Commitments and Contingent Liabilities

3 Months Ended

Mar. 31, 2024

Commitments and Contingencies Disclosure [Abstract]

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. These financial instruments 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.

The Bounce Protection product, a customer deposit overdraft program, 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 March 31, 2024 and December 31, 2023 were as follows (in thousands):


	March 31, 2024		December 31, 2023
Commitments to extend credit:
Commercial loans	$	32,215	28,111
Other loans
Fixed rate	22,028		15,349
Adjustable rate	2,232		1,946
Unused lines of credit:
Fixed rate	19,294		21,532
Adjustable rate	209,901		184,056
Unused overdraft protection amounts on demand accounts	16,386		16,418
Standby letters of credit	5		5
Total commitments	$	302,061	267,417

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. These guarantees generally are fully secured and have varying maturities.

LCNB evaluates each customer's credit worthiness on a case-by-case basis. The amount of collateral obtained is based on management's credit evaluation of the borrower and may include accounts receivable; inventory, property, plant, and equipment; residential realty; and income-producing commercial properties.

Activity in the allowance for credit losses on off-balance sheet credit exposures for the three months ended March 31, 2024 and 2023 is as follows (in thousands):


	Three Months Ended March 31,
	2024		2023
Balance, beginning of period	$	281	—
Impact of adopting ASC 326	—		571
Provision for (recovery of) credit losses	48		(89)

Balance, end of period	$	329	482

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 March 31, 2024 totaled approximately $2.3 million.

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

LCNB and its subsidiaries are parties to various claims and proceedings arising in the normal course of business. Management, after consultation with legal counsel, believes that the liabilities, if any, arising from such proceedings and claims will not be material to LCNB's consolidated financial position or results of operations.