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1.	the success, impact, and timing of the implementation of LCNB’s business strategies;

2.	LCNB’s ability to integrate recent and future acquisitions, including the recent merger with Columbus First Bancorp, Inc., may be unsuccessful, or may be more difficult, time-consuming or costly than expected;

3.	LCNB may incur increased loan charge-offs in the future;

4.	LCNB may face competitive loss of customers;

5.	changes in the interest rate environment may have results on LCNB’s operations materially different from those anticipated by LCNB’s market risk management functions;

6.	changes in general economic conditions and increased competition could adversely affect LCNB’s operating results;

7.	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;

8.	LCNB may experience difficulties growing loan and deposit balances;

9.	the current economic environment poses significant challenges for us and could adversely affect our financial condition and results of operations;

10.	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;

11.	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; and

12.

government intervention in the U.S. financial system, including the effects of recent legislative, tax, accounting and regulatory actions and reforms, including the Dodd-Frank Wall Street Reform and Consumer Protection 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.

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•	35 offices, including a main office in Warren County, Ohio and branch offices in Warren, Butler, Clinton, Clermont, Fayette, Franklin, Hamilton, Montgomery, Preble, and Ross Counties, Ohio,

•	a loan production office in Franklin County, Ohio,

•	an Operations Center in Warren County, Ohio,

•	and 38 ATMs.

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1.	Required regulatory agencies to take "prompt corrective action" with financial institutions that do not meet minimum capital requirements;

2.	Established five capital tiers:  well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized;

3.	Imposed significant restrictions on the operations of a financial institution that is not rated well-capitalized or adequately capitalized;

4.	Prohibited a depository institution from making any capital distributions, including payments of dividends or paying any management fee to its holding company, if the institution would be undercapitalized as a result;

5.	Implemented a risk-based premium system;

6.	Required an audit committee to be comprised of outside directors;

7.	Required a financial institution with more than $500 million in total assets to issue annual, audited financial statements prepared in conformity with U.S. generally accepted accounting principles; and

8.	Required a financial institution with more than $1 billion in total assets to document, evaluate, and report on the effectiveness of the entity's internal control system and required an independent public accountant to attest to management's assertions concerning the bank's internal control system.

1.	Certification of financial reports by the chief executive officer ("CEO") and the chief financial officer ("CFO"), who are responsible for designing and monitoring internal controls to ensure that material information relating to the issuer and its consolidated subsidiaries is made known to the certifying officers by others within the company;

2.	Inclusion of an internal control report in annual reports that include management's assessment of the effectiveness of a company's internal control over financial reporting and a report by the company's independent registered public accounting firm attesting to the effectiveness of internal control over financial reporting;

3.	Accelerated reporting of stock trades on Form 4 by directors and executive officers;

4.	Disgorgement requirements of incentive pay or stock-based compensation profits received within twelve months of the release of financial statements if the company is later required to restate those financial statements due to material noncompliance with any financial reporting requirement that resulted from misconduct;

5.	Disclosure in a company's periodic reports stating if it has adopted a code of ethics for its CFO and principal accounting officer or controller and, if such code of ethics has been implemented, immediate disclosure of any change in or waiver of the code of ethics;

6.	Disclosure in a company's periodic reports stating if at least one member of the audit committee is a "financial expert," as that term is defined by the Securities and Exchange Commission (the "SEC"); and

7.

Implementation of new duties and responsibilities for a company's audit committee, including independence requirements, the direct responsibility to appoint the outside auditing firm and to provide oversight of the auditing firm's work, and a requirement to establish procedures for the receipt, retention, and treatment of complaints from a company's employees regarding questionable accounting, internal control, or auditing matters.

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1.	Merging the Bank Insurance Fund and the Savings Association Insurance Fund into a new fund called the Deposit Insurance Fund, effective March 31, 2006;

2.	Increasing insurance coverage for retirement accounts from $100,000 to $250,000, effective April 1, 2006; and

3.	Eliminating a 1.25% hard target Designated Reserve Ratio, as defined, and giving the FDIC discretion to set the Designated Reserve Ratio within a range of 1.15% to 1.50% for any given year.

1.	Reduced reporting requirements on call reports for the first and third quarters of a reporting year for banks with less than $5 billion in total consolidated assets;

2.	Extended regulatory examination cycles from twelve to eighteen months for banks with less than $3 billion in total consolidated assets;

3.	Requiring federal financial institution regulators to classify all qualifying investment-grade, liquid and readily-marketable municipal securities as level 2B liquid assets under the liquidity coverage ratio rule;

4.	Exempting reciprocal deposits from treatment as brokered deposits under the FDIC's brokered deposits rule, up to the lesser of $5 billion or 20% of bank liabilities; and

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5.	Simplifying regulatory capital requirements by providing that banks with less than $10 billion in total consolidated assets that meet a to-be-developed community bank leverage ratio of tangible equity to average assets will be deemed to be in compliance with capital and leverage requirements.

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(1)	Yields on tax-exempt obligations are computed on a taxable-equivalent basis based upon a 21.0% statutory Federal income tax rate.

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(1)	Excess space in this office is leased to third parties.

(2)	The Bank owns the Oakwood and Oxford office buildings and leases the land.

(3)	The Bank leases the Operations Center from the Warren County Port Authority. Upon expiration of the lease in 2027, the Bank has the option to purchase the property for $1.00.

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•	CFB merged with and into LCNB Corp. on May 31, 2018.

•	Expenses related to the merger with CFB totaled $2,123,000 during 2018.

•	Net gain on sales of securities was significantly greater in 2016 as compared to 2018 and 2017 primarily due to market rates at the time of the sales.

•	Other real estate owned expense was greater in 2016 as compared to 2018 and 2017 because of valuation impairment recognized during 2016.

•	Other non-interest expense for 2018 included $575,000 in net losses from sales of fixed assets, primarily due to losses incurred in the sale of two office buildings. Other non-interest expense for 2017 included $154,000 in organizational costs for LCNB Risk Management, Inc. and $113,000 in losses from sales of fixed assets, primarily due to the sale of a closed office building.

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The Tax Cuts and Jobs Act, which was signed into law on December 22, 2017, lowered LCNB's federal corporate income tax rate from 34% to 21%, beginning in 2018. In addition, LCNB revalued its net deferred tax liability position at the end of 2017 to reflect the reduction in its federal corporate income tax rate and this revaluation resulted in a one-time income tax benefit of approximately $224,000, or $0.02 of basic and diluted earnings per common share for the year ended December 31, 2017.

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(1)	Includes non-accrual loans if any.

(2)	Income from tax-exempt securities is included in interest income on a taxable-equivalent basis.  Interest income has been divided by a factor comprised of the complement of the incremental tax rate of 21% for 2018 and 34% for 2017 and 2016.

(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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(1)	Non-accrual loans, if any, are included in average loan balances.

(2)	Change in interest income from non-taxable investment securities is computed based on interest income determined on a taxable-equivalent yield basis.  Interest income has been divided by a factor comprised of the complement of the incremental tax rate of 21% for 2018 and 34% for 2017 and 2016.

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•	Fiduciary income increased during 2018 due to an increase in assets managed. Fiduciary income increased during 2017 due to an increase in assets managed and to fee adjustments.

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Service charges and fees on deposit accounts increased during 2018 primarily due to fees earned from an Insured Cash Sweep (ICS®) product that was introduced during the second quarter 2017 and from an increase in debit card income. Debit card income benefited from more cards outstanding due to the merger with CFB and greater depositor utilization of the cards. Service charges and fees on deposit accounts increased during 2017 due to fee adjustments on certain services and greater customer utilization of various services.

•	Net gains (losses) on sales of securities were less during 2017 and 2018 as compared to 2016 primarily due to a lower volume of sales.

•	Bank owned life insurance income was greater in 2017 primarily due to mortality benefits. No mortality benefits were received in 2018 or 2016.

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•

Salaries and employee benefits were 14.5% greater in 2018 than in 2017 and 2017 was 2.0% greater than in 2016. The increases for both years were primarily due to salary and wage increases, newly hired employees, and increased health insurance costs, partially offset by net decreases in pension expenses. CFB employees retained and increased incentive payments were also factors during 2018. The number of full-time equivalent employees was 325 at December 31, 2018, 310 at December 31, 2017, and 282 at December 31, 2016.

•	Equipment expenses were greater during 2018 and 2017 as compared to 2016 primarily due to depreciation expense on furniture and equipment purchased for the new Operations Center, which went into service during March 2017.

•

Occupancy expense for 2018 increased primarily due to increased branch rental expense and increased depreciation of bank premises. The increase in branch rental expense primarily reflects rent paid for the new Worthington Office, previously the CFB office. Occupancy expense for 2017 increased primarily due to increased depreciation on bank premises and, secondarily, to increased maintenance-related expenses, both primarily due to the new Operations Center.

•	Marketing expense increased in 2018 primarily due to promotion costs for new checking products introduced in 2018, increased marketing activities in the Columbus area, and expanded used of television, radio, and digital methods of advertising. Marketing expense increased in 2017 primarily due to expanded use of television and digital methods of advertising.

•	FDIC premiums were lower in 2018 and 2017 as compared to 2016 primarily due to a change in the calculation method used to determine periodic premiums.

•	ATM expense for 2017 decreased primarily due to a change in the ATM network that processes PIN-based transactions.

•	Computer maintenance and supplies increased in 2017 and 2018 due to increased technology and software related expenditures designed to offer technological convenience to customers, to protect the integrity of its data systems and software, and to protect the confidentiality of customer information.

•

Contracted services increased in 2018 due to additional fees paid for loan and deposit system upgrades and improvements and to general price increases on other contracted services. Contracted services for 2017 increased largely due to fees paid to professional placement services firms, enhanced utilization of loan review specialists, fees related to an after-hours call answering service, and costs related to moving departments from the Main Office to the Operations Center.

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•	Other real estate owned expense was greater in 2016 primarily due to impairment charges recognized on a commercial property.

•	Merger-related expenses for 2018 and 2017 are due to the acquisition of CFB and are primarily comprised of various professional fees, costs to prepare and distribute the proxy statement/prospectus, and costs to merge CFB's data system into LCNB's system.

•

Other non-interest expense for 2018 included $575,000 in net losses from sales of fixed assets, primarily due to the sale of two office buildings. Other non-interest expense for 2017 included $154,000 in organizational costs for LCNB Risk Management, Inc. and $113,000 in losses from sales of fixed assets, primarily due to the sale of a closed office building. Other non-interest expense for 2016 included a $251,000 penalty incurred during the first quarter 2016 to pre-pay a Federal Home Loan Bank borrowing. The borrowing bore an interest rate of 5.25% and was paid off to reduce future interest expense.

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•	Level 1 – quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the reporting date;

•	Level 2 – inputs other than quoted prices included within level 1 that are observable for the asset or liability either directly or indirectly; and

•	Level 3 - inputs that are unobservable for the asset or liability.

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•	Fiduciary income - this includes periodic fees due from trust and investment services customers for managing the customers' financial assets. Fees are generally charged on a quarterly or annual basis and are recognized ratably throughout the period, as the services are provided on an ongoing basis.

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Service charges and fees on deposit accounts - these include general service fees charged for deposit account maintenance and activity and transaction-based fees charged for certain services, such as debit card, wire transfer, or overdraft activities. Revenue is recognized when the performance obligation is completed, which is generally after a transaction is completed or monthly for account maintenance services.

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1.	Requires most equity investments to be measured at fair value with changes in fair value recognized in net income.

2.	Simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment. When a qualitative assessment indicates that impairment exists, an entity is required to measure the investment at fair value.

3.	Eliminates the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet.

4.	Requires use of the exit price notion when measuring the fair value of financial instruments for disclosure purposes.

5.	Requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments.

6.	Requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements.

7.	Clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets.

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1.	The lease transfers ownership of the underlying asset to the lessee by the end of the lease term.

2.	The lease grants the lessee an option to purchase the underlying asset that the lessee is reasonably certain to exercise.

3.	The lease term is for the major part of the remaining economic life of the underlying asset.

4.	The present value of the sum of the lease payments and any residual value guaranteed by the lessee equals or exceeds substantially all of the fair value of the underlying asset.

5.	The underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term.

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•	Pass – loans categorized in this category are higher quality loans that do not fit any of the other categories described below.

•	Other Assets Especially Mentioned (OAEM) - loans in this category are currently protected but are potentially weak.  These loans constitute a risk but not to the point of justifying a classification of substandard.  The credit risk may be relatively minor yet constitute an undue risk in light of the circumstances surrounding a specific asset.

•

Substandard – loans in this category are inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any.  Assets so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt.  They are characterized by the possibility that the Company will sustain some loss if the deficiencies are not corrected.

•	Doubtful – loans classified in this category have all the weaknesses inherent in loans classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

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•	Level 1 – quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the reporting date.

•

Level 2 – inputs other than quoted prices included within level 1 that are observable for the asset or liability either directly or indirectly.  Level 2 inputs may include quoted prices for similar assets in active markets, quoted prices for identical assets or liabilities in markets that are not active, inputs other than quoted prices (such as interest rates or yield curves) that are observable for the asset or liability, and inputs that are derived from or corroborated by observable market data.

•	Level 3 – inputs that are unobservable for the asset or liability.

•	Fair value for U.S. Treasury notes are determined based on market quotations (level 1).

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•	Fair values for the other debt securities are calculated using the discounted cash flow method for each security.  The discount rates for these cash flows are estimated by the pricing service using rates observed in the market (level 2). Cash flow streams are dependent on estimated prepayment speeds and the overall structure of the securities given existing market conditions.

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