 310-30 [Abstract]
Contractually required principal at acquisition	$ 91,614
Less fair value adjustment	(1,908)
Fair value of acquired loans	89,706
Contractual cash flows not expected to be collected	$ 2,149

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Other Real Estate Owned (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2013 Bank_Loan	Sep. 30, 2012	Dec. 31, 2012 Bank_Loan
Other Real Estate [Roll Forward]
Balance, beginning of year	$ 2,189	$ 1,619
Additions	126	771
Additions due to merger	127	0
Reductions due to sales	(843)	0
Reductions due to valuation write downs	(38)	(76)
Balance, end of period	1,561	2,314
Other real estate owned [Abstract]
Number	7		10
Balance	1,561		2,189
Commercial Real Estate [Member]
Other real estate owned [Abstract]
Number	2		2
Balance	1,443		1,875
Residential Real Estate [Member]
Other real estate owned [Abstract]
Number	5		8
Balance	$ 118		$ 314

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Fair Value Measurements (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended		12 Months Ended
	Sep. 30, 2013 Property Fund		Dec. 31, 2012 Property
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Number of mutual funds that invest in debt securities or loans that qualify for credit under the Community Reinvestment Act	2
Redemption notice required to be given to convert capital account, number of days	60 days
Nonrecurring fair value measurements:
Number of impaired other real estate owned properties	6		8
Other real estate owned impaired carrying value	$ 277		$ 1,809
Fair value of other real estate owned properties	239		1,525
Impaired charges related to other real estate owned properties included in non-interest expense for the period	38		284
Number of other real estate owned properties sold	8
Other real estate owned properties sold during period carrying value	843
Proceeds from sale of other real estate owned properties	1,054
Gain on sales of other real estate properties	211
Loss on sale of property			(8)
Carrying value of repossessed asset	6		23
Proceeds from sale of repossessed assets	8		20
Realized gain (loss) from sale of repossessed assets	2		(3)
Assets:
Loans, net	552,583		448,784
Investment securities, non-taxable, held-to-maturity	21,058		15,424
Federal Reserve Bank stock	1,603		949
Federal Home Loan Bank stock	2,854		2,091
Liabilities:
Deposits	811,412		675,964
Long-term debt	13,251		14,724
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Assets:
Loans, net	0		0
Investment securities, non-taxable, held-to-maturity	0		0
Federal Reserve Bank stock	1,603		949
Federal Home Loan Bank stock	2,854		2,091
Liabilities:
Deposits	0		0
Long-term debt	0		0
Significant Other Observable Inputs (Level 2) [Member]
Assets:
Loans, net	552,583		448,784
Investment securities, non-taxable, held-to-maturity	0		0
Federal Reserve Bank stock	0		0
Federal Home Loan Bank stock	0		0
Liabilities:
Deposits	811,412		675,964
Long-term debt	13,251		14,724
Significant Unobservable Inputs (Level 3) [Member]
Assets:
Loans, net	0		0
Investment securities, non-taxable, held-to-maturity	21,058		15,424
Federal Reserve Bank stock	0		0
Federal Home Loan Bank stock	0		0
Liabilities:
Deposits	0		0
Long-term debt	0		0
Recurring [Member]
Investment securities available-for-sale [Abstract]
U.S. Treasury notes	8,707		18,686
U.S. Agency notes	110,779		90,606
U.S. Agency mortgage-backed securities	45,576		52,541
Corporate securities			3,067
Certificates of deposit with other banks	1,501
Municipal securities:
Non-taxable	80,509		73,882
Taxable	19,685		15,841
Mutual funds	2,385		2,168
Trust preferred securities	147		245
Equity securities	2,015		1,470
Total recurring fair value measurements	271,304		258,506
Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Investment securities available-for-sale [Abstract]
U.S. Treasury notes	8,707		18,686
U.S. Agency notes	0		0
U.S. Agency mortgage-backed securities	0		0
Corporate securities			3,067
Certificates of deposit with other banks	0
Municipal securities:
Non-taxable	0		0
Taxable	0		0
Mutual funds	1,385		1,168
Trust preferred securities	147		245
Equity securities	2,015		1,470
Total recurring fair value measurements	12,254		24,636
Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member]
Investment securities available-for-sale [Abstract]
U.S. Treasury notes	0		0
U.S. Agency notes	110,779		90,606
U.S. Agency mortgage-backed securities	45,576		52,541
Corporate securities			0
Certificates of deposit with other banks	1,501
Municipal securities:
Non-taxable	80,509		73,882
Taxable	19,685		15,841
Mutual funds	1,000		1,000
Trust preferred securities	0		0
Equity securities	0		0
Total recurring fair value measurements	259,050		233,870
Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member]
Investment securities available-for-sale [Abstract]
U.S. Treasury notes	0		0
U.S. Agency notes	0		0
U.S. Agency mortgage-backed securities	0		0
Corporate securities			0
Certificates of deposit with other banks	0
Municipal securities:
Non-taxable	0		0
Taxable	0		0
Mutual funds	0		0
Trust preferred securities	0		0
Equity securities	0		0
Total recurring fair value measurements	0		0
Nonrecurring [Member]
Nonrecurring fair value measurements:
Impaired loans	11,819		4,276
Other real estate owned and repossessed assets	1,561	[1]	2,189	[2]
Total nonrecurring fair value measurements	13,380		6,465
Nonrecurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Nonrecurring fair value measurements:
Impaired loans	0		0
Other real estate owned and repossessed assets	0	[1]	0	[2]
Total nonrecurring fair value measurements	0		0
Nonrecurring [Member] | Significant Other Observable Inputs (Level 2) [Member]
Nonrecurring fair value measurements:
Impaired loans	650		161
Other real estate owned and repossessed assets	1,561	[1]	2,189	[2]
Total nonrecurring fair value measurements	2,211		2,350
Nonrecurring [Member] | Significant Unobservable Inputs (Level 3) [Member]
Nonrecurring fair value measurements:
Impaired loans	11,169		4,115
Other real estate owned and repossessed assets	0	[1]	0	[2]
Total nonrecurring fair value measurements	11,169		4,115
Nonrecurring [Member] | Total Gains (Losses) [Member]
Nonrecurring fair value measurements:
Impaired loans	0		0
Other real estate owned and repossessed assets	175	[1]	(295)	[2]
Total nonrecurring fair value measurements	$ 175		$ (295)

[1] Six other real estate owned properties with a total carrying amount of $277,000 were written down to their combined fair value of $239,000, resulting in an impairment charge of $38,000. Eight other real estate owned properties with a total carrying amount of $843,000 were sold for a combined total of $1,054,000, resulting in a net gain of $211,000. A repossessed asset with a carrying value of $6,000 was sold for $8,000, resulting in a net gain of $2,000. The write-downs, losses, and gains were included in other non-interest expense for the period.

[2] Eight other real estate owned properties with a total carrying amount of $1,809,000 were written down to their combined fair value of $1,525,000, resulting in an impairment charge of $284,000. Another property was sold at a loss of $8,000. Repossessed assets with a carrying value of $23,000 were sold for a combined total of $20,000, resulting in a net loss of $3,000. The write-downs and losses were included in other non-interest expense for the period.

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Earnings Per Common Share (Tables)

9 Months Ended

Sep. 30, 2013

Earnings Per Share [Abstract]

Computations of Earnings per Common Share

The computations are as follows for the three and nine months ended September 30, 2013 and 2012 (dollars in thousands, except share and per share data):

	For the Three Months Ended September 30,			For the Nine Months Ended September 30,
	2013		2012	2013	2012
Net income	$	2,357	1,847	6,433	6,111
Weighted average number of shares outstanding used in the calculation of basic earnings per common share	7,636,098		6,721,699	7,592,818	6,713,959
Add dilutive effect of:
Stock options	29,601		10,089	23,262	8,898
Stock warrants	121,399		65,887	106,606	64,143
Adjusted weighted average number of shares outstanding used in the calculation of diluted earnings per common share	7,787,098		6,797,675	7,722,686	6,787,000
Earnings per common share:
Basic	$	0.31	0.27	0.85	0.91
Diluted	0.30		0.27	0.83	0.90

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Regulatory Capital (Tables)

9 Months Ended

Sep. 30, 2013

Banking and Thrift [Abstract]

Financial Institutions Are Classified into Categories Based upon Capital Adequacy

For various regulatory purposes, financial institutions are classified into categories based upon capital adequacy.

	Minimum Requirement		To Be Considered Well-Capitalized
Ratio of tier 1 capital to risk-weighted assets	4.0	%	6.0	%
Ratio of total capital (tier 1 capital plus tier 2 capital) to risk-weighted assets	8.0	%	10.0	%
Leverage ratio (tier 1 capital to adjusted quarterly average total assets)	3.0	%	5.0	%

Summary of Regulatory Capital and Capital Ratios of LCNB

A summary of the regulatory capital and capital ratios of LCNB follows (dollars in thousands):

	At September 30, 2013			At December 31, 2012
Regulatory Capital:
Shareholders' equity	$	92,215		82,006
Goodwill and other intangibles	(16,405		)	(6,019	)
Accumulated other comprehensive (income) loss	508			(4,721	)
Tier 1 risk-based capital	76,318			71,266
Eligible allowance for loan losses	3,423			3,437
Total risk-based capital	$	79,741		74,703
Capital ratios:
Tier 1 risk-based	13.26		%	15.13	%
Total risk-based	13.86		%	15.86	%
Leverage	8.19		%	8.98	%

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Accumulated Other Comprehensive Income (Tables)

9 Months Ended

Sep. 30, 2013

Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]

Schedule of Changes in Accumulated Other Comprehensive Income

Changes in accumulated other comprehensive income for the nine months ended September 30, 2013 and 2012 are as follows (in thousands):

	Unrealized Gains and Losses on Available-for-Sale Securities			Changes in Pension Plan Assets and Benefit Obligations		Total
2013
Balance at beginning of period	$	4,875		(154	)	4,721
Before reclassifications	(4,758		)	26		(4,732	)
Reclassifications	(497		)	—		(497	)
Balance at end of period	$	(380	)	(128	)	(508	)
2012
Balance at beginning of period	$	5,180		(152	)	5,028
Before reclassifications	1,529			25		1,554
Reclassifications	(586		)	—		(586	)
Balance at end of period	$	6,123		(127	)	5,996

Schedule of Reclassifications Out of Accumulated Other Comprehensive Income to the Statement of Income

Reclassifications out of accumulated other comprehensive income during the three months and nine months ended September 30, 2013 and 2012 and the affected line items in the consolidated statements of income are as follows (in thousands):

	Three Months Ended September 30,			Nine Months Ended September 30,
	2013		2012	2013	2012
Realized gain on sale of securities	$	58	427	753	886
Less provision for income taxes	20		145	256	300
Reclassification adjustment, net of taxes	$	38	282	497	586

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Loans

9 Months Ended

Sep. 30, 2013

Receivables [Abstract]

Loans

Note 4 - Loans

Major classifications of loans at September 30, 2013 and December 31, 2012 are as follows (in thousands):

	September 30, 2013						December 31, 2012
	Acquired Credit Impaired		Other		Total
Commercial and industrial	$	341	30,939		31,280		26,236
Commercial, secured by real estate	4,252		298,059		302,311		238,357
Residential real estate	1,346		214,972		216,318		175,031
Consumer	—		12,928		12,928		10,554
Agricultural	—		3,245		3,245		1,668
Other loans, including deposit overdrafts	—		58		58		1,875
	5,939		560,201		566,140		453,721
Deferred net origination costs (fees)	—		(31	)	(31	)	62
	5,939		560,170		566,109		453,783
Less allowance for loan losses	—		3,423		3,423		3,437
Loans, net	$	5,939	556,747		562,686		450,346

Loans acquired from the merger with First Capital are recorded at fair value with no carryover of the acquired entity's previously established allowance for loan losses.  The excess of expected cash flows over the estimated fair value of acquired loans is recognized as interest income over the remaining contractual lives of the loans using the level yield method.  Subsequent decreases in expected cash flows will require additions to the allowance for loan losses.  Subsequent improvements in expected cash flows result in the recognition of additional interest income over the then-remaining contractual lives of the loans.

Impaired loans acquired are accounted for under FASB ASC 310-30.  Factors considered in evaluating whether an acquired loan was impaired include delinquency status and history, updated borrower credit status, collateral information, and updated loan-to-value information.  The difference between contractually required payments at the time of acquisition and the cash flows expected to be collected is referred to as the nonaccretable difference.  The interest component of the cash flows expected to be collected is referred to as the accretable yield and is recognized as interest income over the remaining contractual life of the loan using the level yield method.   Subsequent decreases in expected cash flows will require additions to the allowance for loan losses.  Subsequent improvements in expected cash flows will result in a reclassification from the nonaccretable difference to the accretable yield.

The following table provides certain information at the acquisition date on loans acquired from First Capital, not including loans considered to be impaired (in thousands):

Contractually required principal at acquisition	$	91,614
Less fair value adjustment	(1,908		)
Fair value of acquired loans	$	89,706
Contractual cash flows not expected to be collected	$	2,149

The following table provides details on acquired impaired loans that are accounted for in accordance with FASB ASC 310-30 (in thousands):

Contractually required principal at acquisition	$	11,460
Contractual cash flows not expected to be collected (nonaccretable difference)	(1,260		)
Expected cash flows at acquisition	10,200
Interest component of expected cash flows (accretable discount)	(1,389		)
Fair value of acquired impaired loans	$	8,811

The following table provides the outstanding balance and related carrying amount for acquired impaired loans at the dates indicated (in thousands):

	September 30, 2013		January 11, 2013
Outstanding balance	$	8,155	11,460
Carrying amount	5,939		8,811

Activity during 2013 for the accretable discount related to acquired impaired loans is as follows (in thousands):

Accretable discount at January 11, 2013	$	1,389
Reclass from nonaccretable discount to accretable discount	157
Less transferred to other real estate owned	(23		)
Less accretion	(394		)
Accretable discount at September 30, 2013	$	1,129

Non-accrual, past-due, and accruing restructured loans as of September 30, 2013 and December 31, 2012 are as follows (in thousands):

	September 30, 2013					December 31, 2012
	Acquired Credit Impaired		Other	Total
Non-accrual loans:
Commercial and industrial	$	—	144	144		264
Commercial, secured by real estate	369		1,120	1,489		788
Residential real estate	143		1,052	1,195		1,231
Total non-accrual loans	512		2,316	2,828		2,283
Past-due 90 days or more and still accruing	—		29	29		128
Total non-accrual and past-due 90 days or more and still accruing	512		2,345	2,857		2,411
Accruing restructured loans	—		14,175	14,175		13,343
Total	$	512	16,520	17,032		15,754
Percentage of total non-accrual loans and loans past-due 90 days or more and still accruing to total loans				0.50	%	0.53	%
Percentage of total non-accrual loans, loans past-due 90 days or more and still accruing, and accruing restructured loans to total loans				3.01	%	3.47	%

Loans sold to and serviced for the Federal Home Loan Mortgage Corporation and other investors are not included in the accompanying consolidated balance sheets.  The unpaid principal balances of those loans at September 30, 2013 and December 31, 2012 are $91,125,000 and $71,568,000, respectively.  Loans sold during the three months ended September 30, 2013 and 2012 totaled $2,434,000 and $7,934,000, respectively, and $16,831,000 and $19,328,000 during the nine months ended September 30, 2013 and 2012, respectively.

The allowance for loan losses and recorded investment in loans for the nine months ended September 30 are as follows (in thousands):

	Commercial & Industrial			Commercial, Secured by Real Estate		Residential Real Estate		Consumer		Agricultural	Other		Total
2013
Allowance for loan losses:
Balance, beginning of year	$	320		2,296		712		108		—	1		3,437
Provision charged to expenses	(41		)	107		268		14		—	21		369
Losses charged off:
Acquired credit impaired loans	—			—		(5	)	—		—	—		(5	)
Other loans	(120		)	(34	)	(203	)	(148	)	—	(56	)	(561	)
Recoveries	4			26		21		98		—	34		183
Balance, end of period	$	163		2,395		793		72		—	—		3,423
Individually evaluated for impairment	$	1		766		190		1		—	—		958
Collectively evaluated for impairment	162			1,629		603		71		—	—		2,465
Acquired credit impaired loans	—			—		—		—		—	—		—
Balance, end of period	$	163		2,395		793		72		—	—		3,423
Loans:
Individually evaluated for impairment	$	166		14,444		1,543		35		—	—		16,188
Collectively evaluated for impairment	30,739			283,288		213,669		12,983		3,245	58		543,982
Acquired credit impaired loans	341			4,252		1,346		—		—	—		5,939
Balance, end of period	$	31,246		301,984		216,558		13,018		3,245	58		566,109
2012
Allowance for loan losses:
Balance, beginning of year	$	162		1,941		656		166		—	6		2,931
Change in classification	18			(18	)	—		—		—	—		—
Provision charged to expenses	163			(16	)	624		(49	)	—	20		742
Losses charged off	(159		)	(234	)	(479	)	(84	)	—	(64	)	(1,020	)
Recoveries	—			71		7		95		—	40		213
Balance, end of period	$	184		1,744		808		128		—	2		2,866
Individually evaluated for impairment	$	21		49		219		—		—	—		289
Collectively evaluated for impairment	163			1,695		589		128		—	2		2,577
Balance, end of period	$	184		1,744		808		128		—	2		2,866
Loans:
Individually evaluated for impairment	$	264		13,895		1,157		13		—	—		15,329
Collectively evaluated for impairment	25,462			223,898		176,114		11,550		2,061	2,993		442,078
Balance, end of period	$	25,726		237,793		177,271		11,563		2,061	2,993		457,407

LCNB uses a risk-rating system to quantify loan quality.  A loan is assigned to a risk category based on relevant information about the ability of the borrower to service the debt including, but not limited to, current financial information, historical payment experience, credit documentation, public information, and current economic trends.  The categories used are:

• Pass – loans categorized in this category are higher quality loans that do not fit any of the other categories described below.

• Other Assets Especially Mentioned (OAEM) - loans in this category are currently protected but are potentially weak.  These loans constitute a risk but not to the point of justifying a classification of substandard.  The credit risk may be relatively minor yet constitute an undue risk in light of the circumstances surrounding a specific asset.

• Substandard – loans in this category are inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any.  Assets so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt.  They are characterized by the possibility that LCNB will sustain some loss if the deficiencies are not corrected.

• Doubtful – loans classified in this category have all the weaknesses inherent in loans classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

A breakdown of the loan portfolio by credit quality indicators at September 30, 2013 and December 31, 2012 is as follows (in thousands):

	Pass		OAEM	Substandard	Doubtful	Total
September 30, 2013
Acquired credit impaired:
Commercial & industrial	$	12	—	329	—	341
Commercial, secured by real estate	—		766	3,486	—	4,252
Residential real estate	—		—	1,346	—	1,346
Total	$	12	766	5,161	—	5,939
Other:
Commercial & industrial	$	27,657	1,815	1,433	—	30,905
Commercial, secured by real estate	285,160		1,957	10,615	—	297,732
Residential real estate	208,654		1,774	4,731	53	215,212
Consumer	12,978		—	40	—	13,018
Agricultural	3,245		—	—	—	3,245
Other	58		—	—	—	58
Total	$	537,752	5,546	16,819	53	560,170
Total:
Commercial & industrial	$	27,669	1,815	1,762	—	31,246
Commercial, secured by real estate	285,160		2,723	14,101	—	301,984
Residential real estate	208,654		1,774	6,077	53	216,558
Consumer	12,978		—	40	—	13,018
Agricultural	3,245		—	—	—	3,245
Other	58		—	—	—	58
Total	$	537,764	6,312	21,980	53	566,109
December 31, 2012
Commercial & industrial	$	22,965	1,804	1,177	264	26,210
Commercial, secured by real estate	222,497		2,653	12,872	107	238,129
Residential real estate	168,338		2,353	4,280	298	175,269
Consumer	10,549		—	62	20	10,631
Agricultural	1,665		—	3	—	1,668
Other	1,876		—	—	—	1,876
Total	$	427,890	6,810	18,394	689	453,783

A loan portfolio aging analysis at September 30, 2013 and December 31, 2012 is as follows (in thousands):

	30-59 Days Past Due		60-89 Days Past Due	Greater Than 90 Days Past Due	Total Past Due	Current	Total Loans Receivable	Total Loans Greater Than 90 Days and Accruing
September 30, 2013
Acquired credit impaired:
Commercial & industrial	$	—	—	—	—	341	341	—
Commercial, secured by real estate	—		54	127	181	4,071	4,252	—
Residential real estate	—		45	80	125	1,221	1,346	—
Total	$	—	99	207	306	5,633	5,939	—
Other:
Commercial & industrial	$	64	99	144	307	30,598	30,905	—
Commercial, secured by real estate	1,362		769	1,120	3,251	294,481	297,732	—
Residential real estate	1,200		492	1,116	2,808	212,404	215,212	29
Consumer	95		16	—	111	12,907	13,018	—
Agricultural	—		—	—	—	3,245	3,245	—
Other	39		—	—	39	19	58	—
Total	$	2,760	1,376	2,380	6,516	553,654	560,170	29
Total:
Commercial & industrial	$	64	99	144	307	30,939	31,246	—
Commercial, secured by real estate	1,362		823	1,247	3,432	298,552	301,984	—
Residential real estate	1,200		537	1,196	2,933	213,625	216,558	29
Consumer	95		16	—	111	12,907	13,018	—
Agricultural	—		—	—	—	3,245	3,245	—
Other	39		—	—	39	19	58	—
Total	$	2,760	1,475	2,587	6,822	559,287	566,109	29
December 31, 2012
Commercial & industrial	$	—	1	264	265	25,945	26,210	—
Commercial, secured by real estate	346		79	788	1,213	236,916	238,129	—
Residential real estate	791		212	1,172	2,175	173,094	175,269	103
Consumer	61		57	25	143	10,488	10,631	25
Agricultural	—		—	—	—	1,668	1,668	—
Other	72		—	—	72	1,804	1,876	—
Total	$	1,270	349	2,249	3,868	449,915	453,783	128

Impaired loans, excluding acquired credit impaired loans, at September 30, 2013 and December 31, 2012 are as follows (in thousands):

	Recorded Investment		Unpaid Principal Balance	Related Allowance	Average Recorded Investment	Interest Income Recognized
September 30, 2013
With no related allowance recorded:
Commercial & industrial	$	—	—	—	—	—
Commercial, secured by real estate	3,067		3,143	—	3,143	85
Residential real estate	344		344	—	382	6
Consumer	—		—	—	1	—
Total	$	3,411	3,487	—	3,526	91
With an allowance recorded:
Commercial & industrial	$	166	271	1	193	1
Commercial, secured by real estate	11,377		11,431	766	10,710	278
Residential real estate	1,199		1,462	190	1,201	23
Consumer	35		35	1	21	2
Total	$	12,777	13,199	958	12,125	304
Total:
Commercial & industrial	$	166	271	1	193	1
Commercial, secured by real estate	14,444		14,574	766	13,853	363
Residential real estate	1,543		1,806	190	1,583	29
Consumer	35		35	1	22	2
Total	$	16,188	16,686	958	15,651	395
December 31, 2012
With no related allowance recorded:
Commercial & industrial	$	—	—	—	975	43
Commercial, secured by real estate	9,541		9,936	—	9,310	350
Residential real estate	417		417	—	397	5
Consumer	20		20	—	23	2
Total	$	9,978	10,373	—	10,705	400
With an allowance recorded:
Commercial & industrial	$	264	822	159	374	—
Commercial, secured by real estate	4,258		4,360	660	4,765	171
Residential real estate	658		853	85	707	2
Consumer	—		—	—	4	—
Total	$	5,180	6,035	904	5,850	173
Total:
Commercial & industrial	$	264	822	159	1,349	43
Commercial, secured by real estate	13,799		14,296	660	14,075	521
Residential real estate	1,075		1,270	85	1,104	7
Consumer	20		20	—	27	2
Total	$	15,158	16,408	904	16,555	573

Loan modifications that were classified as troubled debt restructurings during the three and nine months ended September 30, 2013 and 2012 are as follows (dollars in thousands):

	2013			2012
	Number of Loans	Balance at Modification		Number of Loans	Balance at Modification
Three Months Ended September 30,
Commercial and industrial	—	$	—	—	$	—
Commercial, secured by real estate	1	702		—	—
Residential real estate	—	—		1	100
Consumer	—	—		2	20
Total	1	$	702	3	$	120
Nine Months Ended September 30,
Commercial and industrial	1	$	22	—	$	—
Commercial, secured by real estate	1	702		—	—
Residential real estate	2	335		3	273
Consumer	2	27		2	20
Total	6	$	1,086	5	$	293

Each restructured loan is separately negotiated with the borrower and includes terms and conditions that reflect the borrower's ability to pay the debt as modified.  Modifications may include interest only payments for a period of time, temporary or permanent reduction of the loan's interest rate, capitalization of delinquent interest, or extensions of the maturity date.

LCNB is not committed to lend additional funds to borrowers whose loan terms were modified in a troubled debt restructuring.

A restructured automobile loan with a balance of $13,000 was charged off during the first quarter 2013, which was within twelve months of the loan's modification date.  There were no other troubled debt restructurings that subsequently defaulted within twelve months of the restructuring date for the three and nine months ended September 30, 2013 and 2012.

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Stock Based Compensation (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Period options granted to date vest ratably			5 years
Period options granted expires after date of grant			10 years
Options outstanding [Roll Forward]
Outstanding at beginning of period (in shares)			110,586	124,123
Granted (in shares)			0	14,491
Exercised (in shares)			(5,620)	(2,144)
Outstanding at end of period (in shares)	104,966	136,470	104,966	136,470
Exercisable at end of period (in shares)	67,899	81,193	67,899	81,193
Weighted average exercise price [Roll forward]
Outstanding at beginning of period (in dollars per share)			$ 12.42	$ 12.54
Granted (in dollars per shares)			$ 0.00	$ 12.60
Exercised (in dollars per share)			$ 12.32	$ 13.09
Outstanding at end of period (in dollars per share)	$ 12.43	$ 12.54	$ 12.43	$ 12.54
Exercisable at end of period (in dollars per share)	$ 12.86	$ 13.25	$ 12.86	$ 13.25
Aggregate intrinsic value for option outstanding	$ 708	$ 233	$ 708	$ 233
Aggregate intrinsic value of options exercisable	428	127	428	127
Total expense related to options included in salaries and wages	$ 9	$ 10	$ 28	$ 30
Ownership Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized for issuance (in shares)	200,000		200,000

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Other Real Estate Owned (Tables)

9 Months Ended

Sep. 30, 2013

Real Estate [Abstract]

Changes in Other Real Estate Owned

Changes in other real estate owned are as follows (in thousands):

	Nine Months Ended September 30,
	2013			2012
Balance, beginning of year	$	2,189		1,619
Additions	126			771
Additions due to merger	127			—
Reductions due to sales	(843		)	—
Reductions due to valuation write downs	(38		)	(76	)
Balance, end of period	$	1,561		2,314

Components of Other Real Estate Owned

Other real estate owned at September 30, 2013 and December 31, 2012 consisted of (dollars in thousands):

	September 30, 2013			December 31, 2012
	Number	Balance		Number	Balance
Commercial real estate	2	$	1,443	2	$	1,875
Residential real estate	5	118		8	314
	7	$	1,561	10	$	2,189

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Investment Securities (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Available-for-sale investment securities [Abstract]
Amortized Cost	$ 271,881	$ 251,120
Unrealized Gains	4,538	7,695
Unrealized Losses	5,115	309
Fair Value	271,304	258,506
Continuous Unrealized Loss Position, Fair Value [Abstract]
Less than Twelve Months, Fair Value	155,705
Twelve Months or Greater, Fair Value	143
Continuous Unrealized Loss Position, Unrealized Losses [Abstract]
Less than Twelve Months, Unrealized Losses	5,095
Twelve Months or Greater, Unrealized Losses	20
U.S. Treasury Notes [Member]
Available-for-sale investment securities [Abstract]
Amortized Cost	8,904	18,462
Unrealized Gains	0	224
Unrealized Losses	197	0
Fair Value	8,707	18,686
Continuous Unrealized Loss Position, Fair Value [Abstract]
Less than Twelve Months, Fair Value	8,707
Twelve Months or Greater, Fair Value	0
Continuous Unrealized Loss Position, Unrealized Losses [Abstract]
Less than Twelve Months, Unrealized Losses	197
Twelve Months or Greater, Unrealized Losses	0
US Agency Notes [Member]
Available-for-sale investment securities [Abstract]
Amortized Cost	113,475	89,372
Unrealized Gains	340	1,364
Unrealized Losses	3,036	130
Fair Value	110,779	90,606
Continuous Unrealized Loss Position, Fair Value [Abstract]
Less than Twelve Months, Fair Value	91,919
Twelve Months or Greater, Fair Value	0
Continuous Unrealized Loss Position, Unrealized Losses [Abstract]
Less than Twelve Months, Unrealized Losses	3,036
Twelve Months or Greater, Unrealized Losses	0
US Agency Mortgage-Backed Securities [Member]
Available-for-sale investment securities [Abstract]
Amortized Cost	45,723	51,121
Unrealized Gains	721	1,444
Unrealized Losses	868	24
Fair Value	45,576	52,541
Continuous Unrealized Loss Position, Fair Value [Abstract]
Less than Twelve Months, Fair Value	23,840
Twelve Months or Greater, Fair Value	0
Continuous Unrealized Loss Position, Unrealized Losses [Abstract]
Less than Twelve Months, Unrealized Losses	868
Twelve Months or Greater, Unrealized Losses	0
Certificates of Deposit with Other Banks [Member]
Available-for-sale investment securities [Abstract]
Amortized Cost	1,492
Unrealized Gains	9
Unrealized Losses	0
Fair Value	1,501
Corporate Securities [Member]
Available-for-sale investment securities [Abstract]
Amortized Cost		3,032
Unrealized Gains		35
Unrealized Losses		0
Fair Value		3,067
Non-Taxable Municipal Securities [Member]
Available-for-sale investment securities [Abstract]
Amortized Cost	78,822	70,504
Unrealized Gains	2,480	3,497
Unrealized Losses	793	119
Fair Value	80,509	73,882
Continuous Unrealized Loss Position, Fair Value [Abstract]
Less than Twelve Months, Fair Value	23,864
Twelve Months or Greater, Fair Value	0
Continuous Unrealized Loss Position, Unrealized Losses [Abstract]
Less than Twelve Months, Unrealized Losses	793
Twelve Months or Greater, Unrealized Losses	0
Taxable Municipal Securities [Member]
Available-for-sale investment securities [Abstract]
Amortized Cost	19,157	14,851
Unrealized Gains	668	993
Unrealized Losses	140	3
Fair Value	19,685	15,841
Continuous Unrealized Loss Position, Fair Value [Abstract]
Less than Twelve Months, Fair Value	5,633
Twelve Months or Greater, Fair Value	0
Continuous Unrealized Loss Position, Unrealized Losses [Abstract]
Less than Twelve Months, Unrealized Losses	140
Twelve Months or Greater, Unrealized Losses	0
Mutual Funds [Member]
Available-for-sale investment securities [Abstract]
Amortized Cost	2,408	2,138
Unrealized Gains	0	30
Unrealized Losses	23	0
Fair Value	2,385	2,168
Continuous Unrealized Loss Position, Fair Value [Abstract]
Less than Twelve Months, Fair Value	1,385
Twelve Months or Greater, Fair Value	0
Continuous Unrealized Loss Position, Unrealized Losses [Abstract]
Less than Twelve Months, Unrealized Losses	23
Twelve Months or Greater, Unrealized Losses	0
Trust Preferred Securities [Member]
Available-for-sale investment securities [Abstract]
Amortized Cost	149	250
Unrealized Gains	3	2
Unrealized Losses	5	7
Fair Value	147	245
Continuous Unrealized Loss Position, Fair Value [Abstract]
Less than Twelve Months, Fair Value	46
Twelve Months or Greater, Fair Value	48
Continuous Unrealized Loss Position, Unrealized Losses [Abstract]
Less than Twelve Months, Unrealized Losses	4
Twelve Months or Greater, Unrealized Losses	1
Equity Securities [Member]
Available-for-sale investment securities [Abstract]
Amortized Cost	1,751	1,390
Unrealized Gains	317	106
Unrealized Losses	53	26
Fair Value	2,015	1,470
Continuous Unrealized Loss Position, Fair Value [Abstract]
Less than Twelve Months, Fair Value	311
Twelve Months or Greater, Fair Value	95
Continuous Unrealized Loss Position, Unrealized Losses [Abstract]
Less than Twelve Months, Unrealized Losses	34
Twelve Months or Greater, Unrealized Losses	$ 19

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Borrowings

9 Months Ended

Sep. 30, 2013

Debt Disclosure [Abstract]

Borrowings

Note 7 – Borrowings

Funds borrowed from the Federal Home Loan Bank of Cincinnati ("FHLB") at September 30, 2013 and December 31, 2012 are as follows (dollars in thousands):

	Interest Rate		September 30, 2013		December 31, 2012
Fixed Rate Advances, due at maturity:
Advance due January 2015	2.00	%	$	5,000	5,000
Advance due March 2017	5.25	%	5,000		5,000
Fixed Rate Advances, with monthly principal and interest payments:
Advance due March 2014	2.45	%	528		1,308
Advance due March 2019	2.82	%	1,918		2,397
			$	12,446	13,705

All advances from the FHLB are secured by a blanket pledge of LCNB's 1-4 family first lien mortgage loans in the amount of approximately $181 million and $142 million at September 30, 2013 and December 31, 2012, respectively.  Additionally, LCNB is required to hold minimum levels of FHLB stock, based on the outstanding borrowings.

Short-term borrowings at September 30, 2013 and December 31, 2012 are as follows (dollars in thousands):

	September 30, 2013				December 31, 2012
	Amount		Rate		Amount		Rate
Line of credit	$	11,946	0.75	%	$	2,661	0.75	%
FHLB short-term advance	—		—	%	—		—	%
Repurchase agreements	10,865		0.10	%	11,095		0.10	%
	$	22,811	0.44	%	$	13,756	0.23	%

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Investment Securities

9 Months Ended

Sep. 30, 2013

Investments, Debt and Equity Securities [Abstract]

Investment Securities

Note 3 - Investment Securities

The amortized cost and estimated fair value of available-for-sale investment securities at September 30, 2013 and December 31, 2012 are summarized as follows (in thousands):

	September 30, 2013
	Amortized Cost		Unrealized Gains	Unrealized Losses	Fair Value
U.S. Treasury notes	$	8,904	—	197	8,707
U.S. Agency notes	113,475		340	3,036	110,779
U.S. Agency mortgage-backed securities	45,723		721	868	45,576
Certificates of deposit with other banks	1,492		9	—	1,501
Municipal securities:
Non-taxable	78,822		2,480	793	80,509
Taxable	19,157		668	140	19,685
Mutual funds	2,408		—	23	2,385
Trust preferred securities	149		3	5	147
Equity securities	1,751		317	53	2,015
	$	271,881	4,538	5,115	271,304

	December 31, 2012
	Amortized Cost		Unrealized Gains	Unrealized Losses	Fair Value
U.S. Treasury notes	$	18,462	224	—	18,686
U.S. Agency notes	89,372		1,364	130	90,606
U.S. Agency mortgage-backed securities	51,121		1,444	24	52,541
Corporate securities	3,032		35	—	3,067
Municipal securities:
Non-taxable	70,504		3,497	119	73,882
Taxable	14,851		993	3	15,841
Mutual funds	2,138		30	—	2,168
Trust preferred securities	250		2	7	245
Equity securities	1,390		106	26	1,470
	$	251,120	7,695	309	258,506

The fair value of held-to-maturity investment securities, consisting of taxable and non-taxable municipal securities, approximates amortized cost at September 30, 2013 and December 31, 2012.

Information concerning available-for-sale investment securities with gross unrealized losses at September 30, 2013, aggregated by length of time that individual securities have been in a continuous loss position, is as follows (in thousands):

	Less than Twelve Months			Twelve Months or Greater
	Fair Value		Unrealized Losses	Fair Value	Unrealized Losses
U.S. Treasury notes	$	8,707	197	—	—
U.S. Agency notes	91,919		3,036	—	—
U.S. Agency mortgage-backed securities	23,840		868	—	—
Municipal securities:
Non-taxable	23,864		793	—	—
Taxable	5,633		140	—	—
Mutual funds	1,385		23	—	—
Trust preferred securities	46		4	48	1
Equity securities	311		34	95	19
	$	155,705	5,095	143	20

Management has determined that the unrealized losses at September 30, 2013 are primarily due to fluctuations in market interest rates and do not reflect credit quality deterioration of the securities.   Because LCNB does not have the intent to sell the investments and it is more likely than not that LCNB will not be required to sell the investments before recovery of their amortized cost bases, which may be at maturity, LCNB does not consider these investments to be other-than-temporarily impaired.

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited) (USD $) In Thousands, except Share data, unless otherwise specified	Total	Common Stock [Member]	Retained Earnings [Member]	Treasury Shares [Member]	Accumulated Other Comprehensive Income (Loss) [Member]
Balance Beginning at Dec. 31, 2011	$ 77,960	$ 26,753	$ 57,877	$ (11,698)	$ 5,028
Balance Beginning (in shares) at Dec. 31, 2011		6,704,723
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Dividend Reinvestment and Stock Purchase Plan (in shares)		19,640
Exercise of stock options (in shares)		2,144
Net income	6,111		6,111
Net unrealized gain on available-for-sale securities, net of taxes	1,529				1,529
Reclassification adjustment for net realized gain on sales of available-for-sale securities included in net income, net of taxes	(586)				(586)
Change in nonqualified pension plan unrecognized net loss and unrecognized prior service cost, net of taxes	25				25
Dividend Reinvestment and Stock Purchase Plan	257	257
Exercise of stock options	28		(5)	33
Compensation expense relating to stock options	30	30
Common stock dividends, $0.48 per share	(3,223)		(3,223)
Balance Ending at Sep. 30, 2012	82,131	27,040	60,760	(11,665)	5,996
Balance Ending (in shares) at Sep. 30, 2012		6,726,507
Balance Beginning at Dec. 31, 2012	82,006	27,107	61,843	(11,665)	4,721
Balance Beginning (in shares) at Dec. 31, 2012		6,731,900
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Dividend Reinvestment and Stock Purchase Plan (in shares)		13,832
Exercise of stock options (in shares)		5,620
Acquisition of First Capital Bancshares, Inc. (in shares)		888,811
Net income	6,433		6,433
Net unrealized gain on available-for-sale securities, net of taxes	(4,758)				(4,758)
Reclassification adjustment for net realized gain on sales of available-for-sale securities included in net income, net of taxes	(497)				(497)
Change in nonqualified pension plan unrecognized net loss and unrecognized prior service cost, net of taxes	26				26
Dividend Reinvestment and Stock Purchase Plan	248	248
Exercise of stock options	70	70
Acquisition of First Capital Bancshares, Inc.	12,321	12,321
Compensation expense relating to stock options	28	28
Common stock dividends, $0.48 per share	(3,662)		(3,662)
Balance Ending at Sep. 30, 2013	$ 92,215	$ 39,774	$ 64,614	$ (11,665)	$ (508)
Balance Ending (in shares) at Sep. 30, 2013		7,640,163

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Loans, Impaired Loans (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended	12 Months Ended
	Sep. 30, 2013	Dec. 31, 2012
With no related allowance recorded [Abstract]
Recorded Investment	$ 3,411	$ 9,978
Unpaid Principal Balance	3,487	10,373
Average Recorded Investment	3,526	10,705
Interest Income Recognized	91	400
With an allowance recorded [Abstract]
Recorded Investment	12,777	5,180
Unpaid Principal Balance	13,199	6,035
Related Allowance	958	904
Average Recorded Investment	12,125	5,850
Interest Income Recognized	304	173
Total [Abstract]
Recorded Investment	16,188	15,158
Unpaid Principal Balance	16,686	16,408
Related Allowance	958	904
Average Recorded Investment	15,651	16,555
Interest Income Recognized	395	573
Commercial and Industrial [Member]
With no related allowance recorded [Abstract]
Recorded Investment	0	0
Unpaid Principal Balance	0	0
Average Recorded Investment	0	975
Interest Income Recognized	0	43
With an allowance recorded [Abstract]
Recorded Investment	166	264
Unpaid Principal Balance	271	822
Related Allowance	1	159
Average Recorded Investment	193	374
Interest Income Recognized	1	0
Total [Abstract]
Recorded Investment	166	264
Unpaid Principal Balance	271	822
Related Allowance	1	159
Average Recorded Investment	193	1,349
Interest Income Recognized	1	43
Commercial Secured By Real Estate [Member]
With no related allowance recorded [Abstract]
Recorded Investment	3,067	9,541
Unpaid Principal Balance	3,143	9,936
Average Recorded Investment	3,143	9,310
Interest Income Recognized	85	350
With an allowance recorded [Abstract]
Recorded Investment	11,377	4,258
Unpaid Principal Balance	11,431	4,360
Related Allowance	766	660
Average Recorded Investment	10,710	4,765
Interest Income Recognized	278	171
Total [Abstract]
Recorded Investment	14,444	13,799
Unpaid Principal Balance	14,574	14,296
Related Allowance	766	660
Average Recorded Investment	13,853	14,075
Interest Income Recognized	363	521
Residential Real Estate [Member]
With no related allowance recorded [Abstract]
Recorded Investment	344	417
Unpaid Principal Balance	344	417
Average Recorded Investment	382	397
Interest Income Recognized	6	5
With an allowance recorded [Abstract]
Recorded Investment	1,199	658
Unpaid Principal Balance	1,462	853
Related Allowance	190	85
Average Recorded Investment	1,201	707
Interest Income Recognized	23	2
Total [Abstract]
Recorded Investment	1,543	1,075
Unpaid Principal Balance	1,806	1,270
Related Allowance	190	85
Average Recorded Investment	1,583	1,104
Interest Income Recognized	29	7
Consumer [Member]
With no related allowance recorded [Abstract]
Recorded Investment	0	20
Unpaid Principal Balance	0	20
Average Recorded Investment	1	23
Interest Income Recognized	0	2
With an allowance recorded [Abstract]
Recorded Investment	35	0
Unpaid Principal Balance	35	0
Related Allowance	1	0
Average Recorded Investment	21	4
Interest Income Recognized	2	0
Total [Abstract]
Recorded Investment	35	20
Unpaid Principal Balance	35	20
Related Allowance	1	0
Average Recorded Investment	22	27
Interest Income Recognized	$ 2	$ 2

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Loans Loans, Accretable Discount Related to Acquired Impaired Loans (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2013
Accretable discount related to acquired impaired loans [Roll Forward]
Accretable discount at January 11, 2013	$ 1,389
Reclass from nonaccretable discount to accretable discount	157
Less transferred to other real estate owned	(23)
Less accretion	(394)
Accretable discount at September 30, 2013	$ 1,129

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Income Taxes (Tables)

9 Months Ended

Sep. 30, 2013

Income Tax Disclosure [Abstract]

Reconciliation between Statutory Income Tax and Effective Tax Rate

A reconciliation between the statutory income tax and LCNB's effective tax rate on income from continuing operations follows:

	For the three months ended September 30,				For the nine months ended September 30,
	2013		2012		2013		2012
Statutory tax rate	34.0	%	34.0	%	34.0	%	34.0	%
Increase (decrease) resulting from:
Tax exempt interest	(6.8	)%	(8.3	)%	(7.4	)%	(7.3	)%
Tax exempt income on bank owned life insurance	(1.8	)%	(2.0	)%	(2.0	)%	(1.8	)%
Other, net	—	%	(0.1	)%	0.4	%	—	%
Effective tax rate	25.4	%	23.6	%	25.0	%	24.9	%

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Fair Value Measurements, By Balance Sheet Grouping (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Investment securities:
Available-for-sale	$ 271,304	$ 258,506
FINANCIAL LIABILITIES:
Deposits	811,412	675,964
Long-term debt	13,251	14,724
Carrying Amount [Member]
FINANCIAL ASSETS:
Cash and cash equivalents	14,687	13,475
Investment securities:
Available-for-sale	271,304	258,506
Held-to-maturity	21,058	15,424
Federal Reserve Bank stock	1,603	949
Federal Home Loan Bank stock	2,854	2,091
Loans, net	562,686	450,346
FINANCIAL LIABILITIES:
Deposits	808,335	671,471
Short-term borrowings	22,811	13,756
Long-term debt	12,446	13,705
Fair Value [Member]
FINANCIAL ASSETS:
Cash and cash equivalents	14,687	13,475
Investment securities:
Available-for-sale	271,304	258,506
Held-to-maturity	21,058	15,424
Federal Reserve Bank stock	1,603	949
Federal Home Loan Bank stock	2,854	2,091
Loans, net	564,402	453,060
FINANCIAL LIABILITIES:
Deposits	811,412	675,964
Short-term borrowings	22,811	13,756
Long-term debt	$ 13,251	$ 14,724

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Regulatory Capital (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2013 Risk_Based_Capital_Ratio	Dec. 31, 2012	Sep. 30, 2012	Dec. 31, 2011
Banking and Thrift [Abstract]
Allowance for loan losses to risk-weighted assets	1.25%
Ratios which are based on degree of credit risk	2
Minimum Requirement - Ratio of tier 1 capital to risk-weighted assets	4.00%
Minimum Requirement - Ratio of total capital (tier 1 capital plus tier 2 capital) to risk-weighted assets	8.00%
Minimum Requirement - Leverage ratio (tier 1 capital to adjusted quarterly average total assets)	3.00%
To Be ConsideredWell-Capitalized - Ratio of tier 1 capital to risk-weighted assets	6.00%
To Be ConsideredWell-Capitalized - Ratio of total capital (tier 1 capital plus tier 2 capital) to risk-weighted assets	10.00%
To Be ConsideredWell-Capitalized - Leverage ratio (tier 1 capital to adjusted quarterly average total assets)	5.00%
Regulatory Capital:
Shareholders' equity	$ 92,215	$ 82,006	$ 82,131	$ 77,960
Goodwill and other intangibles	(16,405)	(6,019)
Accumulated other comprehensive (income) loss	508	(4,721)
Tier 1 risk-based capital	76,318	71,266
Eligible allowance for loan losses	3,423	3,437
Total risk-based capital	$ 79,741	$ 74,703
Capital ratios:
Tier 1 risk-based	13.26%	15.13%
Total risk-based	13.86%	15.86%
Leverage	8.19%	8.98%

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Regulatory Capital

9 Months Ended

Sep. 30, 2013

Banking and Thrift [Abstract]

Regulatory Capital

Note 10 – Regulatory Capital

The Bank and LCNB are required by regulators to meet certain minimum levels of capital adequacy. These are expressed in the form of certain ratios. Capital is separated into Tier 1 capital (essentially shareholders' equity less goodwill and other intangibles) and Tier 2 capital (essentially the allowance for loan losses limited to 1.25% of risk-weighted assets). The first two ratios, which are based on the degree of credit risk in LCNB's assets, provide for weighting assets based on assigned risk factors and include off-balance sheet items such as loan commitments and stand-by letters of credit.  The leverage ratio supplements the risk-based capital guidelines.

For various regulatory purposes, financial institutions are classified into categories based upon capital adequacy.

	Minimum Requirement		To Be Considered Well-Capitalized
Ratio of tier 1 capital to risk-weighted assets	4.0	%	6.0	%
Ratio of total capital (tier 1 capital plus tier 2 capital) to risk-weighted assets	8.0	%	10.0	%
Leverage ratio (tier 1 capital to adjusted quarterly average total assets)	3.0	%	5.0	%

As of the most recent notification from their regulators, the Bank and LCNB were categorized as "well-capitalized" under the regulatory framework for prompt corrective action.  Management believes that no conditions or events have occurred since the last notification that would change the Bank's or LCNB's category.

A summary of the regulatory capital and capital ratios of LCNB follows (dollars in thousands):

	At September 30, 2013			At December 31, 2012
Regulatory Capital:
Shareholders' equity	$	92,215		82,006
Goodwill and other intangibles	(16,405		)	(6,019	)
Accumulated other comprehensive (income) loss	508			(4,721	)
Tier 1 risk-based capital	76,318			71,266
Eligible allowance for loan losses	3,423			3,437
Total risk-based capital	$	79,741		74,703
Capital ratios:
Tier 1 risk-based	13.26		%	15.13	%
Total risk-based	13.86		%	15.86	%
Leverage	8.19		%	8.98	%

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Premises and Equipment

9 Months Ended

Sep. 30, 2013

Property, Plant and Equipment [Abstract]

Premises and Equipment

Note 6 – Premises and Equipment

Premises and equipment at September 30, 2013 and December 31, 2012 are summarized as follows (in thousands):

	September 30, 2013		December 31, 2012
Land	$	5,353	4,708
Buildings	18,756		15,616
Equipment	11,952		11,280
Construction in progress	75		—
Total	36,136		31,604
Less accumulated depreciation	16,078		15,040
Premises and equipment, net	$	20,058	16,564

Depreciation charged to expense was $370,000 and $322,000 for the three months ended September 30, 2013 and 2012, respectively, and $1,070,000 and $927,000 for the nine months ended September 30, 2013 and 2012, respectively.

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Stock Based Compensation

9 Months Ended

Sep. 30, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock Based Compensation

Note 13 - Stock Based Compensation

LCNB established an Ownership Incentive Plan (the "Plan") during 2002 that allows for stock-based awards to eligible employees, as determined by the Board of Directors.  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 200,000 shares.

Options granted to date vest ratably over a five year period and expire ten years after the date of grant. Stock options outstanding at September 30, 2013 are as follows:

	Outstanding Stock Options				Exercisable Stock Options
Exercise Price Range	Number	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)	Number	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)
$9.00 - $10.99	23,494	$	9.00	5.3	18,419	$	9.00	5.3
$11.00 - $12.99	63,354	12.05		6.8	31,362	12.06		6.1
$17.00 - $18.99	18,118	18.19		2.1	18,118	18.19		2.1
	104,966	12.43		5.6	67,899	12.86		4.8

The following table summarizes stock option activity for the periods indicated:

	2013				2012
	Options		Weighted Average Exercise Price		Options		Weighted Average Exercise Price
Outstanding, January 1	110,586		$	12.42	124,123		$	12.54
Granted	—		—		14,491		12.60
Exercised	(5,620	)	12.32		(2,144	)	13.09
Outstanding, September 30	104,966		12.43		136,470		12.54
Exercisable, September 30	67,899		12.86		81,193		13.25

The aggregate intrinsic value (the amount by which the current market value of the underlying stock exceeds the exercise price of the option) for options outstanding at September 30, 2013 that were "in the money" (market price greater than exercise price) was $708,000.  The aggregate intrinsic value at that date for only the options that were exercisable was $428,000.  The aggregate intrinsic value for options outstanding at September 30, 2012 that were in the money was $233,000 and the aggregate intrinsic value at that date for only the options that were exercisable was $127,000.  The intrinsic value changes based upon fluctuations in the market value of LCNB's stock.

Total expense related to options included in salaries and employee benefits in the consolidated statements of income for the three and nine months ended September 30, 2013 were $9,000 and $28,000, respectively, and $10,000 and $30,000 for the three and nine months ended September 30, 2012, respectively.

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Accumulated Other Comprehensive Income

9 Months Ended

Sep. 30, 2013

Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]

Accumulated Other Comprehensive Income

Note 11 – Accumulated Other Comprehensive Income

Changes in accumulated other comprehensive income for the nine months ended September 30, 2013 and 2012 are as follows (in thousands):

	Unrealized Gains and Losses on Available-for-Sale Securities			Changes in Pension Plan Assets and Benefit Obligations		Total
2013
Balance at beginning of period	$	4,875		(154	)	4,721
Before reclassifications	(4,758		)	26		(4,732	)
Reclassifications	(497		)	—		(497	)
Balance at end of period	$	(380	)	(128	)	(508	)
2012
Balance at beginning of period	$	5,180		(152	)	5,028
Before reclassifications	1,529			25		1,554
Reclassifications	(586		)	—		(586	)
Balance at end of period	$	6,123		(127	)	5,996

Reclassifications out of accumulated other comprehensive income during the three months and nine months ended September 30, 2013 and 2012 and the affected line items in the consolidated statements of income are as follows (in thousands):

	Three Months Ended September 30,			Nine Months Ended September 30,
	2013		2012	2013	2012
Realized gain on sale of securities	$	58	427	753	886
Less provision for income taxes	20		145	256	300
Reclassification adjustment, net of taxes	$	38	282	497	586

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Document and Entity Information	9 Months Ended
	Sep. 30, 2013	Nov. 07, 2013
Document and Entity Information [Abstract]
Entity Registrant Name	LCNB CORP
Entity Central Index Key	0001074902
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Document Type	10-Q
Document Period End Date	Sep. 30, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q3
Amendment Flag	false
Entity Common Stock, Shares Outstanding		9,283,186

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Retirement Plans

9 Months Ended

Sep. 30, 2013

Compensation and Retirement Disclosure [Abstract]

Retirement Plans

Note 12 – Retirement Plans

LCNB participates in a noncontributory defined benefit retirement multi-employer plan that covers substantially all regular full-time employees hired before January 1, 2009.

Employees of LCNB also participate in a defined contribution retirement plan.  Employees hired on or after January 1, 2009 receive a 50% employer match on their contributions into the 401(k) plan, up to a maximum LCNB contribution of 3% of each individual employee's annual compensation.  Employees hired before January 1, 2009 who received a benefit reduction under certain amendments to the defined benefit retirement plan receive an automatic contribution of 5% or 7% of annual compensation, depending on the sum of an employee's age and vesting service, into the 401(k) plan, regardless of the contributions made by the employees.  This contribution is made annually and these employees do not receive any employer matches to their 401(k) contributions.

Funding and administrative costs of the qualified noncontributory defined benefit retirement plan and 401(k) plan charged to pension and other employee benefits in the consolidated statements of income for the three and nine-month periods ended September 30, 2013 and 2012 are as follows (in thousands):

	For the Three Months Ended September 30,			For the Nine Months Ended September 30,
	2013		2012	2013	2012
Qualified noncontributory defined benefit retirement plan	$	31	230	93	521
401(k) plan	75		88	229	198

Certain highly compensated employees participate in a nonqualified defined benefit retirement plan.  The nonqualified plan ensures that participants receive the full amount of benefits to which they would have been entitled under the noncontributory defined benefit retirement plan in the absence of limits on benefit levels imposed by certain sections of the Internal Revenue Code.

The components of net periodic pension cost of the nonqualified defined benefit retirement plan for the three and nine months ended September 30, 2013 and 2012 are summarized as follows (in thousands):

	Three Months Ended September 30,			Nine Months Ended September 30,
	2013		2012	2013	2012
Service cost	$	18	22	54	66
Interest cost	12		11	35	33
Amortization of unrecognized net (gain) loss	6		5	18	15
Amortization of unrecognized prior service cost	7		7	21	21
Net periodic pension cost	$	43	45	128	135

Amounts recognized in accumulated other comprehensive income, net of tax, at September 30, 2013 and December 31, 2012 for the nonqualified defined benefit retirement plan consists of (in thousands):

	September 30, 2013		December 31, 2012
Net actuarial loss	$	113	125
Past service cost	14		29
	$	127	154

Citizens National Bank had a qualified noncontributory defined benefit pension plan which covered employees hired before May 1, 2005.  LCNB assumed this plan at the time of the merger.

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Retirement Plans (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended		3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended
	Sep. 30, 2013	Dec. 31, 2012	Sep. 30, 2013 Qualified Noncontributory Defined Benefit Retirement Plan [Member]	Sep. 30, 2012 Qualified Noncontributory Defined Benefit Retirement Plan [Member]	Sep. 30, 2013 Qualified Noncontributory Defined Benefit Retirement Plan [Member]	Sep. 30, 2012 Qualified Noncontributory Defined Benefit Retirement Plan [Member]	Sep. 30, 2013 401(k) Plan [Member]	Sep. 30, 2012 401(k) Plan [Member]	Sep. 30, 2013 401(k) Plan [Member]	Sep. 30, 2012 401(k) Plan [Member]	Sep. 30, 2013 Nonqualified Defined Benefit Retirement Plan [Member]	Sep. 30, 2012 Nonqualified Defined Benefit Retirement Plan [Member]	Sep. 30, 2013 Nonqualified Defined Benefit Retirement Plan [Member]	Sep. 30, 2012 Nonqualified Defined Benefit Retirement Plan [Member]
Compensation and Retirement Disclosure [Abstract]
Employer's matching contribution to 401(k) of employees hired on or after January 1, 2009 (in hundredths)	50.00%
Maximum annual contribution per employee, percent (in hundredths)	3.00%
Automatic Annual Contribution Employees Hired Before January 1, 2009 Benefit Reduction Under Certain Amendments Minimum (in hundredths)	5.00%
Automatic Annual Contribution Employees Hired Before January 1, 2009 Due Benefit Reduction Under Certain Amendments Maximum (in hundredths)	7.00%
Funding and administrative costs of noncontributory defined benefit retirement plan and 401(k) plan [Abstract]
Qualified noncontributory defined benefit retirement plan			$ 31	$ 230	$ 93	$ 521
401(k) plan							75	88	229	198
Components of net periodic pension cost [Abstract]
Service cost											18	22	54	66
Interest cost											12	11	35	33
Amortization of unrecognized net (gain) loss											6	5	18	15
Amortization of unrecognized prior service cost											7	7	21	21
Net periodic pension cost											43	45	128	135
Recognized in accumulated other comprehensive income [Abstract]
Net actuarial loss	113	125
Past service cost	14	29
Total	$ 127	$ 154

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Accumulated Other Comprehensive Income (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Accumulated Other Comprehensive Income Loss [Line Items]
Balance at beginning of period			$ 4,721	$ 5,028
Before reclassifications			(4,732)	1,554
Reclassifications			(497)	(586)
Balance at end of period	(508)	5,996	(508)	5,996
Reclassification Adjustment Out Of Accumulated Other Comprehensive Income [Line Items]
Realized gain on sale of securities	58	427	753	886
Less provision for income taxes	20	145	256	300
Reclassification adjustment, net of taxes	(38)	(282)	(497)	(586)
Unrealized gains and losses on available-for-sale securities [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Balance at beginning of period			4,875	5,180
Before reclassifications			(4,758)	1,529
Reclassifications			(497)	(586)
Balance at end of period	(380)	6,123	(380)	6,123
Unrealized gains and losses on available-for-sale securities [Member] | Reclassification Out Of Accumulated Other Comprehensive Income [Member]
Reclassification Adjustment Out Of Accumulated Other Comprehensive Income [Line Items]
Realized gain on sale of securities	58	427	753	886
Less provision for income taxes	20	145	256	300
Reclassification adjustment, net of taxes	38	282	497	586
Changes in pension plan assets and benefit obligations [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Balance at beginning of period			(154)	(152)
Before reclassifications			26	25
Reclassifications			0	0
Balance at end of period	$ (128)	$ (127)	$ (128)	$ (127)