Investment Securities

3 Months Ended

Mar. 31, 2023

Investments, Debt and Equity Securities [Abstract]

INVESTMENT SECURITIES

The amortized cost and estimated fair value of debt securities and the allowance for credit losses of securities held-to-maturity at March 31, 2023 and December 31, 2022 are summarized as follows (in thousands):


	Amortized Cost		Unrealized Gains		Unrealized Losses	Fair Value
March 31, 2023
Debt Securities, Available-for-Sale:
U.S. Treasury notes	$	84,865	—		6,968	77,897
U.S. Agency notes	89,093		—		9,257	79,836
Corporate bonds	7,450		—		823	6,627
U.S. Agency mortgage-backed securities	88,229		8		9,847	78,390
Municipal securities:
Non-taxable	8,872		—		284	8,588
Taxable	46,533		2		4,446	42,089
	$	325,042	10		31,625	293,427

Debt Securities, Held-to-Maturity:
Municipal securities:
Non-taxable	$	16,339	10		984	15,365
Taxable	3,431		—		354	3,077
	$	19,770	10		1,338	18,442


December 31, 2022
Debt Securities, Available-for-Sale:
U.S. Treasury notes	$	84,927	—		8,480	76,447
U.S. Agency notes	89,160		—		11,184	77,976
Corporate Bonds	7,450		13		778	6,685
U.S. Agency mortgage-backed securities	90,746		5		11,311	79,440
Municipal securities:						—
Non-taxable	8,892		—		368	8,524
Taxable	46,556		1		5,779	40,778
	$	327,731	$	19	37,900	289,850

Debt Securities, Held-to-Maturity:
Municipal securities:
Non-taxable	$	16,447	10		594	15,863
Taxable	3,431		—		409	3,022
	$	19,878	10		1,003	18,885

The Company estimated the expected credit losses at March 31, 2023 to be immaterial based on the composition of the securities portfolio.

Information concerning debt securities with gross unrealized losses at March 31, 2023 and December 31, 2022, aggregated by length of time that individual securities have been in a continuous loss position, is as follows (dollars in thousands):


	Less than Twelve Months			Twelve Months or Greater
	Fair Value		Unrealized Losses	Fair Value	Unrealized Losses
March 31, 2023
Available-for-Sale:
U.S. Treasury notes	$	6,577	26	71,321	6,942
U.S. Agency notes	—		—	79,835	9,257
Corporate bonds	1,871		79	4,756	744
U.S. Agency mortgage-backed securities	5,891		104	71,902	9,743
Municipal securities:
Non-taxable	1,579		6	5,959	278
Taxable	5,529		169	36,378	4,277
	$	21,447	384	270,151	31,241

Held-to-Maturity:
Municipal securities:
Non-taxable	$	6,759	508	6,932	476
Taxable	—		—	3,077	354
	$	6,759	508	10,009	830

December 31, 2022
Available-for-Sale:
U.S. Treasury notes	$	16,521	931	59,927	7,549
U.S. Agency notes	7,729		543	70,247	10,641
Corporate Bonds	2,667		283	3,255	495
U.S. Agency mortgage-backed securities	41,543		3,597	37,282	7,714
Municipal securities:
Non-taxable	6,831		248	893	120
Taxable	22,162		1,951	18,435	3,828
	$	97,453	7,553	190,039	30,347

Held-to-Maturity:
Municipal securities:
Non-taxable	$	9,567	593	31	1
Taxable	2,811		370	212	39
	$	12,378	963	243	40

LCNB has not specifically identified available-for-sale securities in a loss position that it intends to sell in the near term and does not believe that it will be required to sell any such securities. Securities are reviewed on a quarterly basis to assess declines in fair value for credit losses. Consideration is given to such factors as the credit rating of the borrower, market conditions such as current interest rates, any adverse conditions specific to the security, and delinquency status on contractual payments. For the three months ended March 31, 2023 and 2022, management concluded that, in all instances, fair values were less than carrying values due to market and other factors and that no credit loss provisions were required.

Debt securities with a market value of $129.0 million and $166.4 million at March 31, 2023 and December 31, 2022, respectively, were pledged to secure public deposits and for other purposes required or as permitted by law.

Excluding holdings in U.S. Treasury securities and U.S. Government Agencies, there were no investments in securities of any

issuer that exceeded 10% of LCNB's consolidated shareholders' equity at March 31, 2023.

Contractual maturities of debt securities at March 31, 2023 were as follows (in thousands). Actual maturities may differ from contractual maturities when issuers have the right to call or prepay obligations.


	Available-for-Sale			Held-to-Maturity
	Amortized Cost		Fair Value	Amortized Cost	Fair Value
Due within one year	$	15,219	15,060	755	754
Due from one to five years	145,761		132,899	3,628	3,501
Due from five to ten years	75,103		66,423	2,440	2,290
Due after ten years	730		655	12,947	11,897
	236,813		215,037	19,770	18,442
U.S. Agency mortgage-backed securities	88,229		78,390	—	—
	$	325,042	293,427	19,770	18,442

Equity securities with a readily determinable fair value are carried at fair value, with changes in fair value recognized in other operating income in the consolidated condensed statements of income. Equity securities without a readily determinable fair value are measured at cost minus impairment, if any, plus or minus any changes resulting from observable price changes in orderly transactions, as defined, for identical or similar investments of the same issuer. LCNB was not aware of any impairment or observable price change adjustments that needed to be made at March 31, 2023 on its investments in equity securities without a readily determinable fair value.

The cost and estimated fair value of equity securities with a readily determinable fair value at March 31, 2023 and December 31, 2022 are summarized as follows (in thousands):


	March 31, 2023			December 31, 2022
	AmortizedCost		Fair Value	Amortized Cost	Fair Value
Mutual funds	$	1,391	1,219	1,429	1,234
Equity securities	10		67	778	1,039
Total equity securities with a readily determinable fair value	$	1,401	1,286	2,207	2,273

Changes in the fair value of equity securities with a readily determinable fair value for the three months ended March 31, 2023 and 2022 were as follows (in thousands):


	Three Months Ended March 31,
		2023	2022
Net losses recognized		(31)	(126)
Less net realized gains on equity securities sold		151	—
Net unrealized losses recognized and still held at period end		(182)	(126)