LCNB LCNB Form 10-Q filing Q2 FY2026

LCNB CORP. AND SUBSIDIARIES

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

Critical Accounting Estimates

The accounting policies of LCNB conform to U.S. generally accepted accounting principles and require management to make estimates and develop assumptions that affect the amounts reported in the financial statements and related footnotes. These estimates and assumptions are based on information available to management as of the date of the financial statements. Actual results could differ significantly from management’s estimates. As this information changes, management’s estimates and assumptions used to prepare LCNB’s financial statements and related disclosures may also change. The most significant accounting policies followed by LCNB are presented in Note 1 of the Notes to Consolidated Financial Statements included in LCNB's 2025 Annual Report on Form 10-K filed with the SEC. Based on the valuation techniques used and the sensitivity of financial statement amounts to the methods, assumptions, and estimates underlying those amounts, management has identified the items described below to be the accounting areas that require the most subjective or complex judgments and, as such, could be most subject to revision as new information becomes available.

Allowance for Credit Losses. The allowance is maintained at a level LCNB management believes is adequate to absorb estimated credit losses identified and inherent in the loan portfolio. The allowance is established through a provision for credit losses charged to expense. Loans are charged against the allowance for credit losses when management believes that the collectability of the principal is unlikely. Subsequent recoveries, if any, are credited to the allowance. The allowance is an amount that management believes will be adequate to absorb estimated losses over the contractual terms in the loan portfolio based on evaluations of the collectability of loans and prior loan loss experience. The evaluations take into consideration such factors as changes in the nature and volume of the loan portfolio, overall portfolio quality, review of specific problem loans, and current and forecasted economic conditions that may affect the borrowers' ability to pay. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

See Note 1 - Summary of Significant Accounting Policies - Allowance for Credit Losses on Loans in the 2025 Annual Report on Form 10-K for further detailed descriptions of LCNB's estimation process and methodology related to the allowance. See also Note 3 – Loans in this Quarterly Report on Form 10-Q for further information regarding LCNB's loan portfolio and allowance.

Accounting for Intangibles. LCNB’s intangible assets are composed primarily of goodwill and core deposit intangibles related to acquisitions of other financial institutions.

Accounting rules require LCNB to determine the fair value of all the assets and liabilities of an acquired entity and to record their fair values on the date of acquisition. LCNB employs a variety of means in determining fair values, including the use of discounted cash flow analysis, market comparisons, and projected future revenue streams. For those items for which management concludes that LCNB has the appropriate expertise to determine fair value, management may choose to use its own calculation of fair value. In other cases, where the fair value is not readily determined, consultation with outside parties is used to determine fair value. Once valuations have been determined, the net difference between the price paid for the acquired entity and the fair value of the balance sheet is recorded as goodwill. Goodwill is assessed at least annually for impairment, with any such impairment recognized in the period identified. A more frequent assessment is performed if there are material changes in the marketplace or within the organizational structure.

Core deposit intangibles acquired from business combinations are initially measured at their estimated fair values and are then amortized on a straight-line basis over their estimated useful lives. Management evaluates whether triggering events or circumstances have occurred that indicate the remaining useful life or carrying value of the amortizing intangible should be revised.

Fair Value Accounting for Debt Securities. Debt securities classified as available-for-sale are recorded at fair value with unrealized gains and losses recorded in other comprehensive income (loss), net of tax. Available-for-sale debt securities in unrealized loss positions are evaluated to determine if the decline in fair value should be recorded in income or in other comprehensive income (loss). LCNB first determines if 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 criteria is met, the security's amortized cost basis is written down to fair value through income. If neither of these criteria is met, LCNB evaluates whether the decline in fair value resulted from credit factors. In making this determination, management considers, among other factors, the extent to which fair value is less than the amortized cost basis, any changes to the rating of the security by rating agencies, and any adverse conditions specifically related to the security or issuer. If the present value of cash flows expected to be collected is less than the amortized cost basis, a provision is recorded to the allowance for credit losses. Any decline in fair value not recorded through an allowance for credit losses is recognized in accumulated other comprehensive income (loss), net of applicable taxes.

Loans Held-For-Sale. Loans held-for-sale (“LHFS”) represent mortgage loans intended to be sold in the secondary market and other loans that management has an active plan to sell. LHFS are carried at the lower of cost or fair value as determined on an aggregate basis by type of loan. Any writedowns to fair value upon the transfer of loans to LHFS are reflected in loan charge-offs. Any further decreases are recognized in non-interest income and increases in fair value above the loan cost basis are not recognized until the loans are sold.

LCNB CORP. AND SUBSIDIARIES

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

Results of Operations

Net income for the three and six months ended June 30, 2026 was $7.5 million and $11.9 million, respectively (total basic and diluted earnings per share of $0.53 and $0.84, respectively). This compares to net income of $5.9 million and $10.5 million (total basic and diluted earnings per share of $0.41 and $0.74) for the same respective three and six-month periods in 2025.

Net interest income for the three and six months ended June 30, 2026 was $19.8 million and $38.6 million, respectively. This compares to net interest income of $17.5 million and $33.8 million for the same respective three and six-month periods in 2025. The growth in net interest income was primarily due to an increase in the average yield on earning assets, a reduction in interest-bearing liabilities, and a decrease in the average rate paid on interest-bearing liabilities. LCNB's tax equivalent net interest margin for the three and six-months ended June 30, 2026 was 3.99% and 3.91%, respectively, compared to 3.47% and 3.36% for the same respective periods in 2025.

LCNB recorded a provision for credit losses of $276 thousand and $2.6 million for the three and six months ended June 30, 2026, respectively. This compares to a provision for credit losses of $18 thousand and $215 thousand for the same respective three and six month periods in 2025. The provision expense for the six-month period in 2026 was primarily driven by specific reserves related to four participated loans recognized during the first quarter of 2026.

Non-interest income for the three and six months ended June 30, 2026 was $5.4 million and $10.0 million, respectively. This compares to non-interest income of $5.2 million and $10.5 million for the same respective periods in 2025. The decrease during the six-month period was primarily due to lower net gains from sales of loans and lower service charges and fees recognized on deposit accounts, partially offset by higher fiduciary income.

Non-interest expense for the three and six months ended June 30, 2026 was $15.7 million and $31.6 million, respectively. This compares to non-interest expense of $15.6 million and $31.4 million for the same respective three and six-month periods in 2025. The increase was primarily due to higher salaries and employee benefits, computer maintenance and supplies, and contracted services expenses, largely offset by lower intangible asset amortization, reduced merger-related expenses, and lower FDIC insurance premiums.

LCNB CORP. AND SUBSIDIARIES

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

Net Interest Income

Three Months Ended June 30, 2026 vs. June 30, 2025

LCNB's primary source of earnings is net interest income, which is the difference between earnings from loans and other investments and interest paid on deposits and other liabilities. The following table presents, for the three months ended June 30, 2026 and June 30, 2025, average balances for interest-earning assets and interest-bearing liabilities, the income or expense related to each item, and the resulting average yields earned or rates paid.

LCNB CORP. AND SUBSIDIARIES

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

The following table presents the changes in taxable-equivalent basis interest income and expense for each major category of interest-earning assets and interest-bearing liabilities and the amount of change attributable to volume and rate changes for the three months ended June 30, 2026 as compared to the same period in 2025. Changes not solely attributable to rate or volume have been allocated to volume and rate changes in proportion to the relationship of absolute dollar amounts of the changes in each.

Net interest income on a fully taxable-equivalent basis for the three months ended June 30, 2026 totaled $19.8 million, an increase of $2.2 million from the comparable period in 2025. Total interest expense decreased $1.9 million, with interest income increasing $388 thousand.

The $388 thousand increase in total interest income was primarily due to a 16 basis point (a basis point equals 0.01%) increase in the average rate earned on the loan portfolio, partially offset by a $12.4 million decrease in average loan balances. The increase in the average loan yield included a $120 thousand increase in accretion income on acquired loans compared to the prior year period. Excluding accretion income in both periods, the average loan yield increased 13 basis points year over year.

The $1.9 million decrease in total interest expense was primarily due to a $114.8 million decrease in average IRA and time certificate deposits and to a 71 basis point decrease in the average rate paid for these deposits. This decrease reflects the strategic runoff of higher-cost certificates and IRA balances as part of LCNB's funding optimization strategy.

LCNB CORP. AND SUBSIDIARIES

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

Six Months Ended June 30, 2026 vs. June 30, 2025

The following table presents, for the six months ended June 30, 2026 and 2025, average balances for interest-earning assets and interest-bearing liabilities, the income or expense related to each item, and the resulting average yields earned or rates paid.

LCNB CORP. AND SUBSIDIARIES

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

The following table presents the changes in taxable-equivalent basis interest income and expense for each major category of interest-earning assets and interest-bearing liabilities and the amount of change attributable to volume and rate changes for the six months ended June 30, 2026 as compared to the same period in 2025. Changes not solely attributable to rate or volume have been allocated to volume and rate changes in proportion to the relationship of absolute dollar amounts of the changes in each.

Net interest income on a fully taxable-equivalent basis for the six months ended June 30, 2026 totaled $38.7 million, an increase of $4.8 million from the comparable period in 2025. Total interest income increased $502 thousand and total interest expense decreased $4.3 million.

The $502 thousand increase in total interest income was primarily due to a $759 thousand increase in loan interest income. This increase was primarily due to a 13 basis point increase in the average rate earned on the loan portfolio, partially offset by a $13.2 million decrease in average loan balances. Included in the increase in the average loan yield was an $83 thousand increase in accretion income recognized on acquired loans compared to the prior year period. Excluding accretion income in both periods, the average loan yield increased 12 basis points from the prior year period.

The $4.3 million decrease in total interest expense was primarily due to a $4.2 million decrease in interest expense for IRA and time certificates. This decrease was primarily due to a $134.3 million decrease in average IRA and time certificates and to an 87 basis point decrease in the average rate paid for these certificates. This decrease reflects the strategic runoff of higher-cost certificates and IRA balances as part of LCNB's funding optimization strategy.

LCNB CORP. AND SUBSIDIARIES

Provision and Allowance For Credit Losses

LCNB continuously reviews the loan portfolio for credit risk through the use of its lending and loan review functions. Independent loan reviews analyze specific loans, providing validation that credit risks are appropriately identified, graded, and reported to the Loan Committee, Board of Directors, and the Audit Committee. New credits meeting specific criteria are analyzed prior to origination and are reviewed by the Loan Committee and the Board of Directors.

The total provision for credit losses is determined based upon management's evaluation as to the amount needed to maintain the allowance for credit losses at a level considered appropriate in relation to the risk of losses inherent in the portfolio. For analysis purposes, the loan portfolio is separated into pools of similar loans. These pools include commercial and industrial loans, owner occupied commercial real estate loans, non-owner occupied commercial real estate loans, real estate loans secured by farms, real estate loans secured by multi-family dwellings, residential real estate loans secured by senior liens on 1-4 family dwellings, residential real estate loans secured by junior liens on 1-4 family dwellings, home equity line of credit loans, consumer loans, loans for agricultural purposes not secured by real estate, construction loans secured by 1-4 family dwellings, construction loans secured by other real estate, and several smaller classifications. Within each pool of loans, LCNB examines a variety of factors to determine the adequacy of the allowance for credit losses, including historic charge-off percentages, overall pool quality, a review of specific problem loans, current economic trends and conditions that may affect borrowers' ability to pay, and the nature, volume, and consistency of the loan pool. Calculating an appropriate level for the allowance and provision for credit losses involves a high degree of management judgment and is, by its nature, imprecise. Revisions may be necessary as more information becomes available or if market conditions change.

LCNB recorded a provision for credit losses of $276 thousand and $2.6 million for the three and six months ended June 30, 2026, compared to $18 thousand and $215 thousand for the same respective periods in 2025. The provision for the three-month period in 2026 included a provision for credit losses on loans of $233 thousand and a provision for off-balance-sheet credit exposures of $43 thousand. The provision for the six-month period in 2026 included a provision for credit losses on loans of $2.6 million and a recovery on off-balance-sheet credit exposures of $16 thousand. The provision for the three-month period in 2025 period included a provision for credit losses on loans of $63 thousand and a recovery on off-balance-sheet credit exposures of $45 thousand and the provision for the six-month period in 2025 included a provision for credit losses on loans of $226 thousand and a recovery on off-balance-sheet credit exposures of $11 thousand. The provision expense for the six month period in 2026 was primarily driven by credit deterioration identified in four commercial credits during the first quarter of 2026. Specifically, LCNB recorded charge-offs related to two participated logistics-sector loans and established specific reserves on two additional commercial and industrial loans in other industries. While certain borrower-specific challenges affecting the reserved commercial and industrial credits were influenced by global trade uncertainty and geopolitical conditions, management believes those impacts were isolated to the affected borrowers and are not indicative of broader deterioration within the commercial and industrial portfolio. Although management continues to monitor economic, geopolitical and industry-specific developments, current portfolio performance metrics, risk rating trends and other credit quality indicators do not support the need for additional segment-level reserve adjustments beyond those already reflected in the allowance for credit losses. The loan portfolio's overall asset quality remains strong, with nonperforming loans to total loans of 0.34% at June 30, 2026, compared to 0.28% at June 30, 2025.

Net recoveries for the three months ended June 30, 2026 totaled $1 thousand and net charge-offs for the six months ended June 30, 2026 totaled $2.7 million, compared to net charge-offs of $79 thousand and $118 thousand for the same respective periods in 2025. Net charge-offs during the six months ended June 30, 2026 primarily reflected the resolution of two unrelated participated loans within the logistics sector. Loans to one borrower, which carried a specific reserve of approximately $1.4 million at December 31, 2025, were charged off during the first quarter with no additional impact to earnings. In addition, LCNB recognized an approximately $1.3 million charge-off during the first quarter of 2026 related to a separate logistics-sector borrower after significant adverse developments arose subsequent to year-end, including the withdrawal of the borrower's sponsor from restructuring discussions and the acceptance by the lending group of a discounted debt-repurchase proposal. The specific reserves discussed above relate to two separate commercial and industrial credits that remained outstanding at June 30, 2026.

LCNB CORP. AND SUBSIDIARIES

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

Non-Interest Income

A comparison of non-interest income for the three and six months ended June 30, 2026 and June 30, 2025 is as follows (in thousands):

Reasons for changes include:

• Fiduciary income increased primarily due to increases in the fair values of trust and brokerage assets managed, on which fees are based. The increases in fair value were due to the opening of new Wealth Management customer accounts and to an increase in the market values of managed assets.

• Service charges and fees on deposit accounts decreased primarily due to decreased fee income received on the ICS product, partially offset by an increase in overdraft fees.

• Net gains from sales of loans decreased due to a strategic decision to retain a higher percentage of loan originations—particularly 1–4 family, first‑lien residential loans—on the balance sheet rather than selling them into the secondary market. Overall loan origination volumes were largely consistent between periods, with 1–4 family, first‑lien residential loan originations totaling $74.2 million during the first six months of 2026, compared to $73.2 million during the first six months of 2025. Loans sold during the six-month period of 2026 totaled $31.4 million, compared to $57.5 million during the same period in 2025.

LCNB CORP. AND SUBSIDIARIES

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

Non-Interest Expense

A comparison of non-interest expense for the three and six months ended June 30, 2026 and June 30, 2025 is as follows (in thousands):

Reasons for changes include:

• Salaries and employee benefits increased due to overall wage and benefit increases, an increased number of employees, and an increase in bonus expense accruals, partially offset by decreases in expenses for LCNB's defined benefit retirement and health insurance plans.

• Amortization of intangibles decreased because the core deposit intangible related to Columbus First Bancorp, Inc. amortized in full during the third quarter of 2025.

• FDIC insurance premiums decreased because of a decreased assessment base reflecting a decrease in total assets and to a reduction in the assessment rate charged.

• Contracted services increased due to increased costs for cloud software and other data services and increased costs for LCNB's overdraft protection product.

• Merger-related expenses during the three and six months ended June 30, 2025 reflect costs incurred in connection with the acquisitions of EFBI and CNNB.

Income Taxes

LCNB's effective tax rate for the three and six months ended June 30, 2026 was 18.5% and 17.7%, respectively, compared to 17.8% and 17.2% for the same respective periods in 2025. The difference between the statutory rate of 21% and the effective tax rates is primarily due to tax-exempt interest income from municipal securities, tax-exempt earnings from bank-owned life insurance, tax-exempt earnings from LCNB Risk Management, Inc., and tax credits and losses related to investments in affordable housing tax credit limited partnerships.

LCNB CORP. AND SUBSIDIARIES

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

Financial Condition

A comparison of balance sheet line items at June 30, 2026 and December 31, 2025 is as follows (dollars in thousands):

Reasons for changes include:

• Debt securities, available-for-sale, decreased due to maturities, calls, and paydowns, partially offset by new securities purchased during the period and to a decrease in unrealized losses.

• Debt securities, held-to-maturity, decreased due to calls of municipal securities.

• Despite record loan originations during the period, loans, net, decreased as elevated borrower payoffs and paydowns more than offset new loan production.

• Core deposit and other intangibles, net decreased due to amortization of core deposit and mortgage servicing rights intangibles.

• Accrued interest and other liabilities decreased due to decreased accrued bonuses (bonuses were paid in February 2026), a decrease in low income housing tax credit payables due to payments for various projects, net decreases in various other payable accounts, and smaller decreases in a number of other accounts.

LCNB CORP. AND SUBSIDIARIES

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

LCNB's loan portfolio represents its largest asset category and is its most significant source of interest income. Loan classifications have been identified as Commercial & Industrial, Commercial Real Estate, Residential Real Estate, Consumer, Agricultural, and Other. Commercial real estate is the largest classification in LCNB's loan portfolio, comprising about 64.2% of total loans at June 30, 2026.

Loans secured by commercial real estate consist of owner-occupied, non-owner-occupied, farmland, multi-family, and construction loans. A commercial real estate, owner-occupied loan finances the purchase, construction, or refinance of a building or other property for which the repayment of principal is dependent upon cash flows from ongoing operations conducted by the party, or an affiliate of the party, who owns the property. A commercial real estate, non-owner occupied loan finances the purchase, construction or refinance of a building or other property for which the repayment of principal is dependent upon rental income associated with the property or the subsequent sale of the property. The values of these loans are primarily impacted by the level of interest rates associated with the debt and to local economic conditions, which dictate occupancy rates and the amount of rent charged. The increase in debt service due to higher interest rates may not be able to be passed on to tenants. As part of the origination process, loan interest rates and occupancy rates are stressed to determine the impact on the borrower’s ability to maintain adequate debt service under different economic conditions. Further, LCNB monitors the concentration in any one industry and has established limits relative to the total of the Bank's Tier 1 and Tier 2 capital for each category of loan. Credit quality trends are monitored by industry to determine if a change in the risk exposure to a certain industry may warrant a change in underwriting standards.

The following table provides a breakdown of amortized cost of commercial real estate loans by property-type classification as of June 30, 2026, excluding loans which are junior in lien or covered by collateral secured with varying classes of assets (dollars in thousands):

LCNB CORP. AND SUBSIDIARIES

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

Most of LCNB's commercial real estate loans are made within its general market area of Southwest and Central Ohio and Northern Kentucky. The following table provides a breakdown of amortized cost of commercial real estate loans by real estate collateral location as of June 30, 2026, excluding loans which are junior in lien or covered by collateral secured with varying classes of assets (dollars in thousands):

Regulatory Capital

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 the Bank's financial statements. LCNB’s and 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% is subject to increasingly stringent limitations on capital distributions as the buffer approaches zero.

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

As of the most recent notification from their regulators, the Bank and LCNB were 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 or LCNB's category.

LCNB CORP. AND SUBSIDIARIES

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

A summary of the Bank's regulatory capital and capital ratios follows (dollars in thousands):

Qualifications for community banking organizations to use a simplified measure of capital adequacy 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 Community Bank Leverage Ratio 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 the June 30, 2026 regulatory capital calculations, but opted not to use this approach. LCNB did not qualify to use the simplified measure for the December 31, 2025 regulatory capital calculations.

Liquidity

Effective liquidity management ensures that cash is available to meet the cash flow needs of borrowers and depositors, pay dividends to shareholders, and meet LCNB's operating cash needs. Primary funding sources include customer deposits with the Bank, short-term and long-term borrowings from the FHLB, line of credit arrangements totaling $115.0 million with three correspondent banks, and interest and repayments received from LCNB's loan and investment portfolios. In addition, LCNB has approximately $37 million in off-balance sheet ICS immediately available for liquidity.

Total remaining borrowing capacity with the FHLB at June 30, 2026 was approximately $159.1 million. Additional borrowings of approximately $115.0 million were available through line of credit arrangements with correspondent banks.

Management closely monitors the level of liquid assets available to meet ongoing funding needs. It is management's intent to maintain adequate liquidity so that sufficient funds are readily available at a reasonable cost. LCNB experienced no liquidity or operational problems as a result of current liquidity levels. Management believes LCNB has the ability to generate and obtain adequate amounts of liquidity to meet its requirements in the short and long-term.

Commitments to extend credit at June 30, 2026 totaled $305.4 million and are more fully described in Note 10 - Commitments and Contingent Liabilities to LCNB's condensed consolidated financial statements. Since many commitments to extend credit may expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements.

LCNB CORP. AND SUBSIDIARIES

FILINGSOURCEITEMBOUNDARYBEGIN Item 3. Quantitative and Qualitative Disclosures about Market Risks FILINGSOURCEITEMBOUNDARYENDItem 3. Quantitative and Qualitative Disclosures about Market Risk

Market risk for LCNB is primarily due to interest rate risk. LCNB attempts to mitigate this risk through asset/liability management strategies designed to decrease the vulnerability of its earnings to material and prolonged changes in interest rates. LCNB does not use derivatives such as interest rate swaps, caps, or floors to hedge this risk. LCNB has not entered into any market risk instruments for trading purposes.

The Bank's Asset and Liability Management Committee primarily uses a combination of Interest Rate Sensitivity Analysis ("IRSA") and Economic Value of Equity ("EVE") analysis for measuring and managing interest rate risk. IRSA is used to estimate the effect on net interest income ("NII") during a one-year period of instantaneous and sustained movements in interest rates, also called interest rate shocks, of 100, 200, and 300 basis points. The annual base projection uses a current interest rate scenario. As shown below, the June 30, 2026 IRSA indicates that either an increase or a decrease in interest rates would have a positive effect on NII. The changes in NII for all rate shock scenarios are within LCNB's acceptable ranges.

(Dollars in thousands)

The IRSA shows the effect on NII during a one-year period only. A longer-range model is the EVE analysis, which shows, accounting for the same rate shocks, the estimated present value of future cash inflows from interest-earning assets less the present value of future cash outflows for interest-bearing liabilities for the same rate shocks. As shown below, the June 30, 2026 EVE analysis indicates that an increase in interest rates will have a negative effect on the EVE and a decrease in interest rates will have a positive effect. The changes in EVE for all rate shock scenarios are within LCNB's acceptable ranges.

The IRSA and EVE simulations discussed above are not projections of future income or equity and should not be relied on as being indicative of future operating results. Assumptions used, including the nature and timing of interest rate levels, yield curve conditions, prepayments on loans and securities, deposit decay rates, pricing decisions on loans and deposits, and reinvestment or replacement of asset and liability cash flows, are inherently uncertain and, as a result, the models cannot precisely measure future NII or equity. Furthermore, the models do not reflect actions that borrowers, depositors, and management may take in response to changing economic conditions and interest rate levels.

LCNB CORP. AND SUBSIDIARIES

Item 4. Controls and Procedures

a) Disclosure controls and procedures. The Chief Executive Officer and the Chief Financial Officer have carried out an evaluation of the effectiveness of LCNB's disclosure controls and procedures that ensure that information relating to LCNB required to be disclosed by LCNB in the reports that it files or submits under the Securities and Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to LCNB's management, including its principal executive officer and principal financial officer, as appropriate, in order to allow timely decisions to be made regarding required disclosures. Based upon this evaluation, these officers have concluded that, as of June 30, 2026, LCNB's disclosure controls and procedures were effective.

b) Changes in internal control over financial reporting. During the period covered by this report, there were no changes in LCNB's internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, LCNB's internal control over financial reporting.

LCNB CORP. AND SUBSIDIARIES

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Except for routine litigation incidental to its business, LCNB is not a party to any material pending legal proceedings and none of its property is the subject of any material proceedings.

Item 1A. Risk Factors

Readers should carefully consider the risk factors previously disclosed in Part I, Item 1A. Risk Factors in LCNB's Form 10-K for the year ended December 31, 2025.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the period covered by this report, LCNB did not sell any of its securities that were not registered under the Securities Act.

Under LCNB's Stock Repurchase Plan Agreement (the "Plan"), LCNB may purchase common shares through various means such as open market transactions, including block purchases and privately negotiated transactions. The number of shares repurchased and the timing, manner, price and amount of any repurchases are determined at LCNB's discretion. Factors include, but are not limited to, share price, trading volume, and general market conditions, along with LCNB’s general business conditions. The Plan may be suspended or discontinued at any time and does not obligate LCNB to acquire any specific number of its common shares.

As part of the Plan, LCNB entered into a trading plan adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended. The 10b5-1 trading plan permits common shares to be repurchased at times that LCNB might otherwise be precluded from doing so under insider trading laws or self-imposed trading restrictions. The 10b5-1 trading plan is administered by an independent broker and is subject to price, market volume, and timing restrictions.

On February 27, 2023, LCNB's Board of Directors authorized the Plan. Under the terms of the Plan, LCNB is authorized to repurchase up to 500,000 of its outstanding common shares. The Plan replaced and superseded LCNB’s prior Issuer Stock Repurchase Plan Agreement, which was adopted on May 27, 2022.

There were no repurchases made under the Plan during the three months ended June 30, 2026, and there are still 310,922 shares that may be purchased pursuant to the Plan.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

During the three months ended June 30, 2026, none of our directors or officers informed us of the adoption, modification, or termination of a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as those terms are defined in Regulation S-K, Item 408.

LCNB CORP. AND SUBSIDIARIES

Item 6. Exhibits

LCNB CORP. AND SUBSIDIARIES

SIGNATURES

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