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Note 3 - Investment Securities | 9 Months Ended
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Sep. 30, 2024
Notes to Financial Statements |
Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block] | NOTE 3 - INVESTMENT SECURITIES The amortized cost and estimated fair value of debt securities at September 30, 2024 and December 31, 2023 are summarized as follows (in thousands):
|  | Amortized Cost |  |  | Unrealized Gains |  |  | Unrealized Losses |  |  | Fair Value |
September 30, 2024 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Debt Securities, Available-for-Sale: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury notes |  | $ | 69,717 |  |  |  | — |  |  |  | 4,145 |  |  |  | 65,572 |
U.S. Agency notes |  |  | 88,668 |  |  |  | — |  |  |  | 5,360 |  |  |  | 83,308 |
Corporate bonds |  |  | 7,450 |  |  |  | — |  |  |  | 588 |  |  |  | 6,862 |
U.S. Agency mortgage-backed securities |  |  | 75,422 |  |  |  | 7 |  |  |  | 7,090 |  |  |  | 68,339 |
Municipal securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  | — |
Non-taxable |  |  | 4,596 |  |  |  | — |  |  |  | 222 |  |  |  | 4,374 |
Taxable |  |  | 36,674 |  |  |  | 1 |  |  |  | 2,508 |  |  |  | 34,167 |
|  | $ | 282,527 |  |  |  | 8 |  |  |  | 19,913 |  |  |  | 262,622 |
Debt Securities, Held-to-Maturity: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Municipal securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-taxable |  | $ | 15,454 |  |  |  | 10 |  |  |  | 765 |  |  |  | 14,699 |
Taxable |  |  | 3,283 |  |  |  | — |  |  |  | 300 |  |  |  | 2,983 |
|  | $ | 18,737 |  |  |  | 10 |  |  |  | 1,065 |  |  |  | 17,682 |
December 31, 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 |
The amortized cost of debt securities in the above table excludes accrued interest of $1.23 million and $1.07 million at September 30, 2024 and December 31, 2023, respectively, that is recorded in other assets on the consolidated balance sheets. The Company estimated the expected credit losses at September 30, 2024 and December 31, 2023 to be immaterial based on the composition of the securities portfolio. Information concerning debt securities with gross unrealized losses at September 30, 2024 and December 31, 2023, 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 Greater |
|  | Fair Value |  |  | Unrealized Losses |  |  | Fair Value |  |  | Unrealized Losses |
September 30, 2024 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Available-for-Sale: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury notes |  | $ | 1,982 |  |  |  | 6 |  |  |  | 63,590 |  |  |  | 4,139 |
U.S. Agency notes |  |  | — |  |  |  | — |  |  |  | 83,308 |  |  |  | 5,360 |
Corporate bonds |  |  | — |  |  |  | — |  |  |  | 6,862 |  |  |  | 588 |
U.S. Agency mortgage-backed securities |  |  | — |  |  |  | — |  |  |  | 68,025 |  |  |  | 7,090 |
Municipal securities: |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Non-taxable |  |  | — |  |  |  | — |  |  |  | 4,374 |  |  |  | 222 |
Taxable |  |  | — |  |  |  | — |  |  |  | 34,046 |  |  |  | 2,508 |
|  | $ | 1,982 |  |  |  | 6 |  |  |  | 260,205 |  |  |  | 19,907 |
Held-to-Maturity: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Municipal securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-taxable |  | $ | — |  |  |  | — |  |  |  | 11,707 |  |  |  | 765 |
Taxable |  |  | — |  |  |  | — |  |  |  | 2,983 |  |  |  | 300 |
|  | $ | — |  |  |  | — |  |  |  | 14,690 |  |  |  | 1,065 |
December 31, 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 |
At September 30, 2024, LCNB’s securities portfolio consisted of 167 securities, 161 of which were in an unrealized loss position. At December 31, 2023, LCNB's securities portfolio consisted of 207 securities, 176 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. LCNB had no intent at September 30, 2024 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 their cost basis. Each quarter, LCNB performs an analysis to determine if any of the unrealized losses on available-for-sale debt securities are comprised of credit losses as compared to unrealized losses due to market interest rate adjustments. The assessment includes a review of the unrealized loss for each security issuance held; the financial condition and near-term prospects of the issuer, including external credit ratings and recent downgrades; and LCNB's ability and intent to hold the security for a period of time sufficient for a recovery in value. LCNB also considers the extent to which the securities are issued by the federal government or its agencies and any guarantee of issued amounts by those agencies. The portfolio continues to consist of a mix of fixed and floating-rate, high quality securities, largely rated AA (or better), displaying an overall effective duration of approximately 3.3 years. No credit losses were determined to be present as of September 30, 2024, as there was no credit quality deterioration noted. Therefore, no provision for credit losses on available-for-sale debt securities was recognized for the third quarter of 2024. Debt securities with a market value of $148.7 million and $124.4 million at September 30, 2024 and December 31, 2023, respectively, were pledged to secure public deposits and for other purposes required or as permitted by law. Excluding holdings in U.S. Treasury securities and U.S. Government Agencies, there were no investments in securities of any issuer that exceeded 10% of LCNB's consolidated shareholders' equity at September 30, 2024. Contractual maturities of debt securities at September 30, 2024 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 |  | $ | 25,093 |  |  |  | 24,668 |  |  |  | 1,163 |  |  |  | 1,158 |
Due from one to five years |  |  | 153,392 |  |  |  | 143,285 |  |  |  | 1,301 |  |  |  | 1,278 |
Due from five to ten years |  |  | 28,620 |  |  |  | 26,331 |  |  |  | 10,459 |  |  |  | 9,919 |
Due after ten years |  |  | — |  |  |  | — |  |  |  | 5,814 |  |  |  | 5,327 |
|  |  | 207,105 |  |  |  | 194,284 |  |  |  | 18,737 |  |  |  | 17,682 |
U.S. Agency mortgage-backed securities |  |  | 75,422 |  |  |  | 68,338 |  |  |  | — |  |  |  | — |
|  | $ | 282,527 |  |  |  | 262,622 |  |  |  | 18,737 |  |  |  | 17,682 |
Certain information concerning the sale of debt securities available-for-sale for the three and nine months ended September 30, 2024 and 2023 was as follows (in thousands):
|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, |  |  | September 30, |
|  | 2024 |  |  | 2023 |  |  | 2024 |  |  | 2023 |
Proceeds from sales |  | $ | — |  |  |  | — |  |  |  | 9,615 |  |  |  | — |
Gross realized gains |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Gross realized losses |  |  | — |  |  |  | — |  |  |  | 214 |  |  |  | — |
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 condensed statements of income. Equity securities without a readily determinable fair value are measured at cost minus impairment, if any, plus or minus any changes resulting from observable price changes in orderly transactions, as defined, for identical or similar investments of the same issuer. LCNB was not aware of any impairment or observable price change adjustments that needed to be made at September 30, 2024 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 September 30, 2024 and December 31, 2023 are summarized as follows (in thousands):
|  | September 30, 2024 |  |  | December 31, 2023 |
|  | Amortized |  |  | Fair |  |  | Amortized |  |  | Fair |
|  | Cost |  |  | Value |  |  | Cost |  |  | Value |
Mutual Funds |  | $ | 1,442 |  |  |  | 1,294 |  |  |  | 1,415 |  |  |  | 1,240 |
Equity Securities |  |  | 10 |  |  |  | 94 |  |  |  | 10 |  |  |  | 96 |
Total equity securities with a readily determinable fair value |  | $ | 1,452 |  |  |  | 1,388 |  |  |  | 1,425 |  |  |  | 1,336 |
Certain information concerning changes in the fair value of equity securities with a readily determinable fair value for the three and nine months ended September 30, 2024 and 2023 were as follows (in thousands):
|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, |  |  | September 30, |
|  | 2024 |  |  | 2023 |  |  | 2024 |  |  | 2023 |
Net gains (losses) recognized during the period on equity securities |  | $ | 49 |  |  |  | (33 | ) |  |  | 25 |  |  |  | (78 | )
Less net losses recognized during the period 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 |  | $ | 49 |  |  |  | (33 | ) |  |  | 25 |  |  |  | (17 | )
LCNB is a member of the FHLB system and its regional FRB. Members are required to own a certain amount of stock based on predetermined formulas. FHLB and FRB stock are carried at cost, which is equal to par value, and periodically evaluated for impairment based on ultimate recovery of par value.

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