UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.   20549

FORM 10-K/A

(Amendment No. 1)

(Mark One)

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

For the fiscal year ended December 31, 2023

or

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

    For the transition period from _______________________  to  ______________________

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)

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of Each Class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, No Par Value	LCNB	NASDAQ

Securities registered pursuant to 12(g) of the Exchange Act:

None

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

☐ Yes         ☒ No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

☐ Yes         ☒ No

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.   ☒ Yes         ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).

☒ Yes         ☐ No

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

Large Accelerated filer ☐                    Accelerated filer ☐

Non-accelerated filer ☒                    Smaller reporting company ☒

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes         ☒ No

The aggregate market value of the registrant’s outstanding voting common stock held by nonaffiliates on June 30, 2023, determined using a per share closing price on that date of $14.76 as quoted on the NASDAQ Capital Market, was $154,001,456.

As of March 15, 2024, 13,224,276 common shares were issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None.

EXPLANATORY NOTE

LCNB Corp. (the “Company”) is filing this Amendment No. 1 (“Amendment No. 1”) to the Annual Report on Form 10-K for the year ended December 31, 2023 (the “Original Form 10-K”), as filed with the United States Securities and Exchange Commission (the “SEC”) on March 15, 2024 (the “Original Filing Date”), solely to correct a certain inadvertent typographical error contained in Item 8 related to the date of the report of Plante & Moran PLLC. Pursuant to Rule 12b-15 under the Securities Exchange Act of 1934, this Amendment No. 1 is signed by a duly authorized representative of the Company. It includes, as Exhibits 31.1 and 31.2, the certifications of the Principal Executive Officer and Principal Financial Officer of the Company pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as well as the consents of the Company’s independent registered public accounting firms for the applicable period as Exhibits 23.1 and 23.2.

Except as described above, no changes have been made to the Original Form 10-K, and this Amendment No. 1 does not modify, amend or update the financial or other information contained in the Original Form 10-K. This Amendment No. 1 does not reflect any events that have occurred on or after the Original Filing Date. Among other things, the Company has not revised forward-looking statements made in the Original Form 10-K to reflect events that occurred or facts that became known to the Company after the Original Filing Date. Therefore, this Amendment No. 1 should be read in conjunction with the Original Form 10-K and any other documents the Company has filed with the SEC on or after the Original Filing Date.

LCNB CORP.

For the Year Ended December 31, 2023

TABLE OF CONTENTS

PART I	4
PART II	5
Item 8.  Financial Statements and Supplementary Data	5
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	5
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	9
PART IV	64
Item 15.  Exhibit and Financial Statement Schedules	64
SIGNATURES	66

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LCNB CORP. AND SUBSIDIARIES

Glossary of Abbreviations and Acronyms

ACL	Allowance for Credit Losses
AFS	Available-for-Sale
ASC	Accounting Standards Codification
ASU	Accounting Standards Update
Bank	LCNB National Bank
BSA	Bank Secrecy Act
CARES Act	Coronavirus Aid, Relief, and Economic Security Act
CECL	Current Expected Credit Losses
CEO	Chief Executive Officer
CFO	Chief Financial Officer
CFPB	Consumer Financial Protection Bureau
Citizens National	Citizens National Bank
CFB	Columbus First Bancorp, Inc.
CNNB	Cincinnati Bancorp, Inc.
Company	LCNB Corp. and its consolidated subsidiaries as a whole
CRA	Community Reinvestment Act of 1977
DCF	Discounted Cash Flow
DDA	Demand Deposit Account
DIF	Deposit Insurance Fund
Dodd-Frank Act	Dodd-Frank Wall Street Reform and Consumer Protection Act
Eaton National	Eaton National Bank & Trust Co.
Economic Aid Act	Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act
FASB	Financial Accounting Standards Board
FDIC	Federal Deposit Insurance Corporation
FFIEC	Financial Institutions Examination Council
FHLB	Federal Home Loan Bank
First Capital	First Capital Bancshares, Inc.
FOMC	Federal Open Market Committee of the Federal Reserve System
GAAP	Generally Accepted Accounting Principles
HTM	Held-to-Maturity
ICS	Insured Cash Sweep
IRA	Individual Retirement Account
LCNB	LCNB Corp. and its consolidated subsidiaries as a whole
LDA	Loss Driver Analysis
LGD	Loss Given Default
LIBOR	London Interbank Offered Rate
NOW	Negotiable Order of Withdrawal
OCC	Office of the Comptroller of the Currency
PCD	Purchased Credit Deteriorated
PD	Probability of Default
PPP	Paycheck Protection Program
SEC	Securities and Exchange Commission
WARM	Weighted Average Remaining Maturity

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LCNB CORP. AND SUBSIDIARIES

PART II

Item 8.  Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors of LCNB Corp.

Opinion on the Financial Statements

We have audited the accompanying balance sheets of LCNB Corp. and its subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related statements of income, comprehensive income, stockholders' equity, and cash flows for each of the years in the two year period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and December 31, 2022, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

Change in Accounting Principle

As discussed in Note 2 to the financial statements, the Corporation has changed its method of accounting for credit losses effective January 1, 2023 due to the adoption of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification No. 326, Financial Instruments - Credit Losses (“ASC 326”). The Corporation adopted the new credit loss standard using the modified retrospective method such that prior period amounts are not adjusted and continue to be reported in accordance with previously applicable generally accepted accounting principles.

Basis for Opinion

The Company's management is responsible for these financial statements. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

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LCNB CORP. AND SUBSIDIARIES

To the Stockholders and Board of Directors of LCNB Corp.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance for Credit Losses on Collectively Evaluated Loans – Refer to Notes 1 and 4 to the financial statements

Critical Audit Matter Description

Management’s estimate of the allowance for credit losses (ACL), includes a reserve on collectively evaluated loans. The reserve on collectively evaluated loans is based on historical loss rates adjusted for qualitative factors. Management’s adjustment for qualitative factors include actual and expected changes in international, national, regional, and local economic and business conditions and developments in which the Company operates that affect the collectability of financial assets; the effect of other external factors such as the regulatory, legal and technological environments, competition, and events such as natural disasters or pandemics; and model risk including statistical risk, reversion risk, timing risk, and model limitation risk.

Significant judgment was required by management in the selection and application of key metrics used to derive the quantitative portion of the ACL. Accordingly, performing audit procedures to evaluate the Company’s estimated ACL involved a high degree of auditor judgment and required significant effort, including the involvement of professionals with specialized skill and knowledge.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the Company’s estimate of the ACL included, but were not limited to, the following:

•We tested the design and operating effectiveness of management’s controls over the determination of the current quantitative assumptions and qualitative factor adjustments.

• We tested the process for determining reserves on collectively evaluated loans including:

◦Evaluation of the appropriateness of management’s methodology.

◦Testing the completeness and accuracy of data utilized by management.

◦Evaluation of the relevance and reliability of information used by management in the development of the estimate.

◦Evaluation of reasonableness of significant assumptions used in the quantitative analysis.

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LCNB CORP. AND SUBSIDIARIES

To the Stockholders and Board of Directors of LCNB Corp.

◦Evaluation of the reasonableness of qualitative adjustment factors, including consideration of whether the adjustments applied were reasonable given portfolio composition; relevant external factors, including economic conditions; and consideration of historical or recent experience and conditions and events affecting the Company.

Valuation of the Acquired Loan Portfolio – Refer to Note 2 to the financial statements

Critical Audit Matter Description

As described in Note 2 to the consolidated financial statements, during 2023 the Company acquired Cincinnati Bancorp, Inc. In connection with the acquisition, management estimated the fair value of acquired loans based on a discounted cash flow methodology that involves assumptions about credit risk, repayments, discount rates, and net losses upon default.

Significant judgment was required by management in the selection and application of certain subjective assumptions. Accordingly, performing audit procedures to evaluate the Company’s estimate of the fair value of acquired loans involved a high degree of auditor judgment and required significant effort, including the involvement of professionals with specialized skill and knowledge.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the Company’s accounting for the acquired loan portfolio included, but was not limited to, the following:

•We tested the design and operating effectiveness of controls including management’s review of the fair value calculations performed by a third-party valuation specialist, completeness and accuracy of data, and key assumptions and inputs used in the estimate.

•We tested management’s process for estimating the fair value of acquired loans including:

◦Involvement of valuation specialists to assist us in testing management’s methodology and significant assumptions used in the estimate.

◦Assessment of management’s selection of valuation methodology and application of significant assumptions.

◦Evaluation of the completeness and accuracy of data used in the estimate.

◦Evaluation of the relevance and reliability of information used in the development of the estimate.

◦Evaluation of the reasonableness of significant assumptions used in the estimate, including comparison to third party market sources, where available, and comparison to independently developed assumptions.

/s/ Plante & Moran PLLC

We have served as the Company’s auditor since 2022.

Auburn Hills, Michigan

March 15, 2024

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LCNB CORP. AND SUBSIDIARIES

Report of Independent Registered Public Accounting Firm

To the Shareholders, Board of Directors, and Audit Committee

LCNB Corp.

Lebanon, Ohio

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of LCNB Corp. (the Company) as of December 31, 2021, the related consolidated statements of income, comprehensive income, shareholders’ equity and cash flows for each of the years in the two-year period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ FORVIS, LLP

(Formerly BKD, LLP)

We served as the Company’s auditor from 2014 to 2022.

Cincinnati, Ohio

March 9, 2022

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LCNB CORP. AND SUBSIDIARIES

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

LCNB CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

At December 31,

(Dollars in thousands)

	2023		2022
ASSETS:
Cash and due from banks	$	36,535	20,244
Interest-bearing demand deposits	3,188		2,457
Total cash and cash equivalents	39,723		22,701
Investment securities:
Equity securities with a readily determinable fair value, at fair value	1,336		2,273
Equity securities without a readily determinable fair value, at cost	3,666		2,099
Debt securities, available-for-sale, at fair value	276,601		289,850
Debt securities, held-to-maturity, at cost, net of allowance for credit losses of $5 at December 31, 2023	16,858		19,878
Federal Reserve Bank stock, at cost	5,086		4,652
Federal Home Loan Bank stock, at cost	15,176		4,415
Loans, net of allowance for credit losses of $10,525 and $5,646 at December 31, 2023 and 2022, respectively	1,712,946		1,395,632
Premises and equipment, net	36,302		33,042
Operating lease right-of-use assets	6,000		6,525
Goodwill	79,509		59,221
Core deposit and other intangibles, net	9,494		1,827
Bank owned life insurance	49,847		44,298
Interest receivable	8,405		7,482
Other assets, net	30,643		25,503
TOTAL ASSETS	$	2,291,592	1,919,398
LIABILITIES:
Deposits:
Non-interest-bearing	$	462,267	505,824
Interest-bearing	1,362,122		1,099,146
Total deposits	1,824,389		1,604,970
Short-term borrowings	97,395		71,455
Long-term debt	113,123		19,072
Operating lease liabilities	6,261		6,647
Accrued interest and other liabilities	15,121		16,579
TOTAL LIABILITIES	2,056,289		1,718,723
COMMITMENTS AND CONTINGENT LIABILITIES	—		—
SHAREHOLDERS' EQUITY:
Preferred shares - no par value, authorized 1,000,000 shares, none outstanding	—		—
Common shares - no par value; authorized 19,000,000 shares at December 31, 2023 and 2022; issued 16,384,952 and 14,270,550 shares at December 31, 2023 and 2022, respectively; outstanding 13,173,569 and 11,259,080 at December 31, 2023 and 2022, respectively	173,637		144,069
Retained earnings	140,017		139,249
Treasury shares at cost, 3,211,383 and 3,011,470 shares at December 31, 2023 and 2022, respectively	(56,015)		(52,689)
Accumulated other comprehensive loss, net of taxes	(22,336)		(29,954)
TOTAL SHAREHOLDERS' EQUITY	235,303		200,675
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	2,291,592	1,919,398

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

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LCNB CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

For the years ended December 31,

(Dollars in thousands, except per share data)

	2023		2022	2021
INTEREST INCOME:
Interest and fees on loans	$	71,894	59,247	56,142
Dividends on equity securities:
With a readily determinable fair value	43		56	51
Without a readily determinable fair value	132		29	21
Interest on debt securities:
Taxable	5,235		5,027	3,668
Non-taxable	688		753	864
Other investments	1,607		641	431
TOTAL INTEREST INCOME	79,599		65,753	61,177
INTEREST EXPENSE:
Interest on deposits	16,571		3,682	3,578
Interest on short-term borrowings	4,060		416	6
Interest on long-term debt	2,619		613	469
TOTAL INTEREST EXPENSE	23,250		4,711	4,053
NET INTEREST INCOME	56,349		61,042	57,124
PROVISION FOR (RECOVERY OF) CREDIT LOSSES	2,077		250	(269)
NET INTEREST INCOME AFTER PROVISION FOR (RECOVERY OF) CREDIT LOSSES	54,272		60,792	57,393
NON-INTEREST INCOME:
Fiduciary income	7,091		6,468	6,674
Service charges and fees on deposit accounts	5,856		6,190	6,036
Net gains on sales of debt securities, available-for-sale	—		—	303
Bank owned life insurance income	1,136		1,074	1,074
Net gains from sales of loans	697		196	852
Other operating income	631		360	1,293
TOTAL NON-INTEREST INCOME	15,411		14,288	16,232
NON-INTEREST EXPENSE:
Salaries and employee benefits	29,108		28,483	27,616
Equipment expenses	1,616		1,629	1,678
Occupancy expense, net	3,301		3,067	2,949
State financial institutions tax	1,628		1,740	1,758
Marketing	1,101		1,184	1,239
Amortization of intangibles	532		478	1,043
FDIC insurance premiums, net	932		530	492
ATM expense	1,112		1,370	1,416
Computer maintenance and supplies	1,358		1,114	1,213
Contracted services	2,776		2,503	2,430
Other real estate owned	4		(866)	2
Merger-related expenses	4,656		—	—
Other non-interest expense	6,299		6,902	6,204
TOTAL NON-INTEREST EXPENSE	54,423		48,134	48,040
INCOME BEFORE INCOME TAXES	15,260		26,946	25,585
PROVISION FOR INCOME TAXES	2,632		4,818	4,611
NET INCOME	$	12,628	22,128	20,974
Earnings per common share:
Basic	$	1.10	1.93	1.66
Diluted	1.10		1.93	1.66
Weighted average common shares outstanding:
Basic	11,417,857		11,410,981	12,589,605
Diluted	11,417,857		11,410,981	12,589,613

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

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LCNB CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

For the years ended December 31,

(Dollars in thousands)

	2023		2022	2021
Net income	$	12,628	22,128	20,974
Other comprehensive income (loss):
Net unrealized gain (loss) on available-for-sale securities (net of tax expense (benefit) of $2,032, $(7,546), and $(1,501) for 2023, 2022, and 2021, respectively)	7,646		(28,391)	(5,645)
Reclassification adjustment for net realized gain on sale of available-for-sale securities included in net income (net of taxes of $0, $0, and $64 for 2023, 2022 and 2021, respectively)	—		—	(239)
Change in nonqualified pension plan unrecognized net gain (loss) and unrecognized prior service cost (net of tax expense (benefit) of $(7), $65, and $9 for 2023, 2022, and 2021, respectively)	(28)		246	32
Other comprehensive income (loss)	7,618		(28,145)	(5,852)
TOTAL COMPREHENSIVE INCOME (LOSS)	$	20,246	(6,017)	15,122
SUPPLEMENTAL INFORMATION:
COMPONENTS OF ACCUMULATED OTHER COMPREHENSIVE LOSS, NET OF TAXES, AS OF YEAR-END:
Net unrealized gain (loss) on securities available-for-sale	$	(22,281)	(29,927)	(1,536)
Net unfunded liability for nonqualified pension plan	(55)		(27)	(273)
Balance at year-end	$	(22,336)	(29,954)	(1,809)

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

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LCNB CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

For the years ended December 31,

(Dollars in thousands, except share data)

	Common Shares Outstanding	Common Shares		Retained Earnings	Treasury Shares	Accumulated Other Comprehensive Income (Loss)	Total Shareholders' Equity
Balance, January 1, 2021	12,858,325	$	142,443	115,058	(20,719)	4,043	240,825
Net income	—	—		20,974	—	—	20,974
Other comprehensive loss, net of taxes	—	—		—	—	(5,852)	(5,852)
Dividend Reinvestment and Stock Purchase Plan	24,012	434		—	—	—	434
Exercise of stock options	311	4		—	—	—	4
Repurchase of common stock	(493,257)	—		—	(8,310)	—	(8,310)
Compensation expense relating to restricted stock	25,565	249		—	—	—	249
Common stock dividends, $0.77 per share	—	—		(9,720)	—	—	(9,720)
Balance, December 31, 2021	12,414,956	143,130		126,312	(29,029)	(1,809)	238,604
Net income	—	—		22,128	—	—	22,128
Other comprehensive loss, net of taxes	—	—		—	—	(28,145)	(28,145)
Dividend Reinvestment and Stock Purchase Plan	24,204	408		—	—	—	408
Repurchase of common stock	(1,212,634)	—		—	(23,660)	—	(23,660)
Compensation expense relating to restricted stock	32,554	531		—	—	—	531
Common stock dividends, $0.81 per share	—	—		(9,191)	—	—	(9,191)
Balance, December 31, 2022	11,259,080	144,069		139,249	(52,689)	(29,954)	200,675
Cumulative change in accounting principle - ASC 326	—	—		(1,922)	—	—	(1,922)
Balance at January 1, 2023, adjusted	11,259,080	144,069		137,327	(52,689)	(29,954)	198,753
Net income	—	—		12,628	—	—	12,628
Other comprehensive income, net of taxes	—	—		—	—	7,618	7,618
Dividend Reinvestment and Stock Purchase Plan	27,654	428		—	—	—	428
Stock issued for acquisition of Cincinnati Bancorp, Inc.	2,042,598	28,577					28,577
Repurchase of common stock	(199,913)	—		—	(3,326)	—	(3,326)
Compensation expense relating to restricted stock	44,150	563		—	—	—	563
Common stock dividends, $0.85 per share	—	—		(9,938)	—	—	(9,938)
Balance, December 31, 2023	13,173,569	$	173,637	140,017	(56,015)	(22,336)	235,303

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

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LCNB CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the years ended December 31,

(Dollars in thousands)

	2023		2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	12,628	22,128		20,974
Adjustments to reconcile net income to net cash flows from operating activities-
Depreciation, amortization and accretion	2,989		2,744		2,612
Provision for (recovery of) credit losses	2,077		250		(269)
Deferred income tax provision (benefit)	(323)		(345)		294
Increase in cash surrender value of bank owned life insurance	(1,136)		(1,074)		(1,074)
Realized and unrealized (gains) losses from equity securities, net	5		292		(141)
Realized gains from sales of debt securities available-for-sale, net	—		—		(303)
Realized (gains) losses from sales of premises and equipment, net	(422)		455		(6)
Realized gains from sales of other real estate owned	—		(889)		—
Origination of mortgage loans for sale	(4,306)		(8,855)		(33,824)
Realized gains from sales of loans	(697)		(196)		(852)
Proceeds from sales of loans	4,346		8,953		34,268
Compensation expense related to restricted stock	563		531		249
Changes in:
Accrued income receivable	245		517		338
Other assets	8,694		2,453		(4,208)
Accrued interest and other liabilities	(3,961)		(1,722)		(237)
TOTAL ADJUSTMENTS	8,074		3,114		(3,153)
NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES	20,702		25,242		17,821
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of equity securities	963		—		—
Proceeds from sales of debt securities, available-for-sale	5,210		—		21,235
Proceeds from maturities, calls, and paydowns of debt securities:
Available-for-sale	22,609		20,680		33,093
Held-to-maturity	3,295		4,317		4,285
Purchases of equity securities	(1,598)		(19)		(16)
Purchases of debt securities:
Available-for-sale	(497)		(39,331)		(161,786)
Held-to-maturity	(280)		(1,223)		(2,447)
Purchase of Federal Reserve Bank stock	(434)		—		—
Proceeds from redemption of Federal Home Loan Bank stock	1,369		1,162		—
Purchase of Federal Home Loan Bank stock	(4,622)		(374)		—
Net increase in loans	(83,709)		(31,720)		(67,649)
Proceeds from sales of other real estate owned	—		1,605		—
Purchases of premises and equipment	(2,606)		(884)		(1,940)
Proceeds from sales of premises and equipment	654		875		6
Cash and cash equivalents acquired, net of cash paid for acquisition	1,893		—		—
NET CASH FLOWS USED IN INVESTING ACTIVITIES	(57,753)		(44,912)		(175,219)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits	8,887		(23,849)		173,396
Net increase (decrease) in short-term borrowings	(30,059)		71,455		—
Proceeds from issuance of long-term debt	95,000		15,000		—
Principal payments on long-term debt	(6,919)		(5,928)		(12,000)
Proceeds from issuance of common stock	428		408		434
Repurchase of common stock	(3,326)		(23,660)		(8,310)
Proceeds from exercise of stock options	—		—		4
Cash dividends paid on common stock	(9,938)		(9,191)		(9,720)
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES	54,073		24,235		143,804
NET CHANGE IN CASH AND CASH EQUIVALENTS	17,022		4,565		(13,594)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	22,701		18,136		31,730
CASH AND CASH EQUIVALENTS AT END OF YEAR	$	39,723	22,701		18,136
LCNB CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For the years ended December 31,
(Dollars in thousands)
	2023		2022		2021
SUPPLEMENTAL CASH FLOW INFORMATION:
CASH PAID DURING THE YEAR FOR:
Interest	$	21,740	4,677		4,228
Income taxes	2,735		4,130		3,665
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING ACTIVITY:
Transfer from loans to other real estate owned and repossessed assets	—		717		—
Right-of-use assets obtained in exchange for lease obligations	$	—	$	370	801

See Note 2 - Business Combinations regarding non-cash transactions included in the acquisition.

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

-13-

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

LCNB Corp. (the "Company" or “LCNB”), an Ohio corporation formed in December 1998, is a financial holding company whose principal activity is the ownership of LCNB National Bank (the "Bank").  The Bank was founded in 1877 and provides full banking services, including Wealth Management and Investment services, to customers primarily in Southwestern Ohio, Franklin County Ohio, Boone County, Kentucky and contiguous areas.

BASIS OF PRESENTATION

The consolidated financial statements include the accounts of the Company and its subsidiaries. Significant intercompany accounts and transactions are eliminated in consolidation.  The accounting and reporting policies of the Company conform with U.S. generally accepted accounting principles and with general practices in the banking industry.

Certain prior period data presented in the consolidated balance sheets for operating lease right-of-use assets and operating lease liabilities have been reclassified to conform with the current year presentation. Certain prior period data presented in the deferred tax assets and liabilities table included in Note 12 - Taxes has been reclassified to conform with the current year presentation. These reclassifications had no effect on net income or shareholders' equity.

USE OF ESTIMATES

The preparation of consolidated 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates. Estimates that management has determined to be critical accounting estimates are more fully described in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of this Form 10-K.

CASH AND CASH EQUIVALENTS

For purposes of reporting cash flows, cash and cash equivalents include cash, balances due from banks, federal funds sold, and interest-bearing demand deposits with original maturities of twelve months or less.  Deposits with other banks routinely have balances greater than FDIC insured limits.

INVESTMENT SECURITIES

The Company adopted ASC 326 on January 1, 2023. It significantly changed guidance for recognizing impairment of financial instruments, including debt securities classified as held-to-maturity ("HTM") or available-for-sale ("AFS").

Certain municipal debt securities that management has the positive intent and ability to hold to maturity are classified as HTM and recorded at amortized cost.  Debt securities not classified as HTM are classified as AFS and recorded at fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive income, a separate component of shareholders’ equity.  Amortization of premiums and accretion of discounts are recognized as adjustments to interest income using the level-yield method.  Realized gains or losses from the sale of securities are recorded on the trade date and are computed using the specific identification method.

Expected credit losses on HTM municipal debt securities are measured on a collective basis by major security types. The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. Substantially all of LCNB's portfolio of held-to-maturity municipal debt securities were issued by local municipalities and governmental authorities.

-14-

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

(Continued)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

For AFS debt securities in an unrealized loss position, LCNB first assesses whether it intends to sell or if it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security's amortized cost basis is written down to fair value through income. For available-for-sale debt securities that do not meet the aforementioned criteria, LCNB evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security is compared to the amortized cost basis of the security. If the present value of expected cash flows is less that the amortized cost basis, a provision for credit losses is recorded for the amount of the difference. Any impairment that is not recorded through an allowance for credit losses is recognized in other comprehensive income.

Changes in the allowance for credit losses are recorded as credit loss expense or recovery. Losses are charged against the allowance when management believes the uncollectibility of an available-for sale debt security is confirmed or when either of the criteria regarding intent or requirement to sell is met.

Prior to the adoption of ASC 326, declines in the fair value of debt securities below their cost that were deemed to be other-than-temporarily impaired, and for which the Company did not intend to sell the securities and it was not more likely than not that the securities would be sold before the anticipated recovery of the impairment, were separated into losses related to credit factors and losses related to other factors. The losses related to credit factors were recognized in earnings and losses related to other factors were recognized in other comprehensive income. In estimating other than temporary impairment losses, management considered the length of time and the extent to which the fair value had been less than cost, the financial condition and near-term prospects of the issuer, and the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. Management determined that no such impairment adjustment was required to be made in the Company's Consolidated Statements of Income as of December 31, 2022 and 2021.

Accrued interest receivable on HTM securities totaled $58,000 and $62,000 at December 31, 2023 and 2022, respectively, and accrued interest receivable on AFS debt securities totaled $1.0 million and $1.1 million at December 31, 2023 and 2022, respectively, and are reported in interest receivable in the Consolidated Balance Sheets. Management has made the accounting policy election to exclude accrued interest receivable on HTM and AFS securities from the estimate of credit losses as accrued interest is written off in a timely manner when deemed uncollectible.

Equity securities with a readily determinable fair value are measured at fair value with changes in fair value recognized in net income.

Federal Home Loan Bank ("FHLB") stock is an equity interest in the Federal Home Loan Bank of Cincinnati.  It can be sold only at its par value of $100 per share and only to the FHLB or to another member institution.  In addition, the equity ownership rights are more limited than would be the case for a public company because of the oversight role exercised by the Federal Housing Finance Agency in the process of budgeting and approving dividends.  Federal Reserve Bank stock is similarly restricted in marketability and value.  Both investments are carried at cost, which is their par value.

FHLB and Federal Reserve Bank stock are both subject to minimum ownership requirements by member banks.  The required investments in common stock are based on predetermined formulas.

-15-

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

(Continued)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

LOANS

The Company’s loan portfolio includes most types of commercial and industrial loans, commercial loans secured by real estate, residential real estate loans, consumer loans, agricultural loans and other types of loans. Most of the properties collateralizing the loan portfolio are located within the Company’s market area.

Loans are stated at the principal amount outstanding, net of unearned income, deferred origination fees and costs, and the allowance for credit losses.  Interest income is accrued on the unpaid principal balance. The delinquency status of a loan is based on contractual terms and not on how recently payments have been received.  Generally, a loan is placed on non-accrual status when it is classified as impaired or there is an indication that the borrower’s cash flow may not be sufficient to make payments as they come due, unless the loan is well secured and in the process of collection.  Subsequent cash receipts on non-accrual loans are recorded as a reduction of principal and interest income is recorded once principal recovery is reasonably assured.  The current year's accrued interest on loans placed on non-accrual status is charged against earnings. Previous years' accrued interest is charged against the allowance for credit losses. Non-accrual loans are returned to accrual status when, in the opinion of management, the financial position of the borrower indicates there is no longer a reasonable doubt as to the timely collection of interest or principal.

Loan origination fees and certain direct loan origination costs are deferred and the net amount amortized as an adjustment of loan yields.  These amounts are being amortized over the lives of the related loans.

In the ordinary course of business, the Company enters into off-balance sheet financial instruments consisting of commitments to extend credit and standby letters of credit.  Such financial instruments are recorded in the consolidated financial statements when they are funded.  The credit risk associated with these commitments is evaluated in a manner similar to the allowance for credit losses on loans.

Loans acquired from mergers are recorded at fair value with no carryover of the acquired entity's previously established allowance for credit 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 credit losses.  Subsequent improvements in expected cash flows result in the recognition of additional interest income over the then-remaining contractual lives of the loans. Management estimates the cash flows expected to be collected at acquisition using a third-party risk model, which incorporates the estimate of key assumptions, such as default rates, severity, and prepayment speeds.

Loans acquired from mergers that have experienced more than insignificant credit deterioration since origination are recorded at the amount paid. An allowance for credit losses is determined using the same methodology as other loans held for investment. The initial allowance for credit losses determined on a collective basis is allocated to individual loans. The sum of the loan's purchase price and allowance for credit losses becomes its initial amortized cost basis. The difference between the initial amortized cost basis and the par value of the loan is a noncredit discount or premium, which is amortized into interest income over the life of the loan. Subsequent changes to the allowance for credit losses are recorded through a provision for credit losses.

ALLOWANCE FOR CREDIT LOSSES ON LOANS

The allowance for credit losses ("ACL") is a valuation account that is deducted from the loans' amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged off against the allowance when management believes that the uncollectability of a loan balance is confirmed. Consumer loans are charged off when they reach 120 days past due.  Subsequent recoveries, if any, are credited to the allowance. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.

Under ASC 326, management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, or term as well as changes in external conditions, such as changes in unemployment rates, property values, or other relevant factors.  This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

-16-

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

(Continued)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

The allowance for credit losses is measured on a pool basis when similar risk characteristics exist. LCNB has identified the following portfolio segments and measures the allowance for credit losses using the following methods:

Portfolio Segment	Pool	Methodology	Loss Driver(s)
Commercial & industrial	Commercial & Industrial	Discounted Cash Flow	Weighted Combined MSA Unemployment and Coincident Economic Activity (CEA) Index for Ohio
Commercial & industrial	Commercial & Industrial - Banc Alliance/Alliance Partners Program	Discounted Cash Flow	Weighted Combined MSA Unemployment and Coincident Economic Activity (CEA) Index for Ohio
Commercial, secured by real estate	Commercial Real Estate (CRE) Non-Owner Occupied	Discounted Cash Flow	Weighted Combined MSA Unemployment
Commercial, secured by real estate	Commercial Real Estate (CRE) Owner Occupied	Discounted Cash Flow	Weighted Combined MSA Unemployment and Moody's Commercial Real Estate Price Indexes (CREPI) - US Commercial
Commercial, secured by real estate	Farm Real Estate	Discounted Cash Flow	Weighted Combined MSA Unemployment
Commercial, secured by real estate	Multifamily	Discounted Cash Flow	Weighted Combined MSA Unemployment
Commercial, secured by real estate	Other Construction, Land Development, and Other Land	Discounted Cash Flow	Weighted Combined MSA Unemployment and Weighted Combined MSA Home Price Index
Residential real estate	Real Estate Mortgage	Discounted Cash Flow	Weighted Combined MSA Unemployment
Residential real estate	Second Mortgage (Residential)	Discounted Cash Flow	Weighted Combined MSA Unemployment
Residential real estate	Home Equity Line of Credit	Discounted Cash Flow	Weighted Combined MSA Unemployment
Residential real estate	Residential 1-4 Family Construction	Discounted Cash Flow	Weighted Combined MSA Unemployment and Weighted Combined MSA Home Price Index
Consumer	Installment - Direct and ODP (Consumer)	Discounted Cash Flow	Weighted Combined MSA Unemployment
Consumer	Letter of Credit	Discounted Cash Flow/Manual	N/A
Consumer	Demand Deposit Account Overdrafts	Manual	N/A
Agricultural	Ag Production and Other Farm	Discounted Cash Flow	Weighted Combined MSA Unemployment
Purchased Credit Deteriorated	PCD - Residential Real Estate	Manual	N/A
Purchased Credit Deteriorated	PCD - Loans Valued Individually	Manual	N/A
Purchased Credit Deteriorated	PCD - Other	Manual	N/A
Other	Other Loans	Remaining Life	N/A

*"MSA" referenced above combines forecasts for Cincinnati, Dayton and Columbus metro areas.

**"Weighted" referenced above refers to weighted average of baseline and alternative scenarios

Management has chosen the discounted cash flow ("DCF") methodology to estimate the quantitative portion of the allowance for credit losses on loans for all loan pools. A Loss Driver Analysis (“LDA”) was performed for each segment to identify potential loss drivers and create a regression model for use in forecasting cash flows. The LDA for all DCF-based pools utilized LCNB’s data and peer data from the Federal Financial Institutions Examination Council's (“FFIEC”) Call Report filings.

In creating the DCF model, as well as reviewing the model quarterly, management established a two-quarter reasonable and supportable forecast period with a six-quarter straight line reversion to the long-term historical average. Due to the infrequency of losses within the farm real estate and agricultural loan portfolios, LCNB elected to use peer data for a more statistically sound calculation.

Key assumptions in the DCF model include the probability of default (“PD”), loss given default (“LGD”), and prepayment/curtailment rates. The model-driven PD and LGD are derived using company specific and peer historical data. Prepayment and curtailment rates were calculated using third party studies of LCNB's data.

-17-

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

(Continued)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Expected credit losses are estimated over the contractual term of the loans, adjusted for prepayments when appropriate. The contractual term excludes extensions, renewals, and modifications unless the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by the Company.

Qualitative factors for the DCF methodology includes the following:

•Actual and expected changes in international, national, regional, and local economic and business conditions and developments in which the Company operates that affect the collectability of financial assets;

•The effect of other external factors such as the regulatory, legal and technological environments, competition, and events such as natural disasters or pandemics;

•Model risk including statistical risk, reversion risk, timing risk, and model limitation risk;

•Changes in the nature and volume of the portfolio and terms of loans; and

•The lending policies and procedures, including changes in underwriting standards and practices for collections, write-offs, and recoveries.

Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not included in the collective evaluation. When the borrower is experiencing financial difficulty at the reporting date and repayment is expected to be provided substantially through the operation or sale of the collateral, expected credit losses are based on the fair value of the collateral at the reporting date adjusted for estimated selling costs.

Prior to the adoption of ASC 326, the provision for loan losses was determined by management based upon its evaluation of the amount needed to maintain the allowance for loan losses at a level considered appropriate in relation to the estimated risk of losses inherent in the portfolio. The methodology used by management to estimate the allowance took into consideration such factors as changes in the nature and volume of the loan portfolio, overall portfolio quality, review of specific problem loans, historic categorical trends, current delinquency levels as related to historical levels, portfolio growth rates, changes in composition of the portfolio, the economic environment, as well as allowance adequacy in relation to the portfolio.

The allowance consisted of specific and general components. The specific component related to loans that were specifically

reviewed for impairment. For such loans, an allowance was established when the discounted cash flows (or collateral value or

observable market price) of the impaired loan was lower than the carrying value of that loan. The general component covered

loans not specifically reviewed for impairment and homogeneous loan pools, such as residential real estate and consumer

loans. The general component was measured for each loan category separately based on each category’s average of historical loss experience over a trailing sixty month period, adjusted for qualitative factors. Such qualitative factors may have included economic conditions if different from the five-year historical loss period, trends in underperforming loans, trends in volume and

terms of loan categories, concentrations of credit, and trends in loan quality.

A loan was considered impaired when management believed, based on information and events current at the time, that it was probable that the Bank would be unable to collect all amounts due, including principal and interest, according to the contractual terms of the loan agreement. An impaired loan was measured by the present value of expected future cash flows using the loan's effective interest rate. An impaired collateral-dependent loan was usually measured based on collateral value. Smaller-balance homogeneous loans, including residential mortgage and consumer installment loans, which were not evaluated individually were collectively evaluated for impairment.

Accrued interest receivable totaling $7.3 million at December 31, 2023 was excluded from the amortized cost basis of the estimate of credit losses and is reported in interest receivable on the consolidated condensed balance sheets. Loans are generally placed on non-accrual status at 90 days past due or when the borrower's ability to repay becomes doubtful. When a loan is placed on non-accrual status, any accrued interest is reversed and charged against interest income.

ALLOWANCE FOR CREDIT LOSSES ON OFF-BALANCE SHEET CREDIT EXPOSURES

Per the guidance in ASC 326, LCNB estimates expected credit losses over the contractual period during which it is exposed to credit risk by a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The allowance for credit losses on off-balance sheet credit exposures is adjusted as a provision for (or recovery of) credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate is made of expected credit losses on commitments expected to be funded over their estimated lives. Funding rates are based on a historical analysis of the Company’s portfolio, while estimates of credit losses are determined using the same loss rates as funded loans.

-18-

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

(Continued)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

LOANS HELD FOR SALE

Mortgage loans originated and intended for sale in the secondary market are carried at the lower of aggregate cost or fair value, as determined by outstanding commitments from investors. Net unrealized losses, if any, are recorded as a valuation allowance and charged to earnings. Mortgage loans held for sale are generally sold with servicing rights retained. Gains and losses on sales of mortgage loans are based on the difference between the selling price and the carrying value of the related mortgage loan sold, which is reduced by the cost allocated to the servicing right. LCNB generally locks in the sale price to the purchaser of the mortgage loan at the same time an interest rate commitment is made to the borrower.

FINANCIAL INSTRUMENTS AND LOAN COMMITMENTS

Financial instruments include off-balance-sheet credit instruments, such as commitments to make loans and commercial letters of credit, issued to meet customer financing needs. The face amount for these items represents the exposure to loss before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded. Instruments, such as standby letters of credit, that are considered financial guarantees are recorded at fair value. Reserves for unfunded commitments are recorded as an "other liability" in the Consolidated Balance Sheets.

PREMISES AND EQUIPMENT

Premises and equipment are stated at cost less accumulated depreciation.  Land is stated at cost. Depreciation is computed on both the straight-line and accelerated methods over the estimated useful lives of the assets, generally 15 to 40 years for premises and 3 to 10 years for equipment.  Leasehold improvements are amortized over the terms of the respective leases or the estimated useful lives of the improvements, whichever is shorter. Costs incurred for maintenance and repairs are expensed as incurred. Premises and equipment are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of a particular asset may not be recoverable.

LEASES

LCNB determines if a contract is a lease or contains a lease at its inception. A liability to make lease payments ("the lease liability") and a right-of-use asset representing the right to use the underlying asset for the lease term, initially measured at the present value of the lease payments, are recorded in the consolidated balance sheet. The discount rate is LCNB's incremental borrowing rate for periods similar to the respective lease terms. LCNB management is reasonably certain that it will exercise the renewal options contained within the contracts for its leased offices and these additional terms have been included in the calculation of the right-of-use assets and the lease liabilities. Most variable lease payments are excluded except for those that depend on an index or a rate or are in substance fixed payments.

A lease is classified as a finance lease if it meets any of five designated criteria. If the lease does not meet any of the five criteria, the lease is classified as an operating lease. All leases entered into by LCNB through December 31, 2023 are classified as operating leases. Lease expense is recognized on a straight-line basis over the lease term for operating leases. LCNB has adopted an accounting policy election to not recognize lease assets and lease liabilities for leases with a term of twelve months or less. Lease expense for such leases is generally recognized on a straight-line basis over the lease term.

OTHER REAL ESTATE OWNED

Other real estate owned includes properties acquired through foreclosure.  Such property is held for sale and is initially recorded at fair value, less costs to sell, establishing a new cost basis.  Fair value is primarily based on a property appraisal obtained at the time of transfer and any periodic updates that may be obtained thereafter.  The allowance for credit losses is charged for any write down of the loan’s carrying value to fair value at the date of transfer.  Any subsequent reductions in fair value and expenses incurred from holding other real estate owned are charged to other non-interest expense.  Costs, excluding interest, relating to the improvement of other real estate owned are capitalized.  Gains and losses from the sale of other real estate owned are included in other non-interest expense.

-19-

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

(Continued)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill is the excess of the purchase price over the fair value of the net identifiable assets acquired in a business combination.  Goodwill is not amortized, but is instead subject to an annual review for impairment. A review for impairment may be conducted more frequently than annually if circumstances indicate a possible impairment. Impairment indicators that may be considered include the condition of the economy and banking industry; estimated future cash flows; government intervention and regulatory updates; the impact of recent events to financial performance and cost factors of the reporting unit; performance of LCNB’s stock, and other relevant events. These and other factors could lead to a conclusion that goodwill is impaired, which would require LCNB to write off the difference between the current estimated fair value of the Company and its carrying value.

The Company’s other intangible assets relate to core deposits acquired from business combinations.  These intangible assets are amortized on a straight-line basis over their estimated useful lives.  Management evaluates whether events or circumstances have occurred that indicate the remaining useful life or carrying value of the amortizing intangible should be revised.

MORTGAGE SERVICING RIGHTS

Mortgage loan servicing rights are recognized as assets based on the allocated value of retained servicing rights on mortgage loans sold. Mortgage loan servicing rights are carried at the lower of amortized cost or fair value and are expensed in proportion to, and over the period of, estimated net servicing revenues. Impairment is evaluated based on the fair value of the rights using groupings of the underlying mortgage loans as to interest rates. Any impairment of a grouping is reported as a valuation allowance.

Servicing fee income is recorded for fees earned for servicing mortgage loans. The fees are based on a contractual percentage of the outstanding principal or a fixed amount per loan and are recorded as income when earned. Amortization of mortgage loan servicing rights is netted against mortgage loan servicing income and recorded in other operating income in the Consolidated Statements of Income.

BANK OWNED LIFE INSURANCE

The Company has purchased life insurance policies on certain officers of the Company.  The Company is the beneficiary of these policies and has recorded the estimated cash surrender value in the Consolidated Balance Sheets.  Income on the policies, based on the increase in cash surrender value and any incremental death benefits, is included in non-interest income in the Consolidated Statements of Income.

AFFORDABLE HOUSING TAX CREDIT LIMITED PARTNERSHIP

LCNB has elected to account for its investment in an affordable housing tax credit limited partnership using the proportional amortization method. Accordingly, LCNB amortizes the initial cost of the investment to income tax expense in proportion to the tax credits and other tax benefits received and recognizes the net investment performance in the income statement as a component of income tax expense. The investment in the limited partnership is included in other assets and the unfunded commitment is included in accrued interest and other liabilities in LCNB's Consolidated Balance Sheets.

-20-

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

(Continued)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

FAIR VALUE MEASUREMENTS

Accounting guidance establishes a fair value hierarchy to prioritize the inputs to valuation techniques used to measure fair value.  A financial instrument’s level within the hierarchy is based on the lowest level of input that is significant to the fair value measurement.  The three broad input levels are:

•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; and

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

Accounting guidance permits, but does not require, companies to measure many financial instruments and certain other items, including loans and debt securities, at fair value.  The decision to elect the fair value option is made individually for each instrument and is irrevocable once made.  Changes in fair value for the selected instruments are recorded in earnings.

The Company did not select any financial instruments for the fair value election in 2023 or 2022.

SHORT-TERM BORROWINGS

Short-term borrowings consist of Federal funds purchased, Federal Home Loan Bank advances, and borrowings from non-affiliated banks. Short-term borrowings mature within one day to 365 days of the transaction date.

ADVERTISING EXPENSE

Advertising costs are expensed as incurred and are recorded as a marketing expense, a component of non-interest expense.

PENSION PLANS

The Company sponsors three pension plans, all of which are frozen to new participants.

Eligible employees of the Company hired before 2009 participate in a multiple-employer qualified noncontributory defined benefit retirement plan.  This plan is accounted for as a multi-employer plan because assets contributed by an employer are not segregated in a separate account or restricted to provide benefits only to employees of that employer.

Two companies previously acquired by the Company had defined benefit pension plans, which were assumed by the Company.

TREASURY STOCK

Common shares repurchased are recorded at cost. Cost of shares retired or reissued is determined using the weighted average method.

STOCK OPTIONS AND RESTRICTED STOCK AWARD PLANS

The cost of employee services received in exchange for stock option grants is the grant-date fair value of the award estimated using an option-pricing model.  The compensation cost for restricted stock awards is based on the market price of the Company's common stock at the date of grant multiplied by the number of shares granted that are expected to vest. The estimated cost is recognized on a straight-line basis over the period the employee is required to provide services in exchange for the award, usually the vesting period.  The Company uses a Black-Scholes pricing model and related assumptions for estimating the fair value of stock option grants and a five-year vesting period for stock options and restricted stock.

REVENUE FROM CONTRACTS WITH CUSTOMERS

LCNB record's revenue from contracts with customers in accordance with Accounting Standards Codification Topic 606, “Revenue from Contracts with Customers” (“Topic 606”). Under Topic 606, LCNB must identify the contract with a customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract, and recognize revenue when, or as, the performance obligation is satisfied. Significant revenue has not been recognized in the current reporting period that results from performance obligations satisfied in previous periods.

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LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

(Continued)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

LCNB's primary sources of revenue are derived from interest and dividends earned on loans, securities, and other financial instruments that are not within the scope of Topic 606. LCNB has evaluated the nature of its contracts with customers and determined that further disaggregation of revenue from contracts with customers into more granular categories beyond what is presented in the Consolidated Statements of Income is not necessary.

LCNB generally satisfies its performance obligations on contracts with customers as services are rendered, and the transaction prices are typically fixed and charged either on a periodic basis, generally monthly, or based on activity. Because performance obligations are satisfied as services are rendered and the transaction prices are fixed, there is little judgment involved in applying Topic 606 that significantly affects the determination of the amount and timing of revenue from contracts with customers.

Revenue-generating activities that are within the scope of ASC 606 and that are presented as non-interest income in LCNB's Consolidated Statements of Income include:

•Fiduciary income - this includes periodic fees due from Wealth Management and Investment Services customers for managing the customers' financial assets. Fees are generally charged on a quarterly or annual basis and are recognized ratably throughout the period, as the services are provided on an ongoing basis.

•Service charges and fees on deposit accounts - these include general service fees charged for deposit account maintenance and activity and transaction-based fees charged for certain services, such as debit card, wire transfer, or overdraft activities. Revenue is recognized when the performance obligation is completed, which is generally after a transaction is completed or monthly for account maintenance services.

INCOME TAXES

Deferred income taxes are determined using the asset and liability method of accounting.  Under this method, the net deferred tax asset or liability is determined based on the tax effects of temporary differences between the book and tax basis of the various balance sheet assets and liabilities and gives current recognition to changes in tax rates and laws.

Management analyzes material tax positions taken in any income tax return for any tax jurisdiction and determines the likelihood of the positions being sustained in a tax examination.  A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur.  The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination.  For tax positions not meeting the “more likely than not” test, no tax benefit is recorded.

EARNINGS PER SHARE

Basic earnings per share allocated to common shareholders is calculated using the two-class method and is computed by dividing net income allocated to common shareholders by the weighted average number of common shares outstanding during the period.  Diluted earnings per share is adjusted for the dilutive effects of stock-based compensation and is calculated using the two-class method or the treasury stock method.  The diluted average number of common shares outstanding has been increased for the assumed exercise of stock-based compensation with the proceeds used to purchase treasury shares at the average market price for the period.

ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS

Financial Accounting Standards (“FASB”) Accounting Standards Update (“ASU”) No. 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting"

ASU No. 2020-04 was issued in March 2020 and provides optional guidance for a limited period of time to ease the potential burden in accounting for or recognizing the effects of reference rate reform on financial reporting. The amendments provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. Originally, the amendments in this update were effective for all entities as of March 12, 2020 through December 31, 2022. ASU No. 2022-06, "Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848" extended the sunset date from December 31, 2022 to December 31, 2024. LCNB has adopted the standard and utilized the LIBOR transition relief allowed under ASU 2020-04 and ASU 2020-06. The impact was immaterial, as all loans indexed to LIBOR were transitioned to another referenced index, predominately the Secured Overnight Financing Rate ("SOFR") for one, three, and six months. In all instances, LCNB was able to meet the criteria for the practical expedients and there was no impact on its results of consolidated operations or financial position.

-22-

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

(Continued)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

ASU No. 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial

Instruments" ("ASC 326")

The Company adopted ASC 326 on January 1, 2023. It significantly changed guidance for recognizing impairment of financial instruments. Previous guidance required an "incurred loss" methodology for recognizing credit losses that delayed recognition until it was probable a loss had been incurred. ASC 326 replaced the incurred loss impairment methodology with a new "current expected credit loss" ("CECL") methodology that reflects expected credit losses over the lives of the credit instruments and requires consideration of a broader range of information to estimate credit losses. ASC 326 requires an organization to estimate all expected credit losses for financial assets measured at amortized cost, including loans and held-to-maturity debt securities, based on historical experience, current conditions, and reasonable and supportable forecasts. It also applies to off-balance sheet credit exposures, such as loan commitments, standby letters of credit, financial guarantees, and other similar instruments. ASC 326 also made changes to the accounting for credit losses on available-for-sale debt securities. Additional disclosures are required.

LCNB adopted ASC 326 using the modified retrospective method for all financial assets measured at amortized cost and off-balance sheet credit exposures. Results for reporting periods beginning after January 1, 2023 are presented under ASC 326, while prior period amounts continue to be reported in accordance with previously applicable guidance. The following table shows the impact of adopting ASC 326 on January 1, 2023 (in thousands):

	As Reported Pre-ASC 326		Impact of ASC 326 Adoption	As Reported Under ASC 326
Assets:
Loans, gross of allowance	$	1,401,278	341	1,401,619
ACL on loans	(5,646)		(2,196)	(7,842)
ACL on debt securities, held to maturity	—		(7)	(7)
Deferred tax assets, net	6,639		511	7,150
Liabilities:
ACL on off-balance sheet credit exposures	—		571	571
Shareholders' Equity:
Retained earnings	139,249		(1,922)	137,327

Federal banking regulatory agencies allow an optional phase-in period of three years for banks to absorb the impact to regulatory capital of implementing CECL. LCNB has elected not to exercise this option and the full impact of adopting ASU No. 2016-13 is included in regulatory capital as of December 31, 2023. Adoption of the ASU did not materially affect LCNB's regulatory capital ratios.

ASU No. 2022-02, "Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures"

ASU No. 2022-02 was issued in March 2022 and became effective for LCNB on January 1, 2023. These amendments eliminated previous troubled debt restructuring ("TDR") recognition and measurement guidance and, instead, required that an entity evaluate whether the modification represents a new loan or a continuation of an existing loan. The amendments also enhance disclosure requirements and introduce new disclosure requirements for certain modifications to borrowers experiencing financial difficulties. Additionally, the amendments require the disclosure of current-period gross charge-offs by year of origination. Adoption of ASU No. 2022-02 did not have a material impact on LCNB's results of consolidated operations or financial position.

-23-

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

(Continued)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

RECENT ACCOUNTING PRONOUNCEMENTS NOT YET EFFECTIVE

From time to time the FASB issues an ASU to communicate changes to U.S. GAAP. The following information provides brief summaries of newly issued but not yet effective ASUs that could have an effect on LCNB’s financial position or results of consolidated operations:

ASU No. 2023-02, "Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (a Consensus of the Emerging Issues Task Force)"

ASU No. 2023-02 was issued in March 2023 and allows reporting entities the option to use the proportional amortization method to account for equity investments made primarily for the purpose of receiving income tax credits and other income tax benefits when certain requirements are met, regardless of the tax credit program from which the income tax credits are received. The proportional amortization method was previously limited to Low-Income Housing Tax Credit investments. Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the income tax credits and other income tax benefits received and recognizes the net amortization and income tax credits and other income tax benefits in the income statement as a component of income tax expense (benefit). For public business entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2024, including interim periods within those fiscal years. Early adoption is permitted. LCNB does not expect adoption of ASU No. 2023-02 to have a material impact on its results of consolidated operations or financial position.

ASU No. 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures"

ASU 2023-07 was issued in November 2023 and changes the requirements for segment disclosures, primarily through enhancing disclosure requirements for significant segment expenses, enhancing interim disclosure requirements, clarifying circumstances in which an entity can disclose multiple segment measures of profit or loss, providing new segment disclosure requirements for entities with a single reportable segment, and modifying other disclosure requirements. A public entity

should apply the amendments retrospectively to all prior periods presented in the financial statements. Upon transition, the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption. The amendments in this ASU are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption

is permitted.

NOTE 2 - BUSINESS COMBINATIONS

Cincinnati Bancorp, Inc.

On November 1, 2023, LCNB acquired Cincinnati Bancorp, Inc. ("CNNB"), the holding company for Cincinnati Federal a federally chartered stock savings and loan association. Under the terms of the definitive merger agreement, CNNB merged with and into LCNB Corp., immediately followed by the merger of Cincinnati Federal with and into LCNB National Bank. CNNB operated four full-service offices in Cincinnati, Ohio and one full-service office in Florence, Kentucky, which became offices of LCNB after the merger. The merger significantly increased LCNB’s existing presence in the Cincinnati market and expanded LCNB’s community banking franchise across the Ohio River into the Northern Kentucky market.

CNNB results of operations were included in LCNB's results beginning November 1, 2023. Net interest income and net loss for CNNB were approximately $1,512,000 and $231,000, respectively, since the date of merger through December 31, 2023 and are included in LCNB's Consolidated Statement of Income.

Under the terms of the merger agreement, CNNB shareholders had the opportunity to elect to receive either 0.9274 shares of LCNB stock or $17.21 in cash for each share of CNNB common stock owned, subject to the limitation that 80% of the consideration be in the form of LCNB common stock and 20% of the consideration be in the form of cash. The fair value of the common stock issued as part of the consideration was determined on the basis of the closing price of LCNB's common stock on the acquisition date.

-24-

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

(Continued)

NOTE 2 - BUSINESS COMBINATIONS (continued)

The following table summarizes the fair value of the total consideration transferred as a part of the CNNB acquisition and the fair value of identifiable assets acquired and liabilities assumed as of the effective date of the transaction (in thousands):

Consideration:
Cash consideration	$	9,475
Common stock (2,042,598 shares issued at $13.99 per share)	28,576
Fair value of total consideration transferred	38,051
Identifiable Assets Acquired:
Cash and cash equivalents	11,368
Debt securities, available-for-sale	5,210
Federal Home Loan Bank stock	7,508
Loans, net	236,692
Premises and equipment	2,767
Operating lease right-of-use assets	64
Core deposit and other intangibles	8,391
Bank owned life insurance	4,413
Deferred income taxes	4,451
Other assets	12,950
Total identifiable assets acquired	293,814
Liabilities Assumed:
Deposits	210,532
Short-term borrowings	55,999
Long-term debt	5,963
Operating lease liabilities	68
Other liabilities	3,489
Total liabilities assumed	276,051
Total Identifiable Net Assets Acquired	17,763
Goodwill Resulting From Merger	$	20,288

The fair value and gross contractual amounts of non-PCD loans as of the acquisition date was $231.9 million and $258.6 million, respectively. LCNB recorded a provision for credit losses on these loans of $1,722,000.

As permitted by ASC No. 805-10-25, Business Combinations, the above estimated amounts may be adjusted up to one year after the closing date of the transaction to reflect any new information obtained about facts and circumstances existing at the acquisition date. As such, any changes in the estimated fair value of assets, including acquired loans, will be recognized in the period the adjustment is identified.

-25-

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

(Continued)

NOTE 2 - BUSINESS COMBINATIONS (continued)

The amount of goodwill recorded reflects LCNB's expansion in the Cincinnati 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 on LCNB's financial records and will not be deductible for tax purposes. Goodwill will be subject to an annual test for impairment and the amount impaired, if any, will be charged to expense at the time of impairment.

The core deposit intangible will be amortized over the estimated weighted average economic life of the various core deposit types, which is ten years.

Direct expenses related to the CNNB acquisition totaled $4,514,000 during the year ended December 31, 2023 and were expensed as incurred and are recorded as Merger-related expenses in the consolidated statements of income.

The following table presents supplemental pro-forma information as if the acquisition had occurred at the beginning of 2022 (in thousands). The unaudited pro forma information includes adjustments for interest income on loans acquired, amortization of intangibles arising from the transaction, depreciation expense on property acquired, interest expenses on deposits acquired, and the related income tax effects. The pro forma financial information is not necessarily indicative of the results of operations that would have occurred had the transaction been effected on the assumed dates.

	2023		2022
Net interest income	$	63,487	68,765
Net income	13,924		22,894
Net income per share, basic and diluted	$	1.03	1.70

Eagle Financial Bancorp, Inc.

On November 29, 2023, LCNB and Eagle Financial Bancorp, Inc. (“EFBI”), the holding company for EAGLE.bank, signed a definitive merger agreement whereby EFBI will merge with and into LCNB in a stock-and-cash transaction. The transaction is expected to close during the second quarter 2024.

Subject to the terms of the merger agreement, which has been approved by the Board of Directors of each company, EFBI shareholders will have the opportunity to elect to receive either 1.1401 shares of LCNB stock, $19.10 per share in cash for each share of EFBI common stock owned, or a combination thereof subject to at least 60%, but not more than 70%, of the shares of EFBI being exchanged for LCNB common stock. As of September 30, 2023, EFBI reported 1,342,275 shares of common stock outstanding, as well as 115,807 options with a weighted average strike price of $16.18 per share (each option carries that right to purchase one EFBI share). Any unexercised stock options of EFBI will be canceled, prior to the effective time of the merger, in exchange for a cash payment per option equal to the difference between $19.10 and the exercise price of the option.

EAGLE.bank operates three full-service banking offices in Cincinnati, Ohio. EFBI had approximately $175.8 million in assets, $139.2 million in net loans, $135.0 million of deposits, and $26.3 million in consolidated stockholders’ equity as of September 30, 2023. When completed, the transaction will increase LCNB’s presence in the Cincinnati market.

Direct expenses related to the EFBI acquisition totaled $142,000 during the year ended December 31, 2023 and were expensed as incurred and are recorded as Merger-related expenses in the consolidated statements of income.

-26-

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

(Continued)

NOTE 3 - INVESTMENT SECURITIES

The amortized cost and estimated fair value of debt securities at December 31 are summarized as follows (in thousands):

	Amortized Cost		Unrealized Gains	Unrealized Losses	Fair Value
2023
Debt Securities Available-for-Sale:
U.S. Treasury notes	$	74,404	—	6,202	68,202
U.S. Agency notes	88,978		—	8,077	80,901
Corporate Bonds	7,450		—	916	6,534
U.S. Agency mortgage-backed securities	81,634		2	8,846	72,790
Municipal securities:
Non-taxable	7,416		—	245	7,171
Taxable	44,923		1	3,921	41,003
	$	304,805	3	28,207	276,601
Debt Securities Held-to-Maturity:
Municipal securities:
Non-taxable	$	13,580	4	872	12,712
Taxable	3,283		—	316	2,967
	$	16,863	4	1,188	15,679
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 December 31, 2023 to be immaterial based on the composition of the

securities portfolio.

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LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

(Continued)

NOTE 3 - INVESTMENT SECURITIES (Continued)

Information concerning debt securities with gross unrealized losses at December 31, 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 More
	Fair Value		Unrealized Losses	Fair Value	Unrealized Losses
2023
Available-for-Sale:
U.S. Treasury notes	$	—	—	68,202	6,202
U.S. Agency notes	—		—	80,901	8,077
Corporate Bonds	734		16	5,800	900
U.S. Agency mortgage-backed securities	—		—	72,287	8,846
Municipal securities:
Non-taxable	1,540		10	5,631	235
Taxable	—		—	40,392	3,921
	$	2,274	26	273,213	28,181
Held-to-Maturity:
Municipal securities:
Non-taxable	$	6,012	476	5,975	396
Taxable	—		—	2,966	316
	$	6,012	476	8,941	712
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

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LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

(Continued)

NOTE 3 - INVESTMENT SECURITIES (Continued)

At December 31, 2023, LCNB’s securities portfolio consisted of 207 securities, 176 of which were in an unrealized loss position. At December 31, 2022, LCNB's securities portfolio consisted of 196 securities, 187 of which were in an unrealized loss position. After considering the issuers of the securities, LCNB management determined that that the unrealized losses were due to changing interest rate environments. At December 31, 2023, as LCNB had no intent to sell its debt securities before recovery of their cost basis and as it was more likely than not that it will not be required to sell its debt securities before recovery of the cost basis, no unrealized losses were deemed to represent credit losses.

Contractual maturities of debt securities at December 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	$	19,196	18,638	1,469	1,442
Due from one to five years	169,415		154,423	1,319	1,270
Due from five to ten years	34,560		30,750	2,849	2,687
Due after ten years	—		—	11,226	10,280
	223,171		203,811	16,863	15,679
U.S. Agency mortgage-backed securities	81,634		72,790	—	—
	$	304,805	276,601	16,863	15,679

Debt securities with a market value of $124,367,000 and $166,412,000 at December 31, 2023 and 2022, respectively, were pledged to secure public deposits and for other purposes required or permitted by law.

Certain information concerning the sale of debt securities available-for-sale for the years ended December 31 was as follows (in thousands):

	2023		2022	2021
Proceeds from sales	$	5,210	—	21,235
Gross realized gains	—		—	365
Gross realized losses	—		—	62

Realized gains or losses from the sale of securities are computed using the specific identification method.

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 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 December 31, 2023 on its investments in equity securities without a readily determinable fair value.

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

	2023			2022
	Amortized Cost		Fair Value	Amortized Cost	Fair Value
Mutual funds	$	1,415	1,240	1,429	1,234
Equity securities	10		96	778	1,039
Total equity securities with a readily determinable fair value	$	1,425	1,336	2,207	2,273

-29-

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

(Continued)

NOTE 3 - INVESTMENT SECURITIES (Continued)

Certain information concerning changes in fair value of equity securities with a readily determinable fair value for the years ended December 31 was as follows (in thousands):

	2023		2022	2021
Net gains (losses) recognized during the period on equity securities	$	(5)	(292)	141
Less net losses recognized on equity securities sold during the period	(61)		—	—
Net unrealized gains (losses) recognized during the reporting period on equity securities still held at period end	$	56	(292)	141

NOTE 4 - LOANS

Major classifications of loans at December 31 were as follows (in thousands):

	2023		2022
Commercial and industrial	$	120,541	120,327
Commercial, secured by real estate:
Owner occupied	206,705		208,485
Non-owner occupied	501,108		420,075
Farmland	37,367		36,340
Multi-family	240,033		189,917
Construction loans secured by 1-4 family dwellings	9,058		7,786
Construction loans secured by other real estate	111,373		73,652
Residential real estate
Secured by senior liens on 1-4 family dwellings	402,026		269,822
Secured by junior liens on 1-4 family dwellings	19,999		10,197
Home equity line-of-credit loans	38,579		26,109
Consumer	25,600		28,414
Agricultural	11,000		10,073
Other loans, including deposit overdrafts	82		81
	1,723,471		1,401,278
Less allowance for credit losses	10,525		5,646
Loans-net	$	1,712,946	1,395,632

Loans in the above table are shown net of deferred origination fees and costs. Deferred origination fees, net of related costs, were $181,000 and $980,000 at December 31, 2023 and 2022, respectively.

-30-

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

(Continued)

NOTE 4 - LOANS (Continued)

Non-accrual loans by class of receivable at December 31 were as follows (dollars in thousands):

	2023				2022
	Non-accrual Loans with no Allowance for Credit Losses		Total Non-accrual Loans	Interest Income Recognized	Non-accrual Loans with no Allowance for Credit Losses	Total Non-accrual Loans	Interest Income Recognized
Commercial and industrial	$	—	—	—	—	—	3
Commercial, secured by real estate
Owner occupied	—		—	—	231	231	15
Non-owner occupied	—		—	—	—	—	—
Farmland	51		51	26	88	88	12
Multi-family	—		—	—	—	—	—
Construction loans secured by 1-4 family dwellings	—		—	—	—	—	—
Construction loans secured by other real estate	—		—	—	—	—	—
Residential real estate
Secured by senior liens on 1-4 family dwellings	29		29	—	72	72	4
Secured by junior liens on 1-4 family dwellings	—		—	—	—	—	—
Home equity line-of-credit loans	—		—	—	—	—	—
Consumer	—		—	—	—	—	—
Agricultural	—		—	—	—	—	—
Total non-accrual loans	$	80	80	26	391	391	34

Two residential real estate loans secured by senior liens on 1-4 family dwellings were added to the non-accrual classification during the first quarter of 2023. Accrued interest reversed and charged against interest income for these loans totaled approximately $3,000. Both loans were paid in full during the third quarter 2023. An additional residential real estate loan was added to the non-accrual classification during the fourth quarter of 2023. Accrued interest reversed and charged against interest income for this loan was approximately $4,000.

Interest income that would have been recorded during 2023 and 2022 if loans on non-accrual status at December 31, 2023 and 2022 had been current and in accordance with their original terms was approximately $14,000 and $32,000, respectively.

The ratio of non-accrual loans to total loans outstanding at December 31, 2023 and 2022 was 0.00% and 0.01%, respectively.

ALLOWANCE FOR CREDIT LOSSES

The ACL is an estimate of the expected credit losses on financial assets measured at amortized cost, which is measured using relevant information about past events, including historical credit loss experience on financial assets with similar risk characteristics, current conditions, and reasonable and supportable forecasts that affect the collectability of the remaining cash flows over the contractual term of the financial assets. A provision for credit losses is charged to operations based on management’s periodic evaluation of these and other pertinent factors as discussed within Note 1 – Basis of Presentation - Adoption of New Accounting Pronouncements included in this Form 10-K.

During the first quarter of 2023, the Company adopted ASU 2016-13, including the CECL methodology for estimating the ACL. This standard was adopted using a modified retrospective approach on January 1, 2023. See Note 1 - Basis of Presentation - Adoption of New Accounting Pronouncements for a summary of the impact adoption of ASU 2016-13 had on LCNB's ACL, retained earnings, and deferred taxes.

-31-

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

(Continued)

NOTE 4 - LOANS (Continued)

QUANTITATIVE CONSIDERATIONS

The ACL is primarily calculated utilizing a DCF model. Key inputs and assumptions used in this model are discussed below:

•Forecast model - For each portfolio segment, an LDA was performed in order to identify appropriate loss drivers and create a regression model for use in forecasting cash flows. The LDA analysis utilized peer FFIEC Call Report data for all pools. The Company plans to update the LDA when materially relevant.

•Probability of default – PD is the probability that an asset will be in default within a given time frame. The Company has defined default as when a charge-off has occurred, a loan goes to non-accrual status, a loan is greater than 90 days past due, or financial difficulty modification status change. The forecast model is utilized to estimate PDs.

•Loss given default – LGD is the percentage of the asset not expected to be collected due to default. The LGD is derived from company specific and peer loss data.

•Prepayments and curtailments – Prepayments and curtailments are calculated based on the Company’s own data. This analysis is updated when materially relevant.

•Forecast and reversion – the Company as of January 1, 2023 established a one-quarter reasonable and supportable forecast period with a one-quarter straight line reversion to the long-term historical average. As of December 31, 2023, the Company established a two-quarter reasonable and supportable forecast period with a six-quarter straight line reversion to the long-term historical average. Extending the forecast and reversion periods from previous quarters has differing effects on pools based on the economic indicators used and the relation of the selected forecast range to the historical average. For example, the historical average for the bank’s unemployment indicator is 5.88%, which is higher than the forecasted range utilized. The extended forecast and reversion period ultimately decreases the reserve associated with the unemployment factor when compared to the historical average.

◦The historical averages for LCNB’s economic indicators are unemployment – 5.88%, change in Coincident Economic Activity – 1.81%, change in Commercial Real Estate Price Indexes – 5.43%, and change in Home Price Index – 3.38%

•Economic forecast – the Company utilizes a third party to provide economic forecasts under various scenarios, which are assessed against economic indicators and management’s observations in the market. As of January 1, 2023, the date of CECL adoption, the Company selected a forecast which forecasted unemployment at 4.16%, the change in Coincident Economic Activity at 1.77%, the change in Commercial Real Estate Price Indexes at 9.35%, and the change in Home Price Index at -1.17% during the forecast periods. As of December 31, 2023, the Company selected a forecast which forecasts unemployment between 4.21% and 4.55%, the change in Coincident Economic Activity between 0.62% and 1.91%, the change in Commercial Real Estate Price Indexes between -8.56% and -6.64%, and the change in the Home Price Index between 0.09% and 4.47% during the forecast periods. Management believes that the resulting quantitative reserve appropriately balances economic indicators with identified risks.

QUALITATIVE CONSIDERATIONS

In addition to the quantitative model, management considers the need for qualitative adjustment for risks not considered in the DCF. Factors that are considered by management in determining loan collectability and the appropriate level of the ACL are listed below:

•Actual and expected changes in international, national, regional, and local economic and business conditions and developments in which the Company operates that affect the collectability of financial assets;

•The effect of other external factors such as the regulatory, legal and technological environments, competition, and events such as natural disasters or pandemics;

•Model risk including statistical risk, reversion risk, timing risk and model limitation risk;

•Changes in the nature and volume of the portfolio and terms of loans; and

•The lending policies and procedures, including changes in undersriting standards and practices for collections, write-offs, and recoveries.

The following table presents activity in the allowance for credit losses and a breakdown of the recorded investment in the allowance for credit losses by portfolio segment for the three years ended December 31 and a breakdown of the recorded investment in the loan portfolio by portfolio segment for the two years ended December 31 (in thousands):

-32-

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

(Continued)

NOTE 4 - LOANS (Continued)

	Commercial & Industrial			Commercial, Secured by Real Estate		Residential Real Estate		Consumer		Agricultural		Other		Total
2023
Allowance for credit losses on loans:
Balance, beginning of year, prior to adoption of ASC 326	$	1,300		3,609		624		86		22		5		5,646
Impact of adopting ASC 326	(512)			1,440		836		446		(9)		(5)		2,196
Acquisition of Cincinnati Bancorp, Inc. - PCD Loans	—			90		403		—		—		—		493
Provision for (recovery of) credit losses	266			(176)		689		(219)		5		88		653
Acquisition of Cincinnati Bancorp, Inc. - provision for credit losses on non-PCD loans charged to expense	—			451		1,268		3		—		—		1,722
Losses charged off	(15)			—		(4)		(83)		—		(166)		(268)
Recoveries	—			—		—		5		—		78		83
Balance, end of year	$	1,039		5,414		3,816		238		18		—		10,525
Individually evaluated for credit loss	$	2		12		5		—		—		—		19
Collectively evaluated for credit loss	1,037			5,402		3,811		238		18		—		10,506
Balance, end of year	$	1,039		5,414		3,816		238		18		—		10,525
Loans:
Individually evaluated for credit loss	$	107		3,293		537		—		—		—		3,937
Collectively evaluated for credit loss	120,434			1,102,351		460,067		25,600		11,000		82		1,719,534
Balance, end of year	$	120,541		1,105,644		460,604		25,600		11,000		82		1,723,471
Percent of loans in each category to total loans	7.0		%	64.2	%	26.7	%	1.5	%	0.6	%	—	%	100.0	%
Ratio of net charge-offs to average loans	0.01		%	—	%	—	%	0.28	%	—	%	117.65	%	0.01	%
2022
Allowance for credit losses on loans:
Balance, beginning of year	$	1,095		3,607		665		105		30		4		5,506
Provision for (recovery of) loan losses	205			69		(81)		(12)		(8)		77		250
Losses charged off	—			(67)		(5)		(37)		—		(157)		(266)
Recoveries	—			—		45		30		—		81		156
Balance, end of year	$	1,300		3,609		624		86		22		5		5,646
Individually evaluated for impairment	$	4		11		6		—		—		—		21
Collectively evaluated for impairment	1,296			3,598		618		86		22		5		5,625
Acquired credit impaired loans	—			—		—		—		—		—		—
Balance, end of year	$	1,300		3,609		624		86		22		5		5,646
Loans:
Individually evaluated for impairment	$	114		963		482		—		—		—		1,559
Collectively evaluated for impairment	119,799			934,568		304,770		28,414		10,073		81		1,397,705
Acquired credit impaired loans	414			724		876		—		—		—		2,014
Balance, end of year	$	120,327		936,255		306,128		28,414		10,073		81		1,401,278
Percent of loans in each category to total loans	8.6		%	66.9	%	21.8	%	2.0	%	0.7	%	—	%	100.0	%
Ratio of net charge-offs to average loans	—		%	0.01	%	(0.01)	%	0.02	%	—	%	100.00	%	0.01	%

-33-

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

(Continued)

NOTE 4 - LOANS (Continued)

	Commercial & Industrial			Commercial, Secured by Real Estate		Residential Real Estate		Consumer		Agricultural		Other		Total
2021
Allowance for credit losses on loans:
Balance, beginning of year	$	816		3,903		837		153		28		(9)		5,728
Provision for (recovery of) loan losses	279			(375)		(190)		(45)		2		60		(269)
Losses charged off	—			(112)		(28)		(9)		—		(105)		(254)
Recoveries	—			191		46		6		—		58		301
Balance, end of year	$	1,095		3,607		665		105		30		4		5,506
Individually evaluated for impairment	$	5		11		9		—		—		—		25
Collectively evaluated for impairment	1,090			3,596		656		105		30		4		5,481
Balance, end of year	$	1,095		3,607		665		105		30		4		5,506
Percent of loans in each category to total loans	7.4		%	64.8	%	24.5	%	2.5	%	0.8	%	—	%	100.0	%
Ratio of net charge-offs to average loans	—		%	(0.01)	%	(0.01)	%	0.01	%	—	%	16.24	%	—	%

The ratio of the allowance for credit losses for loans to total loans at December 31, 2023 and 2022 was 0.61% and 0.40%, respectively.

For collateral dependent loans where management has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and repayment of the loan is to be provided substantially through the operation or sale of the collateral, the allowance for credit losses is measured based on the difference between the fair value of the collateral, less costs to sell, and the amortized cost basis of the loan as of the measurement date.

The following table presents the carrying value and related allowance of collateral dependent individually evaluated loans by class segment for the years ended December 31 (in thousands):

	2023			2022
	Carrying Value		Related Allowance	Carrying Value	Related Allowance
Commercial & industrial	$	—	—	—	—
Commercial, secured by real estate
Owner occupied	72		—	230	—
Non-owner occupied	—		—	—	—
Farmland	51		—	88	—
Multi-family	—		—	—	—
Construction loans secured by 1-4 family dwellings	—		—	—	—
Construction loans secured by other real estate	—		—	—
Residential real estate
Secured by senior liens on 1-4 family dwellings	—		—	40	—
Secured by junior liens on 1-4 family dwellings	—		—	—	—
Home equity line-of-credit loans	—		—	—	—
Consumer	—		—	—	—
Agricultural	—		—	—	—
Other loans, including deposit overdrafts	—		—	—	—
Total	$	123	—	358	—

-34-

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

(Continued)

NOTE 4 - LOANS (Continued)

The risk characteristics of LCNB's material loan portfolio segments were as follows:

Commercial & Industrial Loans. LCNB’s commercial and industrial loan portfolio consists of loans for various purposes, including, for example, loans to fund working capital requirements (such as inventory and receivables financing) and purchases of machinery and equipment.  LCNB offers a variety of commercial and industrial loan arrangements, including term loans, balloon loans, and lines of credit.  Commercial & industrial loans can have a fixed or variable rate, with maturities ranging from one to ten years. Commercial & industrial loans are offered to businesses and professionals for short and medium terms on both a collateralized and uncollateralized basis. Commercial & industrial loans typically are underwritten on the basis of the borrower’s ability to make repayment from the cash flow of the business.  Collateral, when obtained, may include liens on furniture, fixtures, equipment, inventory, receivables, or other assets.  As a result, such loans involve complexities, variables, and risks that require thorough underwriting and more robust servicing than other types of loans.

Commercial, Secured by Real Estate Loans.  Commercial real estate loans include loans secured by a variety of commercial, retail and office buildings, religious facilities, hotels, multifamily (more than four-family) residential properties, construction and land development loans, and other land loans. Mortgage loans secured by owner-occupied agricultural property are included in this category.  Commercial real estate loan products generally amortize over five to twenty-five years and are payable in monthly principal and interest installments.  Some have balloon payments due within one to ten years after the origination date.  The majority have adjustable interest rates with adjustment periods ranging from one to ten years, some of which are subject to established “floor” interest rates.

Commercial real estate loans are underwritten based on the ability of the property, in the case of income producing property, or the borrower’s business to generate sufficient cash flow to amortize the debt. Secondary emphasis is placed upon global debt service, collateral value, financial strength and liquidity of any and all guarantors, and other factors. Commercial real estate loans are generally originated with a 75% to 85% maximum loan to appraised value ratio, depending upon borrower occupancy.

Residential Real Estate Loans.  Residential real estate loans include loans secured by first or second mortgage liens on one to four-family residential properties.  Home equity lines of credit are included in this category.  First and second mortgage loans are generally amortized over five to thirty years with monthly principal and interest payments.  Home equity lines of credit generally have a five year or less draw period with interest only payments followed by a repayment period with monthly payments based on the amount outstanding.  LCNB offers both fixed and adjustable rate mortgage loans.  Adjustable rate loans are available with adjustment periods ranging between one to fifteen years and adjust according to an established index plus a margin, subject to certain floor and ceiling rates.  Home equity lines of credit have a variable rate based on the Wall Street Journal prime rate plus a margin.

Residential real estate loans are underwritten primarily based on the borrower’s ability to repay, prior credit history, and the value of the collateral.  LCNB generally requires private mortgage insurance for first mortgage loans that have a loan to appraised value ratio of greater than 80% or may require other credit enhancements for second lien mortgage loans.

Consumer Loans.  LCNB’s portfolio of consumer loans generally includes secured and unsecured loans to individuals for household, family and other personal expenditures.  Secured loans include loans to fund the purchase of automobiles, recreational vehicles, boats, and similar acquisitions. Consumer loans made by LCNB generally have fixed rates and terms ranging up to 72 months, depending upon the nature of the collateral, size of the loan, and other relevant factors. Consumer loans generally have higher interest rates, but pose additional risks of collectability and loss when compared to certain other types of loans. Collateral, if present, is generally subject to damage, wear, and depreciation.  The borrower’s ability to repay is of primary importance in the underwriting of consumer loans.

Agricultural Loans.  LCNB’s portfolio of agricultural loans includes loans for financing agricultural production or for financing the purchase of equipment used in the production of agricultural products.  LCNB’s agricultural loans are generally secured by farm machinery, livestock, crops, vehicles, or other agricultural-related collateral.

Other Loans, Including Deposit Overdrafts. Other loans may include loans that do not fit in any of the other categories, but it is primarily composed of overdrafts from transaction deposit accounts. Overdraft payments are recorded as a recovery and overdrafts are generally written off after 34 days with a negative balance.

-35-

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

(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 as 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.

-36-

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

(Continued)

NOTE 4 - LOANS (Continued)

The following table presents the amortized cost basis of loans by vintage and credit quality indicators at December 31 (in thousands). The December 31, 2022 table is shown for comparison purposes.

	Term Loans by Origination Year
	2023		2022	2021	2020	2019	Prior	Revolving Loans Amortized Cost Basis	Revolving Loans Converted to Term	Total
2023
Commercial & industrial
Pass	$	17,169	30,518	29,587	11,426	2,732	5,641	16,919	113	114,105
OAEM	—		—	1,474	—	—	—	—	—	1,474
Substandard	—		1,813	—	105	1,592	137	1,315	—	4,962
Doubtful	—		—	—	—	—	—	—	—	—
Total	17,169		32,331	31,061	11,531	4,324	5,778	18,234	113	120,541
Gross charge-offs	—		—	—	—	—	15	—	—	15
Commercial, secured by real estate
Pass	99,055		200,735	156,865	109,810	92,895	283,564	141,354	6,056	1,090,334
OAEM	—		7,671	—	—	—	3,004	—	—	10,675
Substandard	—		—	—	—	1,648	2,987	—	—	4,635
Doubtful	—		—	—	—	—	—	—	—	—
Total	99,055		208,406	156,865	109,810	94,543	289,555	141,354	6,056	1,105,644
Gross charge-offs	—		—	—	—	—	—	—	—	—
Residential real estate
Pass	55,232		83,511	107,120	62,177	19,208	95,643	33,800	—	456,691
OAEM	—		—	—	—	—	18	—	—	18
Substandard	—		446	—	217	—	3,062	170	—	3,895
Doubtful	—		—	—	—	—	—	—	—	—
Total	55,232		83,957	107,120	62,394	19,208	98,723	33,970	—	460,604
Gross charge-offs	—		—	—	—	4	—	—	—	4
Consumer
Pass	8,087		5,820	4,868	4,671	1,382	304	460	—	25,592
OAEM	—		—	—	—	—	—	—	—	—
Substandard	—		—	—	—	8	—	—	—	8
Doubtful	—		—	—	—	—	—	—	—	—
Total	8,087		5,820	4,868	4,671	1,390	304	460	—	25,600
Gross charge-offs	—		—	62	21	—	—	—	—	83
Agricultural
Pass	1,883		464	197	694	46	31	7,685	—	11,000
OAEM	—		—	—	—	—	—	—	—	—
Substandard	—		—	—	—	—	—	—	—	—
Doubtful	—		—	—	—	—	—	—	—	—
Total	1,883		464	197	694	46	31	7,685	—	11,000
Gross charge-offs	—		—	—	—	—	—	—	—	—
Other
Pass	—		—	—	—	—	—	82	—	82
OAEM	—		—	—	—	—	—	—	—	—
Substandard	—		—	—	—	—	—	—	—	—
Doubtful	—		—	—	—	—	—	—	—	—
Total	—		—	—	—	—	—	82	—	82
Gross charge-offs	—		—	—	—	—	—	166	—	166
Total loans	$	181,426	330,978	300,111	189,100	119,511	394,391	201,785	6,169	1,723,471

-37-

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

(Continued)

NOTE 4 - LOANS (Continued)

	Term Loans by Origination Year
	2022		2021	2020	2019	2018	Prior	Revolving Loans Amortized Cost Basis	Revolving Loans Converted to Term	Total
2022
Commercial & industrial
Pass	$	30,132	36,341	20,936	3,632	2,499	5,630	15,403	—	114,573
OAEM	—		—	—	2,142	—	—	1,602	—	3,744
Substandard	1,540		—	106	—	—	51	313	—	2,010
Doubtful	—		—	—	—	—	—	—	—	—
Total	31,672		36,341	21,042	5,774	2,499	5,681	17,318	—	120,327
Gross charge-offs	—		—	—	—	—	—	—	—	—
Commercial, secured by real estate
Pass	135,503		142,446	96,272	100,363	75,387	229,175	129,274	4,955	913,375
OAEM	7,931		—	—	—	7,413	—	—	—	15,344
Substandard	—		—	—	—	—	7,536	—	—	7,536
Doubtful	—		—	—	—	—	—	—	—	—
Total	143,434		142,446	96,272	100,363	82,800	236,711	129,274	4,955	936,255
Gross charge-offs	—		—	—	—	—	67	—	—	67
Residential real estate
Pass	27,892		86,952	54,144	17,804	13,298	78,969	24,359	1,095	304,513
OAEM	—		—	—	—	—	—	—	—	—
Substandard	—		—	—	37	—	1,572	—	6	1,615
Doubtful	—		—	—	—	—	—	—	—	—
Total	27,892		86,952	54,144	17,841	13,298	80,541	24,359	1,101	306,128
Gross charge-offs	—		—	—	—	—	—	5	—	5
Consumer
Pass	8,786		7,561	8,108	3,145	413	316	82	—	28,411
OAEM	—		—	—	—	—	—	—	—	—
Substandard	3		—	—	—	—	—	—	—	3
Doubtful	—		—	—	—	—	—	—	—	—
Total	8,789		7,561	8,108	3,145	413	316	82	—	28,414
Gross charge-offs	—		4	24	9	—	—	—	—	37
Agricultural
Pass	533		243	865	63	116	29	8,224	—	10,073
OAEM	—		—	—	—	—	—	—	—	—
Substandard	—		—	—	—	—	—	—	—	—
Doubtful	—		—	—	—	—	—	—	—	—
Total	533		243	865	63	116	29	8,224	—	10,073
Gross charge-offs	—		—	—	—	—	—	—	—	—
Other
Pass	—		—	—	—	—	—	81	—	81
OAEM	—		—	—	—	—	—	—	—	—
Substandard	—		—	—	—	—	—	—	—	—
Doubtful	—		—	—	—	—	—	—	—	—
Total	—		—	—	—	—	—	81	—	81
Gross charge-offs	—		—	—	—	—	—	157	—	157
Total loans	$	212,320	273,543	180,431	127,186	99,126	323,278	179,338	6,056	1,401,278

-38-

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

(Continued)

NOTE 4 - LOANS (Continued)

LCNB generally performs a classification of assets review, including the regulatory classification of assets, on an ongoing basis. The results of the classification of assets review are validated annually by an independent third party loan review firm. In the event of a difference in rating or classification between those assigned by the internal and external resources, the Company will utilize the more critical or conservative rating or classification. Loans with regulatory classifications are presented monthly to the Board of Directors.

LCNB evaluates the loan risk grading system definitions and allowance for loan loss methodology on an ongoing basis. No significant changes were made to either during the past year.

-39-

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

(Continued)

NOTE 4 - LOANS (Continued)

A loan portfolio aging analysis by class segment at December 31 is as follows (in thousands):

	30-59 Days Past Due		60-89 Days Past Due	Greater Than 90 Days	Total Past Due	Current	Total Loans Receivable	Total Loans Greater Than 90 Days and Accruing
2023
Commercial & industrial	$	—	—	—	—	120,541	120,541	—
Commercial, secured by real estate:
Owner occupied	—		—	72	72	206,633	206,705	72
Non-owner occupied	2,645		—	—	2,645	498,463	501,108	—
Farmland	—		—	—	—	37,367	37,367	—
Multi-family	—		—	—	—	240,033	240,033	—
Construction loans secured by 1-4 family dwellings	—		—	—	—	9,058	9,058	—
Construction loans secured by other real estate	—		—	—	—	111,373	111,373	—
Residential real estate:
Secured by senior liens on 1-4 family dwellings	1,020		414	29	1,463	400,563	402,026	—
Secured by junior liens on 1-4 family dwellings	27		—	—	27	19,972	19,999	—
Home equity line-of-credit loans	174		30	—	204	38,375	38,579	—
Consumer	136		—	—	136	25,464	25,600	—
Agricultural	—		—	—	—	11,000	11,000	—
Other	82		—	—	82	—	82	—
Total	$	4,084	444	101	4,629	1,718,842	1,723,471	72
2022
Commercial & industrial	$	—	—	—	—	120,327	120,327	—
Commercial, secured by real estate:
Owner occupied	—		—	—	—	208,485	208,485	—
Non-owner occupied	—		—	—	—	420,075	420,075	—
Farmland	—		—	—	—	36,340	36,340	—
Multi-family	—		—	—	—	189,917	189,917	—
Construction loans secured by 1-4 family dwellings	—		—	—	—	7,786	7,786	—
Construction loans secured by other real estate	—		—	—	—	73,652	73,652	—
Residential real estate:
Secured by senior liens on 1-4 family dwellings	81		—	79	160	269,662	269,822	39
Secured by junior liens on 1-4 family dwellings	—		—	—	—	10,197	10,197	—
Home equity line-of-credit loans	—		—	—	—	26,109	26,109	—
Consumer	117		3	—	120	28,294	28,414	—
Agricultural	—		—	—	—	10,073	10,073	—
Other	81		—	—	81	—	81	—
Total	$	279	3	79	361	1,400,917	1,401,278	39

-40-

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

(Continued)

NOTE 4 - LOANS (Continued)

From time to time, the terms of certain loans are modified when concessions are granted to borrowers experiencing financial difficulties. Each modification is separately negotiated with the borrower and includes terms and conditions that reflect the borrower's ability to pay the debt as modified. The modification of the terms of such loans may have included one, or a combination of, the following: a temporary or permanent reduction of the stated interest rate of the loan, an increase in the stated rate of interest lower than the current market rate for new debt with similar risk, forgiveness of principal, an extension of the maturity date, or a change in the payment terms.

One modification was granted to a borrower experiencing financial difficulties during the twelve months ended December 31, 2023. The modification was made on a residential real estate loan secured by a senior lien on a single-family home with an outstanding balance of $325,000 at June 30, 2023 and involved a delay of monthly payments for a period of time. This loan was paid in full during the third quarter 2023. No loans meeting the above specifications were modified during the twelve months ended December 31, 2022.

LCNB is not committed to lend additional funds to borrowers whose loan terms were modified.

There were no modified loans that experienced a payment default within twelve months of the restructuring date during the years ended December 31, 2023, 2022, or 2021.

Mortgage 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 December 31, 2023 and 2022 were approximately $391,800,000 and $148,412,000, respectively.

NOTE 5 - PURCHASED CREDIT DETERIORATED LOANS

LCNB acquired loans through the merger with Cincinnati Bancorp for which there was, at acquisition, evidence of more than insignificant deterioration of credit quality since origination. The carrying amount of these loans is as follows (in thousands):

	2023
Purchase price of loans at acquisition	$	8,649
Allowance for credit losses at acquisition	493
Non-credit discount/(premium) at acquisition	1,486
Par value of acquired loans at acquisition	$	10,628

The following table provides, as of December 31, the major classifications of purchased credit deteriorated loans acquired (in thousands):

	2023
Commercial, secured by real estate	2,636
Residential real estate	6,355
Total	$	8,991

The following table provides the outstanding balance and related carrying amount for purchased credit deteriorated loans at December 31 (in thousands):

	2023
Outstanding balance	$	10,458
Carrying amount	8,991

-41-

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

(Continued)

NOTE 5 - PURCHASED CREDIT DETERIORATED LOANS (continued)

Activity during 2023 for the accretable discount related to purchased credit deteriorated loans is as follows (in thousands):

	2023
Accretable discount, beginning of year	—
Accretable discount acquired during period from merger with CNNB	1,486
Less accretion	19
Accretable discount, end of year	1,467

NOTE 6 – OTHER REAL ESTATE OWNED

Other real estate owned includes property acquired through foreclosure or deed-in-lieu of foreclosure and are included in other assets in the Consolidated Balance Sheets.  Changes in other real estate owned were as follows (in thousands):

	2023		2022
Balance, beginning of year	$	—	—
Additions	—		717
Reductions due to sales	—		(717)
Balance, end of year	$	—	—

There were no residential consumer mortgage loans secured by residential real estate in the process of foreclosure at December 31, 2023.

NOTE 7 - PREMISES AND EQUIPMENT

Premises and equipment at December 31 are summarized as follows (in thousands):

	2023		2022
Land	$	8,789	8,222
Buildings	32,321		30,148
Equipment	18,568		17,266
Construction in progress	5,143		4,558
Total	64,821		60,194
Less accumulated depreciation	28,519		27,152
Premises and equipment, net	$	36,302	33,042

Depreciation charged to expense was $1,881,000 in 2023, $1,897,000 in 2022, and $1,931,000 in 2021.

-42-

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

(Continued)

NOTE 8 - LEASES

LCNB has capitalized operating leases for its Union Village, Fairfield, Barron Street, and Worthington offices, for the land at its Oxford and Oakwood offices, for the Milford Lending Office, for certain office equipment, and for its ATMs. The Oakwood lease has a remaining term of fourteen years with options to renew for six additional periods of five years each. The Oxford lease has a remaining term of thirty-seven years with no renewal options. The other leases have remaining terms of less than one year up to nine years, some of which contain options to renew the leases for additional five-year periods.

Lease expenses for offices are included in the Consolidated Statements of Income in occupancy expense, net and lease expenses for equipment and ATMs are included in equipment expenses. Components of lease expense for the years ended December 31 are as follows (in thousands):

	2023		2022	2021
Operating lease expense	$	890	616	840
Short-term lease expense	70		243	48
Variable lease expense	8		4	4
Other	29		11	10
Total lease expense	$	997	874	902

Other information related to leases at December 31are as follows (dollars in thousands):

	2023			2022		2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	911		623		757
Right-of-use assets obtained in exchange for new operating lease liabilities	$	—		370		801
Weighted average remaining lease term in years for operating leases	33.0			33.4		32.9
Weighted average discount rate for operating leases	3.53		%	3.46	%	3.40	%

Future payments due under operating leases as of December 31, 2023 are as follows (in thousands):

2024	$	719
2025	486
2026	333
2027	311
2028	264
Thereafter	9,703
	11,816
Less effects of discounting	5,555
Operating lease liabilities recognized	$	6,261

-43-

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

(Continued)

NOTE 9 - GOODWILL AND OTHER INTANGIBLE ASSETS

Changes in goodwill during 2023 was as follows (in thousands):

	2023		2022
Balance, beginning of year	$	59,221	59,221
Additions from acquisition of CNNB	20,288		—
Balance, end of year	$	79,509	59,221

The acquisition method of accounting requires that assets and liabilities acquired in a business combination are recorded at fair value as of the acquisition date. The valuation of assets and liabilities often involves estimates based on third-party valuations or internal valuations based on discounted cash flow analyses or other valuation techniques, all of which are inherently subjective. This typically results in goodwill, the amount by which the cost of net assets acquired in a business combination exceeds their fair value, which is subject to impairment testing at least annually.

LCNB performs a goodwill impairment test on an annual basis during the fourth quarter, or more often if events or circumstances indicate that it is more-likely-than-not that the fair value of a reporting unit is below its carrying value. Based on our annual impairment analysis of goodwill as of the fourth quarter 2024, it was determined that the fair value was in excess of its respective carrying value and therefore, goodwill is considered not impaired.

Core deposit and other intangible assets in the Consolidated Balance Sheets at December 31 were as follows (in thousands):

	2023				2022
	Gross Intangible Assets		Accumulated Amortization	Net Intangible Assets	Gross Intangible Assets	Accumulated Amortization	Net Intangible Assets
Core deposit intangibles	$	13,508	8,120	5,388	8,544	7,588	956
Mortgage servicing rights	5,881		1,775	4,106	2,408	1,537	871
Total	$	19,389	9,895	9,494	10,952	9,125	1,827

The estimated aggregate future amortization expense for each of the next five years for core deposit intangible assets as of December 31, 2023 is as follows (in thousands):

2024	$	842
2025	658
2026	496
2027	496
2028	497

Amortization of mortgage servicing rights is an adjustment to loan servicing income, which is included with other operating income in the Consolidated Statements of Income.  Activity in the mortgage servicing rights portfolio during the years ended December 31 was as follows (in thousands):

	2023		2022	2021
Balance, beginning of year	$	871	1,039	976
Amount obtained through merger with CNNB	3,427		—	—
Amount capitalized to mortgage servicing rights	48		100	409
Amortization of mortgage servicing rights	(240)		(268)	(346)
Balance, end of year	$	4,106	871	1,039

-44-

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

(Continued)

NOTE 9 - GOODWILL AND OTHER INTANGIBLE ASSETS (continued)

At December 31, 2023, the fair value of servicing rights was $5,023,000, which was determined using discount rates ranging from 10% to 11% and prepayment rate ranging from 6.86% to 10.38%, depending on the stratification of the specific right. At December 31, 2022, the fair value of servicing rights was $1,644,000, which was determined using a discount rate of 11.25% and a prepayment rate of 6.53%. As estimated fair values were greater than the carrying value of LCNB's mortgage servicing rights, management determined that a valuation allowance was not necessary.

NOTE 10 - AFFORDABLE HOUSING TAX CREDIT LIMITED PARTNERSHIPS

LCNB is a limited partner in limited partnerships that sponsor affordable housing projects utilizing the Low Income Housing Tax Credit (LIHTC) pursuant to Section 42 of the Internal Revenue Code. The purpose of the investments is to achieve a satisfactory return on capital, to facilitate the sale of additional affordable housing product offerings, and to assist in achieving goals associated with the Community Reinvestment Act. The primary activities of the limited partnerships include the identification, development, and operation of multi-family housing that is leased to qualifying residential tenants.

The following table presents the balances of LCNB's affordable housing tax credit investment and related unfunded commitment at December 31 (in thousands):

	2023		2022
Affordable housing tax credit investment	$	16,950	16,950
Less amortization	4,626		3,268
Net affordable housing tax credit investment	$	12,324	13,682
Unfunded commitment	$	4,527	7,185

The net affordable housing tax credit investment is included in other assets and the unfunded commitment is included in accrued interest and other liabilities in the Consolidated Balance Sheets.

LCNB expects to fund the unfunded commitment over ten years.

The following table presents other information relating to LCNB's affordable housing tax credit investment for the years indicated (in thousands):

	Year ended December 31,
	2023		2022	2021
Tax credits and other tax benefits recognized	$	1,658	1,394	995
Tax credit amortization expense included in provision for income taxes	1,358		1,142	806

-45-

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

(Continued)

NOTE 11 - TIME DEPOSITS

Contractual maturities of time deposits at December 31, 2023 were as follows (in thousands):

Three months or less	$	28,870
Over three through six months	68,532
Over six through twelve months	140,476
Total 2024	237,878
2025	87,658
2026	8,270
2027	3,692
2028	1,489
Thereafter	1,038
	$	340,025

The aggregate amount of time deposits in denominations of $250,000 or more at December 31, 2023 and 2022 was $50,169,000 and $16,139,000, respectively.

NOTE 12 - BORROWINGS

Long-term debt at December 31 was as follows (in thousands):

	2023				2022
	Amount		Weighted Average Interest Rate		Amount	Weighted Average Interest Rate
FHLB advances	$	100,969	4.87	%	5,000	3.02	%
Term loan	12,154		4.25	%	14,072	4.25	%
Total long-term debt	$	113,123	4.80	%	19,072	3.93	%

The term loan is with a correspondent financial institution and bears a fixed interest rate of 4.25%, amortizes quarterly, and has a final balloon payment due on June 15, 2025.

Contractual maturities of long-term debt at December 31 by year of maturity were as follows (dollars in thousands):

	2023		2022
Maturing within one year	$	4,988	6,918
Maturing one year through two years	13,135		2,001
Maturing two years through three years	25,000		10,153
Maturing three years through four years	25,000		—
Maturing four years through five years	25,000		—
Thereafter	20,000		—
Total	$	113,123	19,072

-46-

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

(Continued)

NOTE 12 - BORROWINGS (continued)

Short-term borrowings at December 31 were as follows (dollars in thousands):

	2023				2022
	Outstanding Balance		Average Rate		Outstanding Balance		Average Rate
Revolving line of credit	$	—	—	%	$	3,000	7.25	%
Lines of credit	21,395		6.00	%	18,455		5.00	%
FHLB short-term advances	76,000		5.53	%	50,000		4.40	%
	$	97,395	5.63	%	$	71,455	4.67	%

At December 31, 2023 and 2022, LCNB Corp. had a short-term revolving line of credit arrangement with a financial institution for a maximum amount of $5 million at an interest rate equal to the Wall Street Journal Prime Rate minus 25 basis points. This agreement expires on June 15, 2024.

At December 31, 2023, the Company had short-term line of credit borrowing arrangements with three correspondent financial institutions.  Under the terms of the first arrangement, the Company can borrow up to $30 million at an interest rate equal to the lending institution’s federal funds rate plus a spread of 50 basis points. At December 31, 2023 and 2022, the outstanding balance of this arrangement totaled $21.4 million and $18.5 million, respectively. Under the terms of the second arrangement, the Company can borrow up to $25 million at an interest rate equal to the FOMC rate plus a spread of 25 basis points. Under the terms of the third arrangement, the Company can borrow up to $25 million at the interest rate in effect at the time of the borrowing.

All long- and short-term advances from the FHLB of Cincinnati are secured by a blanket pledge of the Company’s 1-4 family first lien mortgage loans in the amount of approximately $417 million and $270 million at December 31, 2023 and 2022, respectively.  Remaining borrowing capacity with the FHLB, including both long- and short-term borrowings, at December 31, 2023 was approximately $89.2 million. LCNB could increase its remaining borrowing capacity by purchasing more stock in the FHLB.

At December 31, 2023, standby letters of credit totaling $27.25 million had been issued by the Federal Home Loan Bank of Cincinnati on behalf of LCNB to secure public fund deposits. These letters of credit were cancelled in January 2024.

NOTE 13 - INCOME TAXES

The provision for federal income taxes consists of (in thousands):

	2023		2022	2021
Income taxes currently payable	$	2,952	5,162	4,317
Deferred income tax provision (benefit)	(320)		(344)	294
Provision for income taxes	$	2,632	4,818	4,611

-47-

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

(Continued)

NOTE 13 - INCOME TAXES (continued)

A reconciliation between the statutory income tax and the Company's effective tax rate follows:

	2023		2022		2021
Statutory tax rate	21.0	%	21.0	%	21.0	%
Increase (decrease) resulting from -
Tax exempt interest	(0.9)	%	(0.6)	%	(0.7)	%
Tax exempt income on bank owned life insurance	(1.6)	%	(0.8)	%	(0.9)	%
Captive insurance premium income	(0.8)	%	(0.9)	%	(0.8)	%
Affordable housing tax credit limited partnerships	(2.0)	%	(0.8)	%	(0.6)	%
Nondeductible merger-related expenses	1.7	%	—	%	—	%
Other, net	(0.2)	%	—	%	—	%
Effective tax rate	17.2	%	17.9	%	18.0	%

Deferred tax assets and liabilities, included in the Consolidated Balance Sheets with other assets, consist of the following at December 31 (in thousands):

	2023		2022
Deferred tax assets:
Allowance for credit losses	$	2,217	1,186
Net unrealized losses on investment securities available-for-sale	5,923		7,955
Fair value adjustment on loans acquired from mergers	5,895		40
Benefit plans	277		190
Deferred compensation	580		602
Minimum pension liability	15		7
Operating lease right-of-use assets	1,242		1,338
Other	478		158
	16,627		11,476
Deferred tax liabilities:
Depreciation of premises and equipment	(1,395)		(1,174)
Amortization of intangibles	(2,808)		(1,643)
Mortgage servicing rights	(865)		(183)
Prepaid expenses	(525)		(316)
FHLB stock dividends	(501)		(183)
Operating lease liabilities	(1,243)		(1,338)
Fair value adjustment on time deposits acquired from mergers	(222)		—
Deferred gain on loans sold	(305)		—
Other, net	(198)		—
	(8,062)		(4,837)
Net deferred tax assets (liabilities)	$	8,565	6,639

As of December 31, 2023 and 2022 there were no unrecognized tax benefits and the Company does not anticipate the total amount of unrecognized tax benefits will significantly change within the next twelve months.  There were no amounts recognized for interest and penalties in the Consolidated Statements of Income for the three-year period ended December 31, 2023.

-48-

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

(Continued)

NOTE 13 - INCOME TAXES (continued)

The Company is no longer subject to examination by federal tax authorities for years before 2020.

NOTE 14 - 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.  The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument 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 December 31 were as follows (in thousands):

	2023		2022
Commitments to extend credit:
Commercial loans	$	28,111	22,823
Other loans:
Fixed rate	15,349		191
Adjustable rate	1,946		1,422
Unused lines of credit:
Fixed rate	21,532		41,558
Adjustable rate	184,056		238,876
Unused overdraft protection amounts on demand accounts	16,418		16,566
Standby letters of credit	5		5
	$	267,417	321,441

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 or agreement.  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.

The Company evaluates each customer’s credit worthiness on a case-by-case basis.  The amount of collateral obtained, if deemed necessary by the Company, 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.

-49-

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

(Continued)

NOTE 14 - COMMITMENTS AND CONTINGENT LIABILITIES (continued)

Activity in the allowance for credit losses on off-balance sheet credit exposures for the year ended December 31, 2023 is as follows (in thousands):

Balance, beginning of year, prior to adoption of ASC 326	$	—
Impact of adopting ASC 326	571
Acquisition of Cincinnati Bancorp, Inc.	21
Provision for (recovery of) credit losses	(296)
Losses charged off	(15)
Balance, end of year	$	281

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 December 31, 2023 totaled approximately $2,876,000.

The Company and the Bank 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.

NOTE 15 - REGULATORY MATTERS AND IMPACT ON PAYMENT OF DIVIDENDS

The principal source of income and funds for LCNB Corp. is dividends paid by the Bank.  The payment of dividends is subject to restriction by regulatory authorities.  For 2024, the restrictions generally limit dividends to the aggregate of net income for the year 2024 plus the net earnings retained for 2023 and 2022.  If dividends exceed net income for a year, a bank is generally not required to carry forward the negative amount resulting from such excess if the bank can attribute the excess to the preceding two years. If the excess is greater than the bank's previously undistributed net income for the preceding two years, prior OCC approval of the dividend is required and a negative amount would be carried forward in future dividend calculations. In addition, dividend payments may not reduce capital levels below minimum regulatory guidelines.

At December 31, 2023, the bank paid $650,000 in excess of the previous two years' Bank net income to the holding company due to an $8.75 million dividend for the acquisition of CNNB. In addition, the February 2024 dividend payment was also in excess of the previous two years' Bank net income. The Bank requested after-the-fact OCC approval for these excess payments and that approval remains outstanding.

The Bank must meet certain minimum capital requirements set by federal banking agencies.  Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a material effect on the Company's and Bank's financial statements.  The Bank’s capital amounts and classification are also subject to qualitative judgments by regulators about components, risk weightings, and other factors.

In addition to the minimum capital requirements, a financial institution needs to maintain a Capital Conservation Buffer composed of Common Equity Tier 1 Capital of at least 2.5% above its minimum risk-weighted capital requirements to avoid limitations on its ability to make capital distributions, including dividend payments to shareholders and certain discretionary bonus payments to executive officers. A financial institution with a buffer below 2.5% will be subject to increasingly stringent limitations on capital distributions as the buffer approaches zero.

-50-

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

(Continued)

NOTE 15 - REGULATORY MATTERS AND IMPACT ON PAYMENT OF DIVIDENDS (continued)

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

	Minimum Requirement		Minimum Requirement with Capital Conservation Buffer		To Be Considered Well-Capitalized
Ratio of Common Equity Tier 1 Capital to risk-weighted assets	4.5	%	7.0	%	6.5	%
Ratio of tier 1 capital to risk-weighted assets	6.0	%	8.5	%	8.0	%
Ratio of total capital (tier 1 capital plus tier 2 capital) to risk-weighted assets	8.0	%	10.5	%	10.0	%
Leverage ratio (tier 1 capital to adjusted quarterly average total assets)	4.0	%	N/A		5.0	%

As of the most recent notification from its regulators, the Bank was 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 category.

On September 17, 2019, the FDIC finalized a rule that introduced an optional simplified measure of capital adequacy for qualifying community banking organizations, as required by the Economic Growth, Regulatory Relief and Consumer Protection Act. The simplified rule was designed to reduce burden by removing the requirements for calculating and reporting risk-based capital ratios for qualifying community banking organizations that opt into the framework. It could be used beginning with the March 31, 2020 Call Report. Qualifications to use the simplified approach include having a tier 1 leverage ratio of greater than 9%, less than $10 billion in total consolidated assets, and limited amounts of off-balance-sheet exposures and trading assets and liabilities. A qualifying community banking organization that opts into the framework and meets all requirements under the framework will be considered to have met the well-capitalized ratio requirements under the Prompt Corrective Action regulations and will not be required to report or calculate risk-based capital. LCNB qualified to use the simplified measure for its December 31, 2022 regulatory capital calculations, but did not opt in. It did not qualify to use the simplified approach for its December 31, 2023 regulatory capital calculations.

A summary of the regulatory capital of the Bank at December 31 follows (dollars in thousands):

	2023			2022
Regulatory Capital:
Shareholders' equity	$	242,528		213,052
Goodwill and other intangible assets	(84,897)			(60,177)
Accumulated other comprehensive loss	22,336			29,945
Tier 1 risk-based capital	179,967			182,820
Eligible allowance for credit losses	10,318			5,646
Total risk-based capital	$	190,285		188,466
Capital Ratios:
Common Equity Tier 1 Capital to risk-weighted assets	10.17		%	11.94	%
Tier 1 capital to risk-weighted assets	10.17		%	11.94	%
Total capital (tier 1 capital plus tier 2 capital) to risk-weighted assets	10.75		%	12.31	%
Leverage ratio (tier 1 capital to adjusted quarterly average total assets)	8.05		%	9.72	%

-51-

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

(Continued)

NOTE 16 - ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Changes in accumulated other comprehensive loss for 2023 and 2022 were as follows (in thousands):

	2023				2022
	Unrealized Gains (Losses) on Available-for-Sale Securities		Changes in Pension Plan Assets and Benefit Obligations	Total	Unrealized Gains (Losses) on Available-for-Sale Securities	Changes in Pension Plan Assets and Benefit Obligations	Total
Balance at beginning of year	$	(29,927)	(27)	(29,954)	(1,536)	(273)	(1,809)
Before reclassifications	7,646		(28)	7,618	(28,391)	246	(28,145)
Reclassifications	—		—	—	—	—	—
Balance at end of year	$	(22,281)	(55)	(22,336)	(29,927)	(27)	(29,954)

NOTE 17 - RETIREMENT PLANS

Prior to January 1, 2009, the Company had a single-employer qualified noncontributory defined benefit retirement plan that covered substantially all regular full-time employees.  Effective January 1, 2009, the Company redesigned the plan and merged it into a multiple-employer plan, which is accounted for as a multi-employer plan because assets contributed by an employer are not segregated in a separate account or restricted to provide benefits only to employees of that employer.  Employees hired on or after January 1, 2009 are not eligible to participate in this plan. Effective February 1, 2009, the Company amended the plan to reduce benefits for those whose age plus vesting service equaled less than 65 at that date.  

Also effective February 1, 2009, an enhanced 401(k) plan was made available to those hired on or after January 1, 2009 and to those who received benefit reductions from the amendments to the noncontributory defined benefit 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 company contribution of 3% of each individual employee’s annual compensation.  Employees who received a benefit reduction under the retirement plan amendments 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.

CNNB operated a similar multi-employer plan, accounted for as a multi-employer plan, at the time of the merger, which was assumed by LCNB.

Certain information pertaining to both the LCNB and the former CNNB qualified noncontributory defined benefit retirement plans is as follows:

Legal name	Pentegra Defined Benefit Plan for Financial Institutions
Plan's employer identification number	13-5645888
Plan number	333

The LCNB plan was at least 80% funded as of July 1, 2023 and 2022.  The former CNNB plan was between 65% and 80% funded as of July 1, 2023 and 2022. A funding improvement or rehabilitation plan has not been implemented for either plan, nor has a surcharge been paid to either plan. The Company’s contributions to the qualified noncontributory defined benefit retirement plan do not represent more than 5% of total contributions to the plan.

-52-

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

(Continued)

NOTE 17 - RETIREMENT PLANS (continued)

Funding and administrative costs of the qualified noncontributory defined benefit retirement plan and 401(k) plan charged to salaries and employee benefits in the Consolidated Statements of Income for the years ended December 31 were as follows (in thousands):

	2023		2022	2021
Qualified noncontributory defined benefit retirement plan	$	1,211	1,298	1,178
401(k) plan	701		636	610

The Company expects a total minimum contribution of $258,000 to the qualified noncontributory defined benefit retirement plans in 2024.

Citizens National had a qualified noncontributory defined benefit pension plan which covered employees hired before May 1, 2005.  The Company assumed this plan at the time of the merger. At December 31, 2023 and 2022, the amount of the liability for this plan was, respectively, $122,000 and $128,000, representing the funded status of the plan.

The Bank has a benefit plan which permits eligible officers to defer a portion of their compensation.  The deferred compensation balance, which accrues interest at 8% annually, is distributable in cash after retirement or termination of employment.  The amount of such deferred compensation liability at December 31, 2023 and 2022 was $2,754,000 and $2,867,000, respectively.

The Bank also has supplemental income plans which provide certain employees an amount based on a percentage of average compensation, payable in accordance with individually defined schedules upon retirement. The projected benefit obligation included in other liabilities for the supplemental income plans at December 31, 2023 and 2022 is $570,000 and $689,000, respectively. The average discount rate used to determine the present value of the obligations was approximately 5.7% in 2023 and 5.1% in 2022. There were no service costs associated with the plans for 2023, 2022, or 2021.  Interest costs were $26,000, $36,000, and $42,000 for 2023, 2022, and 2021, respectively.

The deferred compensation plan and supplemental income plans are nonqualified and unfunded. Participation in each plan is limited to a select group of management.

Effective February 1, 2009, the Company established a nonqualified defined benefit retirement plan, which is also unfunded, for certain highly compensated employees.  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 years ended December 31 are summarized as follows (in thousands):

	2023		2022	2021
Service cost	$	—	—	—
Interest cost	77		54	52
Amortization of unrecognized (gain) loss	—		8	8
Net periodic pension cost	$	77	62	60

-53-

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

(Continued)

NOTE 17 - RETIREMENT PLANS (continued)

A reconciliation of changes in the projected benefit obligation of the nonqualified defined benefit retirement plan at December 31 follows (in thousands):

	2023		2022	2021
Projected benefit obligation at beginning of year	$	1,606	1,999	2,124
Service cost	—		—	—
Interest cost	77		54	52
Actuarial (gain) or loss	35		(303)	(33)
Benefits paid	(145)		(144)	(144)
Projected benefit obligation at end of year	$	1,573	1,606	1,999

Projected benefit obligations for the nonqualified defined benefit retirement plan are included in other liabilities in the Consolidated Balance Sheets.

The accumulated benefit obligation for the nonqualified defined benefit retirement plan at December 31, 2023 and 2022 was $1,573,000 and $1,606,000, respectively.

At December 31, 2023 and 2022, unrecognized net loss of $55,000 and $27,000, respectively, was included in accumulated other comprehensive income (loss).

Amounts recognized in accumulated other comprehensive loss, net of tax, at December 31 for the nonqualified defined benefit retirement plan consists of (in thousands):

	2023		2022	2021
Net actuarial (gain) or loss	$	28	(246)	(32)

The estimated unrecognized net actuarial gain that will be amortized from accumulated other comprehensive income into net periodic benefit cost during 2024 for the nonqualified defined benefit retirement plan is $0.

Key weighted-average assumptions used to determine the benefit obligation and net periodic pension costs for the nonqualified defined benefit retirement plan for the years ended December 31 were as follows:

	2023		2022		2021
Benefit obligation:
Discount rate	4.83	%	5.02	%	2.83	%
Salary increase rate	N/A		N/A		N/A
Net periodic pension cost:
Discount rate	5.02	%	2.83	%	2.52	%
Salary increase rate	N/A		N/A		N/A
Amortization period in years	18.61		19.41		20.16

-54-

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

(Continued)

NOTE 17 - RETIREMENT PLANS (continued)

The nonqualified defined benefit retirement plan is not funded.  Therefore no contributions will be made in 2024. 

 Estimated future benefit payments reflecting expected future service for the years ended after December 31, 2023 are (in thousands):

2024	$	144
2025	144
2026	143
2027	143
2028	142
2029-2033	624

NOTE 18 - STOCK-BASED COMPENSATION

LCNB established an Ownership Incentive Plan (the "2002 Plan") during 2002 that allowed for stock-based awards to eligible employees, as determined by the Board of Directors.  The awards were in the form of stock options, share awards, and/or appreciation rights.  The 2002 Plan provided for the issuance of up to 200,000 shares. The 2002 Plan expired on April 16, 2012. Any outstanding unexercised options, however, continued to be exercisable in accordance with their terms and the last of the options were exercised during 2021.

The 2015 Ownership Incentive Plan (the "2015 Plan") was approved by LCNB's shareholders at the annual meeting on April 28, 2015 and allows for stock-based awards to eligible employees, as determined by the Compensation Committee of LCNB's Board of Directors ("Compensation Committee"). Awards may be made in the form of stock options, appreciation rights, restricted shares, and/or restricted share units. The 2015 Plan provides for the issuance of up to 450,000 shares of common stock. The 2015 Plan will terminate on April 28, 2025 and is subject to earlier termination by the Compensation Committee.

Stock-based awards may be in the form of treasury shares or newly issued shares.

LCNB has not granted stock options since 2012. The remaining 311 outstanding shares under the plan were exercised in 2021 at a weighted average exercise price of $12.60

The following table provides information related to stock options exercised during the years indicated (in thousands):

	2021
Intrinsic value of options exercised	1
Cash received from options exercised	4
Tax benefit realized from options exercised	—

Compensation costs related to option awards were recognized in full during the first quarter 2017.

-55-

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

(Continued)

NOTE 18 - STOCK-BASED COMPENSATION (continued)

Restricted stock awards granted under the 2015 Plan were as follows:

	2023			2022			2021
	Shares	Weighted Average Grant Date Fair Value		Shares	Weighted Average Grant Date Fair Value		Shares	Weighted Average Grant Date Fair Value
Nonvested at January 1,	58,314	$	17.99	44,512	$	17.08	28,596	$	17.42
Granted	44,150	17.84		32,554	19.25		26,321	16.85
Vested	(23,447)	17.89		(18,752)	18.01		(9,649)	17.49
Forfeited	—	—		—	—		(756)	16.86
Nonvested at December 31,	79,017	$	17.94	58,314	$	17.99	44,512	$	17.08

At December 31, 2023, there were 79,017 restricted stock awards outstanding with an approximate stock value of $1,246,000 based on that day's closing stock price. At December 31, 2022, there were 58,314 restricted stock awards outstanding with an approximate stock value of $1,050,000 based on that day's closing stock price. The grant date fair value of restricted stock awards was $788,000 and $627,000 in 2023 and 2022, respectively. Grants to officers of LCNB vest over a period of five years while grants to members of the board of directors vest immediately. The grant date fair value is recognized ratably into income over the vesting period.

Total expense related to restricted stock awards included in salaries and wages in the Consolidated Statements of Income for the years ended December 31, 2023, 2022, and 2021 was $563,000, $531,000, and $249,000 respectively. The related tax benefit for the years ended December 31, 2023, 2022, and 2021 was $118,000, $111,000, and $52,000, respectively.

Unrecognized compensation expense for restricted stock awards was $926,000 at December 31, 2023 and is expected to be recognized over a period of 4.2 years.

NOTE 19 - EARNINGS PER SHARE

LCNB has granted restricted stock awards with non-forfeitable dividend rights, which are considered participating securities. Accordingly, earnings per share is computed using the two-class method as required by FASB ASC 260-10-45. Basic earnings per common share is calculated by dividing net income allocated to common shareholders by the weighted average number of common shares outstanding during the period, which excludes the participating securities.  Diluted earnings per common share is adjusted for the dilutive effects of stock options, warrants, and restricted stock.  

-56-

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

(Continued)

NOTE 19 - EARNINGS PER SHARE (continued)

Earnings per share for the years ended December 31 were calculated as follows (in thousands, except share and per share data):

	2023		2022	2021
Net income	$	12,628	22,128	20,974
Less allocation of earnings and dividends to participating securities	86		114	75
Net income allocated to common shareholders	$	12,542	22,014	20,899
Weighted average common shares outstanding, gross	11,497,330		11,469,676	12,635,013
Less average participating securities	79,473		58,695	45,408
Weighted average number of shares outstanding used in the calculation of basic earnings per common share	11,417,857		11,410,981	12,589,605
Add dilutive effect of:
Stock options	—		—	8
Adjusted weighted average number of shares outstanding used in the calculation of diluted earnings per common share	11,417,857		11,410,981	12,589,613
Earnings per common share:
Basic	$	1.10	1.93	1.66
Diluted	1.10		1.93	1.66

NOTE 20 - RELATED PARTY TRANSACTIONS

LCNB has entered into related party transactions with various directors and executive officers. Management believes these transactions do not involve more than a normal risk of collectability or present other unfavorable features.  The following table provides a summary of the loan activity for these officers and directors for the years ended December 31 (in thousands):

	2023		2022
Beginning balance	$	2,192	2,125
New loans and advances	436		317
Change in composition of related parties	—		—
Reductions	(164)		(250)
Ending Balance	$	2,464	2,192

Deposits from executive officers, directors and related interests of such persons held by the Company at December 31, 2023 and 2022 amounted to $2,721,000 and $2,163,000, respectively.

NOTE 21 - FAIR VALUE OF FINANCIAL INSTRUMENTS

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 from the sale of an asset in an orderly transaction between market participants at the measurement date.

-57-

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

(Continued)

NOTE 21 - FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)

The inputs to the 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.

Equity Securities with a Readily Determinable Fair Value

Equity securities with a readily determinable fair value are reported at fair value with changes in fair value reported in other operating income in the Consolidated Statements of Income. Fair values for equity securities are determined based on market quotations (level 1). At December 31, 2022, LCNB had investments in two mutual funds that were traded in active markets and their fair values were based on market quotations (level 1). These two mutual funds were sold during the first quarter of 2023. An investment in another mutual fund is measured at fair value using the fund's net asset value ("NAV") and is considered level 1 because the NAV is determined and published and is the basis for current transactions.

Debt Securities, Available-for-Sale

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 (loss). LCNB utilizes a pricing service for determining the fair values of its debt securities.  Methods and significant assumptions used to estimate fair value are as follows:

•Fair value for U.S. Treasury notes are determined based on market quotations (level 1).

•Fair values for the other debt securities are 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.  

Assets Recorded at Fair Value on a Nonrecurring Basis

Assets that may be recorded at fair value on a nonrecurring basis include individually evaluated collateral dependent loans (or impaired loans prior to the adoption of ASC 326), other real estate owned, and other repossessed assets.

LCNB does not record loans at fair value on a recurring basis. However, from time to time, nonrecurring fair value adjustments to collateral dependent loans are recorded to reflect partial write-downs or specific reserves that are based on the observable market price or current estimated value of the collateral. These loans are reported in the nonrecurring table below at initial recognition of significant borrower distress and on an ongoing basis until recovery or charge-off. The fair values of distressed loans are determined using either the sales comparison approach or income approach. Respective unobservable inputs for the approaches consist of adjustments for differences between comparable sales and the utilization of appropriate capitalization rates.

Other real estate owned is adjusted to fair value, less costs to sell, 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.  Other repossessed assets are valued at estimated sales prices, less costs to sell. The inputs for other real estate owned and other repossessed assets are considered to be level 3.

-58-

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

(Continued)

NOTE 21 - FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)

The following table summarizes the valuation of LCNB’s assets recorded at fair value by input levels as of December 31 (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)
2023
Recurring fair value measurements:
Equity securities with a readily determinable fair value:
Equity securities	$	96	96	—	—
Mutual funds	—		—	—	—
Mutual funds measured at net asset value	1,240		1,240	—	—
Debt securities available-for-sale:
U.S. Treasury notes	68,202		68,202	—	—
U.S. Agency notes	80,901		—	80,901	—
Corporate bonds	6,534		—	6,534	—
U.S. Agency mortgage-backed securities	72,790		—	72,790	—
Municipal securities:
Non-taxable	7,171		—	7,171	—
Taxable	41,003		—	41,003	—
Total recurring fair value measurements	$	277,937	69,538	208,399	—
Nonrecurring fair value measurements:
Individually evaluated collateral dependent loans	$	—	—	—	—
Total nonrecurring fair value measurements	$	—	—	—	—
2022
Recurring fair value measurement:
Equity securities with a readily determinable fair value:
Equity securities	$	1,039	1,039	—	—
Mutual funds	41		41	—	—
Mutual funds measured at net asset value	1,193		1,193	—	—
Debt securities available-for-sale:
U.S. Treasury notes	76,447		76,447	—	—
U.S. Agency notes	77,976		—	77,976	—
Corporate bonds	6,685		—	6,685	—
U.S. Agency mortgage-backed securities	79,440		—	79,440	—
Municipal securities:
Non-taxable	8,524		—	8,524	—
Taxable	40,778		—	40,778	—
Total recurring fair value measurements	$	292,123	78,720	213,403	—
Nonrecurring fair value measurements:
Impaired loans	$	923	—	—	923
Total nonrecurring fair value measurements	$	923	—	—	923

-59-

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

(Continued)

NOTE 21 - FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)

The following table presents quantitative information about unobservable inputs used in nonrecurring Level 3 fair value measurements at December 31, 2023 and 2022 (dollars in thousands):

					Range
	Fair Value		Valuation Technique	Unobservable Inputs	High		Low		Weighted Average
2023
Individually evaluated collateral dependent loans	$	—	Estimated sales price	Adjustments for comparable properties, discounts to reflect current market conditions	Not applicable
2022
Impaired loans	$	—	Estimated sales price	Adjustments for comparable properties, discounts to reflect current market conditions	Not applicable
	923		Discounted cash flows	Discount rate	8.13	%	4.63	%	6.04	%

-60-

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

(Continued)

NOTE 21 - FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)

Carrying amounts and estimated fair values of financial instruments as of December 31 were as follows (in thousands):

				Fair Value Measurements at the End of the Reporting Period Using
	Carrying Amount		Fair Value	Quoted Prices in Active  Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
2023
FINANCIAL ASSETS:
Cash and cash equivalents	$	39,723	39,723	39,723	—	—
Debt securities, held-to-maturity	16,858		15,679	—	—	15,679
Loans, net	1,712,946		1,534,406	—	—	1,534,406
Accrued interest receivable	8,405		8,405	—	8,405	—
FINANCIAL LIABILITIES:
Deposits	1,824,389		1,824,105	1,485,418	338,687	—
Short-term borrowings	97,395		97,395	—	97,395	—
Long-term debt	113,123		112,986	—	112,986	—
Accrued interest payable	1,697		1,697	—	1,697	—
2022
FINANCIAL ASSETS:
Cash and cash equivalents	$	22,701	22,701	22,701	—	—
Debt securities, held-to-maturity	19,878		18,885	—	—	18,885
Loans, net	1,395,632		1,219,112	—	—	1,219,112
Accrued interest receivable	7,482		7,482	—	7,482	—
FINANCIAL LIABILITIES:
Deposits	1,604,970		1,604,380	1,448,470	155,910	—
Short-term borrowings	71,455		71,455	—	71,455	—
Long-term debt	19,072		18,573	—	18,573	—
Accrued interest payable	311		311	—	311	—

The fair values of off-balance-sheet financial instruments such as loan commitments and letters of credit are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements. The fair values of such instruments were not material at December 31, 2023 and 2022.

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 the Company.

-61-

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

(Continued)

NOTE 22 - PARENT COMPANY FINANCIAL INFORMATION

Condensed financial information for LCNB Corp., at the parent company level only, follows (in thousands):

Condensed Balance Sheets:
December 31,	2023		2022
Assets:
Cash on deposit with subsidiary	$	2,370	916
Cash on deposit with unrelated depository institution	48		620
Equity securities, at fair value	—		1,024
Investment in subsidiaries	244,344		215,222
Other assets	872		59
Total assets	$	247,634	217,841
Liabilities:
Short-term borrowings	$	—	3,000
Long-term debt	12,154		14,072
Other liabilities	177		94
Total liabilities	12,331		17,166
Shareholders' equity	235,303		200,675
Total liabilities and shareholders' equity	$	247,634	217,841

Condensed Statements of Income
Year ended December 31,	2023		2022	2021
Income:
Dividends from subsidiaries	$	30,015	17,850	15,820
Interest and dividends	10		35	34
Other income (loss), net	(62)		(123)	155
Total income	29,963		17,762	16,009
Total expenses	4,112		3,305	1,764
Income before income tax benefit and equity in undistributed income of subsidiaries	25,851		14,457	14,245
Income tax benefit	(738)		(705)	(333)
Equity in undistributed income (loss) of subsidiaries	(13,961)		6,966	6,396
Net income	$	12,628	22,128	20,974

-62-

LCNB CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

(Continued)

NOTE 22 - PARENT COMPANY FINANCIAL INFORMATION (continued)

Condensed Statements of Cash Flows
Year ended December 31,	2023		2022	2021
Cash flows from operating activities:
Net income	$	12,628	22,128	20,974
Adjustments for non-cash items -
Increase (decrease) in undistributed income of subsidiaries	13,961		(6,966)	(6,396)
Other, net	292		636	299
Net cash flows provided by operating activities	26,881		15,798	14,877
Cash flows from investing activities:
Proceeds from sales of equity securities	963		—	—
Cash paid for business acquisition, net of cash received	(9,208)		—	—
Net cash flows provided by (used in) investing activities	(8,245)		—	—
Cash flows from financing activities:
Net increase (decrease) in short-term borrowings	(3,000)		3,000	—
Proceeds from long-term debt	—		15,000	—
Principal payments on long-term debt	(1,918)		(928)	—
Proceeds from issuance of common stock	428		409	434
Payments to repurchase common stock	(3,326)		(23,660)	(8,310)
Cash dividends paid on common stock	(9,938)		(9,191)	(9,720)
Other	—		—	4
Net cash flows used in financing activities	(17,754)		(15,370)	(17,592)
Net change in cash	882		428	(2,715)
Cash at beginning of year	1,536		1,108	3,823
Cash at end of year	$	2,418	1,536	1,108

-63-

LCNB CORP. AND SUBSIDIARIES

PART IV

Item 15.  Exhibit and Financial Statement Schedules

(a)1.	Financial Statements
	REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
	Report for 2023 and 2022 - Plante & Moran PLLC (PCAOB ID 166)
	Report for 2021 - FORVIS, LLP (PCAOB ID 686)
	FINANCIAL STATEMENTS
	Consolidated Balance Sheets as of December 31, 2023 and 2022.
	Consolidated Statements of Income for the Years Ended December 31, 2023, 2022, and 2021.
	Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2023, 2022, and 2021.
	Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 2023, 2022, and 2021.
	Consolidated Statements of Cash Flows for the Years Ended December 31, 2023, 2022, and 2021.
	Notes to Consolidated Financial Statements
2.	Financial Statement Schedules – None
3.	Exhibits required by Item 601 Regulation S-K.

(a) Exhibit No.	Exhibit Description
2.1	Agreement and Plan of Merger dated as of December 20, 2017 by and between LCNB Corp. and Columbus First Bancorp, Inc. - incorporated by reference to the Registrant's Current Report on Form 8-K filed on December 21, 2017, Exhibit 2.1.
2.2	Agreement and Plan of Merger dated as of May 17, 2023 by and between LCNB Corp. and Cincinnati Bancorp, Inc. - incorporated by reference to the Registrant's Current Report on Form 8-K filed on May 18, 2023, Exhibit 2.1.
2.3.	Agreement and Plan of Merger dated as of November 28, 2023 by and between LCNB Corp. and Eagle Financial Bancorp, Inc. - incorporated by reference to the Registrant's Current Report on Form 8-K filed on November 29, 2023, Exhibit 2.1.
3.1	Amended and Restated Articles of Incorporation of LCNB Corp., as amended. (This document represents the Amended and Restated Articles of Incorporation of LCNB Corp. in compiled form incorporating all amendments. The compiled document has not been filed with the Ohio Secretary of State.) – incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2018, 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).
4.1	Description of Registrant's Securities - Incorporated by reference to Registrant's Form 10-K for the fiscal year ended December 31, 2019, Exhibit 4.1.
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	LCNB Corp. 2015 Ownership Incentive Plan - incorporated by reference to Registrant's Form DEF 14A Proxy Statement pursuant to Section 14(a), dated March 13, 2015, Exhibit A (001-35292).
10.3	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.
10.4	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.
10.5	Form of Restricted Share Grant Agreement under the LCNB Corp. 2015 Ownership Incentive Plan - incorporated by reference to Registrant's 2015 Form 10-K, Exhibit 10.7.

-64-

LCNB CORP. AND SUBSIDIARIES

(a) Exhibit No.	Exhibit Description
10.6	Form of Business Loan Agreement between LCNB Corp. and Bankers' Bank - incorporated by reference to Registrant's Current Report on Form 8-K filed on February 14, 2022, Exhibit 10.1.
14.1	LCNB Corp. Code of Business Conduct and Ethics - incorporated by reference to the Registrant's Form 10-K for the fiscal year ended December 31, 2018, Exhibit 14.1.
19	LCNB Corp. Insider Trading Policy - previously filed.
21	LCNB Corp. subsidiaries - previously filed.
23.1	Consent of Independent Registered Public Accounting Firm.
23.2	Consent of Independent Registered Public Accounting Firm
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.
97.1	LCNB Corp. Amended & Restated Clawback Policy - previously filed.
101	The following financial information from LCNB Corp.’s Annual Report on Form 10-K for the year ended December 31, 2023 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, tagged as blocks of text.
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

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LCNB CORP. AND SUBSIDIARIES

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

(Registrant)

/s/ Eric J. Meilstrup

Eric J. Meilstrup, President & Chief Executive Officer

October 21, 2024

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