UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
( X )
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2004
( )
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
(I.R.S. Employer
incorporation or organization)
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)
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 X No
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes X No
The number of shares outstanding of the issuer's common stock, without par value, as of July 23, 2004 was 3,346,306 shares.
LCNB Corp.
INDEX
Page No.
Part I - Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets -
June 30, 2004, and December 31, 2003
1
Consolidated Statements of Income -
Three and Six Months Ended June 30, 2004 and 2003
2
Consolidated Statements of Comprehensive Income -
Three and Six Months Ended June 30, 2004 and 2003
3
Consolidated Statements of Stockholders' Equity -
Six Months Ended June 30, 2004 and 2003
4
Consolidated Statements of Cash Flows -
Six Months Ended June 30, 2004 and 2003
5
Notes to Consolidated Financial Statements
6-11
Independent Accountants' Review Report
12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
13-26
Item 3. Quantitative and Qualitative Disclosures about
Market Risks
27
Item 4 Controls and Procedures
27
Part II - Other Information
Item 1 Legal Proceedings
28
Item 2 Changes in Securities and Use of Proceeds
28-29
Item 3 Defaults by the Company on its Senior Securities
29
Item 4 Submission of Matters to a Vote of Security Holders
29
Item 5 Other Information
29
Item 6 Exhibits and Reports on Form 8-K
30
Signatures
31
LCNB CORP. AND SUBSIDIARIES | |||||||||||||||
CONSOLIDATED BALANCE SHEETS | |||||||||||||||
(Dollars in thousands) | |||||||||||||||
June 30, | December 31, | ||||||||||||||
2004 | 2003 | ||||||||||||||
(Unaudited) | |||||||||||||||
ASSETS: | |||||||||||||||
Cash and due from banks | $ | 14,198 | 11,784 | ||||||||||||
Federal funds sold | - | 22,625 | |||||||||||||
Total cash and cash equivalents | 14,198 | 34,409 | |||||||||||||
Securities available for sale, at market value | 140,330 | 150,939 | |||||||||||||
Federal Reserve Bank stock and Federal Home | |||||||||||||||
Loan Bank stock, at cost | 3,008 | 2,962 | |||||||||||||
Loans, net | 326,192 | 315,683 | |||||||||||||
Premises and equipment, net | 12,440 | 12,009 | |||||||||||||
Intangibles, net | 2,503 | 2,832 | |||||||||||||
Other assets | 4,523 | 4,774 | |||||||||||||
TOTAL ASSETS | $ | 503,194 | 523,608 | ||||||||||||
LIABILITIES: | |||||||||||||||
Deposits – | |||||||||||||||
Noninterest-bearing | $ | 70,067 | 66,159 | ||||||||||||
Interest-bearing | 374,686 | 396,874 | |||||||||||||
Total deposits | 444,753 | 463,033 | |||||||||||||
Long-term debt | 4,167 | 4,197 | |||||||||||||
Accrued interest and other liabilities | 3,341 | 3,930 | |||||||||||||
TOTAL LIABILITIES | 452,261 | 471,160 | |||||||||||||
SHAREHOLDERS’ EQUITY: | |||||||||||||||
Common stock-no par value, authorized 4,000,000 shares; | |||||||||||||||
issued and outstanding 3,551,884 shares | 10,560 | 10,560 | |||||||||||||
Surplus | 10,553 | 10,553 | |||||||||||||
Retained earnings | 35,221 | 33,872 | |||||||||||||
Treasury shares at cost, 202,278 and 177,508 shares at June 30, | |||||||||||||||
2004 and December 31, 2003, respectively | (5,281) | (4,356) | |||||||||||||
Accumulated other comprehensive income (loss), net of taxes | (120) | 1,819 | |||||||||||||
TOTAL SHAREHOLDERS’ EQUITY | 50,933 | 52,448 | |||||||||||||
TOTAL LIABILITIES AND | |||||||||||||||
SHAREHOLDERS’ EQUITY | $ | 503,194 | 523,608 | ||||||||||||
The accompanying notes to the consolidated financial statements are an integral part of these statements. | |||||||||||||||
-1-
LCNB CORP. AND SUBSIDIARIES | |||||||||||||
CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||
(In thousands except share and per share data) | |||||||||||||
(unaudited) | |||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||
June 30, | June 30, | ||||||||||||
2004 | 2003 | 2004 | 2003 | ||||||||||
INTEREST INCOME: | |||||||||||||
Interest and fees on loans | $ | 5,003 | 5,539 | 10,063 | 11,308 | ||||||||
Dividends on Federal Reserve Bank | |||||||||||||
and Federal Home Loan Bank stock | 43 | 42 | 66 | 64 | |||||||||
Interest on investment securities – | |||||||||||||
Taxable | 723 | 751 | 1,470 | 1,504 | |||||||||
Non-taxable | 479 | 530 | 973 | 1,063 | |||||||||
Other short-term investments | 32 | 52 | 66 | 92 | |||||||||
TOTAL INTEREST INCOME | 6,280 | 6,914 | 12,638 | 14,031 | |||||||||
INTEREST EXPENSE: | |||||||||||||
Interest on deposits | 1,695 | 2,260 | 3,503 | 4,511 | |||||||||
Interest on borrowings | 53 | 69 | 107 | 142 | |||||||||
TOTAL INTEREST EXPENSE | 1,748 | 2,329 | 3,610 | 4,653 | |||||||||
NET INTEREST INCOME | 4,532 | 4,585 | 9,028 | 9,378 | |||||||||
PROVISION FOR LOAN LOSSES | 210 | 99 | 300 | 217 | |||||||||
NET INTEREST INCOME AFTER | |||||||||||||
PROVISION FOR LOAN LOSSES | 4,322 | 4,486 | 8,728 | 9,161 | |||||||||
NON-INTEREST INCOME: | |||||||||||||
Trust income | 350 | 234 | 715 | 489 | |||||||||
Service charges and fees | 971 | 702 | 1,870 | 1,339 | |||||||||
Net gain on sales of securities | - | - | 127 | - | |||||||||
Insurance agency income | 402 | 399 | 728 | 760 | |||||||||
Gains from sales of mortgage loans | 21 | 275 | 42 | 502 | |||||||||
Gain from sale of credit card portfolio | - | - | 403 | - | |||||||||
Other operating income | 32 | 30 | 69 | 65 | |||||||||
TOTAL NON-INTEREST INCOME | 1,776 | 1,640 | 3,954 | 3,155 | |||||||||
NON-INTEREST EXPENSE: | |||||||||||||
Salaries and wages | 1,735 | 1,707 | 3,507 | 3,411 | |||||||||
Pension and other employee benefits | 430 | 412 | 962 | 896 | |||||||||
Equipment expenses | 265 | 254 | 513 | 486 | |||||||||
Occupancy expense – net | 301 | 268 | 597 | 549 | |||||||||
State franchise tax | 147 | 146 | 284 | 263 | |||||||||
Marketing | 73 | 53 | 208 | 160 | |||||||||
Intangible amortization | 149 | 152 | 301 | 302 | |||||||||
ATM expense | 76 | 74 | 152 | 143 | |||||||||
Other non-interest expense | 821 | 809 | 1,753 | 1,600 | |||||||||
TOTAL NON-INTEREST EXPENSE | 3,997 | 3,875 | 8,277 | 7,810 | |||||||||
INCOME BEFORE INCOME TAXES | 2,101 | 2,251 | 4,405 | 4,506 | |||||||||
PROVISION FOR INCOME TAXES | 545 | 553 | 1,187 | 1,202 | |||||||||
NET INCOME | $ | 1,556 | 1,698 | 3,218 | 3,304 | ||||||||
Dividends declared per common share | $ | 0.28 | 0.2625 | 0.555 | 0.525 | ||||||||
Earnings per common share: | |||||||||||||
Basic | $ | 0.46 | 0.49 | 0.96 | 0.96 | ||||||||
Diluted | 0.46 | 0.49 | 0.96 | 0.96 | |||||||||
Average shares outstanding: | |||||||||||||
Basic | 3,362,446 | 3,437,008 | 3,367,990 | 3,439,162 | |||||||||
Diluted | 3,363,578 | 3,437,158 | 3,369,022 | 3,439,214 | |||||||||
The accompanying notes to consolidated financial statements are an integral part of these statements. | |||||||||||||
-2-
LCNB CORP. AND SUBSIDIARIES | |||||||||||||||||||
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | |||||||||||||||||||
(In thousands) | |||||||||||||||||||
(unaudited) | |||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||
June 30, | June 30, | ||||||||||||||||||
2004 | 2003 | 2004 | 2003 | ||||||||||||||||
Net Income | $ | 1,556 | 1,698 | 3,218 | 3,304 | ||||||||||||||
Other comprehensive income (loss): | |||||||||||||||||||
Net unrealized gain (loss) on available for sale securities (net of tax benefits of $1,220 and $956 for the three and six months ended June 30, 2004, and net of taxes of $388 and $649 for the three and six months ended June 30, 2003) | (2,366) | 754 | (1,854) | 1,261 | |||||||||||||||
Reclassification adjustment for net realized gain on sale of available for sale securities included in net income (net of taxes of $43 for the six months ended June 30, 2004) | - | - | (85) | - | |||||||||||||||
TOTAL COMPREHENSIVE INCOME (LOSS) | $ | (810) | 2,452 | 1,279 | 4,565 | ||||||||||||||
-3-
LCNB CORP. AND SUBSIDIARIES | |||||||||||||||||||||||||||||||||
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY | |||||||||||||||||||||||||||||||||
($000's, except per share amounts) | |||||||||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||||||||
Accumulated | |||||||||||||||||||||||||||||||||
Other | Total | ||||||||||||||||||||||||||||||||
Common | Retained | Treasury | Comprehensive | Shareholders’ | |||||||||||||||||||||||||||||
Shares | Surplus | Earnings | Shares | Income | Equity | ||||||||||||||||||||||||||||
Balance January 1, 2003 | $ | 10,560 | 10,553 | 30,768 | (2,193) | 2,242 | 51,930 | ||||||||||||||||||||||||||
Net income | 3,304 | 3,304 | |||||||||||||||||||||||||||||||
Change in estimated fair value of | |||||||||||||||||||||||||||||||||
securities available for sale, | |||||||||||||||||||||||||||||||||
net of tax and reclassification | |||||||||||||||||||||||||||||||||
adjustment | 1,261 | 1,261 | |||||||||||||||||||||||||||||||
Treasury shares purchased | (240) | (240) | |||||||||||||||||||||||||||||||
Cash dividends declared | (1,805) | (1,805) | |||||||||||||||||||||||||||||||
Balance June 30, 2003 | $ | 10,560 | 10,553 | 32,267 | (2,433) | 3,503 | 54,450 | ||||||||||||||||||||||||||
Balance January 1, 2004 | $ | 10,560 | 10,553 | 33,872 | (4,356) | 1,819 | 52,448 | ||||||||||||||||||||||||||
Net income | 3,218 | 3,218 | |||||||||||||||||||||||||||||||
Change in estimated fair value of | |||||||||||||||||||||||||||||||||
securities available for sale, | |||||||||||||||||||||||||||||||||
net of tax and reclassification | |||||||||||||||||||||||||||||||||
adjustment | (1,939) | (1,939) | |||||||||||||||||||||||||||||||
Treasury shares purchased | (925) | (925) | |||||||||||||||||||||||||||||||
Cash dividends declared | (1,869) | (1,869) | |||||||||||||||||||||||||||||||
Balance June 30, 2004 | $ | 10,560 | 10,553 | 35,221 | (5,281) | (120) | 50,933 | ||||||||||||||||||||||||||
The accompanying notes to consolidated financial statements are an integral part of these statements. | |||||||||||||||||||||||||||||||||
-4-
LCNB CORP. AND SUBSIDIARIES | ||||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||
(thousands) | ||||||||||||
(unaudited) | ||||||||||||
Six Months Ended | ||||||||||||
June 30, | ||||||||||||
2004 | 2003 | |||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||
Net income | $ | 3,218 | 3,304 | |||||||||
Adjustments to reconcile net income to net cash | ||||||||||||
provided by operating activities – | ||||||||||||
Depreciation, amortization and accretion | 1,558 | 1,548 | ||||||||||
Provision for loan losses | 300 | 217 | ||||||||||
Deferred income tax provision (benefit) | - | 207 | ||||||||||
Federal Home Loan Bank stock dividends | (46) | (45) | ||||||||||
Realized gains on sales of securities available for sale | (127) | - | ||||||||||
Realized gain on sale of credit card portfolio | (403) | - | ||||||||||
Origination of mortgage loans for sale | (1,665) | (22,115) | ||||||||||
Realized gains from sales of mortgage loans | (42) | (503) | ||||||||||
Proceeds from sales of mortgage loans | ||||||||||||