ACQUISITIONS

On December 29, 2014, LCNB and BNB Bancorp, Inc. (“BNB”) entered into an Agreement and Plan of Merger (“Merger Agreement”) pursuant to which BNB was acquired by LCNB on April 30, 2015. Immediately following the merger of BNB into LCNB, Brookville National Bank ("Brookville National"), a wholly-owned subsidiary of BNB, was merged into LCNB National Bank. Brookville National operated a main office and a branch office, both in Brookville, Ohio. These offices became branches of the Bank after the merger.

Under the terms of the Merger Agreement, the shareholders of BNB common stock received, for each share of BNB common stock, (i) $15.75 in cash and (ii) 2.005 LCNB common shares.

On October 28, 2013, LCNB and Colonial Banc Corp. (“Colonial”) entered into a Stock Purchase Agreement (“Purchase Agreement”) pursuant to which LCNB purchased from Colonial on January 24, 2014 all of the issued and outstanding shares of Eaton National Bank & Trust Co. ("Eaton National"). Immediately following the acquisition, Eaton National was merged into the Bank. Eaton National operated five full–service branches with a main office and another facility in Eaton, Ohio and branch offices in each of West Alexandria, Ohio, New Paris, Ohio, and Lewisburg, Ohio. These offices became branches of the Bank after the merger.

The mergers with BNB and Eaton National were 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 respective merger dates, as summarized in the following table (in thousands):



	BNB		Eaton National
Consideration Paid:
Common shares issued	$	9,063	—
Cash paid to shareholder(s)	4,403		24,750
Total consideration paid	13,466		24,750

Identifiable Assets Acquired:
Cash and cash equivalents	13,396		15,635
Investment securities	58,239		35,859
Federal Reserve Bank stock	130		41
Federal Home Loan Bank stock	—		784
Loans	34,661		115,944
Premises and equipment	2,311		1,314
Bank owned life insurance	—		3,618
Core deposit intangible	1,418		2,466
Other real estate owned	—		262
Other assets	532		1,624
Total identifiable assets acquired	110,687		177,547

Liabilities Assumed:
Deposits	99,133		165,335
Short-term borrowings	—		651
Deferred income taxes	576		—
Other liabilities	57		263
Total liabilities assumed	99,766		166,249

Total Identifiable Net Assets Acquired	10,921		11,298

Goodwill resulting from merger	2,545		13,452

The amount of goodwill recorded reflects LCNB's entrance into new markets and related synergies that are expected to result from the acquisitions and represent the excess purchase price over the estimated fair value of the net assets acquired. The goodwill will not be amortizable on LCNB's financial records, but is deductible for tax purposes. The core deposit intangible for BNB and Eaton National is being amortized over nine years and eight years, respectively, using the straight-line method.

Prior to the end of the one-year measurement period for finalizing the purchase allocation for BNB, if information becomes available which would indicate adjustments to the purchase price allocation, such adjustments will be included in the purchase price retrospectively.

Direct costs related to the acquisitions were expensed as incurred and are recorded as a merger-related expense in the consolidated statements of income.

The results of operations are included in the consolidated statement of income from the dates of the mergers. The estimated amount of BNB's 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 2015 were as follows (in thousands):



Total revenue	$	1,111
Net income	212

The following table presents unaudited pro forma information as if the merger with BNB had occurred on January 1, 2013 (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 comparable information for 2014 includes adjustments for Eaton National and the comparable information for 2013 includes adjustments for Eaton National and First Capital. The pro forma information does not necessarily reflect the results of operations that would have occurred had the merger with BNB occurred in 2013. In particular, expected operational cost savings are not reflected in the pro forma amounts.



	For Years Ended December 31,
	2015		2014	2013
Total revenue	$	50,213	47,595	50,089
Net income	11,883		10,508	11,505
Basic earnings per common share	1.20		1.07	1.16
Diluted earnings per common share	1.19		1.05	1.14