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	%