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Note 2 - Business Combinations | 9 Months Ended
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Sep. 30, 2024
Notes to Financial Statements |
Business Combination Disclosure [Text Block] | 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 branch offices in Cincinnati, Ohio and 1 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. During the quarter ended September 30, 2024, LCNB consolidated one of the full-service branches acquired from Cincinnati Federal with a full-service branch acquired from EAGLE.Bank resulting in the closure of one branch office in Cincinnati, Ohio. CNNB results of operations were included in LCNB's results beginning November 1, 2023. Under the terms of the merger agreement, CNNB shareholders had the opportunity to elect to receive either 0.9274 shares of LCNB Corp. 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 Corp. 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 Corp.'s common stock on the acquisition date. 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 originally reported at December 31, 2023 and as adjusted at September 30, 2024 (in thousands):
|  | December 31, 2023 |  |  | Adjustments |  |  | September 30, 2024 |
Consideration: |  |  |  |  |  |  |  |  |  |  |  |
Cash consideration |  | $ | 9,475 |  |  |  | — |  |  |  | 9,475 |
Common stock (2,042,598 shares issued at $13.99 per share) |  |  | 28,576 |  |  |  | — |  |  |  | 28,576 |
Fair value of total consideration transferred |  |  | 38,051 |  |  |  | — |  |  |  | 38,051 |
Identifiable Assets Acquired: |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  |  | 11,368 |  |  |  | — |  |  |  | 11,368 |
Debt securities, available-for-sale |  |  | 5,210 |  |  |  | — |  |  |  | 5,210 |
Federal Home Loan Bank stock |  |  | 7,508 |  |  |  | — |  |  |  | 7,508 |
Loans, net |  |  | 236,692 |  |  |  | (732 | ) |  |  | 235,960 |
Premises and equipment |  |  | 2,767 |  |  |  | — |  |  |  | 2,767 |
Operating lease right-of-use assets |  |  | 64 |  |  |  | — |  |  |  | 64 |
Core deposit and other intangibles |  |  | 8,391 |  |  |  | — |  |  |  | 8,391 |
Bank owned life insurance |  |  | 4,413 |  |  |  | — |  |  |  | 4,413 |
Deferred income taxes |  |  | 4,451 |  |  |  | 82 |  |  |  | 4,533 |
Other assets |  |  | 12,950 |  |  |  | 122 |  |  |  | 13,072 |
Total identifiable assets acquired |  |  | 293,814 |  |  |  | (528 | ) |  |  | 293,286 |
Liabilities Assumed: |  |  |  |  |  |  |  |  |  |  |  |
Deposits |  |  | 210,532 |  |  |  | — |  |  |  | 210,532 |
Short-term borrowings |  |  | 55,999 |  |  |  | — |  |  |  | 55,999 |
Long-term debt |  |  | 5,963 |  |  |  | — |  |  |  | 5,963 |
Operating lease liabilities |  |  | 68 |  |  |  | (4 | ) |  |  | 64 |
Other liabilities |  |  | 3,489 |  |  |  | — |  |  |  | 3,489 |
Total liabilities assumed |  |  | 276,051 |  |  |  | (4 | ) |  |  | 276,047 |
Total Identifiable Net Assets Acquired |  |  | 17,763 |  |  |  | (524 | ) |  |  | 17,239 |
Goodwill Resulting From Merger |  | $ | 20,288 |  |  |  | 524 |  |  |  | 20,812 |
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. While the Bank believes that the information available on the merger date provided a reasonable basis for estimating fair value, additional information and evidence may be provided during the fourth quarter of 2024 which will be utilized to finalize all valuations and record final adjustments during the one year subsequent measurement period. These adjustments may include: (i) changes in deferred tax assets or liabilities related to fair value estimates and changes in the expected realization of items considered to be net operating loss carryforwards due to tax calculations still in process, and (ii) changes in goodwill as a result of the net effect of any adjustments. As such, any changes in the estimated fair value of assets, including acquired loans, will be recognized in the period the adjustment is identified. The loan adjustment in the table above was due to a fair value adjustment to deferred fees and costs on loans acquired. The other assets, operating lease liabilities and resulting deferred tax adjustments in the table above were related to the updated fair value adjustments. 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. Total 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 $10,000 and $332,000 during the three and nine months ended September 30, 2024, respectively, and totaled $290,000 and $705,000 during the three and nine months ended September 30, 2023, respectively. They were expensed as incurred and are recorded as merger-related expenses in the consolidated statements of income. Eagle Financial Bancorp, Inc. On April 12, 2024, LCNB acquired Eagle Financial Bancorp, Inc. (“EFBI”), the holding company for EAGLE.bank, an Ohio state-chartered bank. Under the terms of the definitive merger agreement, EFBI merged with and into LCNB Corp., immediately followed by the merger of EAGLE.bank with and into LCNB National Bank. EAGLE.bank operated three full-service banking offices in Cincinnati, Ohio, which became offices of LCNB after the merger. This transaction increased LCNB’s presence in the Cincinnati market. Subject to the terms of the merger agreement, EFBI shareholders had the opportunity to elect to receive either 1.1401 shares of LCNB Corp. 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. 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. The following table summarizes the fair value of the total consideration transferred as a part of the EFBI acquisition and the fair value of identifiable assets acquired and liabilities assumed as originally reported at June 30, 2024 and as adjusted at September 30, 2024 (in thousands):
|  | June 30, 2024 |  |  | Adjustments |  |  | September 30, 2024 |
Consideration: |  |  |  |  |  |  |  |  |  |  |  |
Cash consideration |  | $ | 10,256 |  |  |  | (83 | ) |  |  | 10,173 |
Common stock (918,128 shares issued at $14.04 per share) |  |  | 12,891 |  |  |  | (704 | ) |  |  | 12,187 |
Fair value of total consideration transferred |  |  | 23,147 |  |  |  | (787 | ) |  |  | 22,360 |
Identifiable Assets Acquired: |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  |  | 8,029 |  |  |  | — |  |  |  | 8,029 |
Debt securities, available-for-sale |  |  | 698 |  |  |  | — |  |  |  | 698 |
Federal Home Loan Bank stock |  |  | 4,334 |  |  |  | — |  |  |  | 4,334 |
Loans, net |  |  | 127,700 |  |  |  | — |  |  |  | 127,700 |
Premises and equipment |  |  | 3,427 |  |  |  | — |  |  |  | 3,427 |
Operating lease right-of-use assets |  |  | 48 |  |  |  | — |  |  |  | 48 |
Core deposit and other intangibles |  |  | 3,760 |  |  |  | — |  |  |  | 3,760 |
Bank owned life insurance |  |  | 3,004 |  |  |  | — |  |  |  | 3,004 |
Deferred income taxes |  |  | 1,813 |  |  |  | 2,555 |  |  |  | 4,368 |
Other assets |  |  | 2,590 |  |  |  | 482 |  |  |  | 3,072 |
Total identifiable assets acquired |  |  | 155,403 |  |  |  | 3,037 |  |  |  | 158,440 |
Liabilities Assumed: |  |  |  |  |  |  |  |  |  |  |  |
Deposits |  |  | 132,435 |  |  |  | — |  |  |  | 132,435 |
Short-term borrowings |  |  | 13,000 |  |  |  | — |  |  |  | 13,000 |
Operating lease liabilities |  |  | 48 |  |  |  | — |  |  |  | 48 |
Other liabilities |  |  | 773 |  |  |  | (1 | ) |  |  | 772 |
Total liabilities assumed |  |  | 146,256 |  |  |  | (1 | ) |  |  | 146,255 |
Total Identifiable Net Assets Acquired |  |  | 9,147 |  |  |  | 3,038 |  |  |  | 12,185 |
Goodwill Resulting From Merger |  | $ | 14,000 |  |  |  | (3,825 | ) |  |  | 10,175 |
The fair value and gross contractual amounts of non-PCD loans as of the acquisition date was $101.7 million and $112.5 million, respectively. LCNB recorded a provision for credit losses on these loans of $763,000. 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. While the Company believes that the information available on the merger date provided a reasonable basis for estimating fair value, additional information and evidence may be provided during the fourth quarter of 2024 or later which will be utilized to finalize all valuations and record final adjustments during the one year subsequent measurement period. These adjustments may include: (i) changes in deferred tax assets or liabilities related to fair value estimates and changes in the expected realization of items considered to be net operating loss carryforwards due to tax calculations still in process, and (ii) changes in goodwill as a result of the net effect of any adjustments. As such, any changes in the estimated fair value of assets will be recognized in the period the adjustment is identified. The consideration adjustments are associated with the unearned portion of Eagle.bank's employee stock ownership plan. The other assets, other liabilities and resulting deferred tax adjustments in the table above were related to the updated fair value adjustments. 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. Total 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 nine years. Direct expenses related to the EFBI acquisition totaled $271,000 and $3,044,000 during the three and nine months ended September 30, 2024, respectively, and totaled $12,000 and $37,000 during the three and nine months ended September 30, 2023, respectively. They were expensed as incurred and are recorded as merger-related expenses in the consolidated statements of income.

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