Certain statements made in this document regarding LCNB's financial condition,
results of operations, plans, objectives, future performance and business, are
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as
amended, and the Private Securities Litigation Reform Act of 1995. These
forward-looking statements are identified by the fact they are not historical
facts and include words such as "anticipate", "could", "may", "feel", "expect",
"believe", "plan", and similar expressions. Please refer to LCNB's Annual Report
on Form 10-K for the year ended December 31, 2021, as well as its other filings
with the SEC, for a more detailed discussion of risks, uncertainties and factors
that could cause actual results to differ from those discussed in the
forward-looking statements.

These forward-looking statements reflect management's current expectations based
on all information available to management and its knowledge of LCNB's business
and operations. Additionally, LCNB's financial condition, results of operations,
plans, objectives, future performance and business are subject to risks and
uncertainties that may cause actual results to differ materially. These factors
include, but are not limited to:

1.the success, impact, and timing of the implementation of LCNB's business
strategies;
2.the significant risks and uncertainties for LCNB's business, results of
operations and financial condition, as well as its regulatory capital and
liquidity ratios and other regulatory requirements, caused by the COVID-19
pandemic, which will depend on several factors, including the scope and duration
of the pandemic, its influence on financial markets, the effectiveness of LCNB's
work from home arrangements and staffing levels in operational facilities, the
impact of market participants on which LCNB relies and actions taken by
governmental authorities and other third parties in response to the pandemic;
3.the disruption of global, national, state, and local economies associated with
the COVID-19 pandemic and the Russia/Ukraine conflict, which could affect LCNB's
liquidity and capital positions, impair the ability of our borrowers to repay
outstanding loans, impair collateral values, and further increase the allowance
for credit losses;
4.LCNB's ability to integrate future acquisitions may be unsuccessful or may be
more difficult, time-consuming, or costly than expected;
5.LCNB may incur increased loan charge-offs in the future;
6.LCNB may face competitive loss of customers;
7.changes in the interest rate environment, which may include continued interest
rate increases, may have results on LCNB's operations materially different from
those anticipated by LCNB's market risk management functions;
8.changes in general economic conditions and increased competition could
adversely affect LCNB's operating results;
9.changes in regulations and government policies affecting bank holding
companies and their subsidiaries, including changes in monetary policies, could
negatively impact LCNB's operating results;
10.LCNB may experience difficulties growing loan and deposit balances;
11.United States trade relations with foreign countries could negatively impact
the financial condition of LCNB's
customers, which could adversely affect LCNB 's operating results and financial
condition;
12.deterioration in the financial condition of the U.S. banking system may
impact the valuations of investments LCNB has made in the securities of other
financial institutions resulting in either actual losses or other-than-temporary
impairments on such investments;
13.difficulties with technology or data security breaches, including
cyberattacks, that could negatively affect LCNB's ability to conduct business
and its relationships with customers, vendors, and others;
14.adverse weather events and natural disasters and global and/or national
epidemics; and
15.government intervention in the U.S. financial system, including the effects
of legislative, tax, accounting, and regulatory actions and reforms, including
the CARES Act, the Dodd-Frank Act, the Jumpstart Our Business Startups Act, the
Consumer Financial Protection Bureau, the capital ratios of Basel III as adopted
by the federal banking authorities, and the Tax Cuts and Jobs Act.

Forward-looking statements made herein reflect management's expectations as of
the date such statements are made. Such information is provided to assist
shareholders and potential investors in understanding current and anticipated
financial operations of LCNB and is included pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. LCNB
undertakes no obligation to update any forward-looking statement to reflect
events or circumstances that arise after the date such statements are made.

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

The COVID-19 pandemic has continued to disrupt the global economy and the lives
of individuals throughout the world. Governments, businesses, and the public
have taken and are taking actions to contain the spread of COVID-19 and to
mitigate its effects. While the effects of COVID-19 are not fully known, the
pandemic and related efforts to contain it have disrupted economic activity,
adversely affected the functioning of financial markets, impacted interest
rates, increased economic and market uncertainty, and disrupted trade and supply
chains. While vaccination efforts continue, the future affects from the
pandemic, including the potential scope of recovery, are not fully known.

LCNB participated in the CARES Act PPP that provided government guaranteed and
potentially forgivable loans to applicants. The PPP was implemented by the SBA
with support from the Department of the Treasury and provided small businesses
with funds to pay up to eight or twenty-four weeks, depending on the date of the
loan, of payroll costs including benefits. Funds could also be used to pay
interest on mortgages, rent, utilities, covered operations expenditures, covered
property damage costs, covered supplier costs, and covered worker protection
expenditures. Outstanding PPP loans at March 31, 2022 and December 31, 2021
totaled $1,415,000 and $6,935,000, respectively, and unrecognized fees at those
dates totaled $66,000 and $272,000, respectively.

LCNB continues to closely monitor the COVID-19 pandemic and its impact on its
business, customers, employees, vendors, and service providers and expects to
make future changes to respond to the pandemic as this situation continues to
evolve.

Critical accounting estimates

Allowance for Loan Losses. The allowance for loan losses is established through
a provision for loan losses charged to expense. Loans are charged against the
allowance for loan losses when management believes that the collectibility 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 inherent losses in the loan portfolio, based on evaluations of the
collectibility 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 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.

The allowance consists of specific and general components. The specific
component typically relates to loans that are classified as doubtful,
substandard, or special mention. For such loans an allowance is established when
the discounted cash flows or collateral value is lower than the carrying value
of that loan. The general component covers non-classified loans and is based on
historical loss experience adjusted for qualitative factors, which include
trends in underperforming loans, trends in the volume and terms of loans,
economic trends and conditions, concentrations of credit, trends in the quality
of loans, and borrower financial statement exceptions.

Based on management’s assessments, the allowance for loan losses will be sufficient to absorb the estimated losses inherent in the current loan portfolio.

Acquired Credit Impaired Loans. LCNB accounts for acquisitions using the
acquisition method of accounting, which requires that assets acquired and
liabilities assumed be measured at their fair values at the acquisition date.
Acquired loans are reviewed to determine if there is evidence of deterioration
in credit quality since inception and if it is probable that LCNB will be unable
to collect all amounts due under the contractual loan agreements. The analysis
includes expected prepayments and estimated cash flows including principal and
interest payments at the date of acquisition. The amount in excess of the
estimated future cash flows is not accreted into earnings. The amount in excess
of the estimated future cash flows over the book value of the loan is accreted
into interest income over the remaining life of the loan (accretable yield).
LCNB records these loans on the acquisition date at their fair values. Thus, an
allowance for estimated future losses is not established on the acquisition
date. Subsequent to the date of acquisition, expected future cash flows on loans
acquired are updated and any losses or reductions in estimated cash flows which
arise subsequent to the date of acquisition are reflected as a charge through
the provision for loan losses. An increase in the expected cash flows adjusts
the level of the accretable yield recognized on a prospective basis over the
remaining life of the loan. Due to the number, size, and complexity of loans
within the acquired loan portfolio, there is always a possibility of inherent
undetected losses.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Accounting for Intangibles. LCNB's intangible assets at March 31, 2022 are
composed primarily of goodwill and core deposit intangibles related to
acquisitions of other financial institutions. It also includes mortgage
servicing rights recorded from sales of mortgage loans to the Federal Home Loan
Mortgage Corporation and mortgage servicing rights acquired through the
acquisition of Eaton National Bank & Trust Co. and Columbus First Bancorp, Inc.
Goodwill is not subject to amortization, but is reviewed annually for impairment
or sooner if circumstances indicate a possible impairment. Core deposit
intangibles are being amortized on a straight line basis over their respective
estimated weighted average lives. Mortgage servicing rights are capitalized by
allocating the total cost of loans between mortgage servicing rights and the
loans based on their estimated fair values. Capitalized mortgage servicing
rights are amortized to loan servicing income in proportion to and over the
period of estimated servicing income, subject to periodic review for impairment.

Fair Value Accounting for Debt Securities. Debt securities classified as
available-for-sale are carried at estimated fair value. Unrealized gains and
losses, net of taxes, are reported as accumulated other comprehensive income or
loss in shareholders' equity. Fair value is estimated using market quotations
for U.S. Treasury investments. Fair value for the majority of the remaining
available-for-sale securities is estimated using the discounted cash flow method
for each security with discount rates based on rates observed in the market.

Operating results

Net income for the three months ended March 31, 2022 was $4,523,000 (total basic
and diluted earnings per share of $0.38). This compares to net income of
$5,240,000 (total basic and diluted earnings per share of $0.41) for the same
three month period in 2021.

Net interest income for the three months ended March 31, 2022 was $14,223,000,
compared to $14,372,000 for the same period in 2021. The decrease was primarily
due to a decrease in the average rate earned on the loan portfolio, partially
offset by an increase in average loan and taxable debt security balances. A
decrease in fees recognized from PPP loans contributed to the decrease in
average loan rates.

An increase in the provision for loan losses negatively affected earnings during
the 2022 period. LCNB recorded a provision of $49,000 for the three months ended
March 31, 2022, compared to a credit of $52,000 for the same three month period
in 2021.

Non-interest income for the three months ended March 31, 2022 was $3,550,000.
This compares to $3,465,000 for the same period in 2021. The increase was
primarily due to increases in fiduciary income, service charges and fees on
deposit accounts, and gains from sales of loans. These increases were partially
offset by a decrease in other operating income, primarily due to a decrease in
market values for LCNB's equity investments portfolio.

Non-interest expense for the three months ended March 31, 2022 was $12,250,000,
compared to $11,492,000 for the same three month period in 2021. The increase
was primarily due to a an increase in salaries and employee benefits.

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

Three Months Ended March 31, 2022 vs. March 31, 2021
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 March 31, 2022 and March 31, 2021, 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.

                                                                                                 Three Months Ended March 31,
                                                                            2022                                                               2021
                                                    Average               Interest               Average               Average              Interest               Average
                                                  Outstanding              Earned/                Yield/             Outstanding             Earned/               Yield/
                                                    Balance                 Paid                   Rate                Balance                Paid                  Rate
                                                                                                    (Dollars in thousands)
Loans (1)                                       $   1,376,926              13,786                     4.06  %       $ 1,313,803              14,535                    4.49  %
Interest-bearing demand deposits                        9,743                   9                     0.37  %            15,632                  13    
               0.34  %

Federal Reserve Bank stock                              4,652                   -                        -  %             4,652                   -                       -  %
Federal Home Loan Bank stock                            5,203                  26                     2.03  %             5,203                  26                    2.03  %
Investment securities:
Equity securities                                       4,611                  17                     1.50  %             4,500                  19                    1.71  %
Debt securities, taxable                              298,152               1,095                     1.49  %           211,618                 718                    1.38  %
Debt securities, non-taxable (2)                       28,048                 239                     3.46  %            34,174                 284                    3.37  %
Total earnings assets                               1,727,335              15,172                     3.56  %         1,589,582              15,595                    3.98  %
Non-earning assets                                    195,394                                                           191,287
Allowance for loan losses                              (5,503)                                                           (5,715)
Total assets                                    $   1,917,226                                                       $ 1,775,154

NOW and money fund deposits                     $     511,250              
  147                     0.12  %       $   419,832                 132                    0.13  %
Savings deposits                                      444,243                 147                     0.13  %           375,194                 148                    0.16  %
IRA and time certificates                             189,305                 445                     0.95  %           234,134                 748                    1.30  %
Short-term borrowings                                  12,503                  86                     2.79  %               342                   1                    1.19  %
Long-term debt                                         10,000                  74                     3.00  %            19,689                 134                    2.76  %
Total interest-bearing liabilities                  1,167,301                 899                     0.31  %         1,049,191               1,163                    0.45  %
Demand deposits                                       501,829                                                           458,996
Other liabilities                                      22,371                                                            25,450
Capital                                               225,725                                                           241,517
Total liabilities and capital                   $   1,917,226                                                       $ 1,775,154
Net interest rate spread (3)                                                                          3.25  %                                                          3.53  %
Net interest income and net interest
margin on a taxable-equivalent basis (4)                                   14,273                     3.35  %                                14,432                    3.68  %
Ratio of interest-earning assets to
interest-bearing liabilities                           147.98  %                                                         151.51  %


(1) Includes outstanding loans. (2) Income from tax-exempt securities is included in interest income on a tax equivalent basis. Interest income has been split

  by a factor comprised of the complement of the incremental tax rate of 21%.
(3)The net interest spread is the difference between the average rate on total
interest-earning assets and interest-bearing liabilities.
(4)The net interest margin is the taxable-equivalent net interest income divided
by average interest-earning assets.





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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 March 31, 2022 as compared to the same
period in 2021.  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.

                                                                                         Three Months Ended
                                                                                       March 31, 2022 vs. 2021
                                                                                Increase (decrease) attributable to:
                                                                         Volume                   Rate                  Total
                                                                                           (In thousands)
Interest-earning Assets:
Loans                                                              $            676                (1,425)                (749)

Interest-bearing demand deposits                                                 (5)                    1                   (4)

Federal Reserve Bank stock                                                        -                     -                    -
Federal Home Loan Bank stock                                                      -                     -                    -
Investment securities:
Equity securities                                                                 -                    (2)                  (2)
Debt securities, taxable                                                        314                    63                  377
Debt securities, non-taxable                                                    (52)                    7                  (45)
Total interest income                                                           933                (1,356)                (423)

Interest-bearing Liabilities:
NOW and money fund deposits                                                      27                   (12)                  15
Savings deposits                                                                 25                   (26)                  (1)
IRA and time certificates                                                      (127)                 (176)                (303)
Short-term borrowings                                                            82                     3                   85
Long-term debt                                                                  (71)                   11                  (60)
Total interest expense                                                          (64)                 (200)                (264)
Net interest income                                                $            997                (1,156)                (159)



Net interest income on a fully taxable-equivalent basis for the three months
ended March 31, 2022 totaled $14,273,000, a decrease of $159,000 from the
comparable period in 2021.  Total interest income decreased $423,000, which was
partially offset by a $264,000 decrease in total interest expense.

The $423,000 decrease in total interest income was due primarily to a $749,000
decrease in loan interest income, which was partially offset by a $377,000
increase in interest income from taxable debt securities. The decrease in loan
interest income was primarily due to a 43 basis point (a basis point equals
0.01%) decrease in the average rate earned on loans, partially offset by a $63.1
million increase in the average balance of LCNB's loan portfolio. Loan interest
income for the first quarter 2022 included $248,000 of PPP loan fees recognized,
as compared to $523,000 of PPP fees recognized during the first quarter 2021.
The increase in interest income from taxable debt securities was due to an $86.5
million increase in average securities and to an 11 basis point increase in the
average rate earned on these securities. The decrease in average rates for loans
was primarily due to market conditions and also reflected the decrease in PPP
fees recognized.






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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
The $264,000 decrease in total interest expense was due to a $303,000 decrease
in interest expense for IRA and time certificates and a $60,000 decrease in
interest expense for long-term debt, partially offset by an $85,000 increase in
interest expense for short-term borrowings. Interest expense for IRA and time
certificates decreased due to a 34 basis point decrease in the average rate paid
for these deposits and to an $44.8 million decrease in the average balance of
these deposits. Management believes the decrease reflects customer preferences
for liquidity during uncertain economic periods. Balances in demand deposits,
NOW and money fund deposits, and savings deposits have grown, while balances in
IRA and time deposits have decreased. Interest expense for long-term debt
decreased due to a $9.7 million decrease in average debt outstanding, slightly
offset by a 24 basis point increase in the average rate paid. Interest expense
for short-term borrowings increased primarily because of a $12.2 million
increase in average borrowings outstanding.

Allowance and provision for loan losses

The total provision for loan losses is determined based upon management's
evaluation as to the amount needed to maintain the allowance for loan 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 & 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 loan 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.

The provision for loan losses for the three months ended March 31, 2022 was
$49,000, compared to a credit of $52,000 for the same period in 2021.
Calculating an appropriate level for the allowance and provision for loan losses
involves a high degree of management judgment and is, by its nature, imprecise.
Revisions may be necessary as more information becomes available.

Net charges for the three months ended March 31, 2022 have been $25,000compared to the net recoveries of $3,000 for the same three-month period in 2021.

Non-interest income

A comparison of non-interest income for the three months ended March 31, 2022
and March 31, 2021 is as follows (in thousands):

                                                                          Three Months Ended
                                                                               March 31,
                                                                                         2022             2021             Difference
Fiduciary income                                                                      $ 1,695             1,529                166
Service charges and fees on deposit accounts                                            1,406             1,366                 40

Bank owned life insurance income                                                          265               267                 (2)
Gains from sales of loans                                                                 124                43                 81
Other operating income                                                                     60               260               (200)
Total non-interest income                                                             $ 3,550             3,465                 85



Reasons for changes include:
•Fiduciary income increased due to a combination of new accounts and increases
in the fair value of trust and brokerage assets managed.
•Gains from sales of loans increased primarily due to a higher volume of
residential real estate loan sales.
•Other operating income decreased primarily due to a decrease in unrealized net
gains or losses recognized on equity securities.


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

A comparison of non-interest expenses for the three months ended March 31, 2022
and March 31, 2021 is as follows (in thousands):

                                                     Three Months Ended
                                                          March 31,
                                                                        

2022 2021 Difference

     Salaries and employee benefits                                  $  7,215        6,433           782
     Equipment expenses                                                   408          368            40
     Occupancy expense, net                                               775          794           (19)
     State financial institutions tax                                     436          444            (8)
     Marketing                                                            262          268            (6)
     Amortization of intangibles                                          140          257          (117)
     FDIC insurance premiums, net                                         126          113            13
     Contracted services                                                  610          540            70

     Other non-interest expense                                         2,278        2,275             3
     Total non-interest expense                                      $ 12,250       11,492           758



Reasons for changes include:
•Salaries and employee benefits increased primarily due to increases in salaries
and wages, increased bonus expense accruals, increased compensation expense for
restricted stock grants, increased FICA matching expense, and to a higher
percentage of personnel expenses deferred in 2021 attributable to the high
volume of PPP loans originated in that period.
•Amortization of intangibles decreased because the core deposit intangibles from
the First Capital Bancshares, Inc. and Eaton National Bank & Trust Co.
acquisitions amortized in full during the first quarter 2022.

Income taxes

LCNB's effective tax rate for the three months ended March 31, 2022 was 17.4%,
compared to 18.1% for the three months ended March 31, 2021.  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.





















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                          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 items to March 31, 2022 and December 31, 2021
is as follows (in thousands of dollars):

                                                              March 31, 2022           December 31, 2021            Difference $             Difference %
ASSETS:
Total cash and cash equivalents                             $        19,941                  18,136                    1,805                          

9.95%

Investment securities: Equity securities whose fair value is easily determinable, at fair value

                                                         2,424                   2,546                     (122)                        

(4.79)% Equity securities with no easily determinable fair value, at cost

                                                        2,099                   2,099                        -                             -  %
Debt securities, available-for-sale, at fair value                  293,464                 308,177                  (14,713)                        (4.77) %
Debt securities, held-to-maturity, at cost                           22,873                  22,972                      (99)                        (0.43) %
Federal Reserve Bank stock, at cost                                   4,652                   4,652                        -                             -  %
Federal Home Loan Bank stock, at cost                                 5,203                   5,203                        -                             -  %
Loans, net                                                        1,373,991               1,363,939                   10,052                          0.74  %
Premises and equipment, net                                          34,940                  35,385                     (445)                        (1.26) %
Operating lease right-of-use assets                                   6,191                   6,357                     (166)                        (2.61) %
Goodwill                                                             59,221                  59,221                        -                             -  %
Core deposit and other intangibles                                    2,328                   2,473                     (145)                        (5.86) %
Bank owned life insurance                                            43,488                  43,224                      264                          0.61  %
Interest receivable                                                   8,364                   7,999                      365                          4.56  %
Other assets                                                         20,451                  21,246                     (795)                        (3.74) %
Total assets                                                $     1,899,630               1,903,629                   (3,999)                        (0.21) %

LIABILITIES:
Deposits:
Non-interest-bearing                                        $       517,621                 501,531                   16,090                          3.21  %
Interest-bearing                                                  1,118,985               1,127,288                   (8,303)                        (0.74) %
Total deposits                                                    1,636,606               1,628,819                    7,787                          0.48  %
Short-term borrowings                                                24,746                       -                   24,746                              N/A
Long-term debt                                                       10,000                  10,000                        -                             -  %
Operating lease liabilities                                           6,337                   6,473                     (136)                        (2.10) %
Accrued interest and other liabilities                               15,066                  19,733                   (4,667)                       (23.65) %
Total liabilities                                                 1,692,755               1,665,025                   27,730                          1.67  %

SHAREHOLDERS' EQUITY:
 Common shares                                                      143,432                 143,130                      302                          0.21  %
 Retained earnings                                                  128,555                 126,312                    2,243                          1.78  %
 Treasury shares at cost                                            (50,115)                (29,029)                 (21,086)                   

72.64%

 Accumulated other comprehensive loss, net of taxes                 (14,997)                 (1,809)                 (13,188)                   

729.02%

 Total shareholders' equity                                         206,875                 238,604                  (31,729)                       

(13.30)%

 Total liabilities and shareholders' equity                 $     1,899,630               1,903,629                   (3,999)                        (0.21) %



Reasons for changes include:
•Debt securities, available-for-sale, decreased due to maturities and calls of
securities totaling $9.8 million and decreases in market value totaling $16.7
million, largely offset by purchases of additional securities totaling $12.1
million.
•Net loans increased due to organic growth in the loan portfolio. Most of the
growth occurred in the commercial real estate and commercial and industrial
portfolios, partially offset by decreases in the residential real estate and
agricultural loan portfolios.
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                          LCNB CORP. AND SUBSIDIARIES

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
•Non-interest-bearing deposits and interest-bearing deposits have grown
substantially since the start of the COVID-19 pandemic and this trend continued
during the first three months of 2022. Management believes the growth reflects
customer preferences for liquidity during uncertain economic periods. Balances
in demand deposits and NOW and savings accounts have grown, while balances in
IRA and time deposits have decreased. Interest-bearing deposits show a decrease
because of a $29.5 million decrease in ICS® Demand Reciprocal deposit balances.
•Short-term borrowings increased due to a $20 million one-year revolving line of
credit obtained during the first quarter 2022. The borrowing was used to finance
the repurchase of 1,051,688 shares of LCNB common stock.
•Accrued interest and other liabilities decreased due to a combination of
decreases in accrued bonuses caused by the payment of annual bonuses in January,
a decrease in LIHTC liabilities due to funding payments made during the first
quarter, and net deferred federal income taxes being categorized as an asset at
March 31, 2022 vs. being categorized as a liability at December 31, 2021.
•Treasury shares increased because of the purchase referred to above.
•Accumulated other comprehensive loss, net of taxes increased because of
market-driven decreases in the fair value of LCNB's debt security investments.

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 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 categorized based on capital adequacy:

                                                                                               Minimum Requirement
                                                                                                   with Capital               To Be Considered
                                                                     Minimum Requirement       Conservation Buffer            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                    8.0  %                    10.5  %                        10.0  %
risk-weighted assets
Leverage Ratio (Tier 1 Capital to adjusted quarterly average                      4.0  %                        N/A                         5.0  %
total assets)


According to the most recent notification from their regulators, the Bank and LCNB have been classified as “well capitalized” under the regulatory framework for prompt corrective action. It is management’s opinion that no condition or event has occurred since the last notification that would change the category of the Bank or LCNB.












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                          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):

                                                                       March 31, 2022          December 31, 2021
Regulatory Capital:
Shareholders' equity                                                  $      222,813                   234,451
Goodwill and other intangibles                                               (60,516)                  (60,655)
Accumulated other comprehensive (income) loss                                 14,997                     1,809
Tier 1 risk-based capital                                                    177,294                   175,605
Eligible allowance for loan losses                                             5,530                     5,506
Total risk-based capital                                              $      182,824                   181,111
Capital ratios:
Common Equity Tier 1 Capital to risk-weighted assets                           12.05  %                  12.25  %
Tier 1 Capital to risk-weighted assets                                         12.05  %                  12.25  %
Total Capital to risk-weighted assets                                          12.42  %                  12.64  %
Leverage                                                                        9.54  %                   9.58  %



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. Its use was permitted 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
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 qualifies to use the simplified
measure, but did not opt in for the March 31, 2022 regulatory capital
calculations.

Liquidity

LCNB depends on dividends from the Bank for the majority of its liquid assets,
including the cash needed to pay dividends to its shareholders.  National
banking law limits the amount of dividends the Bank may pay to the sum of
retained net income for the current year plus retained net income for the
previous two years.  Prior approval from the OCC, the Bank's primary regulator,
is necessary for the Bank to pay dividends in excess of this amount. In
addition, dividend payments may not reduce capital levels below minimum
regulatory guidelines.  Management believes the Bank will be able to pay
anticipated dividends to LCNB without needing to request approval.  The Bank is
not aware of any reasons why it would not receive such approval, if required.

Effective liquidity management ensures that cash is available to meet the cash
flow needs of borrowers and depositors, as well as meeting LCNB's operating cash
needs. Primary funding sources include customer deposits with the Bank,
short-term and long-term borrowings from the Federal Home Loan Bank, short-term
line of credit arrangements with two correspondent banks, and interest and
repayments received from LCNB's loan and investment portfolios.

Total remaining borrowing capacity with the Federal Home Loan Bank at March 31,
2022 was approximately $225.5 million. In addition, additional borrowings of
approximately $50.3 million were available through the line of credit
arrangements at March 31, 2022.

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.
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